<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 8-K/A
AMENDMENT NO. 1 TO FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 27, 1996
------------------------
JUST TOYS, INC.
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-20612 13-3677074
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification Number)
Incorporation)
</TABLE>
50 WEST 23RD STREET
NEW YORK, NEW YORK 10010
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 212-645-6335
---------------
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
- ------- ------------------------------------------------------------------
(a) Financial Statements of Businesses Acquired.
-------------------------------------------
Audited Financial Statements
- - Report of Ernst & Young LLP Independent Auditors for the year ended
December 31, 1995
- - Year ended December 31, 1994 -- See note at F-2
- - Balance Sheets as of December 31, 1995 and 1994
- - Statements of Operations for the years ended December 31, 1995 and 1994
- - Statements of Shareholders' (Deficiency) Equity for the years ended December
31, 1995 and 1994
- - Statements of Cash Flows for the years ended December 31, 1995 and 1994
- - Condensed Statements of Cash Flows for the six months ended June 30, 1996 and
1995
- - Notes to Financial Statements
Unaudited Interim Financial Statements
- - Condensed Balance Sheet as of June 30, 1996
- - Condensed Statements of Operations for the six months ended June 30, 1996
and 1995
- - Condensed Statements of Cash Flows for the six months ended June 30, 1996 and
1995
- - Notes to Financial Statements
2
<PAGE>
(b) Pro Forma Financial Information.
-------------------------------
- - Basis of Presentation
- - Unaudited Pro Forma Condensed Combined Statement of Operations for the six
months ended June 30, 1996
- - Unaudited Pro Forma Condensed Combined Statement of Operations for the year
ended December 31, 1995
- - Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(c) Exhibits.
--------
23.1 Consent of Ernst & Young LLP
3
<PAGE>
Index to Financial Statements of Table Toys, Inc.
<TABLE>
<S> <C>
Audited Financial Statements
Report of Ernst & Young LLP Independent Auditors for the year
ended December 31, 1995.................................................. F-1
Year ended December 31, 1994 -- See note at F-2............................ F-2
Balance Sheets as of December 31, 1995 and 1994............................ F-3
Statements of Operations for the years ended December 31, 1995 and 1994.... F-4
Statements of Shareholders' (Deficiency) Equity for the years
ended December 31, 1995 and 1994......................................... F-5
Statements of Cash Flows for the years ended December 31, 1995 and 1994.... F-6
Notes to Financial Statements.............................................. F-7 to F-14
Unaudited Interim Financial Statements
Condensed Balance Sheet as of June 30, 1996................................ F-15
Condensed Statements of Operations for the six months ended June 30, 1996
and 1995.................................................................. F-16
Condensed Statements of Cash Flows for the six months ended June 30, 1996
and 1995.................................................................. F-17
Notes to Financial Statements.............................................. F-18
</TABLE>
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders of
Table Toys, Inc.
We have audited the balance sheet of Table Toys, Inc. (the "Company") as of
December 31, 1995, and the related statements of operations, stockholders'
(deficiency) equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of Table Toys, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
The 1995 financial statements have been prepared assuming that the Company will
continue as a going concern. As more fully described in Note 1, the Company
filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy
Code and has entered into an asset purchase agreement for the sale of
substantially all of its assets to Just Toys, Inc. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
May 9, 1996
F-1
<PAGE>
The financial statements of Table Toys, Inc. (the "Company") for the
year ended December 31, 1994 and the related statements of operations and cash
flows are included herein without the report of independent auditors. Such
financial statements, together with a report of independent auditors in respect
thereto, were delivered to Just Toys, Inc. pursuant to Section 5.2.9 of that
certain Asset Purchase Agreement dated January 22, 1996 between Just Toys, Inc.
and the Company filed as Exhibit 2.1 to the initial Form 8-K filed by Just Toys,
Inc. with respect to its acquisition of substantially all of the operating
assets of the Company. That accounting firm has not consented to the use of its
report in this filing and, therefore, such report has been omitted.
