<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to
Commission file number: 000-28684
BoysToys.com, Inc.
------------------
(Exact Name of Small Business Issuer in Its Charter)
CALIFORNIA 33-0824801
---------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
412 Broadway, San Francisco, California 94133
---------------------------------------------
(Address of principal executive office)
(415) 391-2800
--------------
Issuer's telephone number, including area code
7825 Fay Avenue, Suite 200, La Jolla, California 92037
------------------------------------------------------
(Former Name, Former Address, and Former Fiscal Year,
If Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 number of shares outstanding of the Registrant's Common Stock as of
June 30, 2000 was 15,931,349 shares.
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<PAGE>
<TABLE>
BoysToys.com, Inc.
TABLE OF CONTENTS
<CAPTION>
Page
Number
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2000 (unaudited) and June 30, 1999 . . . . . . . . 3
Consolidated Statements of Operations (unaudited)
Three Months Ended June 30, 2000 (unaudited)
and Three Months Ended June 30, 1999 (unaudited)
and Six Months Ended June 30, 2000 (unaudited)
and Six Months Ended June 30, 1999 . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended June 30, 2000 and June 30, 1999 . . . . . 6
Notes to Consolidated Financial Statements (unaudited) . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . 15
Item 2A. Factors That May Affect Future Results . . . . . . . . . . . 34
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 38
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . 39
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . 39
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 39
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . 39
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 40
- 2 -
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<PAGE>
Part I. Financial Information
Item 1. Financial Statements
</TABLE>
<TABLE>
BOYSTOYS.COM, INC.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2000 and 1999
ASSETS
------
<CAPTION>
June 30,
2000 1999
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 22,154 $ 56,331
Inventory 49,434 -
Prepaid expenses 32,194 4,000
Employee advances 329 -
Construction deposits - 85,000
------------ ------------
Total Current Assets 104,111 145,331
Property and Equipment, Net 2,998,379 1,392,361
Other Assets:
Note Receivable - Officer 89,689 36,010
Investment in Fine Art 15,000 -
Deposits 56,726 37,000
------------ ------------
Total Other Assets 161,415 73,010
------------ ------------
TOTAL ASSETS $ 3,263,905 $ 1,610,702
============ ============
<F1>
See Accountants' Report and Notes to the Financial Statements
</TABLE>
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<PAGE>
<TABLE>
BOYSTOYS.COM, INC.
CONSOLIDATED BALANCE SHEETS
As of June 30, 2000 and 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<CAPTION>
June 30,
2000 1999
------------ ------------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 95,933 $ 602,558
Equipment payable 33,325 -
Accrued Interest on convertible debt 134,618 182,015
Convertible Debt 1,967,254 1,107,355
------------ ------------
Total Current Liabilities 2,231,130 1,891,928
------------ ------------
TOTAL LIABILITIES 2,231,130 1,891,928
Shareholders' (deficit) equity :
Preferred stock, $.01 par value (10,000,000
authorized; none issued and outstanding.) - -
Common Stock, $.01 par value (20,000,000
shares authorized; issued and outstanding:
7,298,639 and 4,501,602 as of June 30, 2000
and 1999, respectively) 72,986 45,016
Additional Paid-in-capital 9,436,068 3,453,676
Common stock subscribed (62,500) (62,500)
Deficit accumulated during the
development stage (to 12/31/99) (7,856,576) (3,717,418)
Deficit for the period January 1
through June 30, 2000 (557,203) -
------------ ------------
Total Shareholders' (Deficit) Equity 1,032,775 (281,226)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY $ 3,263,905 $ 1,610,702
============ ============
<F1>
See Accountants' Report and Notes to the Financial Statements
</TABLE>
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<PAGE>
<TABLE>
BOYSTOYS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
For the six months For the three months
ended June 30, ended June 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Sales * $1,071,163 $ 0 $ 571,187 $ 0
Cost of Sales 266,065 0 115,941 0
---------- ---------- ---------- ----------
Gross Profit 805,098 0 455,246 0
General and
Administrative Expenses (1,062,801) (165,140) (511,675) (93,764)
---------- ---------- ---------- ----------
Total General &
Administrative Expenses (1,062,801) (165,140) (511,675) (93,764)
Operating loss (257,703) (165,140) (56,429) (93,764)
Other Income (Expenses):
Interest Income 1,417 2,761 865 1,067
Interest Expense (134,043) (227,106) (60,363) (194,186)
Depreciation (166,074) - (84,680) -
---------- ---------- ---------- ----------
Total Other Income (Expenses) (298,700) (224,345) (144,178) (193,119)
Deficit Before Income Taxes (556,403) (389,485) (200,607) (286,883)
Provision for Income Taxes (800) (800) - (800)
---------- ---------- ---------- ----------
Net loss $ (557,203) $ (390,285) $ (200,607) $ (287,683)
========== ========== ========== ==========
Net loss per share $ (0.08) $ (0.10) $ (0.03) $ (0.07)
========== ========== ========== ==========
Weighted average shares used
for net loss per share 6,825,281 3,910,115 6,825,281 3,910,115
========== ========== ========== ==========
Net loss per diluted share $ (0.04) $ (0.02) $ (0.01) $ (0.01)
========== ========== ========== ==========
Weighted average shares
used for net loss
per diluted share 9,940,377 10,488,735 9,940,377 10,488,735
========== ========== ========== ==========
<FN>
*Note: The Company commenced operations on January 26, 2000. Thus, the
amounts reflected for revenues are for five months and four days and
not for the complete six month period that ended June 30, 2000.
<F1>
See Accountants' Report and Notes to the Financial Statements
</TABLE>
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<PAGE>
<TABLE>
BOYSTOYS.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
For the six months For the three months
ended June 30, ended June 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (557,203) $ (390,285) $ (200,607) $ (287,683)
Non-cash operating activities
included in operating deficit:
Amortization and Depreciation 166,074 - 84,680 -
(Increase) decrease in assets :
Inventory (49,434) - 7,907 155,000
Prepaid expenses (29,194) 20,000 9,500 8,000
Employee advances (329) - (129) -
Note receivable-officer (52,097) - (5,862) (495)
Increase (decrease) in liabilities :
Accounts payable 25,007 (26,323) 25,907 5,972
Equipment contract payable 33,325 - - -
Accrued interest (29,911) 80,841 58,063 (112,233)
---------- ---------- ---------- ----------
Net cash used in operating activities (493,762) (315,767) (20,541) (231,439)
========== ========== ========== ==========
Cash Flows from Investing Activities
Purchase of equipment & improvements (88,537) (854,011) (19,285) (726,301)
Investment in fine art (15,000) - (5,000) -
---------- ---------- ---------- ----------
Net cash used in investing activities (103,537) (854,011) (24,285) (726,301)
========== ========== ========== ==========
Cash Flows from Financing Activities :
Increase (decrease) in
convertible notes (316,360) (148,313) 42,159 (186,854)
Stock issuances 935,811 1,386,978 - 829,304
---------- ---------- ---------- ----------
Net cash provided by
financing activities 619,451 1,238,665 42,159 642,450
========== ========== ========== ==========
Net increase in cash 22,152 68,887 (2,667) (315,290)
Cash at Beginning of Period 2 (12,556) 24,821 371,621
---------- ---------- ---------- ----------
Cash at End of Period $ 22,154 $ 56,331 $ 22,154 $ 56,331
========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION :
Cash Paid During the Year for:
Interest (Net of amount capitalized) $ 4,425 $ - $ 2,300 $ -
========== ========== ========== ==========
Income Taxes $ - $ - $ - $ -
========== ========== ========== ==========
<F1>
See Accountants' Report and Notes to the Financial Statements
</TABLE>
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<PAGE>
BOYSTOYS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
NOTE 1 - ORGANIZATION AND BUSINESS
BoysToys.com., Inc. (formerly Alternative Entertainment, Inc.) was incorporated
in the state of Delaware on April 21, 1997, under the name Wagg Corp. ("Wagg").
BoysToys.com, Inc. engages in the business of developing, owning and operating
nightclubs providing exotic dance entertainment combined with a full service
restaurant, lounge, and business meeting facilities.
On December 6, 1993 Alternative Entertainment, Inc. a Nevada corporation ("AEI
Nevada") was formed. On June 11, 1999, a wholly owned subsidiary was formed,
RMA of San Francisco, Inc., a California Corporation, which will be the
operating entity for the first such nightclub facility in San Francisco,
California.
On January 15, 1998, AEI Nevada acquired 80% of the outstanding common stock of
Wagg. On January 25, 1998, the shareholders of AEI Nevada voted to execute a
one-for-three reverse split of its common stock. On January 26, 1998, the
shareholders of Wagg voted to execute a one-for-two reverse split of its common
stock. Number of shares and per share amounts have been restated as though the
transaction occurred on December 6, 1993 (Inception).
Following these actions and on January 28, 1998, the Wagg Board of Directors
voted to approve a plan and agreement of reorganization between Wagg and AEI
Nevada. Under the terms of the reorganization, each outstanding share of
Wagg's common stock was exchanged for one share of AEI Nevada common stock and
all of the assets of AEI Nevada were transferred to Wagg. This resulted in AEI
Nevada becoming a wholly-owned subsidiary of Wagg. In conjunction with these
actions, the shareholders of Wagg approved an amendment of Wagg's Certificate
of Incorporation to change its name to Alternative Entertainment, Inc., a
Delaware Corporation ("AEI"). The reorganization has been accounted for as a
reverse acquisition with a public shell. Accordingly, the accompanying
consolidated financial statements have been presented as if AEI Nevada had
always been a part of Wagg.
During 1998 Wagg changed its name to AEI. On December 29, 1998, AEI changed
its name to BoysToys.com, Inc. (the "Company").
Activity during the past two years consisted primarily of efforts devoted to
identifying suitable properties for acquisition, performing administrative
functions, and the initial construction of the Company's first establishment
located in San Francisco, California. On January 26, 2000 operations commenced
at the Company's first location in San Francisco.
- 7 -
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<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Company's policy is to use the accrual method of accounting and to prepare
and present financial statements in accordance with generally accepted
accounting principles.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, RMA of San Francisco, Inc. and AEI Nevada. All
significant intercompany transactions and balances have been eliminated.
FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash, accounts payable
and accrued expenses approximate fair value due to the immediate short-term
maturity of these financial instruments.
The fair value of the Company's notes payable and convertible debt approximates
the carrying amount based on the current rates offered to the Company for debt
of the same remaining maturities with similar collateral requirements.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The company is currently
capitalizing all leasehold improvements, equipment and fixtures associated with
the development of its first establishment located in San Francisco,
California. No depreciation or amortization was recorded in 1998 because the
Company was in the development stage and the assets had not yet been placed
into service. Equipment and fixtures are being depreciated using the straight-
line method over the estimated asset lives ranging from 3 to 7 years.
Leasehold improvements will be amortized using the straight-line method over
the shorter of the life of the improvements or the length of the lease.
The company started recording depreciation and amortization expense in 1999
consistent with generally accepted accounting principles.
Leasehold improvements are primarily architectural, planning and construction
costs associated with construction of the facility. Equipment and fixtures are
primarily computer systems, furniture, lighting, sound and video equipment.
The Company applies the provisions of Statement of Financial Accounting
Standards (SFAS) No. 34. Consequently, interest cost related to the
construction of the Company's first establishment is capitalized and will be
amortized consistent with the leasehold improvements.
- 8 -
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<PAGE>
STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." This statement allows entities to measure
compensation costs related to awards of stock-based compensation, using either
the fair value method or the intrinsic value method. The Company has elected
to account for stock-based compensation programs using the intrinsic value
method.
Companies that do not choose to adopt the expense recognition rules of SFAS No.
123 will continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion (APB) No. 25, but are required to provide
proforma disclosures of the compensation expense determined under the fair-
value provisions of SFAS No. 123. APB No. 25 requires no recognition of
compensation expense for most of the stock-based compensation arrangements
provided by the Company, namely, broad-based employee stock purchase plans and
option grants where the exercise price is equal to the market price at the date
of the grant.
