<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
----------
Commission File Number 0-20612
----------
JUST TOYS, INC.
(Exact Name of Registrant as specified in its Charter)
----------
Delaware 13-3677074
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
20 Livingstone Avenue, Dobbs Ferry, New York 10522
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(914) 674-8697
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 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
The aggregate number of the Registrant's shares outstanding on August 10, 1998
was 4,407,104 shares of Common Stock, par value $.01 per share
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JUST TOYS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets - June 30, 1998
and 1997 (unaudited) and December 31, 1997................................................ 1
Consolidated Statements of Operations (unaudited)
for the Three Months and Six Months Ended June 30, 1998 and 1997.......................... 2
Consolidated Statements of Cash Flows (unaudited)
for the Six Months Ended June 30, 1998 and 1997........................................... 3
Notes to Consolidated Financial Statements (unaudited).................................... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................................. 7
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................................... 11
SIGNATURES.................................................................................................. 13
</TABLE>
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
1998 1997 1997
---- ---- ----
ASSETS (Unaudited)
Current assets:
<S> <C> <C> <C>
Cash...................................................... $ 432,506 $ 189,817 $ 213,789
Accounts receivable, net of allowances of $129,000,
$396,000 and $688,000 (Note 2)......................... 460,345 520,369 97,778
Inventories (Note 3)...................................... 3,849,568 4,591,470 3,713,981
Prepaid and refundable income taxes....................... 39,269 38,188 39,269
Prepaid expenses and other current assets................. 1,765,098 1,307,097 1,710,888
--------- --------- ---------
Total current assets................................... 6,546,786 6,646,941 5,775,705
Property and equipment, at cost, net of accumulated
depreciation and amortization ............................ 3,126,279 3,345,018 3,223,172
Goodwill, net of accumulated amortization..................... 592,066 637,606 614,836
Other assets.................................................. 105,982 127,909 114,535
----------- ---------- ----------
TOTAL.............................................. $ 10,371,113 $ 10,757,474 $ 9,728,248
========== ========== =========
LIABILITIES
Current liabilities:
Due to factor............................................. $ 2,129,010 $ 1,780,440
Accounts payable.......................................... 1,599,450 1,705,130 $ 1,853,246
Accrued liabilities....................................... 779,119 951,347 897,153
----------- ---------- -------
Total current liabilities.............................. 4,507,579 4,436,917 2,750,399
Series B Convertible Redeemable Preferred Stock, 650,000
shares authorized, 294,804, 536,834 and 521,854 shares
issued and outstanding (liquidation value $1,068,665,
$1,946,023 and $1,891,721)................................ 598,338 1,008,482 1,018,990
---------- ---------- ---------
Total liabilities and Series B Stock (Note 5)......... 5,105,917 5,445,399 3,769,389
--------- --------- ---------
STOCKHOLDERS' EQUITY Stockholders' equity (Note 4):
Preferred stock, $1.00 par value, 2,000,000 shares
authorized:
Series A Convertible Redeemable Preferred
Stock, 150,000 shares authorized, 120,000
shares issued and outstanding (liquidation
value $120,000)................................ 120,000 120,000 120,000
Common stock, par value $.01 per share, 15,000,000
shares authorized, 4,405,217, 4,151,409 and 4,178,167
issued and outstanding................................. 44,052 41,514 41,782
Additional paid-in capital................................ 30,068,180 29,798,383 29,849,043
Accumulated deficit....................................... (24,967,036) (24,647,822) (24,051,966)
------------ ----------- -----------
Total stockholders' equity............................. 5,265,196 5,312,075 5,958,859
----------- ----------- -----------
TOTAL.............................................. $ 10,371,113 $ 10,757,474 $ 9,728,248
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales...................................... $3,616,623 $4,843,277 $ 7,492,258 $ 9,301,103
Cost of goods sold............................. 2,157,283 3,117,626 4,470,287 5,861,395
--------- --------- --------- ---------
Gross profit................................... 1,459,340 1,725,651 3,021,971 3,439,708