F-2
<PAGE>
Table Toys, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
ASSETS 1995 1994
---------------------------
<S> <C> <C>
Current assets:
Cash (Note 11) $ 153,857 $ 352,983
Accounts receivable, net of allowance
for doubtful accounts of $199,000 in
1995 and $15,000 in 1994 (Note 11) 598,252 3,355,608
Inventory (Note 4) 1,329,449 2,727,451
Property and equipment held for sale,
net (Note 5) 173,752 -
Deferred income taxes (Note 8) 600,000 -
Refundable income taxes (Note 8) 98,079 -
Prepaid expenses 13,444 48,898
---------------------------
Total current assets 2,966,833 6,484,940
Property and equipment, net (Note 5) - 608,823
Other assets 11,859 32,962
---------------------------
Total assets $ 2,978,692 $7,126,725
===========================
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' (DEFICIENCY) EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,320,476 $2,604,896
Accrued commissions 334,000 343,000
Borrowings under line of credit (Note 6) 439,371 2,479,000
Notes payable (including accrued
interest) to stockholder of Fantasy
Toys, Inc. (Note 3) 544,000 -
Current portion of long-term
obligations (Note 7) 559,762 60,252
Income taxes payable (Note 8) - 27,037
---------------------------
Total current liabilities 4,197,609 5,514,185
Deferred income taxes (Note 8) - 77,608
Long-term obligations (Note 7) - 26,495
Redeemable convertible preferred stock,
$4 par value - 187,490 shares
authorized; 168,900 shares issued and
outstanding (Note 9) 844,500 675,600
Commitments (Notes 3, 9 and 10)
Stockholders' (deficiency) equity:
Common stock, no par value - 2,000,000
shares authorized; 304,140 shares
issued and outstanding 407,344 407,344
(Accumulated deficit) retained earnings (2,470,761) 425,493
---------------------------
Total stockholders' (deficiency) equity (2,063,417) 832,837
---------------------------
Total liabilities and stockholders'
(deficiency) equity $ 2,978,692 $7,126,725
===========================
</TABLE>
See accompanying notes.
F-3
<PAGE>
Table Toys, Inc.
Statements of Operations
YEAR ENDED DECEMBER 31
1995 1994
----------------------------
Revenue (Note 11) $ 5,493,935 $9,298,017
Costs and expenses:
Cost of revenue 5,118,018 6,076,130
Selling, general and administrative
expenses (Note 5) 3,653,160 2,851,032
Interest 225,798 94,851
----------------------------
8,996,976 9,022,013
----------------------------
(Loss) income before (benefit)
provision for income taxes (3,503,041) 276,004
(Benefit) provision for income taxes
(Note 8) (775,687) 105,000
----------------------------
Net (loss) income (2,727,354) 171,004
Preferred stock dividend (Note 9) 168,900 -
----------------------------
(Loss) income attributable to common
stockholders $(2,896,254) $ 171,004
============================
See accompanying notes.
F-4
<PAGE>
Table Toys, Inc.
Statements of Stockholders' (Deficiency) Equity
Years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
RETAINED
EARNINGS/
COMMON STOCK ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 304,140 $407,344 $ 281,769 $ 689,113
Income distribution - - (27,280) (27,280)
Net income - - 171,004 171,004
------------------------------------------------------------------
Balance, December 31, 1994 304,140 407,344 425,493 832,837
Net loss - - (2,896,254) (2,896,254)
------------------------------------------------------------------
Balance, December 31, 1995 304,140 $407,344 $(2,470,761) $(2,063,417)
==================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Table Toys, Inc.