LONG-LIVED ASSETS
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be Disposed Of," which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of the impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount. SFAS No. 121 also addresses the accounting for long-lived assets that
are expected to be disposed of . No impairment of long-lived assets has been
recognized.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and
liabilities. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized.
BASIC LOSS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for
earnings (loss) per share for entities with publicly held common stock. SFAS
No. 128 supersedes the provisions of APB No. 15, and requires the presentation
of basic earnings (loss) per share and diluted earnings (loss) per share. The
Company has adopted the provisions of SFAS No. 128 effective December 6, 1993
(inception).
Basic net loss per share excludes dilution and is computed by dividing net loss
by the weighted average number of common shares outstanding during the reported
periods. Diluted net loss per share reflects the potential dilution that could
occur if a stock option and other commitments to issue common stock were
exercised. During the years ended December 31, 1997 and 1998 options to
purchase zero and 120,000 common shares, respectively, were anti-dilutive and
have been excluded from the weighted average share computation. Furthermore,
the stock options issued to an officer of the Company in 1999 have also been
excluded from the weighted average share computation.
- 9 -
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<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVENTORY
Inventories are materials related to the Company's marketing and selling of
golf balls through its subsidiary. All inventory items are stated at the lower
of cost (first-in, first-out) or market value.
NOTE 3 - NOTE RECEIVABLE - OFFICER
A note receivable in the amount of $ 89,689 is due from an officer of the
Company as of June 30, 2000. This note bears interest at 5.85% and is due upon
demand.
NOTE 4 - BARTER CREDIT
On February 18, 1998, the Company purchased $530,000 of Barter Credits via the
future issuance of 100,000 shares of common stock of the Company. The Barter
Credits entitle the Company to receive goods and services with a fair value
estimated at $530,000 in excess of cash payments made. Management has valued
the Barter Credits at $100,000, which is management's estimate of the fair
value of the Company's common stock at the time the transaction was entered
into. As the Company utilizes the Barter Credits, it will record a stock
issuance for par value and additional paid-in capital for the excess of the
fair value of the goods and/or services received over cash payments made plus
the pro-rata portion of the available Barter Credits utilized to the fair value
of the Barter Credits estimated ($100,000) by the Company. The shares to be
issued are subject to restrictions on their transferability of up to two years.
The Barter Credits expire sixty months from February 18, 1998, unless the
Company has used at least $100,000 of the Barter Credits during this period,
which will extend the remaining Barter Credits through February 18, 2008.
NOTE 5 - PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment as of June 30, 2000 consists of the following:
<S> <C>
Equipment and fixtures $ 321,230
Leasehold improvements:
Capitalized construction costs 2,931,717
Capitalized interest 284,496
Less: accumulated depreciation (539,064)
-----------
$ 2,998,379
</TABLE>
Depreciation expense for the six months ended June 30 was $166,074.
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<PAGE>
<TABLE>
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<CAPTION>
June 30, 2000
-----------
<S> <C>
Accounts payable $ 145,933
Accrued expenses -0-
-----------
$ 145,933
===========
</TABLE>
NOTE 7 - NOTES PAYABLE
<TABLE>
Notes payable as of June 30, 2000 consist of the following:
<S> <C>
Secured promissory notes with issuance dates
ranging from September 1995 to June 2000,
with interest rates ranging from 8% to 12% per
annum. The notes are due at the earlier of one
year after the date of the note or 60 days after
the Company's common stock is traded on any
securities exchange or in any over-the-counter
market. The notes and accrued interest thereon
are secured by Company common stock and
note holders have the option to convert their
debt into Company common stock. These notes
were not paid at their maturity dated and are due
upon demand. 466,940
Unsecured convertible promissory note which is
not to exceed $1,500,000. Interest accrues at 12%
per year, payable quarterly. Principal, and any
accrued interest, is payable on or before
January 23, 2001. 1,100,314
Unsecured short-term note issued on January 23, 2000
with an interest rate at 10% per annum.
Interest was prepaid with 50,000 shares. Principal
is payable on or before January 31, 2001. 100,000
Unsecured convertible promissory note of $300,000
dated December 3, 1999 with a maturity date of
December 1, 2000, and accrues interest at 12%
per annum. 300,000
----------
$1,925,094
==========
</TABLE>
Accrued interest related to notes payable totaled $134,618 as of June 30, 2000.
- 11 -
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<PAGE>
NOTE 8 - SHAREHOLDERS' EQUITY
STOCK OPTIONS ISSUED ON CONVERSION OF ACCOUNTS PAYABLE
During the year ended December 31, 1998, the Company issued options to purchase
60,000 shares of common stock at an exercise price of $1 per share, on the
conversion of $90,000 of accounts payable. None of the options have been
exercised and expire on December 31, 2000.
STOCK OPTION PLANS
The Company has approved two stock option plans that become effective
January 1, 1994, an Incentive Stock Option Plan and a Non-qualified Stock
Option Plan. Both plans are available to officers, directors and key employees
of the Company. Each plan allows for the purchase of up to 500,000 shares of
common stock of the Company.
During the year ended December 31, 1998, the Company issued 60,000 options to a
director under the non-qualified stock option plan. During the year ended
December 31, 1999, 1,950,000 options were granted to officers of the Company as
a compensation award. The options were immediately exercisable for $0.25 per
share and were granted at less than the quoted market price of the stock on the
date of grant. The Company has elected to account for incentive grants and
grants under its Plan following APB No. 25 and related interpretations.
Accordingly, the Company recorded $30,000 and $3,042,000 as compensation
expense for the year ended December 31, 1998 and the year ended
December 31, 1999 respectively, with a corresponding credit to additional paid
in capital. No issuances have occured in the current year.
<TABLE>
A summary of the activity of the stock options for the six months ended
June 30, 2000 is as follows:
<CAPTION>
Weighted Average
Share Exercise Price
---------- ----------
<S> <C> <C>
Outstanding at beginning of period 1,970,000 0.75
Granted -0- 0.25
Forfeited -0-
Exercised -0- 0.25
---------- ----------
Exercisable at end of period 1,970,000 0.35
========== ==========
<FN>
Weighted-average remaining contractual life 10 years
========
</TABLE>
NOTE 9 - INCOME TAXES
<TABLE>
Provision for income taxes is summarized as follows:
<CAPTION>
Year ended December 31, 2000
--------------------------
<S> <C>
Current income taxes $ (800)
Deferred income taxes -
----------
Provision for income taxes $ (800)
==========
</TABLE>
Deferred income taxes reflect the next tax effects of temporary differences
between the carrying amount of assets and liabilities for reporting and the
amounts used for income tax purposes. The tax effects of items comprising the
Company's net deferred tax assets are as follows:
<TABLE>
December 31,
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $2,248,725 $1,008,000
Other -0- 12,000
---------- ----------
Gross deferred tax assets 2,248,725 1,020,000
Valuation allowance (2,248,725) (1,020,000)
---------- ----------
Net deferred tax assets $ -0- $ -0-
========== ==========
</TABLE>
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<PAGE>
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences and carryforward
losses are expected to be available to reduce taxable income. As the
achievement of required future taxable income is uncertain, the Company
recorded a valuation allowance.
As of December 31, 1999, the Company has net operating loss carryforwards for
both federal and state income tax purposes of approximately $4,800,000, which
expire through 2019. Under federal and state laws, the availability of the
Company's net operating loss carryforward may be limited if a cumulative change
in ownership of more than 50% occurs within any three year period. There was
no deferred income tax computed or accumulated for the first three months of
year 2000.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
In February 1995, the Company began leasing real property in San Francisco,
California, which will be used to open its first night club facility. The
operating lease is for a period of ten years with two renewal options, each for
an additional five years. At June 30, 2000, minimum annual rental commitments
under this non-cancelable lease were as follows:
<TABLE>
Year Ending
----------
<S> <C>
2000 103,920
2001 201,600
2002 201,600
2003 201,600
Thereafter 128,400
----------
$ 837,120
==========
</TABLE>
Rent expense for the six months ended June 30, 2000 was $92,132.
NOTE 11 - DEVELOPMENT STAGE
In subsequent years the Company was classified as a development stage company
based on accounting guidelines. However, the Company commenced operations on
January 26, 2000 and thus is no longer classified as a development stage
company.
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<PAGE>
NOTE 12 - GOING CONCERN
As shown in the accompanying financial statements the Company has incurred a
deficit of $501,567 and $976,390 for the years ended December 31, 1997 and
1998, respectively, and incurred a deficit totaling $7,856,756 to
December 31, 1999, and for the six months ended June 30, 2000 has incurred an
operating loss of $557,203. The ability of the Company to continue as a going
concern is dependent on the significant generation of revenue from the
Company's facility in San Francisco, California. The financial statements do
not include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
NOTE 13 - SUBSEQUENT EVENTS
CONVERTIBLE DEBT
Management expects that the other outstanding convertible debt of 1,259,674
will be fully converted by March 2001.
IN THE OPINION OF MANAGEMENT, THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS CONTAIN ALL ADJUSTMENTS, CONSISTING OF NORMAL RECURRING ADJUSTMENTS,
NECESSARY TO PRESENT FAIRLY THE CONSOLIDATED FINANCIAL POSITION OF
BOYSTOYS.COM, INC. AND SUBSIDIARIES (THE COMPANY) AS OF JUNE 30, 2000 AND
JUNE 30, 1999 AND THE RESULTS OF ITS OPERATIONS AND ITS CASH FLOWS FOR THE SIX
AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999. THE RESULTS OF OPERATIONS AND
CASH FLOWS FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2000 ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS TO BE EXPECTED FOR ANY OTHER INTERIM PERIOD OR THE
FULL YEAR. THESE CONSOLIDATED FINANCIAL STATEMENTS SHOULD BE READ IN
COMBINATION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO FOR
THE YEAR ENDED DECEMBER 31, 1999.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This report has been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information normally included in
annual reports has been condensed or omitted pursuant to such rules and
regulations. This report should be read in conjunction with the Company's
latest Annual Report on Form 10-KSB for year ended December 31, 1999, a copy of
which may be obtained by writing to BoysToys.com, Inc., 412 Broadway, San
Francisco, California 94133.
COMPANY STRUCTURE
BoysToys.com, Inc., a Delaware corporation (the "Company"), was
incorporated in the State of Delaware on April 21, 1997 under the name Wagg
Corp.
In January 1998 the Company changed its name to Alternative Entertainment,
Inc. (the same name of a Nevada corporation (identified below as "AEI-Nevada")
previously established for the operation of the Company's business) and in
December 1998 the Company's name was changed to BoysToys.com, Inc.
THE COMPANY'S BUSINESS
The Company, through its wholly-owned subsidiary, RMA of San Francisco,
Inc., a California corporation ("RMA") owns and operates an upscale gentlemen's
club in San Francisco, California (the "Club") under the name, "Boys Toys
Club." The Company originally intended to operate the Club through Boys Toys
Cabaret Restaurants, Inc., a California corporation ("BTC Restaurants") that is
currently a dormant corporation with no operations or assets. All assets and
operations of BTC Restaurants have been assigned to RMA.
The Company has the following subsidiaries: RMA, BTC Restaurants, and
Alternative Entertainment, Inc., a Nevada corporation ("AEI-Nevada") of which
only RMA has any assets or operations.
INTERNET-RELATED MATTERS
While the Company's name includes the ".com" moniker, this reflected the
Company's original intention to pursue business activities involving the use of
the internet. Currently, the Company has not had sufficient financial or
managerial resources to pursue or develop any significant internet related
business: (i) the Company has an internet Web Site for the Company's public and
investor relations (namely, Boystoys.com) (the "Corporate Web Site") and
(ii) six sites that opened in October 1999 and which have remained in
development only (namely, Super-teens.com, Sexyyoungasians.com, Red-hotsex.com,
Pussysource.com, Peeing-girls.com, and Strange-insertions.com) (the
"Developmental Web Sites").
