<PAGE>
===============================================================================
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 March 31, 1999
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
---- ----
As of May 12, 1999, there were 2,238,869 shares outstanding of the Registrant's
Common Stock, par value $.01 per share.
===============================================================================
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
INDEX
Page
----
Part I - FINANCIAL INFORMATION
Item 1 Financial Statements:
Consolidated Balance Sheets - March 31, 1999
and 1998 (unaudited) and December 31, 1998...................... 1
Consolidated Statements of Operations (unaudited)
for the Three Months Ended March 31, 1999 and 1998.............. 2
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended March 31, 1999 and 1998.............. 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
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
--------------------------------- ------------
1999 1998 1998
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash ............................................... $ 210,130 $ 220,536 $ 267,292
Accounts receivable, net of allowances of $405,000,
$267,000 and $458,000 (Note 2) .................. 29,958 89,550 364,791
Inventories (Note 3) ............................... 2,605,237 3,976,102 2,711,685
Prepaid expenses and other current assets .......... 2,051,388 1,913,669 1,871,758
------------ ------------ ------------
Total current assets ............................ 4,896,713 6,199,857 5,215,526
Property and equipment, at cost, net of accumulated
depreciation and amortization ...................... 2,660,861 3,253,680 2,712,369
Goodwill, net of accumulated amortization .............. 533,409 603,451 544,296
Other assets ........................................... 120,425 114,276 131,020
------------ ------------ ------------
TOTAL ....................................... $ 8,211,408 $ 10,171,264 $ 8,603,211
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to factor ...................................... $ 1,176,677 $ 1,367,330 $ 308,836
Accounts payable ................................... 1,606,470 1,742,389 1,778,177
Accrued liabilities ................................ 587,895 562,140 964,964
------------ ------------ ------------
Total current liabilities ....................... 3,371,042 3,671,859 3,051,977
Series B Convertible Redeemable Preferred
Stock, 650,000 shares authorized,
136,684, 520,659 and 137,183 shares issued
and outstanding (liquidation value $495,480,
$1,887,389 and $497,288) (Note 4) .................. 293,982 1,036,503 289,405
------------ ------------ ------------
Total liabilities and Series B Stock ............ 3,665,024 4,708,362 3,341,382
Commitments and contingencies...........................
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 in 1997
(liquidation value $120,000) ............ -- 120,000 --
Common stock, par value $.01 per share, 15,000,000
shares authorized, 2,238,869, 2,089,681 and
2,238,619 issued and outstanding ................ 22,389 20,897 22,386
Additional paid-in capital ......................... 30,209,843 29,872,291 30,208,779
Accumulated deficit ................................ (25,685,848) (24,550,286) (24,969,336)
------------ ------------ ------------
Total stockholders' equity ...................... 4,546,384 5,462,902 5,261,829
------------ ------------ ------------
TOTAL ....................................... $ 8,211,408 $ 10,171,264 $ 8,603,211
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-1-
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Net sales ....................................... $ 2,817,778 $ 3,875,635
Cost of goods sold .............................. 1,756,047 2,313,004
----------- -----------
Gross profit .................................... 1,061,731 1,562,631
----------- -----------
Expenses:
Merchandising, selling, warehousing and
distribution ............................. 881,431 870,721
Royalties ................................... 111,058 160,517
General and administrative .................. 664,337 844,429
----------- -----------
Total ................................ 1,656,826 1,875,667
----------- -----------
Operating loss .................................. (595,095) (313,036)
----------- -----------
Other income (expenses):
Interest expense ............................ (107,102) (130,578)
----------- -----------
Net loss ........................................ (702,197) (443,614)
Preferred stock dividends and accretion (Note 4) (14,315) (54,706)
----------- -----------
Net loss attributable to common stockholders .... $ (716,512) $ (498,320)
=========== ===========
Weighted average common shares outstanding ...... 2,238,697 2,089,207
=========== ===========
Per share data:
Basic and dilutive loss per share attributable to
common stockholders ............................. $ (0.32) $ (0.24)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................ $ (702,197) $ (443,614)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ................ 193,231 203,752
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable ...................... 334,833 8,228
Inventories .............................. 106,448 (262,121)
Prepaid expenses and other current assets (179,630) (163,512)
Other assets ............................. 10,595 259
Increase (decrease) in:
Accounts payable ......................... (171,707) (110,857)
Accrued liabilities ...................... (377,069) (335,013)
----------- -----------
Net cash used in operating activities ........ (785,496) (1,102,878)
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment ............ (130,836) (222,875)
----------- -----------
Net cash used in investing activities ........ (130,836) (222,875)
----------- -----------
Cash flows from financing activities:
Borrowings from factor ........................... 867,841 1,367,330
Dividends paid ................................... (8,671) (34,830)
----------- -----------
Net cash provided by financing activities .... 859,170 1,332,500
----------- -----------
Net (decrease) increase in cash ......................... (57,162) 6,747
Cash - beginning of period .............................. 267,292 213,789
----------- -----------
Cash - end of period .................................... $ 210,130 $ 220,536
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
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, 1998.
