SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number O-25030
PLAY CO. TOYS & ENTERTAINMENT CORP.
(Exact name of registrant as specified in its charter)
Delaware 95-3024222
(State or Jurisdiction of Incorporation
or Organization) (I.R.S. Employer Identification No.)
550 Rancheros Drive, San Marcos, California 92069
(Address of principal executive offices)
(760) 471-4505
(Registrant's telephone number, including area code)
N/A (Former name, former address, and former fiscal year, if changed since
last report)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares of each of the issuer's classes of common equity
outstanding as of the latest practicable date: Common Stock, $.01 par value:
4,103,519 shares outstanding as of November 10, 1997.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PLAY CO. TOYS & ENTERTAINMENT CORP.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Condensed balance sheets as of September 30, 1997
and March 31, 1997 .......................................... 3
Condensed statements of operations for the
three months and six months ended September 30, 1997 and 1996 4
Condensed statements of cash flows for the
six months ended September 30, 1997 and 1996 ................ 5
Notes to condensed financial statements ...................... 6
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............... 7-13
Part II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS 13
Item 2 CHANGES IN SECURITIES AND USE OF PROCEEDS 14
Item 3 DEFAULTS UPON SENIOR SECURITIES 14
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
Item 5 OTHER INFORMATION 14
Item 6 EXHIBITS AND REPORTS ON FORM 8-K 14
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A SUBSIDIARY OF UNITED TOYS & TEXTILES CORP.)
CONDENSED BALANCE SHEETS
ASSETS
(unaudited)
September 30, 1997 March 31, 1997
------------------ --------------
Current
Cash ............................................................................... $ 185,573 $ 177,722
Accounts receivable ................................................................ 398,970 60,206
Merchandise inventories ............................................................ 7,356,635 6,092,930
Other current assets ............................................................... 233,895 247,313
------------ ------------
Total current assets ............................. 8,175,073 6,578,171
Property and Equipment, net of accumulated
depreciation and amortization of $3,106,965
and $2,828,913, respectively ....................................................... 2,563,856 2,475,650
Deposits and other assets ...................................................................... 431,474 324,797
------------ ------------
$ 11,170,403 $ 9,378,618
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
September 30, 1997 March 31, 1997
------------ ------------
Current
Borrowings under financing agreement ................................................. $ 5,634,234 $ 4,438,875
Accounts payable ..................................................................... 4,700,689 3,259,176
Accrued expenses and other liabilities ............................................... 46,855 308,940
Current portion of notes payable ..................................................... 100,000 141,666
------------ ------------
Total current liabilities .................................................... 10,481,778 8,148,657
Notes payable, net of current portion ........................................................... 50,000 100,000
Deferred rent liability ......................................................................... 135,672 126,925
Stockholders' equity:
Series E preferred stock, $1 par, 4,000,000 shares authorized;
3,200,570 and 2,500,570 shares outstanding ......................................... 3,700,570 2,500,570
Common stock, $.01 par value, 40,000,000 shares
authorized; 4,103,519 and 4,083,519 shares outstanding ............................. 41,035 40,835
Additional paid-in-capital ........................................................... 6,562,407 6,512,107
Accumulated deficit .................................................................. (9,801,059) (8,050,476)
Total stockholders' equity ............................................ 502,954 1,003,036
$ 11,170,403 $ 9,378,618
============ ============
See accompanying notes to condensed financial statements
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A SUBSIDIARY OF UNITED TEXTILES & TOYS CORP.)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30, Six Months Ended September 30,
1997 1996 1997 1996
----
Net sales ............................................... $ 4,228,780 $ 3,666,218 $ 7,371,593 $ 6,851,121
Cost of Sales ........................................... 2,384,717 2,528,783 4,358,082 4,680,501
Gross profit ........... 1,844,063 1,137,435 3,013,511 2,170,620
Operating expenses:
Operating expenses ..................... 2,028,571 1,817,170 4,056,974 3,558,962
Depreciation and amortization .......... 139,028 95,580 278,053 191,160
----------- ----------- -----------
Total operating expenses 2,167,597 1,912,750 4,335,027 3,750,122
Operating loss .......................................... (323,534) (775,315) (1,321,516) (1,579,502)
Interest expense ........................................ 217,545 195,663 429,067 374,837
Net loss ................................................ $ (541,079) $ (970,978) $(1,750,583) $(1,954,339)
Net loss applicable to common shares .................... $ (541,079) $ (970,978) $(1,750,583) $(1,954,339)
Net loss per common share ............................... $ (0.13) $ (0.60) $ (0.43) $ (1.35)
Weighted average number of common shares and
share equivalents outstanding ................. 4,103,519 1,604,929 4,093,683 1,446,386
See accompanying notes to condensed financial statements
PLAY CO. TOYS & ENTERTAINMENT CORP.