The Company believes that its Corporate Web Sites are useful in giving the
Company an internet presence or identity for its customers, vendors, and
stockholders Given the location of the Company's Club in San Francisco,
California as a venue for business travelers and the possible use of the
internet by visitors to San Francisco (and by San Francisco-area residents),
the Company believes that its Corporate Web Sites are important to disseminate
information regarding the Company, the Club, and the Club menu and interior
decor.
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The six Developmental Web Sites, which were opened in October 1999, were
intended by the Company as an experiment to assist the Company's management in
becoming familiar with adult internet pay sites (i.e., Web Sites that generate
revenues from monthly subscriber fees).
Currently, the Developmental Web Sites are adult-only Web Sites and each
offers monthly memberships to subscribers at $29.95 per month or $49.95 for
three months. The Company's receives assistance in the operation of each of
the Developmental Web Sites from the following vendors pursuant to oral
agreements as follows: (i) I-Gallery provides adult live-streaming video
content at $1,495 per month under a month to-month arrangement with the
Company; (ii) Web 800 Service provides merchant card services at a fee equal to
15% of any credit card amounts collected under a month-to-month arrangement
with the Company; and (iii) Spotted Fly Technologies is paid $495 per month for
hosting the Company's Corporate Web Sites and the Developmental Web Sites under
a month-to-month arrangement with the Company. From inception in October 1999
through December 31, 1999, the Company derived an aggregate of $916.00 in
revenues from the Developmental Web Sites; and throughout this period the
Company's management has been and remains primarily focused on meeting the
managerial and financial obligations related to the opening and currently the
operation of the Company's Club.
The Corporate Web Sites and the Developmental Web Sites (together with
five inactive but registered Web Sites) required that the Company expend $70
per Web Site or an aggregate of $910 to register the domain names of all these
13 Web Sites. The five inactive Web Sites are as follows: Onlinecontent.com,
Boystoysgambling.com, Boystoyslottery.com, Boystoysgaming.com,
Boystoyshorseracing.com. While the Company registered these Web Sites, the
Company has determined that it does not intend to enter into on-line internet
gaming, horse racing, or any other gambling-related business activities. As a
result, these Web Sites were never developed, tested, and are not on-line.
The Company is continuing to evaluate the Developmental Web Sites and may
add or delete to the list of its Developmental Web Sites as the Company's
financial and managerial resources allows. Further, and subject to the
Company's successful operation of its existing Club, the Company anticipates
that it will explore, within the next 18 months, the acquisition of one or more
established adult-related gentlemens clubs and/or entertainment internet
business opportunities that would compliment the Company's existing Club. In
the event that the Company undertakes any one or more acquisitions, an
acquisition must meet the following criteria:
1. Other upscale gentlemens clubs located in major metropolitan areas;
2. Adult-only Internet Web Sites (Web Sites that require a subscriber to
pay monthly subscription fees);
3. Pre-recorded and/or live-streaming video content providers or vendors
that provide adult-related video content marketable through adult-
related Internet Web Sites (these vendors record live performances by
adult entertainers that may be viewed in real time by subscribers to
adult-only Internet Web Sites); and
4. Other business enterprises that possess proprietary technology or
video compression technology that may be used in conjunction with any
adult-only Internet Web Sites and/or pre-recorded or live-streaming
video content that the Company may otherwise offer.
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Currently, the Company has not identified any acquisition candidates or
otherwise conducted any review or evaluation of any precise acquisition target
or related strategy. The Company has not retained and will likely not have the
financial and managerial resources to obtain independent investment banking or
similar advice in connection with any such acquisition but will likely rely
primarily upon evaluation made by its management. In addition, in the event
that the Company implements an acquisition strategy, the Company will likely be
limited to using its common stock, preferred stock, or a debt security as
consideration in any such transaction. This may well limit the Company's
ability to complete any acquisitions since many sellers prefer to sell their
business in exchange for a cash payment.
The Company is filing this Form 10-SB to ensure that its stockholders can
obtain current information regarding the Company's affairs on a continuous
basis in accordance with the Securities Exchange Act of 1934.
PRIOR PUBLIC OFFERING OF SUBSIDIARY & PRIOR FILING DEFICIENCIES
The Company's subsidiary, AEI-Nevada, previously filed a Registration
Statement on Form SB-2 with the U.S. Securities and Exchange Commission (the
"Registration Statement") for a proposed public offering of over $11 million
(the "Prior Public Offering").
AEI-Nevada's Registration Statement for the Prior Public Offering became
effective on July 3, 1996 and on September 15, 1996, AEI-Nevada filed Form 8-A.
The Prior Public Offering was conducted on an "all or none" basis. This
meant that unless all of the securities that were the subject of AEI-Nevada's
Prior Public Offering were sold, all of the funds received and deposited in the
escrow account (the "Escrow Account") established by AEI-Nevada at First
National Bank (the "Escrow Agent") would be refunded to each purchaser.
All funds received by AEI-Nevada in the Prior Public Offering were
deposited with the Escrow Agent. AEI-Nevada was not successful in obtaining
the services of an underwriter and AEI-Nevada was not successful in selling all
of the securities that were the subject of the Prior Public Offering. As a
result: (1) the Escrow Agent refunded all monies received and deposited into
the Escrow Account to each purchaser of the securities in the Prior Public
Offering; (2) AEI-Nevada did not sell any of the securities that were the
subject of the Prior Public Offering; and (3) AEI-Nevada did not raise any
capital in the Prior Public Offering.
However, under Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), AEI-Nevada was obligated to file with the U.S. Securities and
Exchange Commission (the "Commission") all reports required by Section 13(a) of
the Exchange Act for the year ending December 31, 1996 and thereafter unless
AEI-Nevada had less than 300 shareholders of record and AEI-Nevada filed Form
15 within 30 days after the beginning of any fiscal year following the year in
which the Registration Statement for the Prior Public Offering became
effective.
Although AEI-Nevada's Prior Public Offering failed with the result that no
securities were sold and all funds deposited with the Escrow Agent were
refunded, AEI-Nevada was obligated to file the following reports with the
Commission in accordance with Section 15(d) of the Exchange Act and Rules 15d-1
through 15d-13 thereunder:
A. ANNUAL REPORT. AEI-Nevada was required to file Form 10-KSB for the
1996 fiscal year ending December 31st for 1996, 1997, 1998, and 1999;
B. QUARTERLY REPORT. AEI-Nevada was required to file a Form 10-QSB for
the third quarter in 1996 and for each calendar quarter commencing
with the first quarter, second quarter, and third quarter of 1997,
1998, 1999, and the first quarter of 2000; and
C. SPECIAL REPORTS. AEI-Nevada was required to file Form 8-K upon the
occurrence of any one or more events enumerated in the instructions
for Form 8-K for all time periods following July 3, 1996 to the
present.
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And, under Section 13(b)(2) of the Exchange Act, AEI-Nevada was obligated
to make and keep books, records, and accounts, in reasonable detail, maintain a
system of internal accounting controls for the proper execution and recording
of financial transactions, control access to AEI-Nevada's assets in accordance
with management's authorizations, and reconcile and take appropriate action
with respect to AEI-Nevada's assets, accounts, and records at reasonable
intervals.
Finally, and in connection with the Prior Public Offering, AEI-Nevada
failed to properly file Form SR with the Commission in accordance with Rule 463
of the Securities Act of 1933 and meet the filing requirements thereunder. In
general, Form SR is used to report an issuer's public offering of securities
and use of the proceeds received from a public offering.
Form SR should have been filed within three months and ten days after
July 3, 1996 and the Rule requires that one or more additional filings of
Form SR are required each six months thereafter until all funds received from a
public offering have been applied. Since AEI-Nevada did not receive any
proceeds from the Prior Public Offering, AEI-Nevada should have filed Form SR
to accurately report the failure of the Prior Public Offering and the lack of
any proceeds from the Prior Public Offering. Finally, AEI-Nevada failed to
file a request with the Commission to withdraw its Registration Statement.
Although AEI-Nevada filed Form 15 on March 15, 1997 with the Commission to
terminate its registration under Section 12(g) of the Exchange Act (which
served to terminate AEI-Nevada's obligation to file an Annual Report, Quarterly
Reports, and Special Reports (as described above) required by Section 12(g) of
the Exchange Act), this filing did not terminate AEI-Nevada's obligations to
file an Annual Report, Quarterly Reports, and Special Reports (as described
above) under Section 15(d) of the Exchange Act. Further, the filing of Form 15
did not reduce or eliminate the Company's obligation to properly file Form SR
or meet its record keeping requirements under Section 13(b)(2) of the Exchange
Act.
The Company would likely assert that although AEI-Nevada failed to:
(i) file the Reports (described above) required by Section 15(d) of the
Exchange Act; (ii) file and adhere to the requirements for filing Form SR; and
(iii) failed to adhere to the record keeping requirements of Section 13(b)(2)
of the Exchange Act, these failures were inadvertent and unintentional, did not
result in any injury or loss to any investor, and AEI-Nevada did not receive
any monies or issue any securities as a result of the Prior Public Offering.
The failure of AEI-Nevada to fulfill its obligations to file the reports
required under Section 15(d) of the Exchange Act, to file Form SR in a timely
and accurate basis, and to otherwise observe the record keeping requirements
required by Section 13(b)(2) of the Exchange Act may subject AEI-Nevada, the
Company, and any persons who may be found to have participated in these matters
to liability under Section 20 of the Exchange Act and may subject AEI-Nevada
and such persons to enforcement actions by the Commission under Section 21 and
other provisions of the Exchange Act.
Further, and to the extent that the Company incurs any costs or expenses
with resulting damage or injury to any holder of the Company's Common Stock or
any promissory notes issued by the Company, the Company may incur liability
under state and federal anti-fraud statutes and similar laws for any failure to
disclose these liabilities to any person who purchased the Company's common
stock or promissory notes without sufficient disclosure of the liabilities
faced by the Company.
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In an attempt to address these problems and concurrent with the filing of
this Amendment No. 3 to the Company's Form 10-SB, AEI-Nevada will propose the
following to the Commission: (1) that AEI-Nevada file Form 15 to terminate its
obligations under Section 15(d); (2) that AEI-Nevada file Form SR in connection
with the Prior Public Offering; and (3) AEI-Nevada will file a letter with the
Commission requesting the withdrawal of the Registration Statement. The
Company is also conducting an evaluation of the events and actions taken by
AEI-Nevada to ensure that AEI-Nevada's failure to fulfill its obligations under
federal securities laws will not reoccur.
However, although the Company and AEI-Nevada are taking the above actions,
there can be no assurance that the Company will successfully avoid incurring
any liability, costs, or expenses incurred in connection with these problems.
THE SAN FRANCISCO CLUB
Construction of the 15,000 square foot Club was completed in October 1999
at which time the Company received its certificate of final completion. The
Company has secured an alcoholic beverage license, a cabaret license, and all
other licenses and permits required by the City and County of San Francisco,
California. The Club opened on January 26, 2000 and has remained in operation
since that date.
A subsidiary, Alternative Entertainment, Inc., a Nevada corporation ("AEI-
Nevada") was initially formed to engage in the business of developing, owning,
and operating upscale nightclubs providing exotic dance entertainment combined
with private membership men's clubs and contemporary-styled full service
restaurants and bars. On January 15, 1998, 80% of the Company's Common Stock
was acquired by AEI-Nevada and the Company changed its name from Wagg Corp. to
Alternative Entertainment, Inc. On January 26, 1998, AEI-Nevada, as the
majority stockholder of the Company, effected a one for two reverse split of
the Company's common stock and approved an amendment to the Company's
Certificate of Incorporation to change the Company's name to Alternative
Entertainment, Inc. and to authorize the issuance of up to 8,000,000 shares of
Preferred Stock. The Company has not issued any Preferred Stock and has no
Preferred Stock outstanding.