Statements of Cash Flows
YEAR ENDED DECEMBER 31
1995 1994
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(2,727,354) $ 171,004
Adjustments to reconcile net (loss)
income to net cash provided by (used
in) operating activities:
Depreciation and amortization 475,988 131,246
Write down of impaired property and
equipment 736,435 -
Provision for losses on accounts
receivable 184,000 -
Interest on notes payable to
stockholders of Fantasy Toys,
Inc. (Note 3) 44,000 -
Refundable income taxes (98,079) -
Deferred income taxes (677,608) 36,400
Changes in operating assets and
liabilities, net of the effects
of the acquisition of Fantasy Toys,
Inc. in 1995 (Note 3):
Accounts receivable 2,573,356 (1,059,177)
Inventory 1,848,002 (1,944,813)
Prepaid expenses 35,454 12,202
Other assets 21,103 (34,585)
Accounts payable and accrued
expenses (284,420) 1,509,819
Accrued commissions (9,000) -
Income taxes payable (27,037) (14,529)
----------------------------
Net cash provided by (used in)
operating activities 2,094,840 (1,192,433)
----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of certain assets of
Fantasy Toys, Inc. (Note 3) (500,000) -
Purchases of property and equipment (227,352) (409,341)
----------------------------
Net cash used in investing activities (727,352) (409,341)
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of credit - 2,034,814
Payments under line of credit (2,039,629) -
Proceeds from long-term obligations 635,275 (229,974)
Payments on long-term obligations (162,260) -
Income distribution - (27,280)
----------------------------
Net cash (used in) provided by
financing activities (1,566,614) 1,777,560
----------------------------
Net (decrease) increase in cash (199,126) 175,786
Cash, beginning of year 352,983 177,197
----------------------------
Cash, end of year $ 153,857 $ 352,983
============================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for interest $ 172,136 $ 72,700
Cash paid during the year for income
taxes $ 14,951 $ 83,129
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Capital lease obligations incurred for
lease of new equipment $ - $ 39,746
See accompanying notes.
F-6
<PAGE>
Table Toys, Inc.
Notes to Financial Statements
December 31, 1995
1. DESCRIPTION OF BUSINESS
Table Toys, Inc. (the "Company") was incorporated under the laws of the State of
Texas on September 15, 1989. The Company designs, manufactures and markets
children's play tables on which interlocking blocks are used for play and
education.
On January 26, 1996, the Company filed a voluntary petition for bankruptcy under
Chapter 11 of the Bankruptcy Code. Prior to filing the petition, on January 22,
1996, the Company determined that the best prospect for return on its assets was
a sale of substantially all of its assets to Just Toys, Inc. ("Just Toys").
Accordingly, the Company entered into an asset purchase agreement (the "Asset
Purchase Agreement"), with Just Toys on January 22, 1996. Also on January 22,
1996, the Company entered into a marketing and distribution agreement (the
"Distribution Agreement") with Just Toys for the exclusive distribution of the
Company's inventory. The Company will be compensated for such inventory at its
cost. The Distribution Agreement was approved by the Bankruptcy Court on
February 7, 1996 and will cease upon the closing of the Asset Purchase
Agreement. The Asset Purchase Agreement was approved by the Bankruptcy Court on
May 9, 1996. In accordance with the terms of the Asset Purchase Agreement, the
Company is required to change its corporate name upon the closing of the Asset
Purchase Agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECLASSIFICATIONS
Certain amounts from the 1994 financial statements have been reclassified to
conform to the current year's presentation.
CASH AND CASH EQUIVALENTS
The Company considers all financial instruments with a maturity of three months
or less when purchased to be cash equivalents.
INVENTORY
Inventory is valued at the lower of cost, using primarily the first-in, first-
out ("FIFO") method, or market.
F-7
<PAGE>
Table Toys, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Normal repairs and maintenance
costs are expensed as incurred. Additions and major improvements are
capitalized. The costs of assets retired or otherwise disposed of and the
related allowances for depreciation are eliminated from the accounts in the year
of disposal, and the resulting gain or loss, if any, is included in operations.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets; such lives range from two to seven years.
INCOME TAXES
The Company accounts for income taxes using the liability method in accordance
with the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes".
USE OF ESTIMATES
The preparation of the 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.
ADVERTISING COSTS
Advertising costs are expensed as incurred and amounted to approximately
$218,000 and $388,000, respectively, for the years ended December 31, 1995 and
1994.