--------- --------- --------- ---------
Expenses:
Merchandising, selling, warehousing
and distribution........................ 851,913 858,186 1,722,634 1,762,227
Royalties...................................... 149,260 166,294 309,777 327,798
General and administrative..................... 834,328 817,953 1,678,757 1,737,669
---------- --------- --------- ---------
Total............................... 1,835,501 1,842,433 3,711,168 3,827,694
---------- --------- --------- ---------
Operating loss................................. (376,161) (116,782) (689,197) (387,986)
---------- --------- --------- ---------
Other income (expenses):
Interest expense........................ (124,588) (121,260) (255,166) (249,745)
Other income............................ - 1,765 - 2,439
---------- --------- --------- ---------
Net loss....................................... (500,749) (236,277) (944,363) (635,292)
Preferred stock dividends and
accretion (Note 4)...................... (35,941) (52,291) (90,647) (109,081)
Gain on conversion of Series B
Stock (Note 5).......................... 119,940 - 119,940 -
---------- --------- --------- ---------
Net loss attributable to
common stockholders..................... $ (416,750) $ (288,568) $ (915,070) $ (744,373)
========== ========= ========= ===========
Weighted average common shares
outstanding............................. 4,257,475 4,150,325 4,218,162 4,150,163
========== ========= ========= =========
Per share data:
Basic loss attributable to common
stockholders............................ $ (0.10) $ (0.07) $ (0.22) $ (0.18)
====== ====== ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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JUST TOYS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss...................................................... $ (944,363) $ (635,292)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 408,195 479,425
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable................................ (362,567) (232,791)
Inventories........................................ (135,587) (478,170)
Prepaid and refundable income taxes................ - (9,274)
Prepaid expenses and other current assets.......... (54,210) (188,969)
Other assets....................................... 8,553 (8,259)
Increase (decrease) in:
Accounts payable................................... (253,796) 82,598
Accrued liabilities................................ (118,034) (385,645)
--------- ---------
Net cash used in operating activities ................. (1,451,809) (1,376,377)
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment...................... (288,532) (297,205)
--------- ---------
Net cash used in investing activities.................. (288,532) (297,205)
--------- ---------
Cash flows from financing activities:
Borrowings from factor..................................... 2,129,010 1,780,440
Cash paid in connection with conversion
of Series B Stock (Note 5)............................... (114,621) -
Dividends paid............................................. (55,331) (70,748)
-------- --------
Net cash provided by financing activities.............. 1,959,058 1,709,692
--------- ---------
Net increase in cash.............................................. 218,717 36,110
Cash - beginning of period........................................ 213,789 153,707
------- -------
Cash - end of period.............................................. $ 432,506 $ 189,817
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
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JUST TOYS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies
In the opinion of management, the accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. 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 fair presentation have been included. The results of operations
for the interim periods are not necessarily indicative of the results for a full
year. These consolidated financial statements should be read in conjunction with
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
(1) Basic loss per share attributable to common stockholders:
Basic loss per share was calculated by dividing net loss attributable
to common stockholders by the weighted average number of shares of Common Stock
outstanding. All options, warrants and preferred stock issued by the Company
were antidilutive.
(2) Comprehensive Income:
As of January 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income ("SFAS 130"). SFAS 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Company's financial statements.
(3) Reclassifications:
Certain previously reported amounts have been reclassified to conform
to the 1998 presentation and that of the Form 10-K for the year ended December
31, 1997.