Following these actions and on January 28, 1998, AEI-Nevada's Board of
Directors voted to approve the exchange of one share of the Company's Common
Stock for each share of AEI-Nevada common stock outstanding. This resulted in
AEI-Nevada becoming a subsidiary of the Company. As a result, AEI-Nevada
became a wholly-owned subsidiary of the Company. Subsequently and on December
29, 1998, a majority of the Company's shareholders approved an amendment to the
Company's Certificate of Incorporation to change the Company's name to
BoysToys.com, Inc.
On February 18, 1998, the Company entered into an agreement (the "Purchase
Agreement") with ITEX USA, Inc. ("ITEX") whereby ITEX has agreed to provide the
Company with up to $530,000 cash credit (the "Cash Credit") to be applied to
the Company's purchase of $530,000 in goods and services at prices equal to the
lowest price (as verified in writing); that is, under the Purchase Agreement
that the Company executed with ITEX , the Company holds a Cash Credit equal to
$530,000 and the Company has the right to obtain goods and services from ITEX
up to the maximum amount of the $530,000 Cash Credit such that the price
accorded any such goods or services so obtained is to be equal to the lowest
price verified in writing by competitive bid as agreed between the Company and
ITEX.
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ITEX is a barter exchange company that offers goods and services that it
acquires through barter from others. Under the terms of the Purchase Agreement,
the Company is to issue purchase requests to ITEX and ITEX is then obligated to
provide the goods and services requested through ITEX's suppliers and vendors.
In exchange for the Cash Credit, the Company committed to issue to ITEX the
sum of 100,000 shares of the Company's Common Stock. The Company intends to
use the Cash Credit to acquire, in part, newspaper, billboard, and radio
advertising from ITEX using the Cash Credit for use in promoting the Club.
All of the 100,000 shares of the Company's Common Stock to be issued to
ITEX entitle the Company to receive goods and services with a fair market value
at $530,000 in excess of any cash payments made to any ITEX-identified
suppliers or vendors. In connection with any issuance of the Company's Common
Stock to ITEX: (1) all of the shares will be issued solely to ITEX on a private
placement basis in conformity with the requirements of Section 4(2) of the
Securities Act of 1933; (2) a stock certificate representing any such shares
will be imprinted with a restricted securities legend; (3) the Company will
require that an authorized officer of ITEX execute an investment agreement
wherein ITEX will agree that it is purchasing the shares for investment
purposes only and not with a view to reselling or transferring the shares to
any other person; and (4) the Company will not permit the resale or transfer of
any of the shares issued to ITEX unless the Company receives and approves an
opinion of counsel, satisfactory to the Company, that any such transaction does
not violate the Securities Act of 1933.
The Company has not undertaken any investigation or inquiry into ITEX's
affairs. However, the Company believes that ITEX is a reputable barter exchange
company. The Company further believes that since ITEX does not buy or pay the
suppliers or vendors that the Company may utilize (the Company pays them
directly), that any issuance of the Company's Common Stock to ITEX will adhere
to the requirements of state and federal securities laws
The Company believes that the Club serves three distinct business segments
(a nightclub providing exotic dance entertainment, a full service restaurant
and bar and a private membership men's club) within the confines of a single
facility. The business of the Company is conducted under the trade name,
trademark, and service mark of "Boys Toys." Although the Company intends to
register its claim to these tradenames, the Company has not yet filed an
application with the U.S. Patent and Trademark office to register these names.
The Club's revenues are generated from:
1) food and beverage sales;
2) Boardroom VIP membership sales;
3) nightclub admission (door) fees;
4) fees charged by the Company in connection with the use of credit cards
by patrons to obtain cash equivalent items (i.e., the Company sells
"Diamond Dollars" certificates (in multiples of $10 and $20 amounts)
to patrons of the Club such that each "Diamond Dollars" certificate
may be used in lieu of cash or credit cards at the Club for a patron's
payment of a "dance fee" to an entertainer) ("Cash Equivalent Fees");
5) sales of certain merchandise on display at the Club (i.e., polo
shirts, t-shirts, jackets, and caps) and other merchandise salable on
a consignment basis; and
6) entertainers' lease fees paid by entertainers (dancers) for the
privilege of performing at the Club. (Currently, the Company charges
each entertainer a lease fee equal to $20 to $50 for the right to
perform at the Club during any shift.)
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With respect to Cash Equivalent Fees, the Company charges a service fee
equal to 20% of the amount of any "Diamond Dollars" certificate that it sells
to any patron (i.e., if a patron seeks to purchase $100 in "Diamond Dollars"
certificates, the Company sells the certificates at a price equal to $120).
Each "Diamond Dollars" certificate may be used to pay "dance fees" to an
entertainer (as described above). If an entertainer receives a "Diamond
Dollar" certificate in payment for a "dance fee," the entertainer is able to
exchange each "Diamond Dollars" certificate and receive cash from the Company.
The Company purchases each "Diamond Dollars" certificate from the entertainers
at a 10% discount (i.e., for every $100 in stated value in "Diamond Dollars"
certificates submitted for exchange and redemption, the Company pays $90 in
cash).
As a result, the Company earns $20 upon the sale of every $100 in "Diamond
Dollars" certificates and, upon redemption of a $100 "Diamond Dollars"
certificate, the Company pays only $90 to the entertainer who redeems it.
The Company leases the land and building for the Club through its other
wholly-owned subsidiary, RMA of San Francisco, Inc., a California corporation
("RMA") (and as successor in interest to Boys Toys Caberet Restaurants, Inc., a
California corporation). The real property for the Club is owned by Roma Cafe,
Inc. ("RCI") and is located in San Francisco's financial district at
408-412 Broadway, San Francisco, California.
If the Company is successful in operating the Club and if the Company is
able to obtain additional financing, the Company plans to establish additional
Boys Toys Clubs in other locations, including New York, Chicago, New Orleans
and Boston. However, the Company has not identified any specific location in
any of these cities and these plans are subject to: (i) the successful
operation of its existing Club; (ii) the negotiation of acceptable terms for
the acquisition of an existing gentlemen's club in a location which would be
suitable and compatible with the Company's strategy; and (iii) the availability
of financing terms from a seller of a gentlemen's club that would permit the
Company to complete the acquisition on financial terms that are acceptable to
the Company in view of the Company's then existing financial abilities and the
costs that the Company would incur in expanding its currently limited
management staff and providing additional working capital to meet an expanded
level of operations. The Company has not presently identified any prospective
acquisition candidate and there can be no assurance that the Company will
undertake any such acquisition or otherwise expand to other locations.
If the Company were to establish other Boys Toys Clubs, it anticipates
that the Company would likely lease existing nightclub and/or restaurant
locations, acquire related nightclub/restaurant properties and equipment, and
thereafter make all necessary improvements to such locations, properties and
equipment in order to conform them to the Boys Toys motif.
The Boys Toys Club name, embraces a concept featuring exotic dance
entertainment performed by attractive and talented entertainers within an
upscale and trendy nightclub environment. The Club has an interior setting
where patrons will be surrounded, and among, numerous and various material
items which many men aspire to obtain in their life. The Company anticipates
that a patron of its Club will be quickly struck by the nature and number of
items on display, such as artwork, collectibles, unusual artifacts and
memorabilia. The Company currently has $80,000 of artwork on display in the
Club and consigned for sale pursuant to oral agreements with local San
Francisco-area artists.
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The Company has placed this artwork on display throughout the Club, each
such displayed item will be available for purchase by patrons, or the Company
is able to provide patrons with detailed information concerning how and where
such displayed item may be purchased.
The Company expects that all items on display in the Club will be replaced
with new and different items approximately every 60 to 90 days, thereby giving
the Club a new interior physical appearance every two to three months.
If the Company is successful, the Company further expects that the
exciting and vibrant atmosphere created by the Club's interior decor will be
enhanced by exhilarating lighting and specially selected upbeat music. In
order to obtain the items to place on display in its Club, the Company approach
local and regional vendors of the items it desires to display, and enters into
consignment arrangements with each vendor.
The Company has verbal consignment arrangements that allows the Company to
display various types of artwork, collectibles and memorabilia owned by the
vendors at each Club at no cost to the Company, while in return providing the
vendor with increased exposure to its owned items, and therefor providing the
vendor with potential additional marketing venues and outlets for the sale of
its owned items. However, retail competition for the sale of such items is
intense and there are many other retail galleries and consignment outlets
likely will be able to attract high quality artwork and other items that the
Company seeks to display for consignment at its Club. Thus, there can be no
assurance that the Company will attract high quality items on a consignment
basis or, if it does, that it can continue to do so.
Failure of the Company to obtain additional desired items in the future
and on a consignment basis may result in the Company being unable to embellish
the interior physical decor of its Club in its planned manner. Further,
failure of the Company to obtain the desired items on a consignment basis will
have a material adverse impact on the Company's plan of operation in that such
failure may require the Company to expend significant amounts of its capital to
purchase such items.
The Club has, in addition to its nightclub proper, a full service
restaurant and bar and full service, private VIP members-only men's club.
Rather than just establishing an exotic dance entertainment nightclub, the
Company's business concept for the Club is to create an entertainment complex
combining an exotic dance entertainment nightclub with a full service
restaurant and bar and a private VIP members-only men's club. The concept is to
provide a place where one may enjoy quality exotic dance entertainment, relax
and converse in a place where one may see and be seen, partake in quality
restaurant dining, and entertain and be entertained in private members-only
quarters, all within the Boardroom Restaurant.
The Company believes that excellence in operations, ambiance and location
are important for success in the exotic dance entertainment business. The
Company believes that it will be able to differentiate its Boys Toys Club by
implementing the following strategic elements:
* Combining its exotic dance entertainment nightclubs with its Boys Toys
Club and private VIP members-only men's clubs so as to provide patrons
with a multi-faceted entertainment experience.
* Designing its Boys Toys Club to attract primarily upscale professionals
and businessmen.
* Physically embellishing its Boys Toys concept by creating an exterior
and interior physical decor for its Boys Toys Club which evidences the
style and class of an establishment designed for men's entertainment
and reflecting the upscale caliber of its patrons.
* Providing high quality and attentive service in a manner to ensure
patron satisfaction.
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The Company believes that its Boys Toys concept will create a distinct
image and popularity among upscale gentlemen's club patrons. As such, the
Company believes that it will be successful in marketing T-Shirts, jackets and
other casual-wear merchandise that feature the Boys Toys logo and location.
However, absolutely no assurance can be given that the Company's Boys Toys
concept will create a distinct image and widespread popularity, or that the
Company will be successful in marketing T-Shirts, jackets and other casual-wear
merchandise with the Boys Toys logo.
It is also the Company's philosophy and intention that the Boys Toys Club
exhibit civic and social responsibilities by creating and maintaining an active
relationship with a variety of charity organizations in their respective local
communities.
In this regard, the Company expects to make contributions of food,
services or funds benefitting a wide range of causes, which causes management
of the Company expects to be brought to its attention through suggestions from
the Company's employees, officers and shareholders.
The Company's Club restaurant provides all patrons of the Company's Boys
Toys Club with a full service restaurant, bar and lounge area providing
business lunch buffet and dinner table service by waitresses. The Company has
hired an experienced executive chef and other experienced support personnel and
believes that its menu represents the finest culinary delights, distinctive for
their taste as well as nutritional balance, from throughout the various regions
of the United States.
Coupled with this distinctively American menu, the restaurants are
expected to offer the highest quality of food prepared with the greatest of
care and presented and served in a manner which would reflect the upscale
nature of the Boys Toys Club. As a complement to its food menu, the Company
expects that its Boys Toys Restaurant will offer an extensive selection of
domestic and foreign wines, spirits, and champagne. Management of the Company
anticipates that an average lunch check per customer will be $25.00 and an
average dinner check per customer will be $60.00.
However, these amounts and the operation of the restaurant will be subject
to prevailing competitive conditions.
