As filed with the Securities and Exchange Commission on October 18, 2007
Registration No. 333-______________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ToyZap.com, Inc.
(Name of small business issuer in its charter)
TEXAS 3942 20-8592825
----- ---- ----------
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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ToyZap.com, Inc.
629 Deforest Road
Coppell, Texas 75019
(972) 393-0100
(Address and telephone number of principal executive offices
and principal place of business)
Lance Dean
629 Deforest Road
Coppell, Texas 75019
(972) 393-0100
(Name, address and telephone number for agent for service)
Copies to:
Ray A. Balestri, Esq.
Siobhan F. Kratovil, Esq.
Balestri & Associates
2651 North Harwood, Suite 200
Dallas, Texas 75201
Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this registration statement
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post effective amendment filed under Rule 462(c) of the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. |_|
If this Form is a post effective amendment filed under Rule 462(d) of the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
CALCULATION OF REGISTRATION FEE
Title of each class of Proposed maximum Proposed maximum
securities to be Amount to be offering price per aggregate offering Amount of
registered registered unit price registration fee(1)
---------- ---------- ---- ----- -------------------
Common Stock 2,000,000 $0.075 $150,000.00 $4.61
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(1) Estimated solely for purposed of calculating the registration fee under
Rule 457(a).
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the registration statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
PROSPECTUS
ToyZap.com, Inc.
2,000,000 Shares of Common Stock at $0.075 per Share
This is our initial public offering. Our securities are not listed on any
national securities exchange or the Nasdaq Stock market.
We are offering a total of 2,000,000 shares of our common stock in a direct
public offering, without any involvement of underwriters or broker-dealers. The
offering price is $0.075 per share. This offering will terminate 180 days from
the effective date of this prospectus, or an additional 90 days if extended,
although we may close the offering on any date prior if the offering is fully
subscribed. In the event that 2,000,000 shares are not sold within 180 days from
the effective date of this prospectus, at our sole discretion, we may extend the
offering for an additional 90 days. In the event that 2,000,000 shares are not
sold within 180 days from the effective date of this prospectus, or within the
additional 90 days if extended, all money received by us will be promptly
returned to each subscriber without interest or deduction of any kind. If
2,000,000 shares are sold within 180 days from the effective date of this
prospectus, or within the additional 90 days, if extended, all money received by
us will be retrieved by us and there will be no refund. The funds will be
maintained in a separate bank account at Bank of America, N.A. until we receive
$150,000 at which time we will remove those funds and use the same as set forth
in the Use of Proceeds section of this prospectus. This account is not an
escrow, trust or similar account. Your subscription will only be deposited in a
separate bank account under our name. In the event you are entitled to a refund,
future actions by creditors in the subscription period could preclude or delay
us in refunding your money because we do not have any escrow, trust or similar
account.
Lance Dean, our sole officer and director, will market our common stock and
offer and sell the securities on our behalf. This is a best efforts direct
participation offering that will not utilize broker-dealers. Mr. Dean will not
receive any compensation for his role in selling shares in the offering.
Investing in our common stock involves risks. See "Risk Factors" starting at
page 2.
Offering Price Offering Expenses(1) Proceeds to ToyZap.com
Per Share $ 0.075 $ 0.0075 $ 0.0675
Total $150,000.00 $ 15,000.00 $135,000.00
(1) These offering expenses do not include any underwriting discounts or
commissions. There are no underwriting discounts or commissions to be
paid in connection with this offering.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October 18, 2007.
TABLE OF CONTENTS
Page No.
PROSPECTUS SUMMARY............................................................1
ToyZap.com, Inc..........................................................1
The Offering.............................................................1
Selected Financial Data..................................................2
RISK FACTORS..................................................................2
Risks Relating to ToyZap.com, Inc........................................3
Risks Relating to the Internet Industry..................................8
Risks Relating to this Offering..........................................10
USE OF PROCEEDS...............................................................11
DETERMINATION OF OFFERING PRICE...............................................12
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES.................................13
PLAN OF DISTRIBUTION; TERMS OF OFFERING.......................................14
Section 15(g) of the Exchange Act........................................15
Offering Period and Expiration Date......................................16
Procedures for Subscribing...............................................16
Right to Reject Subscriptions............................................16
Separate Account for Subscriptions.......................................17
BUSINESS......................................................................17
Our Background...........................................................17
Our Business.............................................................17
Products and Services....................................................17
Our Website..............................................................18
Our Target Markets and Marketing Strategy................................18
Growth Strategy..........................................................18
Our Competition..........................................................19
Proprietary Rights.......................................................19
Our Research and Development.............................................19
Government Regulation....................................................19
Employees................................................................19
Facilities...............................................................19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
OR PLAN OF OPERATION.....................................................20
Plan of Operation........................................................20
Limited Operating History; Need for Additional Capital...................22
Results of Operation.....................................................22
Liquidity and Capital Resources..........................................23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT...............................................................23
MANAGEMENT....................................................................24
Officers and Directors...................................................24
Background of Sole Officer and Director..................................25
EXECUTIVE COMPENSATION........................................................26
Summary Compensation Table...............................................26
Employment Agreements....................................................26
Long-Term Incentive Plan Awards..........................................26
Compensation of Directors................................................26
Indemnification..........................................................26
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MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS......................27
DESCRIPTION OF SECURITIES.....................................................27
Common Stock.............................................................27
No Cumulative Voting.....................................................28
Preferred Stock..........................................................28
Dividend Policy..........................................................28
Transfer Agent...........................................................29
INTERESTS OF NAMED EXPERTS AND COUNSEL........................................29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................29
LEGAL PROCEEDINGS.............................................................30
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES...............................................30
EXPERTS.......................................................................30
LEGAL MATTERS.................................................................30
FINANCIAL STATEMENTS.........................................................F-1
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PROSPECTUS SUMMARY
The following prospectus summary is qualified in its entirety by, and should
read in conjunction with, the more detailed information and our Financial
Statements and Notes thereto appearing elsewhere in this prospectus. This
summary does not contain all of the information you should consider before
investing in our common stock. You should read the entire prospectus carefully.
ToyZap.com, Inc.
We are a development stage company. We intend to market and sell plush and
collectible toys to retail customers over the Internet on our website,
www.toyzap.com. The plush and collectible toys to be offered for sale on our
website are intended to be treasured collectibles and safe entertainment for
children.
Our products will be offered in various series. After the conclusion of one
series, additional "characters" will be added. We intend to limit the production
of certain characters. The actual production amount of a certain character will
not be disclosed at the time it is introduced on our website. We think that this
will create an atmosphere that encourages customers to visit our website
frequently and purchase products before inventory runs out. Our principle
business activities will be: developing lines of plush and collectible toys;
creating and updating our website where customers can review and ultimately
purchase our products; and promoting, marketing, and selling our products over
the Internet.
We are a company without revenues or operations, we have minimal assets, and
have incurred losses since inception.
Our principal executive office is located at 629 Deforest Road, Coppell, Texas
75019, and our telephone number is (972) 393-0100. We were formed under the laws
of the State of Texas on May 30, 2006.
The information contained on our website is not part of this prospectus.
The terms "ToyZap.com," "we," "us" and "our" as used in this prospectus refer to
ToyZap.com, Inc.
The Offering
The following is a brief summary of the offering:
Securities being offered: 2,000,000 shares of common stock,
par value $0.001 per share.
Offering price per share: $0.075 per share.
Offering period: The shares are being offered for a
period of 180 days, or an
additional 90 days if extended by
us, although we may close the
offering on any date prior if the
offering is fully subscribed.
Net proceeds to us: $135,000 (net proceeds of $150,000
less offering expenses of $15,000).
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1
Person making the
determination whether
the offering conditions
are satisfied: Lance Dean, our sole officer and
director.
Use of proceeds: We will use the proceeds to pay
administrative expenses, the
implementation of our business
plan, and working capital.
Number of shares
outstanding before
the offering: 8,000,000.
Number of shares
outstanding after
the offering if all
of the shares are
sold: 10,000,000.
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Selected Financial Data
The following information summarizes the more complete historical
financial information at the end of this prospectus.
Period from May 30, 2006
(date of inception)
to June 30, 2007
(Audited)
Balance Sheet
Total Assets $15,100
Total Liabilities $15,100
Stockholders Equity (Deficit) $(8,000)
Period from May 30, 2006
(date of inception)
to June 30, 2007
(Audited)
Income Statement
Revenue $0
Total Expenses $8,000
Net Income (Loss) $(8,000)
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RISK FACTORS
Any investment in our common stock involves a high degree of risk. You should
consider carefully the risks and uncertainties described below, and all other
information contained in this prospectus, before you decide whether to purchase
our common stock. The occurrence of any of the following risk factors could harm
our business. Additional risks and uncertainties not currently known to us or
that we currently deem immaterial may also become important factors that may
harm our business. You may lose part or all of your investment due to any of
these risks or uncertainties.
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Risks Relating to ToyZap.com, Inc.
Because our auditors have issued a going concern opinion, there is substantial
uncertainty we will continue operations in which case you could lose your
investment.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an ongoing business for the next 12
months. The financial statements do not include any adjustments that might
result from the uncertainty about our ability to continue in business. As such
we may have to cease operations and you could lose your investment.
We lack an operating history and have losses that we expect to continue into the
future. There is no assurance our future operations will result in profitable
revenues. If we cannot generate sufficient revenues to operate profitably, we
will cease operations and you will lose your investment.
We were incorporated on May 30, 2006 and we have not started our proposed
business operations or realized any revenues. We have no operating history upon
which an evaluation of our future success or failure can be made. Our net loss
from inception through June 30, 2007 is $8,000. Since June 30, 2007, we have
incurred $12,500 in expenses, of which $10,000 is for legal fees, $2,500 is for
audit fees, and $0 is for filing fees and general office expenses. The $10,000
in legal fees relates to the offering of securities described in this
prospectus. Our ability to achieve and maintain profitability and positive cash
flow is dependent upon:
o completion of this offering;
o our ability to develop and continually update a functional, user-friendly
website through which our products can be sold;
o our ability to procure and maintain on commercially reasonable terms
relationships with third parties to develop and maintain our website,
network infrastructure, and transaction processing systems; and to
manufacture, warehouse, and distribute our products;
o product development;
o our ability to identify and pursue mediums through which we will be able to
market our products;
o our ability to attract customers to our website;
o our ability to generate revenues through sales on our website; and
o our ability to manage growth by managing administrative overhead and
distribution costs.
Based upon current plans, we expect to incur operating losses in future periods
because we will be incurring expenses and not generating revenues. We cannot
guarantee that we will be successful in generating revenues in the future.
Failure to generate revenues will cause you to lose your investment.
We may be unable to protect the intellectual property rights that we have in the
products we manufacture and distribute.
Lance Dean, our sole officer and director, developed the concepts behind the
first line of six characters we intend to offer for sale on our website. Mr.
Dean assigned any intellectual property rights that he may have had in that line
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of characters to us. While Mr. Dean did not believe that the line of characters
infringed on the intellectual property rights of third parties, Mr. Dean did not
take any steps such as copyright or trademark protection to protect his
intellectual property rights in the line of characters, nor did he conduct any
investigation to see if the line of characters infringed on the intellectual
property rights of third parties. We have not conducted any investigation to see
if the first line of characters infringes on the intellectual property rights of
others. We have also not taken any further steps to protect our intellectual
property rights in the first line of characters nor do we intend to do so until
after we receive the proceeds from the offering and start our operations.
For future lines of characters, we will be dependent on concepts and other
intellectual property developed by Mr. Dean and assigned by him to ToyZap.com.
However, Mr. Dean is under no contractual obligation to ToyZap.com to continue
to develop new lines of characters nor is he under any contractual obligation to
assign his intellectual property rights in any new lines of characters to
ToyZap.com. We do not intend to use any person other than Mr. Dean as a source
of concepts for new lines of characters to offer for sale on our website.
Consequently, there can be no assurances that we will be able to offer new lines
of characters for sale on our website.