(A SUBSIDIARY OF UNITED TEXTILES & TOYS CORP.)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended September 30,
1997 1996
-----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................... $(1,750,583) $(1,954,339)
Adjustments used to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization ...................... 278,053 298,532
Amortization of common stock options ............... 107,372 107,372
Deferred rent ...................................... 8,746 (20,825)
Preferred stock issued for financing charges ....... -- 16,000
Increase (decrease) from changes in:
Accounts receivable ..................... (338,764) (258,284)
Merchandise inventories ................... (1,263,705) (2,710,581)
Other current assets ...................... 13,418 126,027
Deposits and other assets ................. (214,050) (40,234)
Accounts payable .......................... 1,441,513 2,115,304
Accrued expenses and other liabilities .. (262,085) (274,802)
Net cash used for operating activities .. (1,980,085) (2,595,830)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ......................... 366,258) (231,477)
----------- -----------
Net cash used for investing activities .. (366,258) (231,477)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred and common stock ........ 1,250,501 834,000
Net borrowings on line of credit ............................ 1,195,359 2,077,947
Repayments of notes payable ................................. (91,666) --
Redemption of preferred stock ............................... -- (87,680)
----------- -----------
Net cash provided by financing activities 2,345,194 2,824,267
----------- -----------
Net increase in cash ................................................. 7,851 (3,040)
Cash at beginning of period .......................................... 177,722 83,650
Cash at end of period ................................................ $ 185,573 $ 80,610
See accompanying notes to condensed financial statements
PLAY CO. TOYS & ENTERTAINMENT CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
Note 1.
The interim accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
for interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by GAAP for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. For further information, management
suggests that the reader refer to the audited financial statements for the year
ended March 31, 1997 included in its Annual Report on Form 10-KSB and the
Company's registration statement on Form SB-2, which became effective on October
2, 1997. Operating results for the six month period ended September 30, 1997 are
not necessarily indicative of the results of operations that may be expected for
the year ending March 31, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Statements contained in this report which are not historical facts may be
considered forward looking information with respect to plans, projections, or
future performance of the Company as defined under the Private Securities
Litigation Reform Act of 1995. These forward looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those projected.
The Company's operations are substantially controlled by United Textiles &
Toys Corp. ("UTTC"), the Company's parent. UTTC currently owns approximately
59.3% of the issued and outstanding shares of the Company's Common Stock.
For the three months ended September 30, 1997 compared to three months
ended September 30, 1996
The Company generated net sales of $4,228,780 in the three months ended
September 30, 1997. This represented an increase of $562,562, or 15.3%, from net
sales of $3,666,218 in the three months ended September 30, 1996. The increase
in sales is directly attributable to increased sales contribution from its
stores of $496,820, or a 13.6% improvement over the stores' sales contribution
in the three months ended September 30, 1996. The sales contribution from the
Company's stores came despite a decrease of $48,592 in same store sales for the
three months ended September 30, 1997. Sales from new stores contributed an
additional $545,412 to the Company's sales in the three months ended September
30, 1997.
The Company posted a gross profit of $1,844,063 in the three months ended
September 30, 1997, an increase of $706,628, or 62.1%, from the gross profit of
$1,137,435 in the three months ended September 30, 1996. This represented an
improvement in the Company's gross margin from 31.0% in the September 1996
period to 43.6% in the September 1997 period. This 12.6% gross margin
improvement was largely due to the ongoing implementation of the Company's plan
to augment its traditional product base of lower margin promotional toys with a
mix of educational toys, which generally produce better margins than promotional
toys.