3. ACQUISITION
In January 1995, the Company acquired substantially all of the equipment and
inventory of Fantasy Toys, Inc. for $760,000. The acquisition was financed
through bank borrowings of $500,000 (See Note 7) and a $260,000 note to the
seller (a component of a total purchaser note payable of $500,000). The $500,000
bank note is payable in monthly installments of $10,417 plus interest from March
1995 through February 1999 and went into default subsequent to year end.
Interest is computed at a prime plus 2% interest rate.
F-8
<PAGE>
Table Toys, Inc.
Notes to Financial Statements (continued)
3. ACQUISITION (CONTINUED)
The note is secured by all inventory, chattel paper, accounts receivable,
contract rights, equipment, general intangibles and fixtures along with personal
guarantees by various stockholders of the Company. The seller also signed a
five-year non-compete agreement which began January 31, 1995 and received a
$240,000 (the balance of the purchaser note payable of $500,000). Both the
$260,000 and $240,000 notes bear interest at 8%, are secured by the assets
purchased, were due on March 31, 1996 and are currently in default.
The acquisition was accounted for under the purchase method of accounting as
follows:
Assets acquired:
Inventory $ 450,000
Property and equipment 310,000
Covenant not-to-compete 240,000
------------
$1,000,000
============
Cash paid and debt incurred:
Cash paid $ 500,000
Note payable to stockholder
of Fantasy Toys, Inc. 500,000
------------
$1,000,000
============
The covenant not-to-compete was amortized in full in 1995, due to the Asset
Purchase Agreement (See Note1) entered into on January 22, 1996.
4. INVENTORY
Inventory consisted of the following:
1995 1994
---------------------------
Raw materials $ 914,663 $ 933,246
Work-in-progress - 84,423
Finished goods 414,786 1,709,782
---------------------------
$1,329,449 $2,727,451
===========================
F-9
<PAGE>
Table Toys, Inc.
Notes to Financial Statements (continued)
5. Property and Equipment
Property and equipment consisted of the following:
1995 1994
----------------------
Equipment $172,681 $ 814,347
Office furniture 1,071 10,398
Leasehold improvements - 26,448
----------------------
173,752 851,193
Less accumulated depreciation and - (242,370)
amortization
----------------------
$173,752 $608,823
======================
In 1995, property and equipment with a net book value of $70,534, primarily
molds that are no longer used and equipment that will not be purchased under the
Asset Purchase Agreement were written off. In addition, property and equipment
was written down by an additional $665,901 to reflect their net realizable value
pursuant to the Asset Purchase Agreement (See Note 1).
6. LINE OF CREDIT
The Company has a $2,600,000 line of credit with a commercial lender. Borrowings
under the line of credit were approximately $439,000 and $2,479,000 at December
31, 1995 and 1994, respectively. This line of credit is payable on demand and is
secured by the accounts receivable and inventory of the Company along with
personal guarantees by various stockholders of the Company. The interest rate is
prime plus 2% (10.5% at December 31, 1995 and 1994).
F-10
<PAGE>
Table Toys, Inc.
Notes to Financial Statements (continued)
7. Long-TERM OBLIGATIONS
Long-term obligations at December 31, 1995 and 1994 consists of the following:
1995 1994
------------------------
(IN DEFAULT)
Note payable to commercial lender (See
Note 3), interest at 10.5% , repayable
in equal monthly installments of
$10,417 through February 1999, secured
by accounts receivable, inventory,
machinery and equipment and the
personal guaranty of two stockholders $ 395,830 $ -
Installment note payable, with interest
at 10%, secured by equipment 2,815 7,210
Capital lease obligation, with interest
at 16%, secured by equipment and
personal guaranty of a stockholder 772 6,616
Capital lease obligation, interest at
17%, due in monthly payments of $1,243
including interest through August
1997, secured by equipment 25,070 35,270
Senior subordinated notes payable to
stockholders, due in February 1996
with interest at 12% per annum (A) 135,275 -
Note payable to commercial lender, - 37,651
interest at 12%
------------------------
559,762 86,747
Less current portion (559,762) (60,252)
------------------------
Long-term obligations $ - $ 26,495
========================
(A) The principal on the senior subordinated notes is payable at the option and
election of the noteholders, either in cash or shares of common stock at a price
of $4 per share of the common stock of the Company. Interest is due at maturity
and is payable in common stock of the Company at $4 per share of common stock.