We intend to rely on a combination of copyright, trademark and trade secret
protection and non-disclosure agreements with employees and third-party service
providers to establish and protect the intellectual property rights that we have
in the products we manufacture and distribute. There can be no assurance that
our competitors will not independently develop products that are substantially
equivalent or superior to ours. There also can be no assurance that the measures
we adopt to protect our intellectual property rights will be adequate to do so.
The ability of our competitors to develop products or other intellectual
property rights equivalent or superior to ours or that our inability to enforce
our intellectual property rights could have a material adverse affect our
results of operation.
Though we do not believe that any of the products we agree to manufacture and
distribute will infringe on the intellectual property rights of third parties in
any material respect, there can be no assurance that third parties will not
claim infringement by us with respect to the products we will manufacture and
distribute. Any such claim, with or without merit, could be time-consuming,
result in costly litigation, cause product shipment delays or require us to
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to us or at
all, which could have a material adverse effect on our business, results of
operations and financial condition.
Changing consumer preferences will require periodic product introduction.
As a result of changing consumer preferences, many toys (including plush and
collectible toys) are successfully marketed for a limited period of time. There
can be no assurance that any of our products or any of our product lines will
continue to be popular for a period of time sufficient enough for us to clear
our inventory or that new products and product lines we introduce will achieve
an acceptable degree of market acceptance, or that if such acceptance is
achieved, it will be maintained for period of time sufficient enough for us to
clear our inventory. Our success will be dependent upon our ability to develop
new products and product lines. Our failure to introduce new products and
product lines and to achieve and sustain market acceptance for such products and
to produce acceptable margins could have a material adverse effect on our
financial condition and results of operations.
We may be subject to product liability claims for our products and are subject
to federal regulation.
Products that we sell may expose us to potential liability from personal injury
claims by end-users of such products. We are currently not involved in any legal
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proceedings and claims incident to the normal conduct of our business. We do not
currently maintain product liability insurance coverage, but should we be
contractually required to carry specified types and amounts of insurance, we
hope to procure such insurance as required. However, there can be no assurance
that we will be able to either procure or maintain such coverage or obtain
additional coverage on acceptable terms, or that such insurance will provide
adequate coverage against any potential claims. Moreover, even if we maintain
adequate insurance, any successful claim could materially and adversely affect
our reputation and prospects. We believe that the products we choose to market
and sell will meet all applicable safety standards.
The United States Consumer Products Safety Commission ("CPSC") has the authority
under certain federal laws and regulations to protect consumers from hazardous
goods. The CPSC may exclude from the market goods it determines are hazardous,
and may require a manufacturer to repurchase such goods under certain
circumstances. Some state, local and foreign governments have similar laws and
regulations. In the event that such laws or regulations change or we are found
in the future to have violated any such law or regulation, the sale of the
relevant product could be prohibited and we could be required to repurchase such
products.
We face intense competition and our inability to successfully compete with our
competitors will have a material adverse effect on our results of operation.
The toy industry and the plush and collectible toy segment of the toy industry
are highly competitive. Our competition in the plush toy segment of the toy
industry includes Ty, Inc., Russ Berrie and Company, Inc., and The Boyds
Collection, Ltd. Many of our competitors have longer operating histories,
greater brand recognition, broader product lines and greater financial resources
and advertising budgets than we do. We intend to distribute our products
exclusively through our website, www.toyzap.com. Our competitors may have more
channels of distribution than we will have, including mass market online
retailers such as eToys.com, Amazon.com, and ToysRUs.com, mail order catalogs,
and brick and mortar retailers. In addition, the toy industry and the plush and
collectible toy segment of the toy industry have certain barriers to entry.
Competition is based primarily on the ability to design and develop new plush
and collectible toys, procure licenses for popular characters and trademarks,
and successfully market products. Many of our competitors offer similar products
or alternatives to our products. We intend to rely solely on concepts and other
intellectual property developed by Lance Dean, our sole officer and director.
Our competitors will procure licenses for popular characters and trademarks that
may be more appealing to the plush and collectible toy market then our
characters and trademarks. Our retail products will compete with other products
for the on-line retail market. There can be no assurance that we will procure an
on-line retail market that will be available to support the products we will
offer or allow us to seek expansion of our products and product lines. There can
be no assurance that we will be able to compete effectively in this marketplace.
Intellectual property claims against us can be costly and could impair our
business.
Other parties may assert infringement or unfair competition claims against us.
We cannot predict whether third parties will assert claims of infringement
against us, or whether any future assertions or prosecutions will harm our
business. If we are forced to defend against any such claims, whether they are
with or without merit or are determined in our favor, then we may face costly
litigation, diversion of technical and management personnel, or product shipment
delays. As a result of such a dispute, we may have to develop non-infringing
technology or enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may be unavailable on terms acceptable to us,
or at all. If there is a successful claim of product infringement against us and
we are unable to develop non-infringing technology or license the infringed or
similar technology on a timely basis, it could impair our business.
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If we do not attract customers to our website on cost-effective terms, we will
not make a profit, which ultimately will result in a cessation of operations.
Our success depends on our ability to attract retail customers of plush and
collectible toys to our website on cost-effective terms. Our strategy to attract
customers to our website, which has not been formalized or implemented, includes
viral marketing, the practice of generating "buzz" among Internet users in our
products through the developing and maintaining weblogs or "blogs", online
journals that are updated frequently and available to the public, postings on
online communities such as Yahoo!(R) Groups and amateur websites such as
YouTube.com, and other methods of getting Internet users to refer others to our
website by e-mail or word of mouth; search engine optimization, marketing our
website via search engines by purchasing sponsored placement in search results;
and entering into affiliate marketing relationships with website providers to
increase our access to Internet consumers. We expect to rely on viral marketing
as the primary source of traffic to our website, with search engine optimization
and affiliate marketing as secondary sources. Our marketing strategy may not be
enough to attract sufficient traffic to our website. If we are unsuccessful at
attracting a sufficient amount of traffic to our website, our ability to get
customers and our financial condition will be harmed.
To date we do not have any customers. We cannot guarantee that we will ever have
any customers. Even if we obtain customers, there is no guarantee that we will
generate a profit. If we cannot generate a profit, we will have to suspend or
cease operations.
We will be dependent on third parties to develop and maintain our website,
network infrastructure, and transaction processing systems; design (based on
concepts developed by our sole officer and director) and manufacture of the
products we will offer for sale on our website; and fulfill a number of customer
service and other retail functions. If such parties are unwilling or unable to
continue providing these services, our business could be severely harmed.
We will rely on third parties to develop and maintain our website, network
infrastructure, and transaction processing systems; design (based on concepts
developed by Lance Dean, our sole officer and director) manufacture the products
we will offer for sale on our website; and conduct a number of traditional
retail operations, including warehousing, preparing merchandise for shipment to
individual customers, and timely distribution of purchased merchandise. To date
we have not entered into any formal relationship with any third parties to
provide these services. Our success will depend on our ability to build and
maintain relationships with such third party service providers on commercially
reasonable terms. If we are unable to build and maintain such relationships on
commercially reasonable terms, we will have to suspend or cease operations. Even
if we are able to build and maintain such relationships, if these parties are
unable to deliver products on a timely basis, our customers could become
dissatisfied and decline to make future purchases. If our customers become
dissatisfied with the services provided by these third parties, our reputation
and the ToyZap.com brand could suffer.
We will depend on third-party delivery services to deliver our products to our
customers on a timely and consistent basis.
We will rely on multiple third parties for the shipment of our products. We will
not have a written long-term agreement with any of these third parties, and as a
result, we cannot be sure that these relationships will continue on terms
favorable to us, if at all. Unexpected increases in shipping costs or delivery
times, particularly during the holiday season, could cause our customers to
become dissatisfied and decline to make future purchases, harming our business,
prospects, financial condition, and results of operations. If our relationships
with these third parties are terminated or impaired or if these third parties
are unable to deliver products for us, we would be required to use alternative
carriers for the shipment of products to our customers. We may be unable to
6
engage alternative carriers on a timely basis or upon terms favorable to us.
Changing carriers would likely have a negative impact on our business, operating
results and financial condition.
Our operating results will depend on our website, network infrastructure, and
transaction processing systems. Capacity restraints or systems failures would
harm our business, results of operations and financial condition.
We have not developed our website, network infrastructure, or transaction
processing systems, and we intend to use the proceeds from this offering to do
so as described in the "Use of Proceeds" section of this prospectus. We will
have to suspend or cease operations if we are unable to develop our website,
network infrastructure, and transaction processing systems.
If we are able to develop our website, network infrastructure, and transaction
processing systems, any systems interruptions that result in the unavailability
of our website or reduced performance of our transaction systems would reduce
our transaction volume and the attractiveness of our services and would
seriously harm our business, operating results, and financial condition. Our
transaction processing systems and network infrastructure may be unable to
accommodate increases in traffic to our website. We may be unable to project
accurately the rate or timing of traffic increases or successfully upgrade our
systems and infrastructure to accommodate future traffic levels on our website.
In addition, we may be unable to upgrade or expand our transaction processing
systems in an affective and timely manner or to integrate any newly developed or
purchased functionality with our then existing systems. Any inability to do so
may cause unanticipated system disruptions, slower response times, degradation
in levels of customer service, impaired quality and speed of order fulfillment
or delays in reporting accurate financial information.
We are solely dependent upon the funds to be raised in this offering to initiate
our operations, the proceeds of which may be insufficient to achieve revenues.
If we need additional funds and can't raise them we will have to terminate our
operations.
We have not started our business operations. We need the proceeds from this
offering to start our operations. If $150,000 is raised, this amount will enable
us, after paying the expenses of this offering, to operate for one year. If we
need additional funds and can't raise the money, we will have to cease
operations.
If we do not make a profit, we may have to suspend or cease operations.
Because we are small and do not have much capital, we must limit the marketing
of our website. The website is how we will generate revenue. Because we will be
limiting our marketing activities, we may not be able to attract enough
suppliers and customers to operate profitably. If we cannot operate profitably,
we may have to suspend or cease operations.
Because our sole officer and director will only be devoting limited time to our
operations, our operations may be sporadic which may result in periodic
interruptions or suspensions of operations. This activity could prevent us from
developing products and attracting customers and result in a lack of revenues
that may cause us to suspend or cease operations.
Our sole officer and director, Lance Dean, will only be devoting limited time to
our operations. Mr. Dean will be devoting approximately 30 hours per week of his
time to our operations. Because our sole officer and director will only be
devoting limited time to our operations, our operations may be sporadic and
occur at times which are convenient to him. As a result, operations may be
periodically interrupted or suspended which could result in a lack of revenues
and a possible cessation of operations.
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Because our sole officer and director does not have prior experience in online
marketing, we may have to hire individuals or suspend or cease operations.
Because our sole officer and director does not have prior experience in online
marketing, we may have to hire additional experienced personnel to assist us
with our operations. If we need the additional experienced personnel and we do
not hire them, we could fail in our plan of operations and have to suspend
operations or cease operations.
Because our sole officer and director does not have prior experience in
financial accounting and the preparation of reports under the Securities
Exchange Act of 1934, we may have to hire individuals which could result in an
expense we are unable to pay.
Because our sole officer and director does not have prior experience in
financial accounting and the preparation of reports under the Securities Act of
1934, we may have to hire additional experienced personnel to assist us with the
preparation thereof. If we need the additional experienced personnel and we do
not hire them, we could fail in our plan of operations and have to suspend
operations or cease operations entirely and you could lose your investment.
Because we have only one officer and director who is responsible for our
managerial and organizational structure, in the future, there may not be
effective disclosure and accounting controls to comply with applicable laws and
regulations which could result in fines, penalties and assessments against us.
We have only one officer and director. He is responsible for our managerial and
organizational structure which will include preparation of disclosure and
accounting controls under the Sarbanes Oxley Act of 2002. When theses controls
are implemented, he will be responsible for the administration of the controls.
Should he not have sufficient experience, he may be incapable of creating and
implementing the controls which may cause us to be subject to sanctions and
fines by the Securities and Exchange Commission.