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Note 2 - Accounts Receivable
Accounts receivable and amounts due from factor consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
-------------------------------- -------------
1998 1997 1997
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Accounts receivable - factor......................... $ 1,858,613 $ 2,503,513 $ 5,047,225
Borrowings from factor............................... (1,858,613) (2,503,513) (5,023,147)
----------- ----------- -----------
Net due from factor.................................. - - 24,078
Accounts receivable - trade.......................... 589,345 916,369 761,700
---------- --------- ----------
Total accounts receivable......................... 589,345 916,369 785,778
Less: Accounts receivable allowances................. (129,000) (396,000) (688,000)
--------- --------- ----------
Total accounts receivable, net of
allowances.................................... $ 460,345 $ 520,369 $ 97,778
========= ========= =========
</TABLE>
Note 3 - Inventories
The inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
------------------------------ -------------
1998 1997 1997
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Finished goods....................................... $ 2,295,443 $ 3,076,285 $ 2,643,941
Material components and supplies..................... 1,554,125 1,515,185 1,070,040
--------- --------- ----------
Total............................................. $ 3,849,568 $ 4,591,470 $ 3,713,981
========= ========= =========
</TABLE>
Note 4 - Stockholders' Equity
Stockholders' equity consists of the following:
<TABLE>
<CAPTION>
Additional Paid-
Preferred Common in Accumulated
Stock Stock Capital Deficit Total
-------- ------ --------------- ------------ -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1997............. $ 120,000 $ 41,782 $ 29,849,043 $(24,051,966) $ 5,958,859
Conversion of Series B Stock to
Common Stock (Note 5).............. 2,270 219,137 221,407
Net loss (unaudited).................. (944,363) (944,363)
Preferred Stock dividends and
accretion.......................... (90,647) (90,647)
Gain on conversion of Series B
Stock (Note 5)..................... 119,940 119,940
---------- --------- ------------ ------------- -----------
Balance June 30, 1998
(unaudited)........................ $ 120,000 $ 44,052 $ 30,068,180 $ (24,967,036) $ 5,265,196
---------- --------- ------------ ------------- -----------
</TABLE>
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Note 5 - Conversion of Series B Stock
On April 9, 1998, the Company offered to pay and exchange $0.5075 in
cash and one share of the Company's Common Stock for each share of Series B
Stock (the "Exchange Offer"). The holders of 225,855 shares of Series B Stock
accepted the Exchange Offer and the Company paid $114,621 in cash and issued
225,855 shares of Common Stock in exchange for the 225,855 shares of Series B
Stock. The market value of the Common Stock and carrying value of the Series B
Stock on the date of exchange amounted to $219,045 and $453,606, respectively.
The total consideration paid by the Company was less than the carrying value of
the Series B Stock by $119,940, and has been accounted for as a gain on
conversion of the Series B Stock.
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<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains forward looking information
and describes the expectations of the Company concerning future business
conditions and the outlook for the Company based on currently available
information. Wherever possible, the Company has identified these forward looking
statements by words such as "anticipates," "believes," "estimates," "expects"
and similar expressions. These forward looking statements are subject to risks
and uncertainties which could cause the Company's actual results or performance
to differ materially from those expressed in these statements. These risks and
uncertainties include the following: reliance on manufacturers based in China,
seasonality and quarterly fluctuations, government regulation, changes in
consumer preferences, reliance on new product introduction, dependence of a
limited number of customers, customer inventory management, the impact of
competition on revenues, margins and pricing and other risks and uncertainties
as may be disclosed from time to time in the Company's public announcements and
filings with the Securities and Exchange Commission. The Company assumes no
obligation to update publicly any forward looking statements, whether as a
result of new information, future events or otherwise.
Results of Operations
Three Months Ended June 30, 1998 and 1997
Net sales for the three months ended June 30, 1998 decreased 25.3% to
$3,617,000 from $4,843,000 in the comparable period in 1997. The decrease in
sales is due primarily to (a) a change in the Company's product mix related to
the acquisition in 1996 of the doll carriage and stroller product lines and
PlayTable product lines which are seasonal in nature and (b) the significant
reduction in inventories and increased seasonality of purchasing patterns at a
number of the Company's larger customers during the three months ended June 30,
1998. Net sales of the Company's Sports toys decreased 40.2% to $1,585,000
during the second quarter of 1998 from $2,651,000 in the comparable period in
1997. Net sales of the Company's Toys category decreased 7.3% to $2,032,000 in
the second quarter of 1998 from $2,192,000 in the same period of 1997. The
change in sales in these categories was primarily attributable to (a) changes in
product mix which have resulted from the Company selectively discontinuing
products it believes will not achieve an acceptable return on investment in the
future and (b) the Company's investments in new products, primarily in the Toys
category.