In general, the Company believes that excellence in operations and quality
of food and service, ambiance, location and price-value relationship are keys
to success in the restaurant industry. The Company believes that it will be
able to differentiate its Club by emphasizing the following strategic elements:
* Positioning in the mid-priced to upper-priced, full service dining
segment of the restaurant industry.
* The location of the Club within the confines of an exciting and upbeat
facility provides a unique and enduring attraction to a broad and
diverse demographic mix of customers in the 25 to 65 age group.
* Quality and attentive service with each waitress generally being
assigned to no more than four tables at lunch and three tables at
dinner to ensure customer satisfaction.
* Consistent quality products through careful ingredient selection and
food preparation.
There can be no assurance that the Company can achieve any one or more of
these objectives or, if it does achieve these objectives, that it can achieve
them while also achieving and maintaining profitability.
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PRIVATE VIP MEMBERSHIP CLUB
The Boys Toys Club has a full service private VIP membership facility is
open only to patrons who are members. These private VIP membership facilities
are known as the "Boardroom." Membership in the Boardroom entitle members to:
(i) access to the private VIP Boardroom; (ii) bring up to six guests to the
Boardroom without payment of any entrance fee (currently $30.00 per person);
(iii) preferred seating for dining; (iv) first priority for special events; and
(v) free limousine service within the city of San Francisco. The Boardroom
also has a business center (with facsimile machines, secretarial staff and
computers).
Additionally, Boardroom members have free use of Boardroom facilities for
private parties and meetings, preferred seating and advanced notices for
special events and holiday functions held at the Club, and access to personal
improvement seminars and concierge services. Currently Boardroom memberships
are for a period of one year, and may be renewed by a member at the end of each
membership year. Membership fees for the Boardroom are $1,000 per annum.
SITE SELECTION CRITERIA AND LEASING
In the event that the Company expands with other locations, the Company
believes that the selection process for sites for the Company's clubs is
critical in determining the potential success of a Boys Toys Club, and
therefore it expects to devote a significant amount of time and resources to
analyze each prospective club site.
A variety of factors are considered in the site selection process,
including local market demographics, site visibility and accessibility and
proximity to significant generators of potential customers such as office
complexes, hotel concentrations and other entertainment centers such as
stadiums and arenas. The Company will also review potential competition and
attempt to analyze the profitability of other nightclub, restaurant and bar
establishments operating in areas where the Company proposes to establish a
Boys Toys Club.
The Company expects that it will likely lease all of its locations for any
additional Boys Toy Club, although the Company may consider purchasing
properties for its facilities in the future, where it is cost effective to do
so.
LOCATION OF BOYS TOYS CLUB
The Company's existing Club is the Company's first club and is located at
408-412 Broadway, San Francisco, California, in the north beach area of the
financial district of San Francisco (the "Facility"), approximately four blocks
north of the landmark Transamerica Building.
The Company leased the Facility from Roma Cafe, Inc. The Company has
obtained a Place of Entertainment Permit with respect to the exotic dance
entertainment aspects of the Company's business at the San Francisco Premises.
The Company has secured an alcoholic beverage license, a cabaret license, and
all other licenses and permits required by the City and County of San
Francisco, California.
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ADDITIONAL BOYS TOYS CABARET CLUBS.
In addition to the existing Club and if the Company can obtain additional
financing on favorable terms, the Company may establish other Boys Toys Clubs.
The exact number, location, and other aspects of this plan has not been
determined at this time.
Additional locations that may be considered for Boys Toys Clubs include
New York, Chicago, New Orleans and Boston. However, the Company has not
identified any specific location in any of these cities and these plans are
subject to: (i) the successful operation of the existing Club; (ii) the
negotiation of acceptable terms for the acquisition of an existing gentlemen's
club in a location which would be suitable and compatible with the Company's
strategy; and (iii) the availability of financing terms from a seller of a
gentlemen's club that would permit the Company to complete the acquisition on
financial terms that are acceptable to the Company in view of the Company's
then existing financial abilities and the costs that the Company would incur in
expanding its currently limited management staff and providing additional
working capital to meet an expanded level of operations. The Company has not
presently identified any prospective acquisition or location and there can be
no assurance that the Company will undertake any such acquisition or otherwise
expand to other locations.
MARKETING
The Club (and any other clubs that the Company may establish), will be
marketed to attract primarily (if not strictly) professional and white collar
businessmen clientele.
The Company plans to use the Club's name to develop name recognition and
patron loyalty to attract these customers. Due to its upscale theme, exotic
dance entertainment experience and quality food and service, the Company
believes that its Boys Toy Clubs will have the unique ability to attract both
local and out-of-town professional and white collar businessmen patronage.
The tour and travel as well as convention segments of the cities in which
Boys Toys Clubs will be located will be another focus of the Company's
marketing strategy. The Company's marketing strategy will be designed to inform
targeted patrons that Boys Toys Clubs provide a unique and exciting atmosphere
not found elsewhere through visual and audio experiences.
The Company expects that the center of its marketing efforts will revolve
around its exotic dance entertainment nightclubs. The Company's Boys Toys
concept will be directed at upscale, professionals and white collar businessmen
aged 25-65 who either reside in or near major U.S. commercial centers where
Boys Toys Clubs will be located, or who frequently visit these areas on
business.
In order to reach this targeted market, the Company will attempt to
establish Boys Toys Clubs in the heart of those cities in which it intends to
operate, so as to make its facilities easily accessible by professional and
white collar businessmen.
The Company believes that its local patrons will include primarily men who
work and/or live near a Boys Toys Club, and who will seek some form of
nightclub environment at the end of their work day which will provide a
comfortable atmosphere with appropriately priced, high quality, food available.
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The Company believes it will meet this type of patron's needs by providing
a quality entertainment experience with a high level of personalized service in
a casual, fun setting - an experience that the Company expects will generate
repeat visits among the local customer segment.
The Company anticipates that its business travel segment will be primarily
composed of individuals traveling on business to those cities where Boys Toys
Clubs are located. The Company further believes that the marketing approach for
this customer requires an emphasis on the beauty and elegance of the Boys Toys
Clubs, the exciting atmosphere, and safety.
The Company expects to promote and advertise its Boys Toys Restaurant and
private VIP members-only men's club segments of its Boys Toys Clubs as if they
were not dependent upon its exotic dance entertainment segment. Thus, the
Company will strongly promote its Boys Toys Restaurants as an establishment
providing the best food possible at reasonable prices. The Company will promote
its private VIP members-only men's club as a private location where men can
meet to, among other things, discuss and effectuate business in a congenial
atmosphere, as well as a place where men can entertain themselves as well as
business clients and associates.
The Company is utilizing billboard, print and direct mail advertising, and
is conducting coordinated promotional efforts with local and regional hotels,
taxi companies and limousine services.
Additionally, the Company intends to utilize merchandise as a means of
marketing its Boys Toys Clubs. Thus, the Company will promote various Boys Toys
merchandise which is expected to be created by the Company as popularity of the
Boys Toys Clubs increases. Such merchandise is expected to include T-Shirts,
jackets, sweatshirts, and other memorabilia.
Because of its Boys Toys Restaurants, and if the Company can maintain the
presence and availability of many interesting items displayed prominently
throughout the Club, the Company believes that its Club will be able to adopt
event-driven promotion oriented marketing strategies. Thus, in addition to
traditional advertising techniques, the Company intends to seek to establish
close ties with the entertainment industry so as to provide the Company with
extensive promotional opportunities.
Events such as surprise appearances by recording artists or professional
athletes can be expected to attract targeted upscale patrons.
BOYS TOYS CLUB OPERATIONS AND MANAGEMENT
The Company will strive to maintain quality and consistency in its
existing Club through the careful training and supervision of personnel and the
establishment of standards relating to food and beverage preparation,
maintenance of facilities and conduct of personnel.
The Company maintains financial and accounting controls for the existing
Club through the use of centralized accounting and management information
systems. Operations information will be collected weekly from the Club, and
club managers will be provided with weekly and 28-day period operating
statements for their locations. Cash will be controlled through daily deposits
of sales proceeds in local operating accounts. The Club is scheduled to be open
daily from 11:00 a.m. to 2:00 a.m.
Overall management of a typical Boys Toys Cabaret Club will be conducted
by two managers, a day manager and an evening manager in addition the Club's
General Manager. The Club also employs a staff consisting of approximately 40
hourly employees and 35 part-time employees.
The additional 35 part-time employees are primarily restaurant servers,
bus persons, and support personnel.
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In addition to these employees, the Company utilizes 25 to 50 female
exotic entertainers (dancers) per night, as independent contractors, on a
varying basis. Each exotic female entertainer is paid directly by a patron for
each dance performed. The Company does not employ or pay any wages, salary,
compensation, or other fees to any of the exotic female entertainers that
perform at the Club. Entertainers also pay a lease fee of $20 to $50 per shift
for the right to perform at the Club. Entertainers receive only "dance fees"
from patrons of the Club. The Company does not receive any percentage from any
cash fees paid by patrons to the entertainers (dancers) that perform at the
Club.
However and as described earlier, when an entertainer redeems any "Diamond
Dollars" certificates (previously received from a patron in payment of any
"dance fees"), the Company pays the entertainer an amount equal to 90% of the
face or stated value of the "Diamond Dollars" certificates that are later
submitted for redemption. (Thus, if an entertainer submits $1,000 in "Diamond
Dollars" certificates to the Company, the Company redeems these certificates by
paying the entertainer $900 in cash.)
The General Manager of the Club reports directly to the Company's
President. The Company's Entertainment Director and Club Manager report to the
General Manager of the Club. Working in concert with these managers, the
Company's President defines operating and performance objectives for the Club
and monitors implementation. The Company expects that its Club managers will
participate in a variety of Company sponsored employee incentive programs such
as the Company's stock option plans. The Company has not yet adopted any stock
plan but may do so in the future.
Awards under any Company sponsored employee incentive programs will be
tied to achievement by facility managers of specified operating targets. The
Company plans for its senior management to regularly visit each Club the
Company operates and meet with the respective managers of those clubs to ensure
that the Company's strategies and standards of quality in all respects of
operations and personnel development are met.
The Company believes that customer service and satisfaction are keys to
the success of its existing Club and any other clubs that the Company may
establish. The Company's commitment to customer service and satisfaction will
be evidenced by several Company practices and policies, including periodic
visits by managers to customers' tables, active involvement of management in
responding to customer comments and assigning waitresses in the Company's Boys
Toys Restaurants to a limited number of tables, generally four for lunch and
three for dinner.
PURCHASING
The Company negotiates directly with suppliers for food and beverage
products to ensure consistent quality and freshness of products and to obtain
competitive prices. The Company purchases substantially all food and beverage
products from authorized local or national suppliers. Food, beverage and other
products and supplies are shipped directly to the Club, although invoices for
purchases will be paid by the Company's wholly-owned subsidiary, RMA of San
Francisco, Inc., a California corporation ("RMA"). RMA is the corporation the
Company established to operate the existing Club.
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MANAGEMENT INFORMATION SYSTEMS
The Company has a computer information system which is designed to
maintain personal profile information on the members of its private VIP
members-only men's club. The profiles are designed to assist managers of the
Club in meeting the personal desires of particular Boardroom members, and will
contain such information as a Boardroom member's favorite beverage, favorite
food and spending habits. This information will be available to any other Club
locations that the Company may establish through a proprietary database, and
will enable Boardroom members to visit any of the Company's Clubs (that the
Company may establish) and be provided with a similar level of personal
service.
The Company's point-of-sale information system is designed to assist in
labor scheduling and food cost management, provide corporate management quicker
access to financial data and reduce a particular club manager's administrative
time.
TRADE NAMES, TRADEMARKS AND SERVICE MARKS
The Company expects to develop and implement Boys Toys trademarks and/or
service marks which will enhance a customer's ability to identify the Company,
as well as the products and services to be offered by the Company.