In addition, the Company issued warrants to purchase approximately 27,500 shares
on common stock at $4 per share to the noteholders.
In June 1992, the Company issued a warrant for the purchase of common stock to
its commercial lender. The warrant entitles the lender to purchase up to 75,098
shares of common stock at $4 per share through December 8, 1998 and contains
anti-dilutive provisions. In addition, the warrant holder has the option after
June 7, 1995 to require the
F-11
<PAGE>
Table Toys, Inc.
Notes to Financial Statements (continued)
7. LONG-TERM OBLIGATIONS (CONTINUED)
Company to purchase the warrant, or shares issued pursuant to the warrant, based
on a formula related to the Company's net book value and past earnings.
Capitalized lease equipment of $63,894 was included in property and equipment as
of December 31, 1994. The net book value of such equipment at December 31, 1994
was approximately $47,000.
8. INCOME TAXES
Refundable income taxes represent the income tax benefit due to the carry back
of net operating losses.
The components of the (benefit) provision for income taxes for the years ended
December 31, 1995 and 1994 were as follows:
1995 1994
-----------------------
Current $ (98,079) $ 68,600
Deferred (677,608) 36,400
Total $(775,687) $105,000
=======================
The (benefit) provision for income taxes differs from the amount computed by
applying federal income tax statutory rate on (loss) income for the year ended
December 31, 1995 and 1994 as follows:
1995 1994
-----------------------
Taxes calculated at statutory rate $(1,191,034) $ 93,841
Loss from which no tax benefit was
provided 409,280 -
State income taxes - 7,920
Other, net 6,067 3,239
-----------------------
$(775,687) $105,000
=======================
At December 31, 1995, the Company had net operating loss carryforwards of
approximately $2,100,000 expiring in 2010. Significant components of deferred
tax assets and liabilities were as follows:
F-12
<PAGE>
Table Toys, Inc.
Notes to Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
DECEMBER 31,
------------------------
1995 1994
------------------------
Net operating loss carry forward $ 785,000 $ -
Allowance for doubtful accounts 74,000 -
Amortization of covenant not-to-compete 83,000 -
Inventory allowance 144,000 -
Write down and depreciation of property
and equipment 224,000 (78,000)
------------------------
1,310,000 (78,000)
Valuation allowance (710,000) -
------------------------
Net deferred tax asset (liability) $ 600,000 $ (78,000)
=========================
The net deferred tax asset at December 31, 1995, represents management's
estimate of deferred tax assets that would be utilized to offset net gains
resulting from the cancellation of debt in conjunction with the settlement of
the bankruptcy case.
9. REDEEMABLE PREFERRED STOCK
The Company is authorized to issue 187,490 shares of $4 par value preferred
stock. The preferred stock is entitled to receive dividends of 10% per annum,
payable on a quarterly basis beginning January 31, 1994, and is convertible to
common stock (subject to certain anti-dilutive provisions) through July 31,
1996. At that time, and over the subsequent 16 quarters, 1/16 of the outstanding
shares will either be redeemed or converted to common stock at the discretion of
the stockholders. The redemption price is par value plus any accrued and unpaid
dividends. Also, the preferred stockholders have a liquidation preference for
both the par value of the preferred stock and any dividends accrued but unpaid.
In May 1994 and February 1995, the Board of Directors approved the issuance of
15,483 and 12,667 shares, respectively, of common stock in satisfaction of the
10% dividends accrued from June 1993 through January 1995 on the preferred
stock. Such shares were not issued. The cumulative dividend on the preferred
stock has been accrued as of December 31, 1995.
F-13
<PAGE>
Table Toys, Inc.