Gross profit as a percentage of net sales increased to 40.4% for the
three months ended June 30, 1998 compared to 35.6% for the three months ended
June 30, 1997. This increase resulted primarily from (a) a change in product mix
which is a result of the Company selectively discontinuing products it believes
will not achieve an acceptable return on investment in the future and (b) the
Company's efforts to market products with a higher gross profit. Gross profit
decreased 15.4% to $1,459,000 in the second quarter of 1998 from $1,725,000 in
the comparable period in 1997 as a result of the decrease in sales.
The Company's net sales and gross margin, as a percentage of sales, is
dependent on its mix of business during a given time period. Variables include
such factors as whether merchandise is shipped from a domestic warehouse or
directly from the Orient, whether the merchandise is purchased from overseas
sources or is produced domestically and the specific blend of products shipped
to the Company's customers.
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<PAGE>
Royalty expense increased as a percentage of net sales to 4.1% in the
period ended June 30, 1998 from 3.4% for the period ended June 30, 1997
primarily due to an increase in net sales of products subject to royalties,
which are a result of the Company's investment in new products.
Operating loss was $376,000 in the three months ended June 30, 1998
compared to an operating loss of $117,000 in the comparable period in 1997. This
difference is primarily attributable to the decrease in sales and gross profit.
Net loss was $501,000 in the second quarter of 1998 as compared to
$236,000 in the comparable period in 1997. During the second quarter of 1998 and
1997, the Company recorded the dividends paid on its preferred stock outstanding
and the accretion of the Series B Stock issued in 1996 to its redemption value
as a change in stockholder's equity and deducted these expenses in computing net
loss attributable to common stockholders. Net loss attributable to common
stockholders during the second quarter of 1998 was reduced by a gain on the
conversion of Series B Stock of $119,940. Basic loss per share attributable to
common stockholders increased to $0.10 per share from $0.07 per share on
4,257,000 and 4,150,000 weighted average shares outstanding in the three months
ended June 30, 1998 and 1997, respectively.
Six Months Ended June 30, 1998 and 1997
Net sales for the six months ended June 30, 1998 decreased 19.4% to
$7,492,000 from $9,301,000 in the comparable period in 1997. The decrease in
sales is due primarily to (a) a change in the Company's product mix related to
the acquisition in 1996 of the doll carriage and stroller product lines and
PlayTable product lines which are seasonal in nature and (b) the significant
reduction in inventories and increased seasonality of purchasing patterns at a
number of the Company's larger customers during the six months ended June 30,
1998. Net sales of the Company's Sports toys decreased 47.3% to $2,731,000
during the first six months of 1998 from $5,181,000 in the comparable period in
1997. This decrease was offset by an increase in the Toys category of 15.6% to
$4,761,000 in the first six months of 1998 from $4,120,000 in the same period of
1997. The change in sales in these categories was primarily attributable to (a)
changes in product mix which have resulted from the Company selectively
discontinuing products it believes will not achieve an acceptable return on
investment in the future and (b) the Company's investments in new products,
primarily in the Toys category.
Gross profit as a percentage of net sales increased to 40.3% for the
six months ended June 30, 1998 compared to 37.0% for the six months ended June
30, 1997. This increase resulted primarily from (a) a change in product mix
which is a result of the Company selectively discontinuing products it believes
will not achieve an acceptable return on investment in the future and (b) the
Company's efforts to market products with a higher gross profit. Gross profit
decreased 12.1% to $3,022,000 in the first six months of 1998 from $3,440,000 in
the comparable period in 1997 as a result of the decrease in sales.
The Company's net sales and gross margin, as a percentage of sales, is
dependent on its mix of business during a given time period. Variables include
such factors as whether merchandise is shipped from a domestic warehouse or
directly from the Orient, whether the merchandise is purchased from overseas
sources or is produced domestically and the specific blend of products shipped
to the Company's customers.
Merchandising, selling warehousing and distribution expenses decreased
2.2% to $1,723,000 for the first six months of 1998 compared to $1,762,000 in
the comparable 1997 period. The decrease in expenses
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<PAGE>
is primarily attributable to lower sales commissions associated with the
decreased sales for the period ended June 30, 1998.
Royalty expense increased as a percentage of net sales to 4.1% in the
period ended June 30, 1998 from 3.5% for the period ended June 30, 1997
primarily due to an increase in net sales of products subject to royalties,
which are a result of the Company's investment in new products.