Currently, the Company has not developed and implemented any trademarks
and/or service marks, and therefore has not filed any applications to register
any trademarks and/or service marks. Furthermore, the Company is unaware of
names similar to the trade names to be used by the Company which are used by
other persons.
The Company's overall policy will be to pursue registration of its marks
whenever possible and to oppose vigorously any infringement of its marks. There
can be no assurance that if and when the Company develops and implements its
trademarks and/or service marks, that such trademarks and/or service marks will
afford protection against competitors with similar products and services. There
can also be no assurance that the Company's trademarks and/or service marks
will not be infringed upon or designed around by others, or that the Company
can adequately prosecute or defend any infringements.
COMPETITION
The Company's existing Club (and any other clubs that the Company may
later establish) will compete with other nightclubs, restaurants and bars, some
of which may be larger and more established, experienced and better financed
than the Company.
Competing nightclubs, restaurants and bars may offer services not offered
by the Club, which could place the Company at a competitive disadvantage.
The Company believes that the following factors will allow the Company to
compete effectively:
* Many of the Company's competitors are not designed to market themselves
as high quality, upscale exotic dance entertainment complexes and have
not attempted to do so.
* The Company's marketing strategy focuses on creating a reputation for
its Clubs as an upscale, tasteful nightclub, restaurant, and bar
facility frequented by professionals and white collar businessmen.
* The Company's three-pronged approach of having its Clubs produce
revenues from food and beverage sales, Boardroom membership fees and
exotic dance nightclub associated fees are anticipated to enhance the
profitability of the Company.
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The adult entertainment industry, including adult entertainment offered in
private clubs and through the internet, is large and includes many well-
established and well-managed and experienced enterprises.
Many of these businesses possess financial and managerial skills that far
exceed the resources that the Company has or will have at any time in the
foreseeable future. Some of the larger operators have multiple locations
within a metropolitan area and effectively utilize their advertising and
marketing budgets to gain greater market share while achieving economies of
scale to lower certain fixed costs per unit and per retail location.
In addition, many of these established operators have developed marketing,
real estate, zoning, and licensing management skills that the Company is not
likely to possess at any time in the near future.
While the Company believes that its Club is unique and will offer and
attract an "upscale" clientele, there can be no assurance that the Company will
be successful or, if the Company achieves any success, that other competitors
will not imitate and duplicate the Company's planned business with the result
that the Company will not gain any significant long-term advantage.
The retail market for locally-produced and owned artwork, memorabilia, and
other items that may be displayed at the Company's Club on a consignment basis
is characterized by intense competition. Further, while the Company currently
has obtained such items and has them on display at its existing Club under oral
arrangements with the owners of the consigned items (such that the Company is
to receive 20% of the proceeds from the sale of any such consigned item), there
can be no assurance that the Company can attract suitable artwork and
memorabilia on a consignment basis or, if it is able to do so, that any such
items can be sold.
REGULATORY ASPECTS
The ownership and operation of restaurants, bars and exotic dance
nightclub businesses are generally subject to extensive state and local
regulation, and the Company, any subsidiaries it may form and various of their
respective officers and employees will be subject to such regulations.
Currently, the Company has not experienced any problems with any of their
business, liquor, or other licenses or permits from any governmental agencies
except that on April 5, 2000, the Company was forced to appear before the
San Francisco Planning Board of Appeals (the "Appeals Board") to respond to
efforts made by the Telegraph Hill Dwellers Association (a local neighborhood
group) ("THDA"). THDA sought to repeal the planning permit previously issued
to the Company by the City of San Francisco Planning Department for the
operation of the Company's Club. In a 3-2 vote, in favor of the Company, the
Appeals Board re-affirmed the Company's prior issuance of the Permit.
While the Company has obtained all necessary licenses and permits needed
to open its Club, the Company will need to renew licenses and permits from
various governmental agencies including, without limitation, applicable zoning,
land use, environmental and building permits.
The federal Americans with Disabilities Act prohibits discrimination on
the basis of disability in public accommodations and employment. The Company's
Boys Toys Cabaret Club is designed to be accessible to the disabled, and will
comply with all current applicable regulations relating to accommodating the
needs of the disabled. There can be no assurance that the Company will
maintain its licenses or permits or that they will always be obtained or
renewed in a timely manner.
The failure to obtain any such permits or licenses could adversely affect
the Company.
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Further, the Club is subject to numerous federal, state and local laws
affecting health, sanitation and safety standards, as well as to state and
local licensing related to the sale of alcoholic beverages. The Company has
secured all appropriate licenses from regulatory authorities allowing it to
sell liquor, beer and wine, champagne, and a food service license from
San Francisco, California health authorities.
Management of the Company believes that the Company's licenses to sell
alcoholic beverages will in all likelihood require that they be renewed
annually and may be suspended or revoked at any time for cause, including
violation by the Company or its employees of any law or regulation pertaining
to alcoholic beverage control, such as those regulating the minimum age of
patrons or employees, advertising, wholesale purchasing and inventory control.
The failure of the Company's Club (and any other clubs that the Company
may acquire or establish) to retain liquor or food service licenses could have
a material adverse effect on its operations. In order to reduce this risk, the
Company intends to develop and implement at its Club standardized procedures
designed to assure compliance with all applicable codes and regulations.
The Company may be subject in certain states to "dram-shop" statutes which
generally provide a person injured by an intoxicated person the right to
recover damages from an establishment that wrongfully served alcoholic
beverages to the intoxicated person. The Company carries liquor liability
coverage as part of its comprehensive general liability insurance.
The Club is also subject to federal and state minimum wage laws governing
such matters as working conditions, overtime and tip credits and other employee
matters. The Company expects that significant numbers of the Company's food and
beverage service and preparation personnel will be paid at rates related to the
federal minimum wage and, accordingly, further increases in the minimum wage
could increase the Company's labor costs.
Finally, the Company believes that since its operations involve "exotic
female entertainment," the Company may be subject to continuing social,
political, and other institutional pressures from organizations, women's
groups, and others who believe that the Company's business is inimical to
social progress and the rights of women. These groups frequently seek to have
city ordinances and other laws enacted which adversely impact the continued
operation of the Company's business or deny the Company the ability to renew
needed licenses or permits.
As a result, many companies that offer adult entertainment similar to the
Company's business expend substantial sums in legal fees and costs to prevent
or at least delay changes to city zoning ordinances, state laws relating to
adult entertainment, and other similar regulations.
To the extent that these organizations and groups are able to organize and
obtain recognition by certain governmental bodies that license or allow the
Company to operate its planned business, the Company would likely suffer
additional costs, expenses, and losses whose magnitude can not be foreseen.
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The Company also maintains a Corporate Web Site and six Developmental Web
Sites on the internet (as discussed earlier). Although the Company believes
that its Corporate Web Site will be helpful in gaining a corporate identity for
the Company and its business, the Developmental Web Sites do contain adult-only
content and there is substantial variation in the definition accorded
"pornography" under state and local laws. For this reason and upon advice of
its counsel, the Company has taken recent steps to carefully revise the content
of its Corporate Web Site to reduce the possibility that the content may be
found to be in violation of such state, federal, and local laws.
The revisions that were undertaken were as follows: (1) a revision to link
the Company's a Corporate Web Site to the U.S. Securities and Exchange
Commission's EDGAR site wherein the Company's filings with the Commission can
be found; (2) the Company's Corporate Web Site has been enhanced to ensure that
a visitor will experience greater ease in navigating each Web Site; and (3) the
content of the Corporate Web Site has been carefully updated to ensure that the
information given is accurate and complete.
Despite these revisions and precautions, the Company may well incur
substantial costs and expenses in defending the content of its website against
assertions that it contains impermissible images or other unlawful content.
Currently, the Company has not received any notice that its Web Sites are in
violation of any state, federal, or local laws although there can be no
assurance that the Company will not later need to defend itself against such
allegations.
The Company also anticipates that it will also expend substantial sums in
legal fees in connection with defending its business licenses, liquor license,
and any other operating, use, or occupancy licenses it requires to operate its
Club. If the Company later acquires and operates any other gentlemen's clubs
at any other location, it will likely incur significant similar expenses for
any such other location as well. These costs will likely arise since there are
significant segments of our society that believe that the Company's business
will inhibit the social progress, rights, and dignity of women and the efforts
undertaken by these segments to restrict or inhibit the Company and its
business. The magnitude of these costs and expenses is expected to be
significant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED JUNE 30, 2000 AND JUNE 30, 1999
During the three months ending June 30, 2000 ("Second Quarter 2000"), the
Company recorded $571,187 in Sales Revenues. Sales Revenues almost entirely
represent sales revenues generated from the Company's Club. This compares to
$0 in revenues during the three months ending June 30, 1999 ("Second Quarter
1999") during which the Company did not have any operations. The Company's
Club did not open until January 26, 2000.
After deducting $115,941 in Cost of Sales, the Company recorded $455,246
in Gross Profit during the Second Quarter 2000. Cost of Sales is primarily
made up of food, liquor, and other miscellaneous expenses related to the
Company's sale of food and beverages at the Club. Since the Company did not
have any operations during the Second Quarter 1999, the Company did not have
any Cost of Sales during that latter period.
The $455,246 in Second Quarter 2000 represents an 80% Gross Profit Margin
(before deduction of other operating and non-operating expenses) during that
period.
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However, during the Second Quarter 2000 the Company also recorded $511,675
in General and Administrative Expenses related both to the operation of the
Company and to the operation of the Club. These expenses are primarily wages,
salaries, and other expenses incurred for management, administrative,
marketing, promotion, accounting, legal, and other similar expenses. This
represented a 456% increase from the amount the Company incurred as General and
Administrative Expenses during the Second Quarter 1999 when the Company
incurred $93,764 during that period.
As a result, during the Second Quarter 2000, the Company recorded an
Operating Loss of $56,429 during the Second Quarter 2000. This compares to an
Operating Loss of $93,764 during the Second Quarter 1999.
However, during the Second Quarter 2000, the Company also recorded
Interest Income of $865, Interest Expense of $60,363, and $84,680 in
Depreciation Expense. The Interest Income represents income the Company
recorded on transient and miscellaneous funds held in bank accounts while the
Interest Expense represents the amount of Interest Expense incurred on notes
payable during the Second Quarter 2000. The amounts compare to $1,067 in
Interest Income and $194,186 in Interest Expense recorded in Second Quarter
1999.
Overall, the Company recorded $144,178 in Total Other Expenses in the
Second Quarter 2000 compared to $193,119 in Total Other Expenses during the
Second Quarter 1999.
When these amounts are added to the Operating Losses the Company incurred
during the period, the Company recorded a Net Loss of $200,607 during the
Second Quarter 2000 compared to a Net Loss of $287,683 during the Second
Quarter 1999. Thus, in the aggregate and during Second Quarter 2000, the
Company's Cost of Sales, General and Administrative Expenses, and the Total
Other Expenses (net of other income) totaled $771,794 during the Second Quarter
2000 compared to the Company's Sales revenues of $571,187 during that period.
Thus, the sum of all such expenses was more than 135% of the Company's sales
revenues during the Second Quarter 2000.
And while the Company incurred a Net Loss during the Second Quarter 2000
of $200,607, this was less than the Net Loss of $287,683 incurred during the
Second Quarter 1999 when the Company did not have any operations or otherwise
generate any Sales revenues.
Therefore, the Company recorded a Net Loss Per Share of $0.03 during the
Second Quarter 2000 compared to a Net Loss Per Share of $0.07 during the Second
Quarter 1999.
SIX MONTH PERIODS ENDED JUNE 30, 2000 AND JUNE 30, 1999
During the six months ending June 30, 2000 (the "First Six Months of
2000"), the Company recorded Sales revenues of $1,071,163 compared to $0 in
Sales revenues during the six months ending June 30, 1999 (the "First Six
Months of 1999") when the Company did not have any operations or Sales
revenues. (The Company's Club opened on January 26, 2000).