We are completely dependent on our sole officer and director to guide our
initial operations, initiate our plan of operations, and provide financial
support. If we lose his services we will have to cease operations.
Our success will depend entirely on the ability and resources of Mr. Dean, our
sole officer and director. If we lose the services or financial support of Mr.
Dean, we will cease operations. Presently, Mr. Dean is committed to providing
his time and financial resources to us. However, Mr. Dean does engage in other
activities and only devotes and will devote a limited amount of time to our
operations.
Risks Relating to the Internet Industry
Our success is tied to the continued use of the Internet and the adequacy of the
Internet infrastructure.
Our future revenues and profits, if any, substantially depend upon the continued
widespread use of the Internet as an effective medium of business and
communication.
Factors which could reduce the widespread use of the Internet include:
o actual or perceived lack of security of information or privacy protection;
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o possible disruptions, computer viruses or other damage to the Internet
servers or to users' computers; and
o excessive governmental regulation.
Customers may be unwilling to use the Internet to purchase goods.
Our future depends heavily upon the general public's willingness to use the
Internet as a means to purchase goods. The demand for and acceptance of products
sold over the Internet are highly uncertain, and most e-commerce businesses have
a short track record. If consumers are unwilling to use the Internet to conduct
business, our business may not develop profitably.
Our relationships with our customers may be adversely affected if the security
measures that we use to protect their personal information, such as credit card
numbers, are ineffective.
Any breach in our website security could expose us to a risk of loss or
litigation and possible liability. We anticipate that we will rely on encryption
and authentication technology licensed from third parties to provide secure
transmission of confidential information. As a result of advances in computer
capabilities, new discoveries in the field of cryptography or other
developments, a compromise or breach of our security precautions may occur. A
compromise in our proposed security could severely harm our business. A party
who is able to circumvent our proposed security measures could misappropriate
proprietary information, including customer credit card information, or cause
interruptions in the operation of our website. We may be required to spend
significant funds and other resources to protect against the threat of security
breaches or to alleviate problems caused by these breaches. However, protection
may not be available at a reasonable price, or at all. Concerns regarding the
security of e-commerce and the privacy of users may also inhibit the growth of
the Internet as a means of conducting commercial transactions.
Because we will rely primarily on on-line credit card payment for our services,
we will risk fraudulent credit card transactions; a failure to adequately
control such transactions would harm our net sales and results of operations
because we do not intend to carry insurance against this risk. We intend to
utilize technology to help us detect the fraudulent use of credit card
information. Nonetheless, we may suffer losses as a result of orders placed with
fraudulent credit card data, even though the associated financial institution
approved payment of the orders. Under current credit card practices, we will be
liable for fraudulent credit card transactions because we do not intend to
obtain a cardholder's signature. Because we have no operating history, we cannot
predict our future levels of bad-debt expense.
If one or more states successfully assert that we should collect sales or other
taxes on the sale of the merchandise that we offer for sale on our website, our
business could be harmed.
We do not intend to collect sales or other similar taxes for physical shipments
of goods into states other than Texas. One or more local, state or foreign
jurisdictions may seek to impose sales tax collection obligations on us and
other out-of-state companies that engage in online commerce. Our business could
be adversely affected if one or more states or any foreign country successfully
asserts that we should collect sales or other taxes on the sale of our
merchandise.
Existing or future government regulation could harm our business.
We are subject to the same federal, state and local laws as other companies
conducting business on the Internet. Today there are relatively few laws
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specifically directed towards conducting business on the Internet. However, due
to the increasing popularity and use of the Internet, many laws and regulations
relating to the Internet are being debated at the state and federal levels.
These laws and regulations could cover issues such as user privacy, freedom of
expression, pricing, fraud, quality of products and services, taxation,
advertising, intellectual property rights and information security.
Applicability to the Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, taxation, libel,
obscenity and personal privacy could also harm our business. Current and future
laws and regulations could harm our business, results of operation and financial
condition.
Laws or regulations relating to privacy and data protection may adversely affect
the growth of our Internet business or our marketing efforts.
We are subject to increasing regulation at the federal, state, and international
levels relating to privacy and the use of personal user information. These data
protection regulations and enforcement efforts may restrict our ability to
collect demographic and personal information from users, which could be costly
or harm our marketing efforts.
Risks Relating to this Offering
Because we do not have an escrow or trust account for your subscription, if we
file for bankruptcy protection or are forced into bankruptcy, or a creditor
obtains a judgment against us and attaches the subscription, you will lose your
investment.
Your funds will not be placed in an escrow or trust account. Accordingly, if we
file for bankruptcy protection or a petition for involuntary bankruptcy is filed
by creditors against us, your funds will become part of the bankruptcy estate
and administered according to the bankruptcy laws. If a creditor sues us and
obtains a judgment against us, the creditor could garnish the bank account and
take possession of the subscriptions. As such, if the minimum conditions of this
offering are not satisfied, it is possible that a creditor could attach your
subscription, which could preclude or delay the return of money to you. If that
happens, you will lose your investment and your funds will be used to pay
creditors.
Because our sole officer and director who is also our sole promoter, will own
64% of the total outstanding common stock if the offering is fully subscribed,
he will retain control of the company and be able to decide who will be
directors and you may not be able to elect any directors which could decrease
the price and marketability of the shares.
If we sell all 2,000,000 shares of common stock in this offering, Lance Dean
will own 64% of the total outstanding common stock. As a result, after
completion of this offering, Mr. Dean will be able to elect all of our directors
and control our operations, which could decrease the price and marketability of
the shares.
Because there is no public trading market for our common stock, you may not be
able to resell your stock.
There is currently no public trading market for our common stock. Therefore
there is no central place, such as stock exchange or electronic trading system,
to resell your shares. If you do want to resell your shares, you will have to
locate a buyer and negotiate your own sale in compliance with applicable federal
and state securities laws.
Because the Securities and Exchange Commission imposes additional sales practice
requirements on brokers who deal in our shares that are penny stocks, some
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brokers may be unwilling to trade them. This means that you may have difficulty
reselling your shares and this may cause the price of the shares to decline.
Our shares would be classified as penny stocks and are covered by Section 15(g)
of the Securities Exchange Act of 1934 and the rules promulgated thereunder
which impose additional sales practice requirements on brokers/dealers who sell
our securities in this offering or in the aftermarket. For sales of our
securities, the broker or dealer must make a special suitability determination
and receive from you a written agreement prior to making a sale for you. Because
of the imposition of the foregoing additional sales practices, it is possible
that brokers will not want to make a market in our shares. This could prevent
you from reselling your shares and may cause the price of the shares to decline.
NASD sales practice requirements may limit a stockholder's ability to buy and
sell our stock.
The NASD has adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending speculative low
priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the NASD believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The NASD requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may have the effect
of reducing the level of trading activity and liquidity of our common stock.
Further, many brokers charge higher transactional fees for penny stock
transactions. As a result, fewer broker-dealers may be willing to make a market
in our common stock, reducing a stockholder's ability to resell shares of our
common stock.
USE OF PROCEEDS
Our offering is being made in a direct public offering, without the involvement
of underwriters or broker-dealers. The table below sets fort the use of proceeds
from this offering:
Gross Proceeds $150,000
Offering Expenses $ 15,000
Net Proceeds $135,000
The net proceeds will be used as follows:
Website development $25,000
Phones and equipment $ 4,500
Internet $ 3,500
Office lease $ 9,600
Product development $ 9,400
Inventory $27,500
Marketing and advertising $15,500
Legal and accounting $40,000
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Total offering expenses of $15,000 to be paid from the proceeds of the offering
are for Securities and Exchange Commission registration fees ($50), printing
expenses ($1,250), audit and administrative fees and expenses ($2,500), blue sky
fees and expenses ($700), legal fees and expenses ($10,000), and transfer agent
fees ($500) connected with this offering. No other expenses of the offering will
be paid from proceeds.
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Upon completion of the offering, we intend to immediately initiate the
development of our website, www.toyzap.com. We intend to hire an outside web
designer to assist us in designing and building our website and retaining a
third party service provider to build and maintain our network infrastructure
and transaction processing system. We believe that it will take two to three
months to create a workable website, network infrastructure, and transaction
processing system.
We intend to establish a new executive office. This will include rent for
physical office space, phones, internet access costs, computer equipment, and
other office equipment. We estimate that the cost for phones and equipment and
internet access costs to be $4,500 and $3,500, respectively, during the next 12
months, and rent for our new executive office to be $9,600 during the next 12
months (or $800 per month).
We intend to begin product development and building inventory. Product
development will include negotiating agreements on commercially reasonable terms
with third parties to continue the development of the first line of six
characters we will offer for sale on our website, including artist renderings,
design, and prototypes, and will also include securing our intellectual property
rights in that first line of characters, including investing whether or not the
first line of six characters infringes on the intellectual property rights of
others and obtaining copyright and trademark protection, if available. Building
inventory will include negotiating agreements on commercially reasonable terms
with third parties to manufacture the products to be offered for sale on our
website and to conduct a number of traditional retail operations, including
warehousing, preparing merchandise for shipment to individual customers, and
timely distribution of purchased products. To date we have not entered into any
formal relationship with any third parties to provide these services. We
estimate product development and inventory costs to be $9,400 and $27,500,
respectively, during the next 12 months.
Marketing and advertising will be focused on attracting retail customers of
plush and collectible toys to our website. Our strategy to attract customers to
our website, which has not been formalized or implemented, includes viral
marketing, through developing and maintaining blogs, postings on online
communities such as Yahoo!(R) Groups and amateur websites such as YouTube.com,
and other methods of getting Internet users to refer others to our website by
e-mail or word of mouth; search engine optimization, which would involve
marketing our website via search engines by purchasing sponsored placement in
search results; and entering into affiliate marketing relationships with other
website providers to increase our exposure to Internet users. We intend to rely
on viral marketing as the primary source of traffic to our website, with search
engine optimization and affiliate marketing as secondary sources. The cost of
developing the marketing and advertising campaign is estimated to be $15,500, of
which $5,500 will be used for viral marketing and $10,000 will be used for
search engine optimization and affiliate marketing.
We estimate that our legal, auditing, and accounting fees to be $40,000 during
the next 12 months.
The proceeds from the offering will allow us to operate for 12 months. Lance
Dean, our sole officer and director, determined that the finds would last 12
months, including but not limited to filing reports with the Securities and
Exchange Commission as well as business activities contemplated by our business
plan.
DETERMINATION OF OFFERING PRICE
The price of the shares we are offering was arbitrarily determined in order for
us to raise $150,000 in this offering. The offering price bears no relationship
whatsoever to our assets, earnings, book value or other criteria of value. Among
the factors considered were:
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o our lack of operating history;
o the proceeds to be raised by the offering;
o the amount of capital to be contributed by purchasers in this offering in
proportion to the amount of stock to be retained by our existing
shareholders, and
o our relative cash requirements.
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES
Dilution represents the difference between the offering price and the net
tangible book value per share immediately after completion of this offering. Net
tangible book value is the amount that results from subtracting total
liabilities and intangible assets from total assets. Dilution arises mainly as a
result of our arbitrary determination of the offering price of the shares being
offered. Dilution of the value of the shares you purchase is also a result of
the lower book value of the shares held by our existing shareholders.
As of June 30, 2007, the net tangible book value of our shares of common stock
was a deficit of $(8,000) or approximately $(0.001) per share based upon
8,000,000 shares outstanding.
Upon completion of this offering, the net tangible book value of the 10,000,000
shares to be outstanding, will be $127,000 or approximately $0.0127 per share.
The net tangible book value of the shares held by our existing shareholders will
be increased by $0.0128 per share without any additional investment on their
part. You will incur an immediate dilution of $0.0623 per share to $0.0127 per
share.
After completion of this offering, purchasers of shares in offering will
collectively own approximately 20% of the total number of shares then
outstanding shares for which the purchasers will have made cash investments in
the aggregate of $150,000, or $0.075 per share. Our existing shareholders will
own approximately 80% of the total number of shares then outstanding, for which
they will have made contributions of $8,000 in services, or approximately $0.001
per share.
