PLAY CO. TOYS & ENTERTAINMENT CORP.
550 Rancheros Drive
San Marcos, CA 92069
PROXY STATEMENT
FOR
Annual Meeting of Stockholders
To Be Held on March 6, 1997
This proxy statement and the accompanying form of proxy have been
mailed on February 11, 1997 to the stockholders of record on December 27, 1996
of Play Co. Toys, a Delaware corporation (the "Corporation") in connection with
the solicitation of proxies by the Board of Directors of the Corporation for use
at the Annual Meeting to be held on March 6, 1997 and at any adjournment
thereof.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
Shares of the Corporation's common stock, par value $.01 per share
(the "Common Stock") represented by an effective proxy in the accompanying form
will, unless contrary instructions are specified in the proxy, be voted FOR the
election of the three (3) persons nominated by the Board of Directors as
Directors.
Any such proxy may be revoked at any time before it is voted.
A stockholder may revoke this proxy by notifying the Secretary of the
Corporation either in writing prior to the Annual Meeting or in person at the
Annual Meeting, by submitting a proxy bearing a later date or by voting in
person at the Annual Meeting. An affirmative vote of a plurality of the shares
of Common Stock, present in person or represented by proxy, at the Annual
Meeting and entitled to vote thereon is required to elect the Directors. A
stockholder voting through a proxy who abstains with respect to the election of
Directors is considered to be present and entitled to vote on the election of
directors at the meeting, and is in effect a negative vote, but a stockholder
(including a broker) who does not give authority to a proxy to vote, or
withholds authority to vote, on the election of Directors shall not be
considered present and entitled to vote on the election of Directors. A
stockholder voting through a proxy who abstains with respect to approval of any
other matter to come before the meeting is considered to be present and entitled
to vote on that matter and is in effect a negative vote, but a stockholder
(including a broker) who does not give authority to a proxy to vote, or
withholds authority to vote, on any such matter shall not be considered present
and entitled to vote thereon.
<PAGE>
The Corporation will bear the cost of the solicitation of proxies by
the Board of Directors. The Board of Directors may use the services of its
Executive Officers and certain Directors to
solicit proxies from stockholders in person and by mail, telegram and telephone.
Arrangements may also be made with brokers, fiduciaries, custodians, and
nominees to send proxies, proxy statements and other material to the beneficial
owners of the Common Stock held of record by such persons, and the Corporation
may reimburse them for reasonable out-of-pocket expenses incurred by them in so
doing.
The Corporation's annual report on Form 10-KSB for the fiscal year
ended March 31, 1996, including audited financial statements, and the
Corporation's quarterly report on Form 10-QSB for the nine months ended December
31, 1996, are annexed to this Proxy Statement.
The principal executive offices of the Corporation are located at 550
Rancheros Drive, San Marcos, CA 92069 the Corporation's telephone number is
(619) 471-4505.
Independent Public Accountants
The Board of Directors of the Corporation has selected BDO Seidman,
LLP, as independent certified public accountants of the Corporation for the
fiscal year ending March 31, 1996. Stockholders are not being asked to approve
such selection because such approval is not required. The audit services
provided by BDO Seidman, LLP consisted of examination of financial statements,
services relative to filings with the Securities and Exchange Commission, and
consultation in regard to various accounting matters. No representative of BDO
Seidman, LLP is expected to be present at the annual meeting. Any appropriate
questions to the Corporation's auditors should be made through the Corporation.
RECENT DEVELOPMENTS
On January 16, 1997 Play Co. Toys & Entertainment Corp. (the "Company")
announced the acquisition of substantially all of the assets of Toys
International. The acquisition in principal included the assignment to the
Company of the three store leases held by Toys and all of its inventory. Toys
through its three locations in fiscal 1996 generated approximately $3,700,000 in
revenues with an estimated net profit of approximately $400,000. Included in the
leased properties is a 5,000 square ft. facility in the South Coast Plaza Mall,
one of the premiere malls in the country, in which this store generated close to
$2,000,000 in revenues. Richard Brady, the Company's president stated, "The
acquisition of Toys International, is a tremendous step in the right direction
for the Company, in refocusing its product lines to include not only an
educational and interactive format but to now also include highly profitable
specialty items.