(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 1999 presentation and that of the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
-4-
<PAGE>
Note 2 - Accounts Receivable
- ----------------------------
Accounts receivable and amounts due from factor consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------------- ------------
1999 1998 1998
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Accounts receivable - factor ....... $ 1,782,025 $ 2,146,261 $ 4,635,787
Borrowings from factor ............. (1,782,025) (2,146,261) (4,635,787)
----------- ----------- -----------
Net due from factor ................ -0- -0- -0-
Accounts receivable - trade ........ 434,958 356,550 822,791
----------- ----------- -----------
Total accounts receivable ....... 434,958 356,550 822,791
Less: Accounts receivable allowances (405,000) (267,000) (458,000)
----------- ----------- -----------
Total accounts receivable, net of
allowances .................. $ 29,958 $ 89,550 $ 364,791
=========== =========== ===========
</TABLE>
Note 3 - Inventories
- --------------------
The inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
-------------------------------- ------------
1999 1998 1998
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Finished goods ................. $1,719,151 $2,560,263 $2,049,996
Material components and supplies 886,086 1,415,839 661,689
---------- ---------- ----------
Total ....................... $2,605,237 $3,976,102 $2,711,685
========== ========== ==========
</TABLE>
Note 4 - Stockholders' Equity
- -----------------------------
Stockholders' equity consists of the following:
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated
Stock Capital Deficit Total
--------- ------------ ------------ -----
<S> <C> <C> <C> <C>
Balance December 31, 1998.................... $ 22,386 $ 30,208,779 $ (24,969,336) $ 5,261,829
Conversion of Series B Stock to
Common Stock................................ 3 1,064 1,067
Net loss (unaudited)......................... (702,197) (702,197)
Preferred Stock dividends and
accretion................................... (14,315) (14,315)
--------- ------------ ------------- -----------
Balance March 31, 1999
(unaudited)................................. $ 22,389 $ 30,209,843 $ (25,685,848) $ 4,546,384
========= ============ ============= ===========
</TABLE>
-5-
<PAGE>
Note 5 - Segment Information
- ----------------------------
Information regarding the Company's business segments for the three
month period ended March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------------------------- -----------------------------
United States Hong Kong United States Hong Kong
------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales ................. $ 2,270,360 $ 547,418 $ 2,533,622 $ 1,342,013
Operating income (loss).... $ (418,365) $ (176,730) $ (247,583) $ (65,453)
Identifiable assets (1).... $ 6,565,040 $ 1,638,703 $ 8,352,119 $ 1,811,480
</TABLE>
(1) Excludes corporate assets of $7,665 at March 31, 1999 and 1998,
respectively.