The following table compares the differences of your investment in our shares
with the investment of our existing shareholders.
Existing shareholders if all of the shares are sold:
Price per share $ 0.001
Net tangible book value per share before offering $ (8,000)
Net tangible book value per share after offering $ 0.0127
Increase to present shareholders in net tangible book value
per share after offering $ 0.0128
Capital contributions $ 8,000
Number of shares outstanding before the offering 8,000,000
Number of shares after offering held by existing shareholders 10,000,000
Percentage of ownership after offering assuming maximum number
of shares are sold. 80%
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Purchasers of shares in this offering if all of the shares are sold:
Price per share $ 0.075
Dilution per share $ 0.0623
Capital contributions $ 150,000
Number of shares after offering held by public investors 2,000,000
Percentage of ownership after offering 20%
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PLAN OF DISTRIBUTION; TERMS OF THE OFFERING
We are offering 2,000,000 shares of common stock in a direct public offering,
without any involvement of underwriters or broker-dealers. The offering price is
$0.075 per share. Funds from this offering will be placed in a separate bank
account at Bank of America, N.A. Its telephone number is (972) 745-6608. The
funds will be maintained in the separate bank until we receive $150,000 at which
time we will remove those funds and use the same as set forth in the Use of
Proceeds section of this prospectus. This account is not an escrow, trust or
similar account. If we have not sold 2,000,000 shares and raised $150,000 within
180 days of the effective date of our registration statement, plus 90 additional
days if we choose to extend the offering, all funds will be promptly returned to
you without a deduction of any kind. However, future actions by creditors in the
subscription period could preclude or delay us in refunding your money. During
the 180-day period and possible additional 90-day period, no funds will be
returned to you. You will only receive a refund of your subscription if we do
not raise $150,000 within the 180-day period referred to above which could be
expanded by an additional 90 days at our discretion for a total of 270 days.
Sold securities are deemed securities which have been paid for with collected
funds prior to expiration of 180 days, 270 days if extended. Collected funds are
deemed funds that have been paid by the drawee bank. Lance Dean, our sole
officer and director, will make the determination regarding whether the offering
conditions are satisfied. There are no finders involved in our distribution.
Our sole officer and director will not purchase shares in this offering.
We will sell the shares in this offering through Lance Dean, our sole officer
and director. He will not receive any commission from the sale of any shares. He
will not register as a broker/dealer under Section 15 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), in reliance upon Rule 3a4-1. Rule
3a4-1 sets forth those conditions under which a person associated with an issuer
may participate in the offering of the issuer's securities and not be deemed to
be a broker/dealer. The conditions are that:
1. The person is not statutorily disqualified, as that term is defined
in Section 3(a)(39) of the Exchange Act, at the time of his participation;
and,
2. The person is not compensated in connection with his participation
by the payment of commissions or other remuneration based either directly
or indirectly on transactions in securities; and,
3. The person is not at the time of their participation, an associated
person of a broker/dealer; and,
4. The person meets the conditions of Paragraph (a)(4)(ii) of Rule
3a4-1 of the Exchange Act, in that he (A) primarily performs, or is
intended primarily to perform at the end of the offering, substantial
duties for or on behalf of the issuer otherwise than in connection with
transactions in securities; and (B) is not a broker or dealer, or an
associated person of a broker or dealer, within the preceding 12 months;
and (C) do not participate in selling and offering of securities for any
14
issuer more than once every 12 months other than in reliance on Paragraphs
(a)(4)(i) or (a)(4)(iii) of Rule 3a4-1.
Mr. Dean is not statutorily disqualified, is not being compensated, and is not
associated with a broker/dealer. He is and will continue to be our sole officer
and director at the end of the offering and has not been during the last 12
months and is currently not a broker/dealer or associated with a broker/dealer.
He has not during the last 12 months and will not in the next 12 months offer or
sell securities for another corporation.
We intend to distribute the prospectus to friends, relatives, and business
associates of Mr. Dean. Mr. Dean will not purchase any shares in this offering
and there will be no offers or sales to affiliates of Mr. Dean. Further, the
shares will not be offered through any media or through investment meetings. Mr.
Dean will personally contact a potential investor. The only means of
communication will be verbal, by telephone or personal contact. The only
document to be delivered in connection with the offering will be this
prospectus. No communications or prospectus will be delivered prior to the
effective date of our registration statement.
We intend to sell our shares in the states of New York, New Jersey, Tennessee,
Florida, Texas, Nevada, and Minnesota. Prior to selling our shares in the
foregoing jurisdictions, we will file applications for the sale thereof with the
respective securities administrations of those jurisdictions. We have not filed
any applications for registration with any states and we do not intend to do so
until we have been advised by the Securities and Exchange Commission that it has
no further comments regarding our public offering.
A separate bank account will be opened at Bank of America, N.A. The subscription
price will be deposited into the account. Payment will be made by check or bank
wire. All fees related to the account will be paid by Mr. Dean.
Section 15(g) of the Exchange Act
Our shares are "penny stocks" covered by Section 15(g) of the Exchange Act, and
Rules 15g-1 through 15g-6 and Rule 15g-9 promulgated thereunder. They impose
additional sales practice requirements on broker/dealers who sell our 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 annual income exceeding $200,000 or $300,000 jointly
with their spouses). While Section 15(g) and Rules 15g-1 through 15g-6 apply to
brokers-dealers, they do not apply to us.
Rule 15g-1 exempts a number of specific transactions from the scope of the penny
stock rules.
Rule 15g-2 declares unlawful broker/dealer transactions in penny stocks unless
the broker/dealer has first provided to the customer a standardized disclosure
document.
Rule 15g-3 provides that it is unlawful for a broker/dealer to engage in a penny
stock transaction unless the broker/dealer first discloses and subsequently
confirms to the customer current quotation prices or similar market information
concerning the penny stock in question.
Rule 15g-4 prohibits broker/dealers from completing penny stock transactions for
a customer unless the broker/dealer first discloses to the customer the amount
of compensation or other remuneration received as a result of the penny stock
transaction.
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Rule 15g-5 requires that a broker/dealer executing a penny stock transaction,
other than one exempt under Rule 15g-1, disclose to its customer, at the time of
or prior to the transaction, information about the sales persons compensation.
Rule 15g-6 requires broker/dealers selling penny stocks to provide their
customers with monthly account statements.
Rule 15g-9 requires broker/dealers to approved the transaction for the
customer's account; obtain a written agreement from the customer setting forth
the identity and quantity of the stock being purchased; obtain from the customer
information regarding his investment experience; make a determination that the
investment is suitable for the investor; deliver to the customer a written
statement for the basis for the suitability determination; notify the customer
of his rights and remedies in cases of fraud in penny stock transactions; and,
the NASD's toll free telephone number and the central number of the North
American Administrators Association, for information on the disciplinary history
of broker/dealers and their associated persons. The application of the penny
stock rules may affect your ability to resell your shares.
The NASD has adopted rules that require that in recommending an investment to a
customer, a broker/dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending speculative low
priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the NASD believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The NASD requirements make it more difficult for broker/dealers to
recommend that their customers buy our common stock, which may have the effect
of reducing the level of trading activity and liquidity of our common stock.
Further, many brokers charge higher transactional fees for penny stock
transactions. As a result, fewer broker/dealers may be willing to make a market
in our common stock, reducing a stockholder's ability to resell shares of our
common stock.
Again, the foregoing rules apply to broker/dealers. They do not apply to us in
any manner whatsoever. Since our shares are covered by Section 15(g) of the
Exchange Act, which imposes additional sales practice requirements on
broker/dealers, many broker/dealers may not want to make a market in our shares
or conduct any transactions in our shares. As such, your ability to dispose of
your shares may be adversely affected.
Offering Period and Expiration Date
This offering will start on the date of this prospectus and continue for a
period of up to 270 days.
Procedures for Subscribing
If you decide to subscribe for any shares in this offering, you must
1. execute and deliver a subscription agreement; and
2. deliver a check or certified funds to us for acceptance or
rejection.
The subscription agreement requires you to disclose your name, address,
telephone number, number of shares you are purchasing, and the price you are
paying for your shares.
All checks for subscriptions must be made payable to ToyZap.com and sent to
ToyZap.com, 629 Deforest Road, Coppell, Texas 75019.
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Right to Reject Subscriptions
We have the right to accept or reject subscriptions in whole or in part, for any
reason or for no reason. All monies from rejected subscriptions will be returned
immediately by us to the subscriber, without interest or deductions.
Subscriptions for securities will be accepted or rejected within 48 hours after
we receive them.
Separate Account for Subscriptions
Subscriptions will be placed in a separate bank account at Bank of America N.A.,
until we have received $150,000. Upon receipt of $150,000, we will withdraw and
use the funds. If we do not receive the $150,000 within 180 days of the
effective date of this offering, 90 additional days if extended, or a total of
270 days, all subscriptions received by it will be promptly returned to each
investor without interest or deduction therefrom.
BUSINESS
Our Background
ToyZap.com, Inc. was incorporated pursuant to the laws of the State of Texas on
May 30, 2006.
Our Business
We are a development stage company. We intend to market and sell lines of plush
and collectible toys to retail customers over the Internet on our website,
www.toyzap.com. Our principle business activities will be: developing lines of
plush and collectible toys; creating and updating our website where customers
can review and ultimately purchase our products; and promoting, marketing, and
selling our products over the Internet.
We are a company without revenues or operations, we have minimal assets, and
have incurred losses since inception.
Products and Services
We intend on developing and retailing lines of branded plush and collectible
toys. The toys we will be offering for sale on our website are intended to be
treasured collectibles and safe entertainment for children. Our products will be
offered in various series. After the conclusion of one series, additional
"characters" will be added. We intend to limit the production of certain
characters. The actual production amount of a certain character will not be
disclosed at the time it is introduced on our website. We think that this will
create an atmosphere that encourages customers to visit our website frequently
and purchase products before inventory runs out.
Our sole officer and director, Lance Dean, developed the concepts behind the
first line of six characters we intend to develop and retail called "WebPeeps".
Mr. Dean assigned any intellectual property rights that he might have had in
that first line of six characters to ToyZap.com. For future lines of characters,
we intend to rely on concepts and other intellectual property developed by Mr.
Dean and assigned to ToyZap.com.
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We intend to negotiate agreements with third parties to continue the development
of the first line of characters and any future lines of characters, including
artist renderings, design, and prototypes. We also intend to enter into
agreements with third parties to manufacture our products and to conduct a
number of traditional retail operations, including warehousing, preparing
merchandise for shipment to individual customers, and timely distribution of
purchased products. As of the date of this prospectus. we have not entered into
any such agreements nor have we identified any third party service providers.
Our Website
We intend to develop an easy-to-use website to market and retail our products.
The website will directly correlate to the story and marketing of each line of
"Webpeeps". Each individual character will be featured on the website to detail
the character's story, background and persona. In addition to being an
informative link to the character and product, the website will contain a
shopping cart feature for direct purchase of products from the limited character
lines. The website serves as both a source to purchase the products and
enlighten the consumer with extended information and histories of each
character. Consumers may navigate the site via user-friendly menu options to
direct their visit to a character page, the online catalog to purchase character
products or company information sections such as customer service, investor
relations, frequently asked questions and contact information.