General and administrative expenses decreased 3.4% to $1,679,000 for
the first six months of 1998 from $1,738,000 in the comparable period ended in
1997. As a result of the cost controls implemented in 1997, the Company had a
decrease in payroll and other overhead costs during the period.
Operating loss was $689,000 in the six months ended June 30, 1998
compared to an operating loss of $388,000 in the comparable period in 1997. This
difference is primarily attributable to the decrease in sales and gross profit.
Net loss was $944,000 in the first six months of 1998 as compared to
$635,000 in the comparable period in 1997. During the first six months of 1998
and 1997, the Company recorded the dividends paid on its preferred stock
outstanding and the accretion of the Series B Stock issued in 1996 to its
redemption value as a change in stockholder's equity and deducted these expenses
in computing net loss attributable to common stockholders. Net loss attributable
to common stockholders during the six months ended June 30, 1998 was reduced by
a gain on the conversion of Series B Stock of $119,940. Basic loss per share
attributable to common stockholders increased to $0.22 per share from $0.18 per
share on 4,218,000 and 4,150,000 weighted average shares outstanding in the six
months ended June 30, 1998 and 1997, respectively.
Backlog
Total order backlog at June 30, 1998 and 1997 was approximately
$2,364,000 and $3,599,000, respectively. The Company expects substantially all
of such orders to be filled during 1998. Cancellations may materially reduce the
amount of sales realized from the Company's backlog. The business of the Company
is characterized by customer order patterns which vary from one year to the next
largely because of the different levels of consumer acceptance of a product
line, product availability, marketing strategies, inventory levels of retailers
and differences in overall economic conditions. The use of just-in-time/quick
response inventory techniques and replenishment programs by larger retailers has
resulted in fewer orders being placed in advance of shipment and more orders for
immediate delivery. This distorts the comparisons of unshipped orders at any
given date. The Company expects these trends to continue. Additionally, it is a
general industry practice that orders are subject to amendment or cancellation
by customers prior to shipment. Therefore, comparisons of unshipped orders in
any specific period in any given year with those same periods in preceding years
are not necessarily indicative of sales for an entire year. Order backlog is
also impacted by a shift in the Company's revenues to the second half of the
year with fourth quarter revenues becoming increasingly significant. The Company
does not consider total order backlog to be a meaningful indicator of future
sales.
-9-
<PAGE>
Liquidity and Capital Resources
The Company's working capital at June 30, 1998 was $2,039,000 as
compared to $3,025,000 at December 31, 1997.
Inventory levels were $742,000 lower at June 30, 1998 compared with
June 30, 1997 as a result of the implementation of new inventory control systems
and the Company selectively discontinuing products it believes will not achieve
an acceptable return on investment in the future.
Cash used in operating activities for the six months ended June 30,
1998 was $1,452,000 as compared with $1,376,000 in the comparable period in
1997. The increase in cash needs was caused by the increased seasonality of the
Company's product lines and the decreased sales for the first six months of the
year.
Cash used in investing activities was $289,000 and $297,000 in the six
month periods ended June 30, 1998 and 1997, respectively, which was primarily
attributable to capital expenditures for fixed assets, including molds and
tooling for new products.
Cash provided by financing activities was $1,959,000 and $1,710,000 in
the first six months of 1998 and 1997, respectively, primarily from borrowings
from the Company's factor.
The Company's factoring agreement with Milberg Factors, Inc.
("Milberg") provides for advances equal to the lesser of 85% of total accounts
receivable or $5,000,000. The factoring charge is 0.65% of receivables. Advances
bear interest at the rate of prime plus one percent. Milberg has also agreed to
advance to the Company, at the Company's request, the lesser of $2,000,000 or
50% of the Company's inventory located in the United States. Milberg has also
agreed to advance to the Company additional funds during 1998 based upon cash
flow projections approved by Milberg. Such advances will also bear interest at
the rate of prime plus one percent. Additionally, the factoring arrangement with
Milberg is secured by a mortgage on the real property owned by the Company's
manufacturing subsidiary.