Operating expenses in the three months ended September 30, 1997 were
$2,028,571. This represented a $211,401, or 11.6%, increase over the Company's
operating expenses of $1,817,170 in the three months ended September 30, 1996.
The primary reasons for the operating expense increase were an increase in
payroll and related expenses of $75,648, a decrease of rental and other income
of $64,546 and an increase in rent expense of $37,934. A contributing factor to
the increases in rent and payroll related expenses was the acquisition of the
three Toys International stores in January 1997. Two of the Toys International
stores generate higher gross profit than the Company's original stores but also
carry higher rent and salary expenses than the original stores. Those increases
were partially offset by a reduction in advertising expense of $66,788.
Operating expenses for the three months ended September 30, 1997 were equivalent
to the Company's operating expenses for the three months ended June 30, 1997.
During the three months ended September 30, 1997, the Company recorded
non-cash depreciation and amortization expenses of $139,028, a $43,448 increase
from $95,580 in the period ended September 30, 1996. This increase was largely
due to depreciation on the Toys International assets acquired in January 1997.
Total operating expenses (operating expenses combined with depreciation and
amortization) in the September 1997 period were $2,167,597, a $254,847, or
13.3%, increase from total operating expenses of $1,912,750 in the September
1996 period. Total operating expenses for the three months ended September 30,
1997 were equivalent to the Company's total operating expenses for the three
months ended June 30, 1997.
As a result of the $706,628 improvement in gross profit more than
offsetting the $254,847 increase in total operating expenses, the Company's
operating loss decreased by $451,781 from $775,315 during the three months ended
September 30, 1996 to $323,534 during the three months ended September 30, 1997.
This represented a 58.3% reduction in the Company's operating loss.
Interest expense totaled $217,545 for the three months ended September 30,
1997. This represented a $22,230, or 11.2%, increase over interest expense of
$195,663 in the three months ended September 30, 1996. The primary reason for
the increased level of interest expense was a higher level of borrowings in the
September 1997 period than in the September 1996 period.
As a result of the above mentioned factors, the Company recorded a net loss
of $541,079 for the three months ended September 30, 1997. This represented a
$429,899 reduction from the net loss of $970,978 recorded in the three months
ended September 30, 1996. The net loss per common share for the September 1997
period was $(0.13) compared to a net loss per common share in the September 1996
period of $(0.60). The loss per common share decreased in the September 1997
period compared to the corresponding prior period due to an increase in the
weighted average number of shares outstanding from 1,604,929 in the September
1996 period to 4,103,519 in the September 1997 period.
For the six months ended September 30, 1997 compared to six months ended
September 30, 1996
The Company generated net sales of $7,371,593 in the six month period ended
September 30, 1997. This represented an increase of $520,472, or 7.6%, from net
sales of $6,851,121 in the six month period ended September 30, 1996. The
increase in sales is directly attributable to increased sales contribution from
its stores of $556,169, or an 8.1% improvement over the stores' sales
contribution in the six month period ended September 30, 1996. The sales
contribution from the Company's stores came despite a decrease of $359,361 in
same store sales for the six month period ended September 30, 1997. Sales from
new stores contributed an additional $915,530 to the Company's sales in the six
month period ended September 30, 1997.
The Company posted a gross profit of $3,013,511 in the six month period
ended September 30, 1997, an increase of $842,891, or 38.8%, from the gross
profit of $2,170,620 in the six month period ended September 30, 1996. This
represented an improvement in the Company's gross margin from 31.7% in the
September 1996 period to 40.9% in the September 1997 period. This 9.2% gross
margin improvement was largely due to the ongoing implementation of the
Company's plan to augment its traditional product base of lower margin
promotional toys with a mix of educational toys, which generally produce better
margins than promotional toys.
Operating expenses in the six month period ended September 30, 1997 were
$4,056,974. This represented a $498,012, or 14.0%, increase over the Company's
operating expenses of $3,558,962 in the six month period ended September 30,
1996. The primary reasons for the operating expense increase were an increase in
rent expense of $264,272, an increase in payroll and related expenses of
$179,544 and a decrease of rental and other income of $131,257. A contributing
factor to the increases in rent and payroll related expenses was the acquisition
of the three Toys International stores in January 1997. Two of the Toys
International stores generate higher gross profit than the Company's original
stores but also carry higher rent and salary expenses than the original stores.