Gayle Hoepner, the president of Toys International shall continue on as
a consultant to the Company for a period of ninety days and will accompany
Richard Brady to the toy fairs in Germany and New York this month, in order to
facilitate a smooth transfer.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The securities entitled to vote at the meeting are the Common Stock,
par value $.01 par value per share. The presence, in person or by proxy, of a
majority of shares entitled to vote will constitute a quorum for the meeting.
Each share of Common Stock entitles its holder to one vote on each matter
submitted to the stockholders. The close of business on December 27, 1996 has
been fixed as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting and any adjournment thereof. At that date,
__________ shares of Common Stock were outstanding. Voting of the shares of
Common Stock is on a non-cumulative basis.
The following table sets forth information as of December 27, 1996,
with respect to the beneficial ownership of shares of Common Stock by (i) each
person (including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), known by the Corporation to be the
owner of more than 5% of the outstanding shares of Common Stock, (ii) each
Director, and (iii) all Officers and Directors as a group. Except to the extent
indicated in the footnotes to the following table, each of the individuals
listed below possesses sole voting power with respect to the shares of Common
Stock listed opposite his name.
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percentage of Class (%)
<S> <C> <C>
Mister Jay Fashions International, Inc. (1) 6,680,000 ___
448 West 16th Street
New York, NY 10011
Multimedia Concepts, International, Inc. ___ ___
448 West 16th
New York, NY 10011
Richard Brady 125,662 ___
c/o Play Co. Toys
550 Rancheros Drive
San Marcos, CA 92069
All Officers and Directors as ___ ___
a group (4 persons) (1)
</TABLE>
Certain Reports
No person who, during the fiscal year ended March 31, 1995, was a
Director, Officer or beneficial owner of more than ten percent of the Common
Stock (which is the only class of securities of the Corporation registered under
Section 12 of the Securities Exchange Act of 1934 (the "Act") (a "Reporting
Person") failed to file on a timely basis, reports required by Section 16 of the
Act during the most recent fiscal year or prior years, except Angela Burnett did
not file a Form 4 with respect to the receipt of stock options in June 1994. Ms.
Burnett filed a Form 5 on September 28, 1995. The foregoing is based solely upon
a review by the Corporation of Forms 3 and 4 during the most recent fiscal year
as furnished to the Corporation under Rule 16a-3(d) under the Act, and Forms 5
and amendments thereto furnished to the Corporation with respect to its most
recent fiscal year, and any representation received by the Corporation from any
reporting person that no Form 5 is required, except as described herein.
It is expected that the following will be considered at the meeting
and action taken thereon.
I. ELECTION OF DIRECTORS
The Board of Directors currently consists of five members elected for
a term of one year and until their successors are duly elected and qualified. An
affirmative vote of a plurality of the shares of Common Stock, present in person
or represented by proxy at the Annual Meeting, and entitled to vote thereon is
required to elect the Directors. All proxies received by the Board of Directors
will be voted for the election as Directors of the nominees listed below if no
direction to the contrary is given. In the event any nominee is unable to serve,
the proxy solicited hereby may be voted, in the discretion of the proxies, for
the election of another person in his stead. The Board of Directors knows of no
reason to anticipate this will occur.
The following table sets forth as of February , 1997 with respect to the
three nominees for election as Directors of the Corporation:
<TABLE>
<CAPTION>
Position with Corporation; Continually
Name Principal Occupation and Age Since
<S> <C> <C>
Harold Rashbaum Chairman of the Board, 70 1996
Ilan Arbel Director, 42 1993
Sheikhar Boodram Director; 34 1996
</TABLE>
All Directors hold office until the next annual meeting of stockholders
or until their successors are duly elected and qualified. Officers are elected
annually by, and serve at the discretion of the Board of Directors. There are no
family relationships between or among any Officers or Directors of the
Corporation. The Corporation granted to Hanover Sterling & Company, Ltd., the
Underwriter of the Corporation's initial public offering, the right to nominate
one individual for election to the Corporation's Board of Directors. Since
Hanover ceased operations in February 1995, this right is no longer outstanding.
Ilan Arbel was the Chairman of the Board of Directors of the Corporation
since June 1994 and has been a Director of the Corporation since May 1993. Mr.
Arbel was been the President, Chief Executive Officer and a Director of U.S.
Wireless Corporation (formerly American Toys, Inc.) from inception in February
1993 to July 1996. Mr. Arbel has been President, Chief Executive Officer, a
Director and an affiliate of Mister Jay Fashions International, Inc. since 1991.