Note 6 - Subsequent Events
- --------------------------
On April 1, 1999, the Company was notified that the Nasdaq Review
Counsel had affirmed the Nasdaq Listings Qualifications Panel's October 29, 1998
decision to delist the Company's Common Stock from the Nasdaq Stock Market.
On April 7, 1999, the Company announced that it had signed a Letter of
Intent to acquire 4KIDZ, Inc. and 4KIDZ Worldwide, Ltd., two privately held toy
companies. The proposed acquisitions are subject to due diligence and the
Company obtaining necessary financing.
-6-
<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
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934. The statements appear in a number of places in this Quarterly Report and
include statements regarding the intent, belief or current expectations of Just
Toys, Inc. (the "Company") with respect to, among other things, future business
conditions and the outlook for the Company including trends affecting the
Company's business, financial condition and results of operations. Readers are
cautioned not to place undue reliance on these forward looking statements, which
speak only as of the date hereof. 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 the Far East, dependence on a limited number of major customers, competition
from major toy companies, seasonality and quarterly fluctuations, government
regulation, as well as the items set forth under "Business--Certain Cautionary
Factors" in the Company's December 31, 1998 Form 10-K. Wherever possible, the
Company has identified forward looking statements by words such as
"anticipates," "believes," "estimates," "expects" and similar expressions. 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 March 31, 1999 and 1998
Net sales for the three months ended March 31, 1999 decreased 27.3% to
$2,817,000 from $3,876,000 in the comparable period in 1998. The decrease in
sales is due primarily to a decline in first quarter shipments from Hong Kong.
The Company believes that this decline resulted from reductions in advance toy
orders from retailers due to concerns over inventory levels and weak fourth
quarter toy sales. Additionally, as part of its inventory reduction plan, during
the first quarter of 1999 the Company sold certain discontinued merchandise at
lower prices than in the comparable period of 1998.
Gross profit as a percentage of net sales decreased to 37.7% for the
three months ended March 31, 1999 compared to 40.3% for the three months ended
March 31, 1998. This decrease resulted primarily from the sale of certain
discontinued merchandise at lower profit margins in connection with the
inventory reduction plan. Gross profit decreased 32.1% to $1,061,000 in the
first quarter of 1999 from $1,563,000 in the comparable period in 1998 as a
result of the decrease in sales.
The Company's net sales and gross margin, as a percentage of sales, is
to some extent 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 Far East, whether the merchandise is purchased
from overseas sources or is produced domestically and the specific blend of
products shipped to the Company's customers.
Royalty expense decreased to $111,000 in the period ended March 31,
1999 from $161,000 in the period ended March 31, 1998 primarily due to the
decrease in net sales.
-7-
<PAGE>
General and administrative expenses decreased 21.3% to $664,000 for the
first quarter of 1999 from $844,000 in the comparable 1998 period. This decrease
resulted from (a) cost control measures being implemented by the Company and (b)
the reimbursement from an insurance carrier of certain legal expenses incurred
in previous years.
The Company had an operating loss of $595,000 in the three months ended
March 31, 1999 compared with an operating loss of $313,000 in the three months
ended March 31, 1998. This difference is primarily attributable to the decrease
in sales and gross profit.
Interest expense decreased to $107,000 in the first quarter of 1999 as
compared to $131,000 in the comparable period in 1998. This change was due
primarily to decreased borrowings from Milberg during the year as a result of
lower sales and inventory levels in the first quarter of 1999.
The Company had a net loss of $702,000 in the first quarter of 1999 as
compared to $444,000 in the first quarter of 1998. This difference is primarily
attributable to the decrease in sales and gross profit.
In 1999 and 1998, the Company deducted dividends paid on its preferred
stock outstanding, and the accretion of the Series B Stock issued in 1996 to its
redemption value as expenses in computing net loss attributable to common
stockholders.
Basic loss per share attributable to common stockholders for the three
months ended March 31, 1999 totaled $.32 per share compared to a basic loss per
share attributable to common stockholders of $.24 per share in the comparable
period in 1998 based upon 2,239,000 and 2,089,000 weighted average shares
outstanding in the three months ended March 31, 1999 and 1998, respectively.