Cost of Sales for the First Six Months of 2000 were $266,065 or
approximately 24.84% of the Company's Sales revenues during this period. Cost
of Sales is primarily composed of food, liquor, and other miscellaneous
expenses related to the Company's sale of food and beverages at the Club.
Since the Company did not have any operations during the First Six Months of
1999, the Company did not have any Cost of Sales during that latter period.
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General and Administrative Expenses during the First Six Months of 2000,
primarily made up of wages, salaries, and other expenses incurred for
management, administrative, marketing, promotion, accounting, legal, and other
similar expenses, totaled $1,062,801 (approximately $5,871.83 per day during
the 181 days of the First Six Months of 2000). Thus, General and
Administrative Expenses equaled 99.22% of the Company's Sales revenues of
$1,071,163 during the First Six Months of 2000.
While the Company believes that its Cost of Sales and General and
Administrative Expenses during the First Six Months of 2000 were high in
relation to the Company's Sales revenues during this period, the Company
believes that it may be able to better manage and control some of the
components of these expenses in the future as the Company's management becomes
better able to manage and control labor, food, liquor, and other operating
expenses.
However, there can be no assurance that the Company will achieve better
operating results in the future since the Company will continue to face intense
competition from others clubs and restaurants. (See "Factors That May Impact
Future Results" elsewhere in this Form 10-QSB.)
As a result, the Company recorded a Net Loss of $577,203 during the First
Six Months of 2000 compared to a Net Loss of $390,285 during the First Six
Months of 1999. And, the Company recorded a Net Loss Per Share of $0.08 during
the First Six Months of 2000 compared to a Net Loss Per Share of $0.10 during
the First Six Months of 1999.
LIQUIDITY AND CAPITAL RESOURCES
There are several components which affect the Company's ability to meet
its financial needs, including funds generated from operations, capital
expenditures, short-term borrowing capacity and the ability to obtain long-term
capital on reasonable terms.
On June 30, 2000, the Company had $104,111 in Total Current Assets. This
compares to $2,231,130 in Total Current Liabilities as of that date. Thus, in
relative terms, the Company had less than five cents in Total Current Assets
for each one dollar in Total Current Liabilities as of June 30, 2000. This
compares to June 30, 1999 when the Company had $145,331 in Total Current Assets
on June 30, 1999 and $1,891,928 in Total Current Liabilities on June 30, 1999.
Thus, as of June 30, 1999, the Company had approximately eights cents in Total
Current Assets for every one dollar in Total Current Liabilities. As a result,
in relative terms, the Company has had a decline in its liquidity from
June 30, 1999 to June 30, 2000.
And, while $1,967,254 of the Company's $2,231,130 in Total Current
Liabilities on June 30, 2000 represented notes payable that were convertible
into the Company's common stock, the Company's aggregate Total Current
Liabilities of $2,231,130 on June 30, 2000 increased by nearly 18% from the
$1,891,928 amount of Total Current Liabilities as of June 30, 1999. Moreover,
on June 30, 1999 the Company had $145,331 in Total Current Assets; on
June 30, 2000 the Company had Total Current Assets of only $104,111. Thus, in
absolute terms, the Company's liquidity has decreased as Total Current
Liabilities have increased and Total Current Assets have decreased from
June 30, 1999 to June 30, 2000.
The Company has been dependent upon its ability to obtain capital by
issuing convertible promissory notes on a private placement basis. The Company
does not have and does not anticipate receiving any commitments from any
underwriter or venture capital fund to assist it in meeting its current
financial obligations.
There can be no assurance that the Company will be able to repay all of
its outstanding notes payable as they become due.
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In order to meet its obligations at maturity with respect to the
outstanding principal and interest on such notes payable, the Company will be
required to restructure the terms of such notes and/or refinance such notes
through additional third-party debt and/or equity financing. The Company can
make no assurance that it will be able to restructure such notes payable or as
to the ultimate terms thereof. In addition, there can be no assurance that the
Company will be successful in obtaining such third-party financing.
ITEM 2A. FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's business organization and existing debt and obligations on
its balance sheet all involve elements of substantial risk. In many instances,
these risks arise from factors over which the Company will have little or no
control. Some adverse events may be more likely than others and the
consequence of some adverse events may be greater than others. No attempt has
been made to rank risks in the order of their likelihood or potential harm. In
addition to those general risks enumerated elsewhere, any purchaser of the
Company's Common Stock should also consider the following factors.
1. CONTINUED OPERATING LOSSES & LACK OF OPERATING HISTORY. The Company
incurred a Net Loss of $577,203 during the First Six Months of 2000 and a Net
Loss of $4,530,243 during the twelve months ending December 31, 1999. The
Company may well incur significant additional losses in the future as well.
The Company lacks a substantial operating history on which to base its
anticipated expense and revenues. There is no assurance that the Company's
operations will be successful or that it will be profitable in the future.
2. UNCERTAINTIES OF REVENUES. While the Company has expended substantial
resources for the development of its Club in San Francisco, California, the
Club is subject to changing state and municipal codes and ordinances. There
can be no assurance that the Company will be successful in operating the Club
or in generating revenues sufficient to sustain profitable operations.
3. CURRENT FINANCIAL STRUCTURE, LIMITED EQUITY, LIMITED WORKING CAPITAL &
NEED FOR ADDITIONAL FINANCING. While the Company's management believes that
its financial policies have been prudent, the Company has relied, in large
part, upon the use of debt financing to provide a substantial portion of the
Company's financial needs. The Company had, as of December 31, 1999, an
aggregate of $2,519,069 in current liabilities that are due for payment prior
to December 31, 2000 and of which $2,283,614 was in the form of convertible
debt convertible into shares of the Company's Common Stock. While the Company
believes that the Company's operation of the Club will be successful and will
allow the Company to generate sufficient profits and cash flow to service and
repay its existing debt, the Company may need to obtain additional financing or
renegotiate its existing debt financing in the event that the Company's
operations are not successful. In that event the Company may need to obtain
additional financing. The Company has had only limited discussions with
potential investors and it does not anticipate receiving any assurances that
the Company will obtain any additional capital from any investors. Further,
the Company has not sought to receive and has not received any commitments or
assurances from any underwriter, investment banker, venture capital fund, or
other individual or institutional investor. In the event that that the Company
needs additional financing there can be no assurance that the Company will
obtain any new financing or, if it is successful, that it can be obtained on
reasonable terms in light of the Company's current circumstances. (See
"Financial Statements.")
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4. PRIOR FILING DEFICIENCIES OF SUBSIDIARY. The Company's wholly-owned
subsidiary, AEI-Nevada, failed to file certain reports required by Section
15(d) of the Exchange Act, observe its filing obligations with respect to Form
SR, and otherwise observe certain book and record keeping obligations required
under the Exchange Act. While the Company believes that AEI-Nevada's failures
did not result in any injury or loss to any investor, AEI-Nevada and the
Company may have incurred liability for failure to fulfill these obligations
and if so, the Company may incur liability for violation of other laws as well.
5. AUDITOR'S OPINION: GOING CONCERN. Except for the explanatory paragraph
included in the firm's report on the financial statements for the years ended
December 31, 1997, 1998, and 1999 relating to the substantial doubt existing
about the Company's ability to continue as a going concern, the audit report
did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles.
6. SUBORDINATE TO EXISTING AND FUTURE DEBT & AUTHORIZED BUT UNISSUED
PREFERRED STOCK. All of the Common Stock offered hereby are subordinate to the
claims of the Company's existing and future creditors and any future holders of
the Company's preferred stock. The Company is authorized to issue up to
8,000,000 shares of the Company's preferred stock and currently the Company has
not issued any preferred stock.
7. MARKETING STRATEGY. While the Company believes that the operation of the
Club will be successful, there is no guarantee that these business operations
will be commercially accepted with sales revenues sufficient to permit the
Company to achieve or maintain profitable operations.
8. LIMITED PUBLIC MARKET. There is a limited trading market for the
Company's Common Shares, and there is no guarantee that a continuous liquid
trading market will subsequently develop. There can be no assurance that the
Common Shares will ever gain any liquid trading volumes in any other market or
gain listing on any stock exchange. Further, the Company's Common Stock is a
"Penny Stock" and as such, the ability of the Company to gain a liquid trading
market for it will be inhibited by various regulations and there can be no
assurance that any liquid trading market for the Company's Common Stock will
ever develop or, if it does develop, that it can be maintained. The Company
became a "reporting company" on January 23, 2000.
9. CONCENTRATION & LACK OF DIVERSIFICATION. The Company's assets are
invested almost entirely in the existing Club. While the Company believes that
will be successful, in the event that the Club is not successfully received by
the market, the Company will likely incur substantial and protracted losses
since the Company lacks diversification.
10. CONTROL BY OFFICERS AND DIRECTORS. The Company's present directors and
officers hold the power to vote an aggregate of 37.66% of the Company's Common
Shares as of December 31, 1999 (after including any shares purchasable upon
exercise of all existing common stock purchase options held by the Company's
officers and directors). The Company has granted a common stock purchase
option (the "First Amato Option") to Ralph M. Amato, the Company's Chairman,
President, Secretary, and Founder. The First Amato Option grants Mr. Amato the
right to purchase 1,200,000 shares of the Company's Common Stock at an exercise
price of $0.25 per Common Share. The First Amato Option has no expiration
date. In addition, Mr. Amato holds a second common stock purchase option for
the purchase of 600,000 shares of the Company's Common Stock with an exercise
price of $0.25 per share (the "Second Amato Option"). The Second Amato Option
expires February 13, 2004. Finally, Michael L. Potter, the Company's Secretary
and Director, holds an option to purchase 250,000 shares of the Company's
Common Stock at a purchase price of $0.25 per share (the "Potter Option"). The
Potter Option expires on February 13, 2004.
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11. COMPETITION. The Company's existing Club (and any other clubs that the
Company may establish) will face severe competition from several established
companies who have well-established operations, experienced management, and
possess significantly greater financial resources. In addition, the
gentlemen's club business is very competitive and many of competitors have
substantially greater managerial resources. Further, because the gentlemens
club business is dependent upon the uncertain commercial viability of the
Company's business, it is especially sensitive to ever-changing and
unpredictable competitive trends which can not be easily predicted and which
are beyond the control of the Company. Finally, the Company's sale of any
consigned artwork and memorabilia items can not be guaranteed since competition
from other retail outlets is intense and the availability of desired items for
items to display in the Club may not be desired by some sellers of such items.
For these and other reasons, the Company's business may be said to be riskier
than investments in other types of businesses.
12. DEPENDENCE UPON KEY PERSONNEL AND NEW EMPLOYEES. The Company believes its
success will depend, to a significant extent, on the efforts and abilities of
Ralph M. Amato, the Company's President and CEO. The loss of the services of
Mr. Amato could have a material and continuing adverse effect on the Company.
The Company's success also depends upon its ability to attract and retain
qualified employees. Hiring to meet anticipated Company operations will
require the Company to assimilate significant numbers of new employees during a
relatively short period of time.
13. KEY MAN INSURANCE & LIMITED FULL-TIME MANAGEMENT. While the Company
currently plans to obtain key man life insurance on the life of Ralph M. Amato,
the Company has no key man life insurance on his life. In the event that he is
unable to perform his duties, the Company's business may be adversely impacted.
If the Company grows, it will need to hire additional management and the
ability of the Company to employ suitable management at a cost acceptable to
the Company, in light of the Company's limited financial resources, can not be
assured.
14. LACK OF INDEPENDENT EVALUATION OF BUSINESS PLAN & PROPOSED STRATEGY. The
Company has not obtained any independent evaluation of the Company's Business
Plan and the Company's proposed business strategy. There can be no assurance
that the Company's Club or proposed strategy will generate any revenues, or if
revenues can be generated, that they can be generated at a level to maintain
profitability.