Since August 1995, Mr. Arbel has been a Director of Multimedia Concepts
International, Inc., a public company, a designer and manufacture of clothing.
In 1990, Mr. Arbel was an Officer and Director of Carlo Fashions, Inc., a
company which filed a bankruptcy petition and has received a discharge in
bankruptcy. From 1989 to present, Mr. Arbel has been the sole Officer and
Director of TransAtlantic Commerce Corp., a company involved in investments and
finance in the United States and Europe. Mr. Arbel is a graduate of the
University Bar Ilan in Israel, with B.A. degrees in Economics, Business and
Finance.
Sheikhar Boodram was appointed as a Director of the Corporation on February
2, 1996. Mr. Boodram was been a Director of U.S. Wireless Corporation from May
1993 to July 1996. From September 1992 to present, Mr. Boodram has been employed
as Vice-President and a Director of Mister Jay Fashions International, Inc. From
October 1991 to September 1992, Mr. Boodram was employed as a designer with
Mister Jay Fashions International, Inc. Mr. Boodram has been the President and
Secretary of Multimedia Concepts International, Inc. since June 12, 1995. Mr.
Boodram is the sole Officer and Director of American Eagle Industries Corp. and
Match II, Inc. From 1979 until October 1991, Mr. Boodram was the production
manager for Lady Helene Sophisticates, Ltd., a manufacturer of ladies garments
which ceased operations in 1991.
Harold Rashbaum was appointed as Chairman of the Board of Directors of the
Corporation on February 2, 1996. Mr. Rashbaum was the Secretary, Treasurer and a
director of Hollywood Productions, Inc. from May 1996 to January 1997, at which
time he was elect as president. Mr. Rashbaum has been the secretary, chief
financial officer and a director of D.L. Productions, Inc., since its inception
in April 1996. From January 1991 to March 1992, he was a consultant for National
Wholesale Liquidators, Inc., a retailer of household goods and housewares. From
February 1996 to present, Mr. Rashbaum has been the president and a director of
H.B.R. Consultant Sales Corp., of which his wife is the sole stockholder. From
March 1992 to June 1995, Mr. Rashbaum was a consultant to 47th Street Photo,
Inc., a retailer of electronics, which position was at the request of the
bankruptcy court, during the time it was in Chapter 11. Mr. Rashbaum has the
chairman of the board of Play Co. Toys & Entertainment Corp., since February
1996, which company is a wholesaler and retailer of childrens toys.
Board Meetings, Committees and Compensation
During the fiscal year ended March 31, 1996, no meetings of the Board
of Directors were held and action was taken on __________ occasion by unanimous
written consent of the Board of Directors in lieu of a meeting. The Corporation
does not pay its Directors for their attendance at meetings of the board of
Directors.
The Board of Directors recommends that you vote "FOR" the nominees for
Director.
EXECUTIVE COMPENSATION AND RELATED MATTERS
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid by the Company during the years ended March 31, 1996, 1995
and 1994 to each of the named executive officers of the Company.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
Name and Principal Other Annual
Position Year Salary($) Bonus($)(1) Compensation($)
Richard Brady 1996 117,230 - 7,979(2)
Chief Executive Officer, 1995 120,000 - 7,829(2)
President and Director 1994 114,450 - 7,229(2)
-----------------------------
</TABLE>
(1) No bonuses were paid during the periods herein stated.
(2) Includes an automobile allowance of $6,600 for 1996, 1995 and 1994,
respectively, and the payment of life insurance premiums of $1,379, $1,888, and
$629, for 1996, 1995 and 1994, respectively.
Employment Agreements
In May 1993 the Company entered into three year employment agreement with
Richard Brady, the Chief Executive Officer and President of the Company. The
employment agreement provides for an annual salary of $120,000. In addition, the
employment agreement provides for an automobile allowance and an annual bonus of
2% of the earnings of the Company before depreciation, interest and taxes
("EBDIT"), provided the Company earns a minimum EBDIT of $750,000 for the fiscal
year ended March 31, 1994 and $900,000 for the fiscal year ended March 31, 1995.
The Company also pays for $500,000 of life insurance for Mr. Brady. No bonuses
were earned for either of the years ended March 31, 1996, 1995 or 1994.