Those increases were partially offset by a reduction in advertising expense of
$204,353.
During the six month period ended September 30, 1997, the Company recorded
non-cash depreciation and amortization expenses of $278,053, a $86,893 increase
from $191,160 in the period ended September 30, 1996. This increase was largely
due to depreciation on the Toys International assets acquired in January 1997.
Total operating expenses (operating expenses combined with depreciation and
amortization) in the September 1997 period were $4,335,027, a $584,905, or
15.6%, increase from total operating expenses of $3,750,122 in the September
1996 period.
As a result of the $842,891 improvement in gross profit more than
offsetting the $584,905 increase in total operating expenses, the Company's
operating loss decreased by $257,986 from $1,579,502 during the six month period
ended September 30, 1996 to $1,321,516 during the six month period ended
September 30, 1997. This represented a 16.3% reduction in the Company's
operating loss.
Interest expense totaled $429,067 for the six month period ended September
30, 1997. This represented a $54,230, or 14.5%, increase over interest expense
of $374,837 in the six month period ended September 30, 1996. The primary reason
for the increased level of interest expense was a higher level of borrowings in
the September 1997 period than in the September 1996 period.
As a result of the above mentioned factors, the Company recorded a net loss
of $1,750,583 for the six month period ended September 30, 1997. This
represented a $203,756 reduction from the net loss of $1,954,339 recorded in the
six month period ended September 30, 1996. The net loss per common share for the
September 1997 period was $(0.43) compared to a net loss per common share in the
September 1996 period of $(1.35). The loss per common share decreased in the
September 1997 period compared to the corresponding prior period due to an
increase in the weighted average number of shares outstanding from 1,446,386 in
the September 1996 period to 4,093,683 in the September 1997 period.
Liquidity and Capital Resources
At September 30, 1997, the Company had a working capital deficit of
$(2,306,705) compared to a working capital deficit of $(1,570,486) at March 31,
1997. The Company has generated operating losses for the past several years and
has historically financed those losses and its working capital requirements
through sales of preferred stock. There can be no assurance that the Company
will be able to generate sufficient revenues or have sufficient controls over
expenses and other charges to achieve profitability.
During the six month period ended September 30, 1997, the Company used
$1,980,085 of cash in its operations compared to $2,595,830 used in operations
in the six month period ended September 30, 1996. The Company's net loss was
approximately $1.75 million and $1.95 million, respectively, in those periods.
The Company used $366,258 of cash in its investing activities during the
six month period ended September 30, 1997 compared to $231,477 in the six month
period ended September 30, 1996.
The Company generated $2,345,194 from its financing activities in the six
month period ended September 30, 1997 compared to the generation of $2,824,267
from financing activities in the six month period ended September 30, 1996. The
primary contributors to the Company's financing activities were borrowings on
the Company's line of credit and proceeds from the issuance of preferred stock.
Those proceeds were used to finance the Company's working capital and capital
expenditure requirements and operating losses during the six month period ended
September 30, 1997.
As a result of the above factors, the Company had a net increase in cash of
$7,851 in the six month period ended September 30, 1997 compared to a net
decrease in cash of $3,040 in the six month period ended September 30, 1996.
During the three months ended September 30, 1997, the Company opened one
new store and remodeled an existing store to the Company's new format that
emphasizes specialty and educational toys. Both stores are located in strip
malls in San Diego county, California. In October 1997, the Company opened a new
store in a highly trafficked mall in Ontario, California and opened a temporary
store for the Christmas season in a highly trafficked mall in Costa Mesa,
California. In early November 1997, the Company opened an additional store in a
highly trafficked mall in Redondo Beach, California. Later in the month of
November, it expects to open an additional store in a highly trafficked mall
located in Tempe, Arizona. The Tempe store will be the first Company store
located outside of California.