Liquidity and Capital Resources
The Company's primary sources of liquidity and capital resources in
1999 and 1998 were funds provided from operations and its factoring agreement
with Milberg Factors, Inc. ("Milberg"). At March 31, 1999, working capital was
$1,526,000 compared to approximately $2,164,000 at December 31, 1998.
Cash used in operating activities in the first three months of 1999 was
$785,000 as compared with $1,103,000 in the comparable period in 1998. The
decrease in cash used in operations was a result of the decrease in sales and
gross profit in the first three months of 1999 which was partially offset by the
decline in inventory levels in 1999.
Cash used in investing activities was $131,000 and $223,000 for the
three months ended March 31, 1999 and 1998, respectively, which was primarily
attributable to capital expenditures for fixed assets, including molds and
tooling for new products.
Cash provided by financing activities was $859,000 and $1,333,000 in
the first three months of 1999 and 1998, respectively. Funds borrowed from
Milberg were used to finance the operations of the business.
The Company's factoring agreement with 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
-8-
<PAGE>
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. 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.
The Company believes that its cash flow from operations and available
borrowings will be adequate to meet its obligations for the ensuing year.
Year 2000
Many existing computer systems and programs process transactions using
two digits rather than four digits for the year of a transaction. Unless the
hardware and/or the software has been modified, a significant number of those
computer systems and programs may process a transaction with a date of the year
2000 as the year "1900", which could cause the system or the program to fail or
create erroneous results before, on or after January 1, 2000 (the "Y2K Issue").
The Company's Y2K project is intended to reduce the effects on the
Company's business of the Y2K Issue. The Y2K project involves: (i) an inventory
of Y2K items and an assessment of the Y2K compliance of items determined to be
material to the Company; (ii) upgrading or replacing material items that are
determined not to be Y2K compliant; (iii) testing material items and evaluating
Y2K compliance of the Company's customers, suppliers and contractors; and (iv)
designing and implementing contingency plans. All phases of the project are
being performed by the Company. Testing of the Company's computer systems and
programs as upgraded or replaced under conditions simulating actual use is
scheduled to be completed by June 1999.
The Company's principal computer systems consist of: (i) management
information software ("MIS") for accounts receivable, general ledger, payables,
order entry, sales reporting, inventory tracking and product distribution; (ii)
electronic data interchange ("EDI") for order-taking, invoicing and the like
between the Company and its major customers; (iii) systems involved in the
Company's manufacturing operations such as materials purchasing and
manufacturing scheduling; and (iv) local area network and personal computer
operating systems.
The Company installed a Y2K compliant MIS system at its headquarters in
early 1997 and at its Hong Kong subsidiaries in late 1998. Initial testing has
confirmed such systems' Y2K compliance and the Company plans further testing
throughout the Y2K project. In April 1999, the MIS systems at the Company's
United States manufacturing subsidiary were upgraded to Y2K compliant systems
and hardware. The Company estimates that the upgrading, replacing and testing of
such systems will cost approximately $25,000 which will be funded from cash flow
from operations. There is no assurance at this time that software upgrades or
replacements will resolve all of the Company's MIS Y2K issues.
The Company has installed and successfully tested Y2K compliant EDI
software. The Company is communicating with its customers, contractors and
suppliers to evaluate their EDI Y2K compliance. The Company believes that over
the upcoming months its major customers will continue to test their EDI systems
for internal, intermediary and supplier Y2K compliance. The Company would be
unable to receive and invoice orders from a customer through EDI if the customer
or its EDI intermediaries are not Y2K
-9-
<PAGE>
compliant. Although the Company does not transmit electronic orders to its
contractors and suppliers, delays or non-delivery of goods to the Company could
arise from Y2K Issues affecting their businesses.