The Company has no plans to issue additional securities to its management,
promoters or their affiliates or associates other than through the Company's
stock option plan.
Employee Benefit Plan
1994 Stock Option Plan
During 1994, the Corporation adopted the Corporation's 1994 Stock
Option Plan (the "Option Plan"). The Board believes that the Option Plan is
desirable to attract and retain executives and other key employees of
outstanding ability. Under the Option Plan, options to purchase an aggregate of
not more than 150,000 shares of Common Stock may be granted from time to time to
key employees, Officers, Directors, advisors and independent consultants to the
Corporation and its subsidiaries. On June 1, 1994, an option to purchase 10,000
shares of Common Stock were granted to Angela Burnett, which option is
exercisable at $2.10 per share. The option vested in full on June 1, 1995 and
may be exercised to purchase all shares pursuant thereto. No other options have
been granted date.
The Board of Directors is charged with administration of the Option
Plan, the Board is generally empowered to interpret the Option Plan, prescribe
rules and regulations relating thereto, determine the terms of the option
agreements, amend them with the consent of the optionee, determine the employees
to whom options are to be granted, and determine the number of shares subject to
each option and the exercise price thereof. The per share exercise price for
incentive stock options ("ISOs") will not be less than 100% of the fair market
value of a share of the Common Stock on the date the option is granted (110% of
fair market value on the date of grant of an ISO if the optionee owns more than
10% of the Common Stock of the Corporation).
Options will be exercisable for a term determined by the Board which
will not be less than one year. Options may be exercised only while the original
grantee has a relationship with the Corporation or a subsidiary of the
Corporation which confers eligibility to be granted options or up to ninety (90)
days after termination at the sole discretion of the Board. In the event of
termination due to retirement, the Optionee, with the consent of the Board,
shall have the right to exercise his option at any time during the thirty-six
(36) month period after such retirement. Options may be exercised up to
thirty-six (36) months after death or total and permanent disability. In the
event of certain basic changes in the Corporation, including a change in control
of the Corporation (as defined in the Option Plan) in the discretion of the
Board, each option may become fully and immediately exercisable. ISOs are not
transferable other than by will or the laws of descent and distribution. Options
may be exercised during the holder's lifetime only by the holder, his or her
guardian or legal representative.
Options granted pursuant to the Option Plan may be designated as ISOs,
with the attendant tax benefits provided under Section 421 and 422A of the
Internal Revenue Code of 1986. Accordingly, the Option Plan provides that the
aggregate fair market value (determined at the time an ISO is granted) of the
Common Stock subject to ISOs exercisable for the first time by an employee
during any calendar year (under all plans of the Corporation and its
subsidiaries) may not exceed $100,000. The Board may modify, suspend or
terminate the Option Plan; provided, however, that certain material
modifications affecting the Option Plan must be approved by the stockholders,
and any change in the Option Plan that may adversely affect an optionee's rights
under an option previously granted under the Option Plan requires the consent of
the optionee.
1994 401(k) Employee Stock Option Plan ("ESOP")
In May 1994, the Corporation adopted corporate resolutions approving a
401(k) Employee Stock Ownership Plan (the "Plan") which Plan covers
substantially all employees of the Corporation. The Plan was filed on July 14,
1995 with the Internal Revenue Service, which Plan includes provisions for both
an Employee Stock Ownership Plan ("ESOP") and a 401(k) Plan. The ESOP will allow
only contributions by the Corporation, which can be made annually at the
discretion of the Corporation's Board of Directors. The ESOP has been designed
to invest primarily in the Common Stock. The 401(k) portion of the Plan will be
contributed to by the employees of the Corporation through payroll deductions.
The Corporation does not intend to match contributions to the 401(k).
Contributions to the ESOP may result in an expense, resulting in a reduction in
earnings, and may dilute the ownership interest of persons who currently own
securities of the Corporation. On January 26, 1995, Messrs. Brady and Davidson
and Atoys contributed an aggregate of 40,000 shares of the Common Stock to the
Plan.
Certain Relationships and Related Transactions
From October 1996 to January 1997, Europe American Capital Corporation
("EACC"), an affiliate of the Ilan Arbel, a director of the Company, has
exercised its option to purchase shares of the Company's Series E Preferred
Stock, whereby EACC has purchased 1,300,000 shares for $1,300,000. The proceeds
of the funds received for such investment enabled the Company to acquire the
assets of Toys International and finance the opening of the Company's new store
in _________, California, in addition to financing the Company's owrking capital
needs.