At September 30, 1997, the Company had an inventory financing line of
credit with Congress Financial Corporation ("Congress") in connection with a
Loan and Security Agreement ("Loan Agreement") that was executed on February 1,
1996. The Loan Agreement provides for maximum borrowings of $7,000,000 based on
the "Cost Value of Eligible Inventory," as defined in the Loan Agreement. The
Loan Agreement also requires the Company to maintain, at all times, a net worth
of $500,000. The Loan Agreement requires the payment of a quarterly service fee
of $10,000, The line of credit is secured by substantially all assets of the
Company, is guaranteed by UTTC, and is further collateralized by $3,000,000 in
letters of credit provided by Europe American Capital Corp. ("EACC"). Interest
on outstanding balances is charged at prime plus 1.5%. The Loan Agreement
matures February 1, 1998.
The Company is exploring options to find a lender to replace the Congress
line of credit. The Company has been verbally informed by a lender that its loan
committee has approved a loan subject to the Company's receipt of an additional
$1.5 million in equity. There can be no assurance that the loan agreement will
be consummated.
The toy industry is seasonal with approximately 45% to 49% of the Company's
annual sales occurring during the months of October through December. As a
result, sources of funds to repay amounts due under inventory finance
arrangements with financial institutions and manufacturers are typically
generated from sales during the peak selling season.
The Company has prepared cash flow forecasts for the fiscal year ending
March 31, 1998. Management acknowledges that the Company will require additional
financing in addition to its support from its line of credit with Congress and
from vendor credit lines in order to meet its capital requirements for the
fiscal year ending March 31, 1998. In addition, the Company may require
additional capital to redesign current and future retail locations to
incorporate its plans to focus on the educational and specialty toy market. The
Company has filed a registration statement with the Securities and Exchange
Commission for an initial public offering for the Company's Series E preferred
shares to meet those capital requirements. The offering is being managed by West
America Securities Corp. on a best efforts basis with an objective of raising
net proceeds to the Company of approximately $2.5 million. However, there can be
no assurance that this offering will be consummated.
In September 1997, the NASDAQ SmallCap Market System delisted the Company's
common stock for perceived failure to maintain the required minimum
stockholders' equity of $1,000,000 and for public interest concerns.
Subsequently, the Company's common stock began trading on the over-the counter
market. West America Securities Corp. has agreed to market the above noted
preferred stock offering with the preferred shares and common stock all trading
(or to be traded) on the over-the counter market. However, the delisting may
have a negative impact on the Company's ability to raise additional equity or
debt financing.
In addition, Mr. Ilan Arbel, an affiliate of EACC, in a letter dated June
10, 1997, represented his willingness to provide additional working capital to
the Company, should such be necessary, through September 30, 1998.
Trends Affecting Liquidity, Capital Resources and Operations
The Company's sales efforts are focused primarily on a defined geographic
segment consisting of the Southern California area and the Southwestern United
States. The Company's future financial performance will depend upon continued
demand for toys and hobby items and on general economic conditions within that
geographic market area, the Company's ability to choose locations for new
stores, the Company's ability to purchase product at favorable prices and on
favorable terms, and the effects of increased competition and changes in
consumer preferences.
The toy and hobby retail industry faces a number of potentially adverse
business conditions including price and gross margin pressures and market
consolidation. The domination of the toy industry by Toys R Us has resulted in
increased price competition among various toy retailers and declining gross
margins for such retailers. Moreover, the domination of Toys R Us has resulted
in the liquidation or bankruptcy of many toy retailers throughout the United
States, including some in the Southern California market. There can be no
assurance that the Company's business strategy will enable it to compete
effectively in the toy industry.
Management currently knows of no trends reasonably expected to have a
material impact upon the Company's operations or liquidity in the foreseeable
future. The Company's operating history has been characterized by narrow profit
margins; accordingly, the Company's earnings will depend significantly on its
ability to purchase its product on favorable terms, to obtain store locations on
favorable terms, retail a large volume and variety of products efficiently, and
to provide quality support services. The Company's prices are, in part, based on
market surveys of its competitors' prices, primarily those of Toys R Us. As a
result, aggressive pricing policies, such as those used by Toys R Us, have
resulted in the Company reducing its retail prices on many items, thereby
reducing the available profit margin. Moreover, increases in expenses or other
charges to income may have a material adverse effect on the Company's results of
operations. There can be no assurance that the Company will be able to generate
sufficient revenues or have sufficient control over expenses and other charges
to increase profitability.