Our Target Markets and Marketing Strategy
We believe that our primary target market will consist of individuals and
collectors of plush toys. We anticipate that we will market and promote our
website on the Internet. Our marketing strategy is to promote our products and
attract individuals and collectors to our website. Our marketing initiatives are
merely proposals and, thus, have not yet been commenced. We anticipate that our
marketing initiatives will include:
o utilizing viral marketing, the practice of getting consumers to refer
friends to the site through e-mail or word of mouth. ToyZap.com will
aggressively trigger viral marketing through strategic campaigns which
may include posting on blogs and online communities such as Yahoo!(R)
Groups, contests, implementation of features on our website which
encourage users to generate an email to a friend, or give-aways tied
to a viral process. Other viral techniques under consideration include
creating short comedy videos that people can view on our website or on
amateur websites such as YouTube.com and e-mail to others to watch,
and branded "fun" interactive online applications on our website.
o developing a search engine marketing or "SEM" campaign. SEM is the
process of marketing a website via search engines, by purchasing
sponsored placement in search results. For example, a user might go to
Google and put in the term "plush toys" or "collectible toys" - our
strategic purchasing of these keyword search terms will cause our ad
to come up. It might read "Find collectible plush toys at ToyZap.com"
and when clicked, it will take the user to our site.
o entering into affiliate marketing relationships with website providers
to increase our access to Internet consumers. Affiliate marketing
means that we would place a link to our website or a banner
advertisement on the websites of other companies in exchange for
placing their link or banner advertisement on our website. Such
marketing increases access to users, because the users of other
websites may visit our website as a result of those links or banner
advertisements.
We expect to rely on viral marketing as our primary marketing strategy, with SEM
and affiliate marketing as secondary marketing strategies.
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Growth Strategy
Our objective is to become a recognized Internet provider of in demand and
appropriately priced products. Our strategy is to provide our customers with
exceptional personal service and products that will be treasured collectibles
and safe entertainment. As noted above, however, our marketing proposals are, at
this point, merely proposals and have not yet been commenced.
Key elements of our strategy include plans to:
o negotiate agreements with third-party designers, manufacturers and
distributors for our products;
o continue to expand our website;
o increase the number of Internet users to our website through viral
marketing, SEM, and affiliate marketing campaigns; and
o continue to develop new products based on concepts and other
intellectual property developed by our sole officer and director,
Lance Dean, and assigned to ToyZap.com.
Our Competition
See the Risk Factors section of this prospectus for a discussion on the
competition we currently face or may face in the future.
Proprietary Rights
See the Risk Factors section of this prospectus for a discussion on the
intellectual property issues we face in our business.
Our Research and Development
We are not currently conducting any research and development activities. For all
lines of characters we will offer for sale on our website, we intend to rely on
concepts and other intellectual property developed by Lance Dean, our sole
officer and director. Mr. Dean is under no contractual obligation to the Company
to continue to develop new lines of characters nor is he under any contractual
obligation to assign his rights in any new lines of characters to the Company.
We do not intend to use any other person other than Mr. Dean as a source for new
lines of characters to offer for sale on our website. We intend to rely on third
party service providers to continue the development of concepts developed by Mr.
Dean and assigned to ToyZap.com.
Government Regulation
See the Risk Factors section of this prospectus for a discussion relevant
government regulation and the legal uncertainties related to our business
activities.
Employees
As of September 1, 2007, we have no employees other than our sole officer and
director. We anticipate that we will not hire any employees in the next twelve
months, unless we generate significant revenues. We believe our future success
19
depends in large part upon the continued service of our sole officer and
director, Lance Dean.
Facilities
Our executive, administrative and operating offices are located at 629 Deforest
Road, Coppell, Texas 75019. This is also the home residence of our sole officer
and director, Lance Dean. Mr. Dean makes this space available to the company
free of charge. There is no written agreement documenting this arrangement. We
intend to lease office space for a new executive, administrative, and operating
office. We estimate that the cost will be $800 per month. As of the date of this
prospectus, we have not entered into any lease agreement nor have we identified
any third party service providers.
We have no policies with respect to investments in real estate or interests in
real estate, real estate mortgages, or securities of or interests in persons
primarily engaged in real estate activities.
MANAGEMENT'S DISCUSSION AND ANAYLSIS OR PLAN OF OPERATION
This section of the prospectus includes a number of forward-looking statements
that reflect our current views with respect to future events and financial
performance. Forward-looking statements are often identified by words like:
believe, expect, estimate, anticipate, intend, project and similar expressions,
or words which, by their nature, refer to future events. You should not place
undue certainty on these forward-looking statements, which apply only as of the
date of this prospectus. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or our predictions.
We are a development stage company and have not started operations or generated
or realized any revenues from our business operations.
Our auditors have issued a going concern opinion. This means that our auditors
believe there is substantial doubt that we can continue as an on-going business
for the next 12 months. Our auditor's opinion is based on our suffering initial
losses, having no operations, and having a working capital deficiency. The
opinion results from the fact that we have not generated any revenues and no
revenues are anticipated until we complete the development of our website,
network infrastructure, and transaction processing systems; complete our initial
product development; secure third parties to manufacture the products to be
offered for sale on our website and to conduct a number of traditional retail
operations, including warehousing, preparing merchandise for shipment to
individual customers, and timely distribution of purchased products; build or
inventory; and begin to sell toys to our target market over the Internet. We
believe the technical aspects of our website, network infrastructure, and
transaction processing systems will be sufficiently developed to use for our
operations and we will have a sufficient inventory of products 120 days from the
completion of our offering. Accordingly, we must raise cash from sources other
than operations. Our only other source for cash at this time is investments by
others in our company. We must raise cash to implement our project and begin our
operations. The money we raise in this offering will last 12 months.
We have only one officer and director. He is responsible for our managerial and
organizational structure which will include preparation of disclosure and
accounting controls under the Sarbanes Oxley Act of 2002. When theses controls
are implemented, he will be responsible for the administration of the controls.
Should he not have sufficient experience, he may be incapable of creating and
implementing the controls which may cause us to be subject to sanctions and
fines by the Securities and Exchange Commission which ultimately could cause you
to lose your investment.
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Plan of Operation
Assuming we raise $150,000 in this offering, we believe we can satisfy our cash
requirements during the next 12 months.
Upon completion of our public offering, our specific goal is to profitably
develop plush and collectible toys and to sell such toys to retail customers
over the Internet on our website, toyzap.com. We intend to accomplish the
foregoing through the following milestones:
1. Complete our public offering. We believe this could take up to 180
days from the date the Securities and Exchange Commission declares our
offering effective. We will not begin operations until we have closed this
offering. We intend to concentrate all of our efforts on raising as much
capital as we can during this period.
2. After completing the offering, we will immediately hire an outside
web designer to begin development of our website and begin negotiations
with service providers to develop our network infrastructure and
transaction processing systems. The negotiation of service providers and
the development and maintenance of the website, network infrastructure and
transaction processing systems will be ongoing during the life of our
operations. Developing a workable version of our website will take
approximately three months, and developing workable versions of our network
infrastructure and transaction processing systems will take approximately
six months. A detailed breakdown of the costs of developing our website,
network infrastructure and transaction processing systems is set forth in
the Use of Proceeds section of this prospectus.
3. Once we have completed the offering, we will also begin to
establish our new office and acquire the equipment we will need to begin
operations. Establishing our offices will take approximately 30 days. We do
not intend to hire employees. We believe that it will cost $9,600 to
establish our new office. Our sole officer and director will handle our
administrative duties. A detailed breakdown of the cost of establishing our
office and operating our office for 12 months is set forth in the Use of
Proceeds section of this prospectus.
4. After completing the offering, we will also begin product
development and building inventory. We acquired the rights to the first
line of six characters we intend to offer for sale on our website from
Lance Dean, our sole officer and director. Throughout the life of our
operations, we will continue to develop new characters based on concepts
and other intellectual property developed by Mr. Dean. We intend to rely on
third party service providers to develop and manufacture our products and
to conduct a number of traditional retail operations, including
warehousing, preparing merchandise for shipment to individual customers,
and timely distribution of purchased products. To date we have not entered
into any formal relationship with any third parties to provide these
services, and we intend to start the process following completion of the
offering. Completing product development on the first line of six
characters we intend to offer for sale on our website and building
inventory will take 90 to 120 days, and we believe that this will cost a
minimum of $36,900. Product development and building inventory are ongoing
matters that will continue during the life of our operations. A detailed
breakdown of product development and building inventory costs for 12 months
is set forth in the Use of Proceeds section of this prospectus.
5. Approximately 90 days after we complete our public offering, we
intend to promote our website primarily through viral marketing, such as
blogs, postings on online communities such as Yahoo!(R) Groups and amateur
21
websites such as YouTube.com, and other methods of getting Internet users
to refer others to our website by e-mail or word of mouth. We also intend
to use search engine optimization, the marketing of our website via search
engines by purchasing sponsored placement in search result, and to enter
into affiliate marketing relationships with website providers to increase
our access to Internet consumers. We believe that it will cost a minimum of
$15,500 for our marketing campaign. Marketing is an on-going matter that
will continue during the life of our operations. A detailed breakdown of
marketing costs for 12 months is set forth in the Use of Proceeds section
of this prospectus.
6. Approximately six to nine months after we complete our public
offering, we believe that we will be able to begin selling plush and
collectible toys on our website.
Until our website is fully operational, our network infrastructure and
transaction processing systems are in place and we have a sufficient inventory
of plush and collectible toys to offer for sale on our website, we will not be
able to sell our products. We believe that we will have to spend approximately
$69,900 in order to ensure that our website is fully operational, our network
infrastructure and transaction processing systems are in place, and we have a
sufficient inventory of plush and collectible toys to offer for sale on our
website. If we are unable to negotiate suitable terms with service providers to
develop and manufacture our products and to conduct a number of traditional
retail operations, including warehousing, preparing merchandise for shipment to
individual customers, and timely distribution of purchased products, and to
attract customers to our website, we may have to suspend or cease operations.
If we cannot generate sufficient revenues to continue operations, we will
suspend or cease operations. If we cease operations, we do not know what we will
do and we do not have any plans to do anything else.
Limited Operating History; Need for Additional Capital
There is no historical financial information about us upon which to base an
evaluation of our performance. We are in development stage operations and have
not generated any revenues. We cannot guarantee we will be successful in our
business operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital resources
and possible cost overruns.
To become profitable and competitive, we have to develop our website, network
infrastructure, and transaction processing systems; complete our initial product
development; secure third parties to manufacture the products to be offered for
sale on our website and to conduct a number of traditional retail operations,
including warehousing, preparing merchandise for shipment to individual
customers, and timely distribution of purchased products; build or inventory;
and begin to sell toys to our target market over the Internet. We are seeking
equity financing to provide for the capital required to implement our
operations. We have no assurance that future financing will be available to us
on acceptable terms. If financing is not available on satisfactory terms, we may
be unable to continue, develop or expand our operations. Equity financing could
result in additional dilution to existing shareholders.
Results of Operations
From Inception on May 30, 2006 to June 30, 2007
During the period we incorporated the company, hired the attorney, and hired the
auditor for the preparation of this registration statement. We have prepared an
internal business plan. We have reserved the domain name "www.toyzap.com." Our
loss since inception is $8,000, which is the value of the 8,000,000 shares of
our common stock issued for services. Subsequent to June 30, 2007, we incurred
22
$12,500 of additional expenses of which $10,000 is for legal fees, $2,500 for
audit fees, and $0 for filing fees and general office costs. We have not
initiated items 2, 3, 4, 5, and 6 of our milestones previously described and
will not do so until we have completed this offering. Specifically, with
reference to item 3 we have not established an office nor acquired any
equipment. With reference to items 2 and 4, we have not secured a web designer
or any service providers to develop our network infrastructure and transaction
processing systems; manufacture the products to be offered for sale on our
website, and conduct a number of traditional retail operations, including
warehousing, preparing merchandise for shipment to individual customers, and
timely distribution of purchased products. With reference to item 4, while we do
own the rights to manufacture the first line of characters we intend to offer
for sale on our website, we have not begun product development or building
inventory. With reference to item 5, we have not commenced any promotion,
marketing, or advertising. With reference to item 6, we have not made any sales.
Since inception, we sold 5,280,000 shares of common stock to our sole officer
and director for $5,280 in services, and 2,720,000 shares of common stock to our
attorney in exchange for legal services.
Liquidity and Capital Resources
To meet our need for cash we are attempting to raise money from this offering.