The Company's initial tests have confirmed that the Company's local
area network operating system is Y2K compliant. The Company intends to upgrade
or replace any manufacturing operations software or other personal computer
based software found not to be Y2K compliant. The Company also intends to
replace personal computers found not to be Y2K compliant. The Company expects
the software upgrades and replacements and personal computer replacements to be
completed by June 1999 at an estimated cost of approximately $25,000.
The failure to correct a material Y2K Issue could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Particularly because
of the uncertainty of the Y2K readiness of customers, suppliers and contractors,
the Company is unable to assess at this time whether the consequences of the Y2K
Issue will have a material impact on the Company's results of operations,
liquidity or financial condition.
To date, the Company has not established a contingency plan for
possible Y2K Issues. Where needed, the Company intends to establish contingency
plans based on its testing and evaluation experience.
The Company estimates that the total cost of Y2K compliance will be
approximately $125,000. To date, the cost to the Company of Y2K compliance has
been approximately $75,000.
The cost of Y2K compliance and the referenced completion dates are
based on management's best estimates and may be updated as additional
information becomes available. Reference is made to the first paragraph of Item
2 of this report, which addresses forward-looking statements made by the
Company.
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 in the Company's product mix. 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.
Backlog
Total order backlog at March 31, 1999 and 1998 was approximately
$2,087,000 and $1,198,000, respectively. The Company expects substantially all
of its current backlog to be filled during 1999. 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
-10-
<PAGE>
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.
Other Information
On April 1, 1999, the Company was notified that the Nasdaq Review
Counsel had affirmed the Nasdaq Listings Qualifications Panel's October 29, 1998
decision to delist the Company's Common Stock from the Nasdaq Stock Market.
On April 7, 1999, the Company announced that it had signed a Letter of
Intent to acquire 4KIDZ, Inc. and 4KIDZ Worldwide, Ltd., two privately held toy
companies. The proposed acquisitions are subject to due diligence and the
Company obtaining necessary financing.
On May 11, 1999, the Company reported that Barry Shapiro, the Company's
President and Chief Executive Officer, will be resigning in order to take a
position with another toy company. The Company's Board of Directors promoted
Jerry Carroll, the Company's Vice President of Domestic Manufacturing, to the
position of Senior Vice President and Chief Operating Officer.
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).
-11-
<PAGE>
3.5 Amended and Restated By-laws incorporated by reference to
Exhibit 3.4 to the 1996 3rd Quarter 10-Q.
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 From 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.
*10 Form of stock option agreement, dated March 23, 1999, with
respect to options to purchase an aggregate of 92,000 shares of
the Company's Common Stock issued to certain directors of the
Company.
+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: May 14, 1999
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-
<PAGE>
JUST TOYS, INC.
20 LIVINGSTONE AVENUE
DOBBS FERRY, NEW YORK 10522
Stock Option
OPTION dated this 23rd day of March 1999 (the "Effective Date"),
granted by Just Toys, Inc., a Delaware corporation (hereinafter the "Company"),
to ________________ (the "Holder").
WHEREAS, the Company desires to afford the Holder the opportunity to
purchase shares of its Common Stock, par value $.01 per share (the "Common
Stock"), as hereinafter provided; and
WHEREAS, on March 23, 1999, the Board of Directors authorized the grant
of the option conferred hereby to the Holder.
NOW, THEREFORE, in consideration of the foregoing premises, the Company
hereby agrees as follows:
1. Grant of Option. The Company hereby grants to the Holder an option
(the "Option") to purchase up to an aggregate of _______ shares of Common Stock
(such number of shares being subject to adjustment as provided in paragraph 5
hereof) on the terms and subject to the conditions hereinafter set forth. The
Holder shall not have any of the rights of a shareholder of the Company with
respect to the shares of Common Stock covered by the Option except to the extent
that one or more certificates for such shares shall be delivered to him upon the
due exercise of the Option.
2. Purchase Price. The purchase price per share of the shares of Common
Stock to be issued upon exercise of the Option shall be $.391.