Notes to Financial Statements (continued)
9. REDEEMABLE PREFERRED STOCK (CONTINUED)
Upon any event of default, as defined, the holders of at least a majority of the
preferred stock shall be entitled at any special meeting of the holders of the
preferred stock to elect such number of directors of the Company as will permit
the holders of the preferred stock to elect a majority of the directors of the
Company. The preferred directors shall serve until 30 days after all events of
default shall have ceased to continue. The preferred stockholders have not
taken steps to enforce this right.
10. COMMITMENTS
The Company has several operating leases for office space and equipment. Total
lease expense was approximately $89,200 for 1995 and $119,600 for 1994. Future
minimum lease commitments for the Company are approximately $3,700 for 1996 and
$2,470 for 1997.
11. CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration of
credit risk are primarily cash and accounts receivable. The Company maintains
its cash and cash equivalents in accounts with a limited number of financial
institutions. The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral.
Sales to significant customers were as follows:
YEAR ENDED DECEMBER 31,
1995 1994
-------------------------
Customer #1 25% -
Customer #2 - 40%
Customer #3 17% 15%
-------------------------
42% 55%
=========================
F-14
<PAGE>
Table Toys, Inc.
Condensed Balance Sheet
(Unaudited)
June 30, 1996
ASSETS
Current assets:
Cash $ 663,645
Deferred income taxes 600,000
Refundable income taxes (Note 8) 98,079
------------
Total current assets 1,361,724
Investment in Just Toys, Inc. Preferred
Stock 941,932
------------
Total assets $ 2,303,656
=============
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS'
(DEFICIENCY) EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,794,943
Borrowings under line of credit 528,607
Notes payable (including accrued
interest) to stockholder of Fantasy 556,000
Toys, Inc.
Other debt 156,551
------------
Total current liabilities 4,036,101
Redeemable convertible preferred stock,
$4 par value - 187,490 shares
authorized; 168,900 shares issued and
outstanding 878,280
Stockholders' (deficiency) equity:
Common stock, no par value - 2,000,000
shares authorized; 304,140 shares
issued and outstanding 407,344
(Accumulated deficit) (3,018,069)
------------
Total (deficiency) equity (1,732,445)
------------
Total liabilities and stockholders' $ 2,303,656
(deficiency) equity =============
See accompanying notes.
F-15
<PAGE>
Table Toys, Inc.
Condensed Statements of Operations
(Unaudited)
SIX MONTHS ENDED JUNE 30
1996 1995
-----------------------------
Revenue $1,461,191 $ 1,087,798
Costs and expenses:
Cost of revenue 1,525,713 1,067,738
Selling, general and administrative 379,797 985,258
expenses
Interest 69,209 107,548
-----------------------------
1,974,719 2,160,544
-----------------------------
Loss before (benefit) provision for (513,528) (1,072,746)
income taxes
(Benefit) provision for income taxes - (189,000)
(Note 8)
-----------------------------
Net loss (513,528) (883,746)
Preferred stock dividend 33,780 101,340
-----------------------------
Loss income attributable to common $ (547,308) $ (985,086)
stockholders =============================
See accompanying notes.
F-16
<PAGE>
Table Toys, Inc.
Condensed Statements of Cash Flows
SIX MONTHS ENDED JUNE 30
1996 1995
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(513,528) $ (883,746)
Adjustments to reconcile net (loss)
income to net cash provided by (used 112,976
in) operating activities:
Depreciation and amortization 95,978 -
Interest on notes payable to 12,000 20,000
stockholders of Fantasy Toys, Inc.
Deferred income taxes - (189,000)
Changes in operating assets and
liabilities, net of the effects of the
acquisition of Fantasy Toys, Inc. in
1995:
Accounts receivable 598,252 2,739,213
Inventory 465,291 577,246
Prepaid expenses 13,444 (69,435)
Other assets 11,859 (33,256)
Accounts payable and accrued expenses 140,467 (1,039,658)
---------------------------
Net cash provided by (used in) 823,763 1,234,340
operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of certain assets of - (500,000)
Fantasy Toys, Inc.