If we raise $150,000 in this offering, we will implement the plan of operation
described above. We cannot guarantee that once we begin operations we will stay
in business. If we are unable to successfully produce plush and collectible toys
and attract customers to our website, we may quickly use up the proceeds from
this offering and will need to find alternative sources, like a second public
offering, a private placement of securities, or loans from our officers or
others in order for us to maintain our operations. At the present time, we have
not made any arrangements to raise additional cash, other than through this
offering.
Our sole officer and director is willing to commit to loan us money for our
operations until this offering has been completed or until the offering period
has expired. There are no documents setting forth this agreement. We will not be
using any of the proceeds of the offering to repay money advanced to us by Mr.
Dean.
Pursuant thereto, if no funds are raised in our offering then Mr. Dean has
agreed not to seek repayment of expenses he has paid on our behalf and we will
not be liable to Mr. Dean or any other party for payment of expenses undertaken
by Mr. Dean on our behalf. If we do not raise $150,000 in this offering, we will
not be able to satisfy our cash requirements and will immediately go out of
business.
If we need additional cash and can't raise it we will either have to suspend
operations until we do raise the cash, or cease operations entirely. If we raise
the minimum amount of money from this offering, it will last a year. Other than
as described in this paragraph, we have no other financing plans.
As of the date of this prospectus, we have yet to generate any revenues from our
business operations.
We issued 8,000,000 shares of common stock pursuant to the exemption from
registration contained in section 4(2) of the Securities Act of 1933. This was
accounted for as a sale of common stock.
As of September 1, 2007, our total assets were $15,100 and our total liabilities
were $27,600 comprised of $15,100 owed to Lance Dean, our sole director and
officer, $0 to open a bank account, $2,500 for audit fees, and $10,000 of
accounts payable for filing and general office costs. As of September 1, 2007,
we had cash of $15,100. Lance Dean, our sole officer and director, is willing to
loan us the money needed to fund operations until this offering has been
completed. Operations include but are not limited to filing reports with the
Securities and Exchange Commission as well as the business activities
contemplated by our business plan. Our current liabilities to Mr. Dean do not
23
have to be paid at this time, but will be repaid from the proceeds of this
offering. Our related party liabilities consist of money advanced by our sole
officer and director. Upon effectiveness of this registration statement by the
Securities and Exchange Commission, we will owe $10,000 to our attorney for
services related to this registration statement.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of September 1, 2007 regarding the
number of shares of common stock of ToyZap.com beneficially owned, before and
after giving effect to the sale of the shares of common stock offered, by our
directors and named executive officers, our directors and named executive
officers as a group, and persons owning 5% or more of ToyZap.com's stock.
Name and Address of Beneficial Number of Shares Before the Offering/ Number of Shares After the Offering/
Owner(1)(2) Percent of Class Percent of Class
-------------------------------------- --------------------------------------- ---------------------------------------
Lance Dean 5,280,000/66% 5,280,000/53%
629 Deforest Road
Coppell, Texas 75019
Balestri & Associates 2,720,000/34% 2,720,000/27%
2651 North Harwood
Suite 200
Dallas, Texas 75201
|
(1) All directors, named executive officers, and persons owning 5% our more of
ToyZap.com's stock have sole voting and investment power with respect to
the shares listed.
(2) No director, named executive officer, or persons owning 5% our more of
ToyZap.com's stock has any rights to acquire any shares from options,
warrants, rights, conversion privileges or similar obligations.
There are no arrangements currently in place which may result in a change of
control of ToyZap.com.
MANAGEMENT
Officers and Directors
The name, address, age, and positions of our present sole officer and director
is set forth below:
Name and Address Age Position(s)
-------------------------- --------- -------------------------------------------
Lance Dean 43 President, Chief Executive Officer,
629 Deforest Road Chief Financial Officer,
Coppell, Texas 75019 Secretary and sole Director
|
Our sole director will serve until is successor is elected and qualified, or
until the earlier of his death, resignation or removal from office. Our sole
officer was elected by the board of directors for a one year term, and will
serve until his successor is duly elected and qualified, or until the earlier of
his death, resignation or removal from office. The board of directors has no
nominating, auditing, or compensation committees.
24
Background of Our Sole Officer and Director
Lance Dean--President, Chief Executive Officer, Chief Financial Officer
Secretary, and sole director.
Lance Dean, age 43, is President, Chief Executive Officer, Chief Financial
Officer, Secretary and sole Director of Toyzap.com, Inc. and has held these
positions since May 30, 2006. Mr. Dean is currently the President of Fallon
Products, Inc. a Texas corporation that creates, markets, and develops new
products for various industries. Mr. Dean developed and was granted multiple
patents for products marketed under the Fallon Products brand. These proprietary
products have grossed over $5 million in sales and licensing fees for the
company since its inception in 2001. Most recently, Mr. Dean developed a solar
light security sign named LiteWatch (patent-pending) and sold the product in an
asset purchase agreement with Advance Bridging Technologies, better known for
its affiliation with Norteck Holding Companies. From 1996 to 2007, Mr. Dean was
the national account manager for Honeywell International in Syosset, NY.
Honeywell International is a diversified technology and manufacturing leader,
serving customers worldwide with control technologies for buildings, homes, and
industry, automotive products, turbochargers and specialty materials. Mr. Dean
supervised and managed top industry accounts for Honeywell Security and Custom
Electronics divisions while negotiating and converting national accounts to the
Honeywell product line. Mr. Dean achieved the 2006 Top Sales Growth with 40% of
sales and in 2005 accomplished $140 million in sales and 40% in growth. In
addition, Mr. Dean is a multi-year recipient of Honeywell's National Salesman of
the Year, Sales Achievement Award (National Accounts), member of the Presidents
Club and was awarded the 2005 Global Salesperson of the Year. Mr. Dean is a Sig
Sigma with a Green Belt certification. Prior to his tenure with Honeywell, Mr.
Dean was the Top Independent Sales Representative for U.S. Foam Corp., a
manufacturer of toys and sporting good items where he launched and managed sales
of new products for national accounts including Wal-Mart, Target, CVS
Drugstores, and other prominent national retailers and distributors.
Mr. Dean devotes approximately 30 hours per week to our operations and will
devote additional time as required. Mr. Dean is not an officer or director of
any other reporting company.
Audit Committee Financial Expert
We do not have an audit committee financial expert because we believe the cost
related to retaining a financial expert at this time is prohibitive. Further,
because we have no operations, at the present time, we believe the services of a
financial expert are not warranted.
Conflicts of Interest
Mr. Dean devotes approximately 30 hours per week to Toyzap.com. The only
conflict that exists is Mr. Dean's devotion of time to other projects. Mr.
Dean's current work interests, noted above, are not competitors of the Company
since the purpose of these other businesses is not to offer toys for sale to
retail customers. In particular, Fallon Products does not create, market, or
develop toys.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us from inception on May
30, 2007 through September 1, 2007, to our sole officer and director. The
information includes the dollar value of base salaries, bonus awards and number
of stock options granted, and certain other compensation, if any.
25
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
Name and Principle Years Salary Bonus Other Annual Restricted Securities LTIP Other Annual
Position ($) ($) Compensation Stock Underlying Payouts Compensation
($) Awards ($) Options/ ($) ($)
SARs (#)
------------------------- --------- --------- --------- ---------------- ----------- ------------- ---------- ----------------
Lance Dean President, 2006 0 0 0 0 0 0 0
Secretary, Treasurer, 2005 0 0 0 0 0 0 0
and Director 2004 0 0 0 0 0 0 0
|
The compensation discussed herein addresses all compensation awarded to, earned
by, or paid to our named executive officer.
There are no other stock option plans, retirement, pension, or profit sharing
plans for the benefit of our sole officer and director other than as described
herein.
Employment Agreements
We have not entered into an employment agreement with our sole officer and
director. We do not contemplate entering into any employment agreements until
such time as we begin profitable operations.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide compensation intended
to serve as incentive for performance.
Compensation of Directors
Our sole director does not receive any compensation for serving as a member of
the board of directors.
Indemnification
Under our Certificate of Formation and Bylaws, we may indemnify an officer or
director who is made a party to any proceeding, including a lawsuit, because of
his position, if he acted in good faith and in a manner he reasonably believed
to be in our best interest. We may advance expenses incurred in defending a
proceeding. To the extent that the officer or director is successful on the
merits in a proceeding as to which he is to be indemnified, we must indemnify
him against all expenses incurred, including attorney's fees. With respect to a
derivative action, indemnity may be made only for expenses actually and
reasonably incurred in defending the proceeding, and if the officer or director
is judged liable, only by a court order. The indemnification is intended to be
to the fullest extent permitted by the laws of the State of Texas.
Regarding indemnification for liabilities arising under the Securities Act which
may be permitted to directors or officers under Texas law, we are informed that,
in the opinion of the Securities and Exchange Commission, indemnification is
against public policy, as expressed in the Securities Act and is, therefore,
unenforceable.
26
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our securities are not listed on any exchange or quotation service. We are not
required to comply with the timely disclosure policies of any exchange or
quotation service. The requirements to which we would be subject if our
securities were so listed typically include the timely disclosure of a material
change or fact with respect to our affairs and the making of required filings.
Although we are not required to deliver an annual report to security holders, we
intend to provide an annual report to our security holders, which will include
audited financial statements.
When we become a reporting company with the Securities and Exchange Commission,
the public may read and copy any materials filed with the Securities and
Exchange Commission at the Security and Exchange Commission's Public Reference
Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may also
obtain information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is www.sec.gov.
There are no outstanding options or warrants to purchase, or securities
convertible into, shares of our common stock.
There are currently 8,000,000 shares of common stock outstanding, all of which
are restricted securities that may be sold under Rule 144 of the rules and
regulations promulgated by the Securities and Exchange Commission under the
Securities Act. We have not agreed to register these shares. Under Rule 144, the
shares may be publicly sold, subject to volume restrictions and restrictions on
the manner of sale, commencing one year after their acquisition. Rule 144
provides that a person may not sell more than 1% of the total outstanding shares
in any three-month period and the sales must be sold in a brokers' transaction
or in a transaction directly with a market maker.
The number of holders of record of shares of our common stock is two. On May 30,
2006, Lance Dean, our sole officer and director, received 5,280,000 shares of
common stock, and Balestri & Associates received 2,720,000 shares of common
stock, all of which are restricted securities. Accordingly, if 2,000,000 shares
are sold in this offering, after May 30, 2007, Mr. Dean and Balestri &
Associates can sell up to 100,000 shares each every 90 days. Sales by Mr. Dean
or Balestri & Associates could have a depressive effect on the market price of
our shares of common stock should a market develop of which there is not
assurance.
There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our board of directors.
DESCRIPTION OF SECURITIES
Common Stock
ToyZap.com, Inc. is authorized to issue 200,000,000 shares of common stock, par
value $0.001 per share. Holders of common stock are entitled to one vote per
share and to receive dividends or other distributions when and if declared by
the Board of Directors. As of September 1, 2007, there were 8,000,000 shares of
common stock outstanding held by two shareholders of record.
27
Our common stock does not have preemptive rights, meaning that our common
shareholders' ownership interest would be diluted if additional shares of common
stock are subsequently issued and the existing shareholders are not granted the
right, in the discretion of the Board of Directors, to maintain their percentage
ownership interest in ToyZap.com. This lack of protection from dilution to
minority shareholders could allow our Board of Directors to issue additional
shares of our common stock to persons friendly with our existing management,
thus preventing any change in control of ToyZap.com.
Upon any liquidation, dissolution or winding-up of ToyZap.com, our assets, after
the payment of debts and liabilities and any liquidation preferences of, and
unpaid dividends on, any class of preferred stock then outstanding, will be
distributed pro-rata to the holders of the common stock. The holders of the
common stock have no right to require us to redeem or purchase their shares.
The holders of common stock are entitled to share equally in dividends, if and
when declared by our Board of Directors, out of funds legally available
therefore, subject to the priorities given to any class of preferred stock which
may be issued.