15. LIMITED MANAGERIAL EXPERIENCE OF CORPORATE OFFICERS. The Company's
officers, Ralph M. Amato and Michael L. Potter, Esq. have no substantial recent
experience in acquiring, establishing, developing, or operating clubs that
feature female exotic dance entertainment other than the recent and limited
experience gained at the existing Club which opened on January 26, 2000. The
Company has, under an employment agreement, employed Gary Marlin as the General
Manager of the Club who has 13 years of managerial experience in the management
of adult entertainment clubs and the Company has hired two additional managers
(a Restaurant Manager and an Entertainment Director) each of whom has over
12 years of experience. While the Company believes that these individuals
possess the necessary skills and experience, the Company will likely need to
secure the services of others who possess top management skill, experience, and
industry knowledge. There can be no assurance that the Company can secure and
retain any additional necessary top corporate officers and corporate staff on
terms acceptable to the Company.
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16. NO ASSURANCE OF AVAILABILITY OF THE ADDITIONAL CAPITAL & PAYMENT OF DEBTS.
The Company's continued operation of its existing Club will be dependent upon
the Company's ability to meet its obligations to an aggregate of $2,519,069 in
amounts due as Total Current Liabilities (as of December 31, 1999). There can
be no assurance that the Company will be successful in paying these debts. The
Company has received no commitment from any underwriter or other source of
capital that any additional capital will be provided to the Company. There can
be no assurance that the Company will be successful in generating and
sustaining sufficient cash flow to pay these debts.
17. NO PLANNED DIVIDENDS. The Company does not anticipate that it will pay
any dividends on the Company's Common Stock. Any profits that the Company may
generate, if any, will be reinvested into the Company.
18. GOVERNMENT REGULATION & EXOTIC ENTERTAINMENT INDUSTRY. The Company seeks
to operate establishments that offer "female exotic entertainment." This
business routinely suffers severe and unfavorable regulatory burdens, adverse
zoning ordinances, and other oppressive government regulations which may result
in the Company incurring substantial losses and significant delays in
connection with the development of any establishment.
19. LACK OF DIVERSIFICATION. The Company's proposed business involving the
operation of establishments offering "female exotic entertainment" will not
provide any diversification. If the Company is successful, all of the
Company's business and assets will be concentrated in the same industry.
20. POTENTIAL DILUTION. Funding of the Company's business plan is likely to
result in substantial and on-going dilution of the Company's existing
stockholders. While there can be no guarantee that the Company will be
successful in raising additional capital, if the Company is successful in
obtaining any additional capital, existing stockholders may incur substantial
dilution.
21. RULE 144 STOCK SALES. As of December 31, 1999, the Company had 1,541,374
shares of the Company's outstanding Common Stock as "restricted securities"
which may be sold only in compliance with Rule 144 adopted under the Securities
Act of 1933 or other applicable exemptions from registration. Rule 144 provides
that a person holding restricted securities for a period of one year may
thereafter sell in brokerage transactions, an amount not exceeding in any three
month period the greater of either (i) 1% of the Company's outstanding Common
Stock, or (ii) the average weekly trading volume during a period of four
calendar weeks immediately preceding any sale. Persons who are not affiliated
with the Company and who have held their restricted securities for at least two
years are not subject to the volume limitation. Possible or actual sales of the
Company's Common Stock by present shareholders under Rule 144 may have a
depressive effect on the price of the Company's Common Stock if any liquid
trading market develops.
22. RISKS OF LOW PRICED STOCKS. Trading in the Company's Common Stock is
limited since the Company's Common Stock is a "Penny Stock" and thereby the
retail market for the Common Stock is subject to burdens that are imposed on
brokers whose customers may wish to acquire the Company's Common Stock.
Consequently, a shareholder may find it more difficult to dispose of, or
to obtain accurate quotations as to the price of, the Company's securities. In
the absence of a security being quoted on NASDAQ, or the Company having
$2,000,000 in net tangible assets, trading in the Common Stock is covered by
Rule 3a51-1 promulgated under the Securities Exchange Act of 1934 for non-
NASDAQ and non-exchange listed securities. Under such rules, broker/dealers who
recommend such securities to persons other than established customers and
accredited investors (generally institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or an annual
income exceeding $200,000 or $300,000 jointly with their spouse) must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities are
also exempt from this rule if the market price is at least $5.00 per share, or
for warrants, if the warrants have an exercise price of at least $5.00 per
share. The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure related to the market for penny stocks and for trades in
any stock defined as a penny stock.
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The Commission has adopted regulations under such Act which define a penny
stock to be any NASDAQ or non-NASDAQ equity security that has a market price or
exercise price of less than $5.00 per share and allow for the enforcement
against violators of the proposed rules.
In addition, unless exempt, the rules require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule prepared by the
Commission explaining important concepts involving a penny stock market, the
nature of such market, terms used in such market, the broker/dealer's duties to
the customer, a toll-free telephone number for inquiries about the
broker/dealer's disciplinary history, and the customer's rights and remedies in
case of fraud or abuse in the sale.
Disclosure also must be made about commissions payable to both the
broker/dealer and the registered representative, current quotations for the
securities, and, if the broker/dealer is the sole market maker, the
broker/dealer must disclose this fact and its control over the market. Monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
While many NASDAQ stocks are covered by the proposed definition of penny
stock, transactions in NASDAQ stock are exempt from all but the sole market-
maker provision for (i) issuers who have $2,000,000 in tangible assets has been
in operation for at least three years ($5,000,000 if the issuer has not been in
continuous operation for three years), (ii) transactions in which the customer
is an institutional accredited investor, and (iii) transactions that are not
recommended by the broker/dealer.
In addition, transactions in a NASDAQ security directly with the NASDAQ
market maker for such securities, are subject only to the sole market-maker
disclosure, and the disclosure with regard to commissions to be paid to the
broker/dealer and the registered representatives. The Company's securities are
subject to the above rules on penny stocks and the market liquidity for the
Company's securities could be severely affected by limiting the ability of
broker/dealers to sell the Company's securities.
22. MATTER OF "Y2K" AND THE COMPANY'S COMPUTER AND INFORMATION SYSTEMS. The
Company has acquired point-of-sale computer hardware and software together with
certain management information systems for use in its existing Club. While
the Company has had its computer hardware and software evaluated to ensure that
it will operate effectively in the year 2000 or beyond and otherwise not result
in "Y2K" operating problems (problems arising out of the inability of any
computer systems to accurately calendar all dates following December 31, 1999
as occurring in the year 2000 and thereafter rather than inaccurately calendar
all such dates as 1900, etc.) there can be no assurance that the Company's
point-of-sale computer hardware and software together with certain management
information systems will function effectively in the year 2000 or beyond.
PART II - OTHER INFORMATION (Unaudited)
ITEM 1. LEGAL PROCEEDINGS
On April 13, 2000, Superior Heating and Sheet Metal, Inc. (the
"Plaintiff") filed a Complaint against the Company, W.B. Elmer & Company,
Lewis Chin and other unnamed persons in Superior Court for the County of
San Francisco (the "Complaint").
The Complaint asserts that: (i) the Company breached a contract to pay for
services to the Plaintiff; (ii) the Plaintiff is entitled to payment for the
reasonable value of the services rendered by the Plaintiff; and (iii) the
Plaintiff is entitled to exercise its foreclosure rights pursuant to a
mechanics' lien. The Complaint arises out of the construction of the Company's
Club.
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The Plaintiff seeks $119,822 in damages. While the Company believes that
it is not responsible for payment of these monies and that the general
contractor, W.B. Elmer & Company, is responsible for the payment of all such
amounts, there can be no assurance that the Company will prevail in any
ultimate resolution of this litigation or that the Company will not incur
substantial and protracted litigation costs, expenses, and settlement payments
in resolving the claims made in the Complaint and the resulting litigation.
On April 18, 2000 the Company was served with a copy of a summons and a
Complaint filed in Superior Court for the County of San Francisco by Tucknott
Electric Co. (the "Tucknott Plaintiff") asserts: (i) that the Company breached
its contract with the Tucknott Plaintiff; (ii) that the Company has been
unjustly enriched at the expense of the Tucknott Plaintiff; and (iii) that the
Tucknott Plaintiff is entitled to exercise its foreclosure rights pursuant to a
mechanics' lien. This Complaint also arises out of the construction of the
Company's Club.
The Tucknott Plaintiff seeks $52,666.49 in damages. While the Company
believes that it is not responsible for payment of these monies and that the
general contractor, W.B. Elmer & Company, is responsible for the payment of all
such amounts, there can be no assurance that the Company will prevail in any
ultimate resolution of this litigation or that the Company will not incur
substantial and protracted litigation costs, expenses, and settlement payments
in resolving the claims made in the Complaint and the resulting litigation.
On July 28, 2000 the Company (including its wholly-owned subsidiary, AEI-
Nevada) was served with a copy of a summons and a Complaint filed in the
Superior Court for the County of San Diego by Ken Marc (the "Marc Plaintiff") a
holder of a convertible promissory note with a principal amount of $10,000 (the
"Marc Note"). The Marc Plaintiff asserts (i) that the Company breached its
obligations to the Marc Plaintiff by not repaying principal and interest due on
the Marc Note; (ii) that the Company has been unjustly enriched at the expense
of the Marc Plaintiff; and (iii) that the Marc Plaintiff is entitled to relief
for damages incurred by the Marc Plaintiff.
The Company intends to attempt to negotiate a settlement with the Marc
Plaintiff, however there can be no assurance that the Company will be
successful.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Not applicable.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits have been filed with the Company's Form 10-SB and
are hereby incorporated by reference herein:
3 Certificate of Incorporation - Wagg Corp.
3.1 Amendment to Certificate of Incorporation - Wagg Corp.
3.2 Amendment to Certificate of Incorporation - Wagg Corp.
3.3 By-Laws of Wagg Corp. (Delaware)
3.4 Articles of Incorporation - Alternative Entertainment, Inc. (NV)
3.5 By-Laws of Alternative Entertainment, Inc. (NV)
3.6 Articles of Incorporation of RMA of San Francisco, Inc.
3.7 By-Laws of RMA of San Francisco, Inc.
4.1 Specimen of Common Stock Certificate
10 Agreement for the Purchase of Common Stock
10.1 Lease for Office Space in La Jolla, California
10.2 Lease of Real Property from Roma Cafe, Inc.
10.3 Lease of Apartment Units in San Francisco, California
10.4 Indemnification Agreement between the Company and Ralph M. Amato
10.5 Agreement with Itex Corporation
10.6 Employment Agreement Between the Company and Gary Marlin
10.7 Loan Agreement with Unsecured Convertible Note
10.8 Unsecured Promissory Note (C. Palozzi)
10.9 Settlement Agreement With Bowne of Los Angeles, Inc.
10.10 Unsecured Promissory Note (V. Amato)
10.11 Unsecured Promissory Note (V. Amato)
10.12 Secured Promisory Note (R. Smith)
10.13 Secured Promissory Note (I. Weeda Family Trust)
10.14 Secured Promissory Note (I. Weeda Family Trust)
10.15 Secured Promissory Note (K. Marc)
10.16 Secured Promissory Note (G. W. Smith)
10.17 Secured Promissory Note (D. Hylton)
10.18 Secured Promissory Note (M. Yonika)
10.19 Unsecured Promissory Note (R. Kaelan)
10.20 Unsecured Convertible Promissory Note ($300,000 - Chin)
10.21 Addendum to Promissory Note (Essex)
10.22 Unsecured Promissory Note ($70,000 - Amato)
10.23 Unsecured Promissory Note ($16,000 - Amato)
10.24 Unsecured Promissory Note ($100,000 - Chin)
23.1 Consent of Pannell Kerr Forster
23.2 Resignation of Pannell Kerr Forster
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant:
BoysToys.com, Inc.
/S/ Ralph M. Amato
---------------------------------------
Ralph M. Amato
President, Chief Executive Officer
Chief Financial Officer
Date: August 4, 2000
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