During the six months ended June 30, 1998, 227,050 shares of Series B
Stock were converted into an equivalent number of shares of Common Stock.
The Company believes that its cash flow from operations and available
borrowings will be adequate to meet its obligations for the ensuing year.
Seasonality
The toy industry is typically seasonal in nature due to the heavy
demand for toy products during the Christmas season. During the past several
years, the Company has experienced a shift in its revenues to the second half of
the year with fourth quarter revenues becoming increasingly significant. The
Company expects that this trend will continue due to industry changes and due to
changes to its product mix related to the doll carriage and stroller product
lines and the PlayTable product lines which were acquired in 1996. This
concentration increases the risk of (a) underproduction of popular items, (b)
overproduction of less popular items and (c) failure to achieve tight and
compressed shipping schedules.
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<PAGE>
Other Information
Effective February 23, 1998, new continued listing standards were
adopted for securities trading on the Nasdaq National Market. The Company's
Common Stock is not in compliance with two of the new requirements, specifically
maintenance of (i) a one dollar per share closing bid price and (ii) a
$5,000,000 market value of public float. Under applicable Nasdaq rules, the
Company was advised on February 27, 1998 of its non-compliance with these two
standards and was given until May 28, 1998 to achieve compliance. The Company
has not regained compliance with these two standards.
To be eligible for listing on the Nasdaq SmallCap Market, the Company's
stock must, among other things, maintain a one dollar per share minimum bid
price for at least 10 consecutive trade days. The Company has submitted a plan
to Nasdaq providing for the taking of action designed to achieve compliance with
the one dollar per share minimum bid price requirement. The action to be taken
includes a 1 for 2 reverse stock split of the Company's Common Stock ("Reverse
Split"). The Company believes that the Reverse Split may have the effect of
increasing the market price per share of the Company's Common Stock allowing the
Common Stock to be included in the Nasdaq SmallCap Market. A vote of the
Company's stockholders to approve the Reverse Split will be held at the
Company's 1998 Annual Meeting which is scheduled for September 1, 1998. If
approved, the Reverse Split is expected to be implemented on or about September
2, 1998.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Certificate of Incorporation, incorporated by reference to Exhibit
3.1 to the Registration Statement on Form S-1 (File No. 33-50878).
3.2 Certificate of Amendment of Certificate of Incorporation
incorporated by reference to Exhibit 3.5 of the Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission on
November 8, 1996 (the "1996 3rd Quarter 10-Q").
3.3 Certificate of Designations, Preferences and Rights of the Series
A Convertible Redeemable Preferred Stock (included in Exhibit 4.1
hereof).
3.4 Certificate of Designations, Preferences and Rights of the Series
B Convertible Redeemable Preferred Stock (included in Exhibit 4.2
hereof).
3.5 Amended and Restated By-laws incorporated by reference to Exhibit
3.4 to the 1996 3rd Quarter 10-Q.
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<PAGE>
4.1 Certificate of Designations, Preferences and Rights of the Series
A Convertible Redeemable Preferred Stock, incorporated by
reference to Exhibit 4 of the Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission on November 7, 1995.
4.2 Certificate of Designations, Preferences and Rights of the Series
B Convertible Redeemable Preferred Stock, incorporated by
reference to Exhibit 3.2 of the Current Report on Form 8-K filed
with the Securities and Exchange Commission on July 10, 1996 (the
"July 1996 Form 8- K").
4.3 Form of Warrant, dated June 26, 1995, issued to various parties in
respect of the aggregate of 60,000 shares of the Company's Common
Stock, incorporated by reference to Exhibit 4.2 of the July 1996
Form 8-K.
+27 Financial Data Schedule
- --------------------------
* Filed herewith
+ Filed with the Securities and Exchange Commission only pursuant to
Article 5 of Regulation S-X.
(b) Reports on Form 8-K -- None
-12-
<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 thereunto duly authorized.
Dated: August 14, 1998
JUST TOYS, INC.,
a Delaware corporation
By: /s/ Barry Shapiro
----------------------------
Barry Shapiro
Chief Executive Officer
By: /s/ David Schwartz
----------------------------
David Schwartz
Chief Financial Officer and
Principal Accounting Officer
-13-
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