3. Expiration Date; Vesting of Option. (a) Subject to the provisions of
paragraph 5 hereof, the Option shall expire at 5:00 P.M. New York time on March
22, 2009 (the "Expiration Date"), and any portion of the Option remaining
unexercised after such time shall be canceled without further notice or action.
(b) The Option may be exercised in full or in installments at any
time after August 31, 1999 and prior to the Expiration Date.
4. Non-Transferability. The Option, and the rights and privileges
conferred hereby, are not transferable by the Holder other than by will or under
the laws of descent and distribution. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment or similar process
upon the Option, shall render the Option null and void.
<PAGE>
5. Adjustments. (a) New option rights may be substituted for the
Option, or the Company's duties as to the Option may be assumed, by a
corporation other than the Company, or by a parent or subsidiary of the Company
or such corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation or like occurrence in which the Company
is involved. Notwithstanding the foregoing or the provisions of Sections 5(b)
and (c) hereof, in the event such corporation, or parent or subsidiary of the
Company or such corporation, does not substitute new option rights for and
substantially equivalent to, the Option, or assume the Option, the Option shall
terminate and thereupon become null and void (i) upon dissolution or liquidation
of the Company, or similar occurrence, (ii) upon any merger, consolidation,
acquisition, separation, reorganization, or similar occurrence, where the
Company will not be a surviving entity or (iii) upon a transfer of substantially
all of the assets of the Company or more than 80% of the outstanding shares of
Common Stock in a single transaction; provided, however, that the Holder shall
have the right immediately prior to or concurrently with such dissolution,
liquidation, merger, consolidation, acquisition, separation, reorganization or
similar occurrence, to exercise any unexpired portion of the Option whether or
not then exercisable.
(b) The existence the Option shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issuance of Common Stock or subscription rights thereto, or
any merger or consolidation of the Company, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
(c) In the event that the Stock Option Committee (the
"Committee") of the Company's Board of Directors determines that any dividend or
other distribution (whether in the form of cash, Common Stock, other securities,
or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other corporate transaction or event affects the
Common Stock such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Option, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number of shares of Common Stock subject to the Option and (ii) the
exercise price with respect to the Option or, if deemed appropriate, make
provision for a cash payment to the Holder. Without limiting the generality of
the foregoing, any such adjustment shall be deemed to have prevented any
dilution and enlargement of the Holder's rights if the Holder receives in any
such adjustment rights which are substantially similar (after taking into
account the fact that the Holder has not paid the applicable exercise price) to
the rights the Holder would have
-2-
<PAGE>
received had he exercised the Option and become a shareholder of the Company
immediately prior to the event giving rise to such adjustment.
(d) Adjustments and elections under this Section 5 shall be made by
the Committee whose determination as to what adjustments, if any, shall be made
and the extent thereof shall be final, binding and conclusive.
6. Securities Regulations. (a) If at any time the Company's Board of
Directors shall in its discretion determine that the listing, registration or
qualification of the shares of Common Stock subject to the Option upon any
securities exchange or under any federal or state law, or the approval or
consent of any governmental regulatory body, is necessary or desirable in
connection with the issuance or purchase of such shares hereunder, the Option
shall not be exercisable in whole or in part unless such listing, registration,
qualification, approval or consent shall have been effected or obtained free
from any conditions not reasonably acceptable to the Company's Board of
Directors.
(b) Unless at the time of the exercise of the Option and the
issuance of the shares of Common Stock purchased by the Holder pursuant thereto
there shall be in effect as to such shares a Registration Statement under the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations of
the Securities and Exchange Commission (the "Commission"), the Holder shall
deliver to the Company at the time of exercise, a certificate in a form
reasonably satisfactory to the Company and/or counsel to the Company (i)
acknowledging that the shares of Common Stock so acquired may be "restricted
securities" within the meaning of Rule 144 promulgated under the Act; (ii)
certifying that he is acquiring the shares of Common Stock issuable to him upon
such exercise for the purpose of investment and not with a view to their sale or
distribution; and (iii) containing the Holder's agreement that such shares of
Common Stock may not be sold or otherwise disposed of except in accordance with
applicable provisions of the Act. The Company shall not be required to issue or
deliver certificates for shares of Common Stock until there shall have been
compliance with all applicable laws, rules and regulations, including rules and
regulations of the Commission.