Inflation and Seasonality
During the past few years, inflation in the United States has been
relatively stable. In management's opinion, this is expected to continue for the
foreseeable future. However, should the American economy again experience double
digit inflation rates, as was the case in the past, the impact on prices could
adversely affect the Company's operations.
The Company's business is highly seasonal with a large portion of its
revenues and profits being derived during the months of November and December.
Accordingly, the Company is required to obtain substantial short-term borrowing
during the first three quarters of the calendar year in order to purchase
inventory and to finance capital and operational expenditures. The Company's
past history of negative cash flows during the fiscal year are partially a
result of its seasonal business nature. The Company's cash flows are negative
for most months prior to the Christmas season. The Company's negative cash flow
for all months except November and December historically has been serviced via
the Company's line of credit, special credit terms with vendors, and from the
sale of equity instruments, principally preferred stock.
PART II
Item 1. Legal Proceedings
In June 1997, in the Superior Court of the State of California, Los Angeles
County, Shook Development Corp. commenced suit against the Company for breach of
contract pertaining to premises leased by the Company from South San Dimas, a
California Limited Partnership. The premises are located in San Dimas,
California. The lease for the premises has a term from November 15, 1990 through
March 2000. The Company vacated the premises in April 1997. The plaintiff is not
the entity with which the Company entered the lease. Under California State law
and the provisions of the lease, plaintiff has a duty to mitigate its damages.
Plaintiff seeks damages, of a continuing nature, for unpaid rent, unpaid Common
Area Maintenance charges, late charges, interest, costs, and attorneys' fees.
The Company is defending against this action.
Also in June 1997, in the Superior Court of the State of California, Orange
County, Prudential Insurance Company of America commenced suit against the
Company for breach of contract pertaining to premises leased by the Company. The
premises are located in Riverside, California, and the lease extends from August
1995 through January 2001. In April 1997, the Company vacated the premises.
Under California State law and the provisions of the lease, plaintiff has a duty
to mitigate its damages. Plaintiff seeks damages, of a continuing nature, for
unpaid rent, unpaid Common Area Maintenance charges, late charges, interest,
costs, and attorneys' fees. The Company is defending against this action.
In May 1997, in the Superior Court of the State of California, Los Angeles
County, PNS Stores, Inc. commenced suit against the Company and its former
guarantor for breach of contract pertaining to premises leased by the Company.
The premises are located in Whittier, California. The lease for the premises has
a term from September 1994 through January 2000. The Company vacated the
premises in March 1997. Under California State law and the provisions of the
lease, plaintiff has a duty to mitigate its damages. Plaintiff seeks damages, of
a continuing nature, for unpaid rent, unpaid Common Area Maintenance charges,
late charges, interest, costs, and attorneys' fees. The Company is defending
against this action.
In October 1997, in the Superior Court of the State of California, County
of San Bernardino, Foothill Marketplace commenced suit against the Company and
its former guarantor for breach of contract pertaining to premises leased by the
Company. The premises are located in Rialto, California. The lease for the
premises has a term from February 1987 through November 2003. The Company
vacated the premises in August 1997. Under California State law and the
provisions of the lease, plaintiff has a duty to mitigate its damages. Plaintiff
seeks damages, of a continuing nature, for unpaid rent, proximate damages,
costs, and attorneys' fees. Once served, the Company shall defend against this
action.
No Director, Officer, or affiliate of the Company, nor any associate of
same, is a party to, or has a material interest in, any proceeding adverse to
the Company.
Item 2. Changes in Securities and Use of Proceeds: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.87 - Lease Agreement for Store-Clairemont
Exhibit 10.88 - Lease Agreement for Store-Redondo Beach
Exhibit 10.89 - Lease Agreement for Store-Arizona Mills
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 18th day of November 1997.
PLAY CO. TOYS & ENTERTAINMENT CORP.
By: /s/ Richard L. Brady
Richard L. Brady
President and Chief Executive Officer
By: /s/ James B. Frakes
James B. Frakes
Chief Financial Officer