In February 1996, pursuant to the terms of the Congress Financing, EACC
delivered to Congress a $2,000,000 letter of credit. EACC is an affiliate of
Ilan Arbel, the Corporation's Chairman of the Board. The Congress Financing is
also guaranteed by Atoys, the majority stockholder of the Corporation. As
compensation for the issuance of the L/C the Corporation granted to EACC
options, subject to stockholder approval, (i) to purchase up to an aggregate of
1,250,000 shares of Common Stock of a purchase price of 25% of the closing bid
price for the Common Stock on the last business day prior to exercise, for a
period of six months from issuance and (ii) to purchase up to an aggregate of
20,000,000 shares of the Corporation's preferred stock, designated as the
"Series E Preferred Stock".
In February 1996, the Welker Trust gave notice to the Corporation to
put the remaining 122,368 shares of its Series B Preferred Stock to the
Corporation as well as accrued dividends thereon, aggregating $9,152.88.
Pursuant to an oral agreement between the Company and the Welker Trust, the
Company shall redeem all 122,368 shares plus accrued interest thereon, pursuant
to a payment schedule. The Company shall pay $43,840.30 to the Welker Trust on
each of March 1, 1996, April 1, 1996 and May 1, 1996. See "Proposal III."
On January 30, 1996, pursuant to the requirements of the Loan Agreement
with Congress, Atoys, the majority stockholder of the Corporation, converted all
$1,400,000 of debt owed by the Corporation into equity. In exchange for the
debt, Atoys agreed to receive from the Corporation one share of preferred stock,
with the right to vote elect 2/3 of the Corporation's board of directors, upon
receipt of stockholder approval. The conversion of debt into equity increases
the Corporation's stockholders' equity and reduces total liabilities, thereby
reducing the Corporation's debt to equity ratio.
On October 18, 1995, prior to the Congress Financing, the Corporation
entered into the LOC Agreement with EACC, pursuant to which EACC agreed to
provide to Imperial Bank a letter of credit terminating April 16, 1996, in the
amount of $2,000,000 to Imperial Bank. Upon the consummation of the Congress
Financing the Imperial Bank line of credit was repaid and terminated. See
"Recent Developments."
FINANCIAL INFORMATION
ENCLOSED HEREIN ARE THE AUDITED FINANCIAL STATEMENTS OF THE COMPANY FOR
THE YEAR ENDED MARCH 31, 1996 AND THE UNAUDITED FINANCIAL STATEMENTS OF THE
COMPANY FOR THE NINE MONTHS ENDED DECEMBER 31, 1996. A COPY OF THE CORPORATION'S
ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED MARCH 31, 1996 AND THE
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED DECEMBER 31, 1995, FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT THE
ACCOMPANYING EXHIBITS TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST
THEREFOR SENT TO ANGELA BURNETT, SECRETARY, PLAY CO. TOYS, 550 RANCHEROS DRIVE,
SAN MARCOS, CA 92069. EACH SUCH REQUEST MUST SET FORTH A GOOD FAITH
REPRESENTATION THAT AS OF DECEMBER 27, 1996 THE PERSON MAKING THE REQUEST WAS
THE BENEFICIAL OWNER OF SHARES OF THE CORPORATION'S COMMON STOCK ENTITLED TO
VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS.
II. OTHER BUSINESS
As of the date of this proxy statement, the only business which the Board
of Directors intends to present, and knows that others will present, at the
Annual Meeting is that herein above set forth. If any other matter or matters
are properly brought before the Annual Meeting, or any adjournments thereof, it
is the intention of the persons named in the accompanying form of proxy to vote
the proxy on such matters in accordance with their judgment.
Stockholder Proposals
Proposals of stockholders intended to be presented at the
Corporation's 1997 Annual Meeting of Stockholders must be received by the
Corporation on or prior to _____________, 1997 to be eligible for inclusion in
the Corporation's proxy statement and form of proxy to be used in connection
with the 1997 Annual Meeting of Stockholders.
By Order of the Board of Directors,
Angela Burnett
Secretary
February 11, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
COMPLETE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.NO POSTAGE IS
REQUIRED IF IT IS MAILED IN THE UNITED STATES OF AMERICA.
<PAGE>