No Cumulative Voting
Holders of shares of our common stock do not have cumulative voting rights,
which means that the holders of more than 50% of the outstanding shares, voting
for the election of directors, can elect all of the directors to be elected, if
they so choose, and, in that event, the holders of the remaining shares will not
be able to elect any of our directors. After this offering is completed,
assuming the sale of all of the shares of common stock offered, present
stockholders will own approximately 98% of our outstanding shares.
Preferred Stock
ToyZap.com is authorized to issue 1,000,000 shares of preferred stock, $0.001
par value per share. We have no preferred shares issued and outstanding.
However, the Board of Directors may later determine to issue our preferred
stock. If issued, the preferred stock may be created and issued in one or more
series and with such designations, rights, preferences and restrictions as shall
be stated and expressed in the resolution(s) providing for the creation and
issuance of such preferred stock. If preferred stock is issued and we are
subsequently liquidated or dissolved, the preferred stockholders would have
preferential rights to receive a liquidating distribution for their shares prior
to any distribution to common shareholders.
Although we have no present intent to do so, we could issue shares of preferred
stock with such terms and privileges that a third party acquisition of
ToyZap.com could be difficult or impossible, thus entrenching our existing
management in control of ToyZap.com indefinitely.
Dividend Policy
To date, we have not paid any dividends. The payment of dividends, if any, on
our common stock in the future is within the sole discretion of our Board of
Directors and will depend upon our earnings, capital requirements, financial
condition, and other relevant factors. Our sole director, Mr. Dean, does not
intend to declare any dividends on the common stock in the foreseeable future,
but instead intends to retain all earnings, if any, for use in our business
operations.
28
Transfer Agent
We will use Securities Transfer Corporation located at 2591 Dallas Parkway,
Suite 102, Frisco, Texas 75034 as our transfer agent.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No "expert," as that term is defined in Item 509 of Regulation S-B, was hired on
a contingent basis, or will receive a direct or indirect interest in us, except
as specified below, or was a promoter, underwriter, voting trustee, director,
officer, or employee of the company, at any time prior to filing this
Registration Statement. Our "counsel," as that term is defined in Item 509 of
Regulation S-B, Balestri & Associates, received 2,720,000 shares of our common
stock in exchange for legal services rendered in connection with the offering.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 30, 2006, we issued 5,280,000 shares of restricted common stock to Lance
Dean, our sole officer and director, in consideration of services valued at
$5,280. Balestri & Associates has acted as our legal counsel in connection with
this offering. In exchange for legal services, Balestri & Associates will
receive $10,000 in cash and 2,720,000 shares of our common stock. The shares
held by Mr. Dean and Balestri & Associates represent 66% and 34%, respectively,
of our issued and outstanding shares. This represents the complete interests of
our current shareholders prior to any further issuance of stock under this
registration statement.
Mr. Dean has advanced funds to us for our legal, audit, filing fees, general
office administration, and cash needs. As of September 1, 2007, Mr. Dean has
advanced us $15,100 for our benefit. Mr. Dean will not be repaid from the
proceeds of this offering and will only be repaid if and when ToyZap.com has a
positive cash flow. There is no due date for the repayment of funds advanced by
Mr. Dean. The obligation to Mr. Dean does not bear interest. There is no written
agreement evidencing the advancement of funds by Mr. Dean or the repayment of
the funds to Mr. Dean. The entire transaction was oral.
Our executive, administrative and operating offices are located at Mr. Dean's
home residence. Mr. Dean provides space for the company's operations free of
charge. There is not written agreement evidencing this arrangement.
LEGAL PROCEEDINGS
We are not party to any pending litigation and none is contemplated or
threatened.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICTION
FOR SECURITES ACT LIABILITIES
Our Certificate of Formation and Bylaws provide that we shall indemnify our
officers or directors against expenses incurred in connection with the defense
of any action in which they are made parties by reason of being our officers or
directors, except in relation to matters as which such director or officer shall
be adjudged in such action to be liable for negligence or misconduct in the
performance of his duty. One of our officers or directors could take the
29
position that this duty on our behalf to indemnify the director or officer may
include the duty to indemnify the officer or director for the violation of
securities laws.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to our
Certificate of Formation, Bylaws, Texas laws or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by one of our directors, officers, or control persons, and the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or control person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
EXPERTS
Our financial statements for the period from inception to June 30, 2007,
included in this prospectus, have been audited by Moore & Associates, Chartered,
telephone (702) 253-7499, as set forth in their report included in this
prospectus. Their report is given upon their authority as experts in accounting
and auditing.
LEGAL MATTERS
Balestri & Associates, 2651 North Harwood, Suite 200, Dallas, Texas 75201,
telephone (214) 981-9080, has acted as our legal counsel.
30
TOYZAP.COM, INC.
FINANCIAL STATEMENTS
June 30, 2007 and December 31, 2006
F-1
C O N T E N T S
Independent Registered Public Accounting Firm................................F-3
Balance Sheets...............................................................F-4
Statements of Operations.....................................................F-5
Statements of Stockholders' Equity...........................................F-6
Statements of Cash Flows.....................................................F-7
Notes to the Financial Statements............................................F-8
|
F-2
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Toyzap.com, Inc.
(A Development Stage Company)
Coppell, Texas
We have audited the accompanying balance sheets of Toyzap.com, Inc as of June
30, 2007 and December 31, 2006 and the related statements of operations,
stockholders' equity and cash flows for the six months ended June 30, 2007 and
from inception on May 30, 2006 through December 31, 2006 and June 30, 2007.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Toyzap.com, Inc. as of June 30,
2007 and the results of its operations and its cash flows for the six months
ended June 30, 2007 and from inception on May 30, 2006 through December 31, 2006
and June 30, 2007, in conformity with accounting principles generally accepted
in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 7 to the
consolidated financial statements, the Company has not yet established an
ongoing source of revenues sufficient to cover its operating costs and allow it
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 7. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Moore & Associates Chartered
-------------------------------------
Moore & Associates Chartered
Las Vegas, Nevada
August 14, 2007
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2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146
(702) 253-7511 Fax (702) 253-7501
F-3
TOYZAP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
June 30, December 31,
2007 2006
-------- --------
ASSETS
CURRENT ASSETS
Cash in bank $ 15,100 $ --
-------- --------
TOTAL CURRENT ASSETS 15,100 --
-------- --------
TOTAL ASSETS $ 15,100 $ --
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Advances from related parties $ 15,100 $ --
-------- --------
TOTAL CURRENT LIABILITIES 15,100 --
LONG-TERM DEBT -- --
-------- --------
TOTAL LIABILITIES 15,100 --
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock: $0.001 par value;
1,000,000 shares authorized, no
shares issued and outstanding -- --
Common stock: $0.001 par value;
200,000,000 shares authorized, 8,000,000
shares issued and outstanding 8,000 8,000
Additional paid in capital -- --
Accumulated deficit (8,000) ) (8,000)
-------- --------
TOTAL STOCKHOLDERS' EQUITY -- --
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 15,100 $ --
======== ========
|
The accompanying notes are an integral part of these financial statements.
F-4
TOYZAP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the From Inception From Inception
Six Months On May 30, On May 30,
Ended 2006 through 2006 through
June 30, December 31, June 30,
2007 2006 2007
----------- ----------- -----------
REVENUES $ -- $ -- $ --
COST OF SALES -- -- --
----------- ----------- -----------
GROSS MARGIN -- -- --
----------- ----------- -----------
OPERATING EXPENSES
General and administrative -- 8,000 8,000
----------- ----------- -----------
TOTAL OPERATING EXPENSES -- 8,000 8,000
----------- ----------- -----------
NET LOSS $ -- $ (8,000) $ (8,000)
----------- =========== ===========
BASIC LOSS PER SHARE $ -- $ (0.00)
=========== ===========
Weighted Average Shares
Outstanding 8,000,000 8,000,000
=========== ===========
|
The accompanying notes are an integral part of these financial statements.
F-5
TOYZAP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Total
Common Stock Additional Paid Accumulated Stockholders'
Shares Amount in Capital Deficit Equity
--------- --------- --------- --------- ---------
Balance May 30, 2006 -- $ -- $ -- $ -- $ --
Shares issued for services
at $0.001 per share 8,000,000 8,000 -- -- 8,000
For the period
ended December 31, 2006 -- -- -- (8,000) (8,000)
--------- --------- --------- --------- ---------
Balance December 31, 2006 8,000,000 8,000 -- (8,000) --
For the six months
ended June 30, 2007 -- -- -- -- --
--------- --------- --------- --------- ---------
Balance June 30, 2007 8,000,000 $ 8,000 $ -- $ (8,000) $ --
========= ========= ========= ========= =========
|
The accompanying notes are an integral part of these financial statements
F-6
TOYZAP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
From From
For the Inception Inception
Six Months On May 30, On May 30,
Ended 2006 through 2006 through
June 30, December 31, June 30,
2007 2006 2007
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ -- $ (8,000) $ (8,000)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Common stock issued for services -- 8,000 8,000
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable -- -- --
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITES -- -- --
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Film costs incurred -- -- --
-------- -------- --------
NET CASH (USED) BY INVESTING ACTIVITIES -- -- --
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock issued -- -- --
Increase in advances from related parties 15,100 -- 15,100
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,100 -- 15,100
-------- -------- --------
NET INCREASE IN CASH 15,100 -- 15,100
CASH - Beginning of period -- -- --
-------- -------- --------
CASH - End of period $ 15,100 $ -- $ 15,100
======== ======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
CASH PAID FOR:
Interest $ -- $ -- $ --
======== ======== ========
Income taxes $ -- $ -- $ --
======== ======== ========
NON CASH FINANCING ACTIVITIES: $ -- $ -- $ --
======== ======== ========
|
The accompanying notes are an integral part of these financial statements.
F-7
TOYZAP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 and DECEMBER 31, 2006
1. Summary of Significant Accounting Policies
Nature of Business
ToyZap.com, Inc. (the Company) was incorporated in the State of Texas
on May 30, 2006. The Company was incorporated to engage in the
business of internet toy sales.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Basic (Loss) per Common Share
Basic (loss) per share is calculated by dividing the Company's net
loss applicable to common shareholders by the weighted average number
of common shares during the period. Diluted earnings per share is
calculated by dividing the Company's net income available to common
shareholders by the diluted weighted average number of shares
outstanding during the year. The diluted weighted average number of
shares outstanding is the basic weighted number of shares adjusted for
any potentially dilutive debt or equity. There are no such common
stock equivalents outstanding as of June 30, 2007 and December 31,
2006.
(Loss) Shares Basic (Loss) Per Share
(Numerator) (Denominator) Amount
June 30, 2007 $ -0- 8,000,000 $ 0.00
========== ========= ========
December 31, 2007 $ (8,000) 8,000,000 $ (0.00)
========== ========= ========
|
Dividends
The Company has not adopted any policy regarding payment of dividends.
No dividends have been paid during any of the periods shown.
Comprehensive Income
The Company has no component of other comprehensive income.
Accordingly, net income equals comprehensive income for the period
ended June 30, 2007.
Advertising Costs
The Company's policy regarding advertising is to expense advertising
when incurred. The Company had not incurred any advertising expense as
of June 30, 2007.
F-8
TOYZAP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 and DECEMBER 31, 2006
1. Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or
less to be cash equivalents to the extent the funds are not being held
for investment purposes.
Income Taxes
The Company provides for income taxes under Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. SFAS No.
109 requires the use of an asset and liability approach in accounting
for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases
of assets and liabilities and the tax rates in effect when these
differences are expected to reverse. The Company's predecessor
operated as entity exempt from Federal and State income taxes.
SFAS No. 109 requires the reduction of deferred tax assets by a
valuation allowance if, based on the weight of available evidence, it
is more likely than not that some or all of the deferred tax assets
will not be realized.