Purchases of property and equipment - (38,938)
---------------------------
Net cash used in investing activities - (538,938)
---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of credit 89,236 -
Payments under line of credit - (1,453,863)
Proceeds from long-term obligations - 500,000
Payments on long-term obligations (403,211) (80,163)
---------------------------
Net cash (used in) provided by (313,975) (1,034,026)
financing activities
---------------------------
Net (decrease) increase in cash 509,788 (338,624)
Cash, beginning of year 153,857 352,983
---------------------------
Cash, end of year $ 663,645 $ 14,359
===========================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for interest $ 57,208 $ 87,548
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Capital lease obligations incurred for
lease of new equipment $ - $ 39,746
Investment in Just Toys, Inc. Preferred
Stock $ 941,932 $ -
F-17
<PAGE>
Table Toys, Inc.
Notes to Condensed Financial Statements
(Unaudited)
June 30, 1996
1. BASIS OF PRESENTATION
The accompanying interim financial statements of Table Toys, Inc. ("Table Toys")
as of June 30, 1996 and for the six months ended June 30, 1996 and 1995 have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Article 10 of Regulation S-X and are
unaudited. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 1996 are not
necessarily indicative of results to be expected for the year ending December
31, 1996.
SALE OF ASSETS
On January 26, 1996, Table Toys, Inc. filed a voluntary petition for bankruptcy
under Chapter 11 of the Bankruptcy Code. Prior to filing the petition, on
January 22, 1996, Table Toys determined that the best prospect for return on its
assets was a sale of substantially all of its assets to Just Toys, Inc. ("Just
Toys"). Accordingly, Table Toys entered into an asset purchase agreement (the
"Asset Purchase Agreement"), with Just Toys on January 22, 1996. Also on January
22, 1996, the Table Toys entered into a marketing and distribution agreement
(the "Distribution Agreement") with Just Toys for the exclusive distribution of
the Table Toys' inventory. The Distribution Agreement was approved by the
Bankruptcy Court on February 7, 1996 and ceased upon the closing of the Asset
Purchase Agreement. The Asset Purchase Agreement was approved by the Bankruptcy
Court on May 9, 1996 and the sales closed on June 27, 1996. In accordance with
the terms of the Asset Purchase Agreement, Table Toys is required to change its
corporate name upon the closing of the Asset Purchase Agreement.
As consideration for the assets acquired, Table Toys received cash of $391,291
and 538,243 shares of Series B Convertible Preferred Stock with a liquidation
value of $3.625 per share. Such shares were valued at $1.75 per share.
F-18
<PAGE>
Just Toys, Inc.
Pro Forma Condensed Combined Financial Statements
(Unaudited)
BASIS OF PRESENTATION
The following pro forma condensed combined statements of operations for the year
ended December 31, 1995, and the six months ended June 30, 1996 give effect to
Just Toys, Inc. and Subsidiaries (the "Company") acquiring substantially all of
the assets of Table Toys, Inc.
The pro forma information is based on the historical financial statements of the
Company and Table Toys, Inc., giving effect to the transactions under the
purchase method of accounting and the assumptions and adjustments in the
accompanying notes to the pro forma financial statements.
The pro forma statements of operations for the year ended December 31, 1995 and
the six months ended June 30, 1996 give effect to the transaction as if it
occurred at the beginning of the respective periods presented. Because the
transaction closed on June 27, 1996 and the acquisition was recorded in the
historical balance sheet of Just Toys, Inc. as of June 30, 1996, a pro forma
balance sheet as of June 30, 1996 has not been presented herein.
The pro forma condensed combined statements of operations have been prepared by
the Company's management based upon the historical financial statements of the
Company and Table Toys, Inc. These pro forma condensed combined statements of
operations may not be indicative of the results that actually would have
occurred if the acquisition had been effected at the beginning of the respective
periods presented. The pro forma condensed combined statements of operations
should be read in conjunction with the historical financial statements and notes
contained elsewhere herein, and in the Company's annual report on Form 10-K and
the Company's quarterly report on Form 10-Q.
P-1
<PAGE>
Just Toys, Inc.