7. Loans and Financial Accommodations to Holder. (a) In order to assist
the Holder with the acquisition of shares of Common Stock pursuant to the
exercise of the Option, including the payment of any taxes resulting from such
exercise, the Committee may, in its discretion authorize (i) the extension of a
loan to the Holder by the Company, (ii) the payment by the Holder of the
purchase price of such shares in installments, (iii) the guarantee by the
Company of a loan obtained by the Holder from a third party or (iv) such other
reasonable arrangements to facilitate the exercise of the Option in accordance
with applicable law.
(b) The Committee or the Board of Directors shall determine the
terms of any loan or guarantee made pursuant hereto, including the interest rate
and other terms of repayment thereof, and whether such loan or guarantee shall
be secured or unsecured. Each loan shall be evidenced by a promissory note
having a maximum term to maturity of not more than sixty (60)
-3-
<PAGE>
months. The maximum amount of any loan or guarantee shall be the option price
for shares purchased upon exercise of the Option plus (i) related interest
payments and (ii) the amount of tax liability incurred by the Holder as a result
of the exercise of the Option. No amount loaned to the Holder and no amount the
repayment of which is guaranteed by the Company shall be used for any purpose
other than payment of (i) the purchase price of shares acquired upon the
exercise of the Option, (ii) taxes attributable to such exercise and (iii)
interest.
8. Method of Exercising Option. (a) The Option (or installments
thereof) may be exercised by executing and delivering an Option Exercise Notice
in the form attached hereto as Exhibit A. Such notice shall be accompanied by
payment of the full purchase price as follows: (i) in cash (including check,
bank draft or money order) payable to the order of the Company or (ii) at the
discretion of the Committee, by delivering to the Company shares of Common Stock
already owned by the Holder, and having a fair market value (as defined in
paragraph 8(b)) on the date of exercise equal to the option price or a
combination of such shares and cash, or (iii) by any other proper method
specifically approved by the Committee.
(b) For the purpose of any computation under paragraph 8(a) of the
fair market value per share of Common Stock, such value shall be deemed to mean
(i) if the of Common Stock is quoted on the Nasdaq Stock Market or listed on a
national securities exchange, the closing price on such market or such exchange,
(ii) if the of Common Stock is not quoted on the Nasdaq Stock Market or listed
on a national securities exchange, the mean between the closing bid and asked
prices of publicly-traded shares of Common Stock in the over-the-counter market
as reported on the Nasdaq system or by any nationally recognized quotation
service selected by the Company, or (iii) if the Common Stock is not then
publicly-traded, as determined, in good faith, by the Committee, on the date of
exercise of the Option, or if such date shall not be a day during which shares
of Common Stock were traded, then on the next date immediately preceding such
date during which such trades were effected.
(c) If the Option should be exercised in part only, the Company
shall, upon surrender of the Option for cancellation, execute and deliver a new
option evidencing the rights of the Holder to purchase the balance of the shares
of Common Stock purchasable hereunder. All shares purchased hereunder shall be
deemed to be fully paid and non-assessable.
9. Conditions to Issuance of Shares. The Company shall not be required
to issue any certificate for shares of Common Stock purchased upon the exercise
of the Option unless such shares are at the time of such exercise listed on the
Nasdaq Stock Market or any national securities exchange on which the Common
Stock may then be listed.
10. General. (a) The Option shall be construed in accordance with the
laws of the State of New York and shall be binding upon the Company and inure to
the benefit of the Holder and any successors of the business of the Company,
but, except as provided for herein, neither the Option nor any rights or
privileges conferred hereunder shall be assignable by the Holder.