Pro Forma Condensed Combined Statement of Operations
(Unaudited)
For the six months ended June 30, 1996
<TABLE>
<CAPTION>
JUST TABLE PRO FORMA PRO FORMA
TOYS TOYS ADJUSTMENTS COMBINED
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $8,508,027 $1,461,191 (1,461,191) 2 $8,508,027
Cost of goods sold 5,245,113 1,525,713 (1,461,191) 2 5,309,635
----------------------------------------------- -----------
Gross profit 3,262,914 (64,522) 3,198,392
Operating expenses 3,691,812 379,797 4,071,609
----------------------------------------------- -----------
Operating loss (428,898) (444,319) (873,217)
Other income (expenses):
Interest expense (172,433) (69,209) (18,097) 1 (259,739)
Interest and dividend income 3,242 3,242
Other income 251,863 - 251,863
----------------------------------------------- -----------
Net loss (346,226) (513,528) (18,097) (877,851)
Preferred stock dividend - 33,780 (33,780) 3
Loss attributable to common stockholders $ (346,226) $ (547,308) $ (15,683) $ (877,851)
=============================================== ===========
Weighted average common shares
outstanding 4,150,000 4,150,000
============ ===========
Net loss per common share $(0.08) $(0.21)
============ ===========
</TABLE>
P-2
<PAGE>
Just Toys, Inc.
Pro Forma Condensed Combined Statement of Operations
(Unaudited)
For the year ended December 31, 1995
<TABLE>
<CAPTION>
JUST TABLE PRO FORMA PRO FORMA
TOYS TOYS ADJUSTMENTS COMBINED
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $19,588,348 $ 5,493,935 $ 25,082,283
Cost of goods sold 13,338,943 5,118,018 18,456,961
------------------------------------------- ---------------
Gross profit 6,249,405 375,917 6,625,322
Operating expenses 12,315,601 3,653,160 15,968,761
------------------------------------------- ---------------
Operating loss (6,066,196) (3,277,243) (9,343,439)
Other income (expenses):
Interest expense (357,562) (225,798) (36,194) 1 (619,554)
Interest and dividend income 141,440 - 141,440
Writedown of investment in Hong
Kong property (1,578,000) - (1,578,000)
Settlement of arbitration and related
legal expenses (909,594) - (909,594)
Other expense (17,012) - (17,012)
------------------------------------------- ---------------
Loss before income taxes (benefit) (8,786,924) (3,503,041) (36,194) (12,326,159)
Provision for income taxes (benefit) (775,687) 775,687 4
------------------------------------------- ---------------
Net loss (8,786,924) (2,727,354) (36,194) (12,326,159)
Preferred stock dividend - 168,900 (168,900) 3
------------------------------------------- ---------------
Loss income attributable to common
stockholders $(8,786,924) $(2,896,254) $(132,706) $(12,326,159)
=========================================== ===============
Weighted average common shares
outstanding 4,150,000 4,150,000
============= ===============
Net loss per common share $(2.12) $(2.97)
============= ===============
</TABLE>
P-3
<PAGE>
Just Toys, Inc.
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
1. To accrue additional interest at 9.25% per annum on cash portion of purchase
price which was financed through borrowings from the factor.
2. To eliminate inter-company sales.
3. To eliminate preferred stock dividend.
4. To eliminate tax benefit applicable to Table Toys, Inc.
5. Based on the preliminary allocation of purchase price by Just Toys, Inc., the
fair value of depreciable assets approximates book value. Accordingly, a pro
forma adjustment related to depreciation and amortization was not required.
P-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JUST TOYS, INC.
September 10, 1996
By: /s/ Morton J. Levy
-------------------------
Morton J. Levy
Chief Executive Officer
4
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit Description Page
- ------- ----------- ----
23.1 Consent of Ernst & Young LLP
5
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-69812) pertaining to the 1992 Incentive and Non-Qualified Stock
Option Plan of Just Toys, Inc. of our report dated May 9, 1996 with respect to
the financial statements, of Table Toys, Inc. included in Just Toys, Inc.'s Form
8-K dated June 27, 1996, as amended, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
September 9, 1996