-4-
<PAGE>
(b) The Company may establish from time to time, appropriate
procedures to provide for payment or withholding of such income or other taxes
as may be required by law to be paid or withheld in connection with the exercise
of the Option. The Holder shall pay the Company all such amounts requested by
the Company to permit the Company to take any deduction available to it
resulting from the exercise of the Option. The Company may also establish, from
time to time, appropriate procedures to ensure that the Company receives prompt
advice concerning the occurrence of any event which may create, or affect the
timing or amount of, any obligation to pay or withhold any such taxes or which
may make available to the Company any tax deduction resulting from the
occurrence of such event, and the Holder will comply with all such procedures so
established.
IN WITNESS WHEREOF, the Company has caused the Option to be duly
executed by its duly authorized officer, on the day and year first above
written.
JUST TOYS, INC.
By: ____________________
Barry Shapiro
President
Agreed to and Accepted
______________________
-5-
<PAGE>
EXHIBIT A
---------
Form of Option Exercise Notice
------------------------------
----------- ---, -----
Just Toys, Inc.
20 Livingstone Avenue
Dobbs Ferry, NY 10522
Attention: President
Ladies and Gentlemen:
The undersigned hereby irrevocably elects to exercise the within
Option to the extent of purchasing ______ shares of Common Stock at $.391 per
share for an aggregate purchase price of $________. Enclosed is payment of the
purchase price as follows (check applicable box):
[ ] 1. Payment in Cash.
Check, bank draft or money order in the aggregate amount of the
exercise price, payable to Just Toys, Inc.
[ ] 2. Payment with Common Stock or Common Stock and Cash.
(a) Delivery of Certificate No.(s)__________ representing
shares of Common Stock, duly endorsed to Just Toys,
Inc. The shares of Common Stock evidenced by such
certificate have been valued at $ per share, in
accordance with Section 8(b) of the Option. I
understand that if the enclosed certificate represents
more full shares of Common Stock than are necessary to
cover the exercise price, the Company will deliver to
the undersigned a certificate covering the excess
number of full shares.
(b) Check, bank draft or money order for the remaining
exercise price of $_________, payable to Just Toys,
Inc. (required if a fractional share is involved or if
payment is being made only partly with Common Stock).
A-1
<PAGE>
Please have the certificate representing said shares forwarded
to me as indicated below.
Instructions: PLEASE PRINT YOUR NAME BELOW (FIRST, MIDDLE
INITIAL, LAST). If joint tenancy is requested, please mark the box below and
list both names in full.
Mr. ____________________________ Soc. Sec. # _________________
Mrs. ____________________________ Soc. Sec. # _________________
Miss ___________________________ Soc. Sec. # _________________
Ms. ___________________________ Soc. Sec. # _________________
Joint Tenancy [ ]
Street Address _________________________________________________
City __________________ State ______________ Zip Code __________
Very truly yours,
________________________
(Signature)
________________________
(Signature)
A-2
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 210,130
<SECURITIES> 0
<RECEIVABLES> 434,958
<ALLOWANCES> 405,000
<INVENTORY> 2,605,237
<CURRENT-ASSETS> 4,896,713
<PP&E> 7,604,287
<DEPRECIATION> 4,943,426
<TOTAL-ASSETS> 8,211,408
<CURRENT-LIABILITIES> 3,371,042
<BONDS> 0
293,982
0
<COMMON> 22,389
<OTHER-SE> 4,523,995
<TOTAL-LIABILITY-AND-EQUITY> 8,211,408
<SALES> 2,817,778
<TOTAL-REVENUES> 2,817,778
<CGS> 1,756,047
<TOTAL-COSTS> 1,656,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,102
<INCOME-PRETAX> (702,197)
<INCOME-TAX> 0
<INCOME-CONTINUING> (702,197)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (702,197)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