The provision for income taxes differs from the amounts which would be
provided by applying the statutory federal income tax rate to net loss
before provision for income taxes for the following reasons:
June 30, December 31,
2007 2006
---------- ----------
Income tax expense at statutory rate $ -0- $ 2,720
Common stock issued for services -0- (2,720)
Valuation allowance -0- -0-
---------- ----------
Income tax expense per books $ -0- $ -0-
========== ==========
|
Net deferred tax assets consist of the following components as of:
June 30, December 31,
2007 2006
---------- ----------
NOL Carryover $ -0- $ -0-
Valuation allowance -0- -0-
---------- ----------
Net deferred tax asset $ -0- $ -0-
========== ==========
|
Due to the change in ownership provisions of the Tax Reform Act of
1986, net operating loss carry forwards for federal income tax
reporting purposes are subject to annual limitations. Should a change
in ownership occur net operating loss carry forwards may be limited as
to use in future years.
F-9
TOYZAP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 and DECEMBER 31, 2006
1. Summary of Significant Accounting Policies (Continued)
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances
that could indicate carrying amounts of long-lived assets may not be
recoverable. When such events or changes in circumstances are present,
the Company assesses the recoverability of long-lived assets by
determining whether the carrying value of such assets will be
recovered through undiscounted expected future cash flows. If the
total of the future cash flows is less than the carrying amount of
those assets, the Company recognizes an impairment loss based on the
excess of the carrying amount over the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or the fair value less costs to sell.
Accounting Basis
The basis is accounting principles generally accepted in the United
States of America. The Company has adopted a December 31 fiscal year
end.
Stock-based compensation.
As of June 30, 2007, the Company has not issued any share-based
payments to its employees.
The Company adopted SFAS No. 123-R effective January 1, 2006 using the
modified prospective method. Under this transition method, stock
compensation expense includes compensation expense for all stock-based
compensation awards granted on or after January 1,2006, based on the
grant-date fair value estimated in accordance with the provisions of
SFAS No. 123-R.
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. Where
applicable, SFAS No. 157 simplifies and codifies related guidance
within GAAP and does not require any new fair value measurements. SFAS
No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those
fiscal years. Earlier adoption is encouraged. The Company does not
expect the adoption of SFAS No. 157 to have a significant effect on
its financial position or results of operation.
In June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -
an interpretation of FASB Statement No. 109", which prescribes a
recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN
F-10
TOYZAP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 and DECEMBER 31, 2006
1. Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements (Continued)
48 also provides guidance on de-recognition, classification, interest
and penalties, accounting in interim periods, disclosure and
transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company does not expect the adoption of FIN 48
to have a material impact on its financial reporting, and the Company
is currently evaluating the impact, if any, the adoption of FIN 48
will have on its disclosure requirements.
In March 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 156, "Accounting for
Servicing of Financial Assets--an amendment of FASB Statement No.
140." This statement requires an entity to recognize a servicing asset
or servicing liability each time it undertakes an obligation to
service a financial asset by entering into a servicing contract in any
of the following situations: a transfer of the servicer's financial
assets that meets the requirements for sale accounting; a transfer of
the servicer's financial assets to a qualifying special-purpose entity
in a guaranteed mortgage securitization in which the transferor
retains all of the resulting securities and classifies them as either
available-for-sale securities or trading securities; or an acquisition
or assumption of an obligation to service a financial asset that does
not relate to financial assets of the servicer or its consolidated
affiliates. The statement also requires all separately recognized
servicing assets and servicing liabilities to be initially measured at
fair value, if practicable, and permits an entity to choose either the
amortization or fair value method for subsequent measurement of each
class of servicing assets and liabilities. The statement further
permits, at its initial adoption, a one-time reclassification of
available for sale securities to trading securities by entities with
recognized servicing rights, without calling into question the
treatment of other available for sale securities under Statement 115,
provided that the available for sale securities are identified in some
manner as offsetting the entity's exposure to changes in fair value of
servicing assets or servicing liabilities that a servicer elects to
subsequently measure at fair value and requires separate presentation
of servicing assets and servicing liabilities subsequently measured at
fair value in the statement of financial position and additional
disclosures for all separately recognized servicing assets and
servicing liabilities. This statement is effective for fiscal years
beginning after September 15, 2006, with early adoption permitted as
of the beginning of an entity's fiscal year. Management believes the
adoption of this statement will have no immediate impact on the
Company's financial condition or results of operations.
F-11
TOYZAP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007 and DECEMBER 31, 2006
1. Summary of Significant Accounting Policies (Continued)
Revenue Recognition
The Company recognizes revenue when products are fully delivered or
services have been provided and collection is reasonably assured.
2. COMMON STOCK
On May 29, 2007, the Company issued 8,000,000 shares of its common
stock for services valued at $8,000 to its founders.
3. GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principle, which contemplate
continuation of the Company as a going concern. However, the Company
has accumulated deficit of $8,000 as of June 30, 2007. The Company
currently has limited liquidity, and has not completed its efforts to
establish a stabilized source of revenues sufficient to cover
operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the
near future, on additional investment capital to fund operating
expenses The Company intends to position itself so that it may be able
to raise additional funds through the capital markets. In light of
management's efforts, there are no assurances that the Company will be
successful in this or any of its endeavors or become financially
viable and continue as a going concern.
F-12
Dealer Prospectus Delivery Option
Until __________, 2007, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect the their unsold
allotments or subscriptions.
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Certificate of Formation and Bylaws provide that we shall indemnify our
officers or directors against expenses incurred in connection with the defense
of any action in which they are made parties by reason of being our officers or
directors, except in relation to matters as which such director or officer shall
be adjudged in such action to be liable for negligence or misconduct in the
performance of his duty. One of our officers or directors could take the
position that this duty on our behalf to indemnify the director or officer may
include the duty to indemnify the officer or director for the violation of
securities laws.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act"), may be permitted to our directors,
officers and controlling persons pursuant to our Certificate of Formation,
Bylaws, Texas laws or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by one of our directors,
officers, or control persons, and the successful defense of any action, suit or
proceeding) is asserted by such director, officer or control person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by a controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be paid by the
registrant, are as follows:
SEC Registration Fee $ 50
Printing Expenses $ 1,250
Audit/Administrative Fees and Expenses $ 2,500
Blue Sky Fees/Expenses $ 700
Legal Fees/Expenses $10,000
Transfer Agent Fees $ 500
TOTAL $15,000
|
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On May 30, 2006, ToyZap.com sold 5,280,000 restricted shares of common stock to
Lance Dean for services valued at $5,280, and 2,720,000 restricted shares of
common stock to Balestri & Associates in exchange for services related to the
preparation of this registration statement. ToyZap.com relied in Section 4(2) of
the Securities Act as its exemption from registration when it issued the shares
of common stock to Mr. Dean and Balestri & Associates. Both Mr. Dean and
Balestri & Associates agreed to hold the shares for investment purposes only and
to transfer such shares only in a registered offering or in reliance upon an
exemption therefrom.
ITEM 27. EXHIBITS.
Exhibit No. Description
3.1 Certificate of Formation of ToyZap.com, Inc.
3.2 Bylaws of ToyZap.com, Inc.
4.1 Form of specimen stock certificate for Common Stock.
5.1 Opinion of Balestri & Associates.
23.1 Consent of Moore & Associates, Chartered.
23.2 Consent of Balestri & Associates.
99.1 Form of subscription agreement for Common Stock.
|
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement:
a. To include any prospectus required under Section 10(a)(3) of the
Securities Act.
b. To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement.
c. To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Dallas,
State of Texas on October 18, 2007.
TOYZAP.COM, INC.
By: /s/ Lance Dean
--------------
Lance Dean
President, Secretary, Treasurer, and Director
|
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
stated on October 18, 2007:
Signature Title
/s/ Lance Dean President, Secretary, Treasurer, and Director
-------------- Principal Executive Officer, Principal Financial
Officer, and Principal Accounting Officer)
|
Exhibit 3.2
BYLAWS
OF
TOYZAP.COM, INC.
A Texas Corporation
TABLE OF CONTENTS
ARTICLE ONE: OFFICES..........................................................1
1.01 Registered Office and Agent................................1
1.02 Other Offices..............................................1
ARTICLE TWO: SHAREHOLDERS.....................................................1
2.01 Place of Meetings..........................................1
2.02 Annual Meeting.............................................1
2.03 Special Meetings...........................................1
2.04 List of Shareholders.......................................2
2.05 Notice.....................................................2
2.06 Quorum.....................................................2
2.07 Majority Vote..............................................2
2.08 Voting of Shares...........................................2
2.09 Proxies....................................................3
2.10 Presiding Officials at Meetings............................3
2.11 Election Inspectors........................................3
2.12 Closing of Transfer Books; Record Date.....................4
ARTICLE THREE: DIRECTORS......................................................4
3.01 Management.................................................4
3.02 Number; Election; Term; Qualification......................4
3.03 Removal....................................................4
3.04 Vacancies..................................................4
3.05 First Meeting..............................................4
3.06 Regular Meetings...........................................5
3.07 Special Meetings...........................................5
3.08 Quorum; Majority Vote......................................5
3.09 Procedure; Minutes.........................................5
3.10 Presumption of Assent......................................5
3.11 Interested Directors.......................................5
3.12 Compensation...............................................6
3.13 Chairman of the Board......................................6
3.14 Committees.................................................6
ARTICLE FOUR: GENERAL PROVISIONS RELATING TO MEETINGS.........................6
4.01 Notice.....................................................6
4.02 Waiver of Notice...........................................7
4.03 Telephone and Similar Meetings.............................7
4.04 Action by Written Consent..................................7
i
|
ARTICLE FIVE: OFFICERS AND OTHER AGENTS.......................................7
5.01 In General.................................................7
5.02 Election...................................................7
5.03 Removal....................................................7
5.04 Vacancies..................................................8
5.05 Authority..................................................8
5.06 Compensation...............................................8
5.07 Employment and Other Contracts.............................8
5.08 President..................................................8
5.09 Vice Presidents............................................8
5.10 Secretary..................................................8
5.11 Assistant Secretaries......................................8
5.12 Treasurer..................................................9
5.13 Assistant Treasurers.......................................9
5.14 Bonding....................................................9
ARTICLE SIX: CERTIFICATES AND SHAREHOLDERS....................................9
6.01 Certificated and Uncertificated Shares.....................9
6.02 Certificates for Certificated Shares.......................9
6.03 Lost, Stolen, or Destroyed Certificates....................9
6.04 Transfer of Shares........................................10
6.05 Registered Shareholders...................................10
6.06 Legends...................................................10
ARTICLE SEVEN: MISCELLANEOUS PROVISIONS......................................11
7.01 Dividends.................................................11
7.02 Reserves..................................................11
7.03 Indemnification and Insurance.............................11
7.04 Books and Records.........................................11
7.05 Fiscal Year...............................................11
7.06 Seal......................................................11
7.07 Checks....................................................11
7.08 Resignation...............................................11
7.09 Securities of Other Corporations..........................12
7.10 Amendment.................................................12
7.11 Invalid Provisions........................................12
7.12 Headings..................................................12
|
ii
BYLAWS
of
TOYZAP.COM, INC.
A Texas Corporation
ARTICLE ONE: OFFICES
1.01 Registered Office and Agent. The registered office and registered
agent of Toyzap.com, Inc. (hereinafter referred to as the "Corporation") shall
be as designated from time to time by the appropriate filing by the Corporation
in the office of the Secretary of State of Texas.
1.02 Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Texas, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE TWO: SHAREHOLDERS
2.01 Place of Meetings. All annual meetings of shareholders shall be
held at such place, within or without the State of Texas, as may be designated
by the Board of Directors and stated in the notice of the meeting or in a duly
executed waiver of notice thereof. Special meetings of shareholders may be held
at such place, within or without the State of Texas, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof. If no
place for a meeting is designated, it shall be held at the registered office of
the Corporation.
2.02 Annual Meeting. The annual meetings of shareholders shall be held
on a date and at a time to be determined by the Board of Directors. At the
annual meeting, the shareholders shall elect directors and transact such other
business as may properly be brought before the meeting.
2.03 Special Meetings. Only such business shall be transacted at a
special meeting as may be stated or indicated in the notice of such meeting.
Special meetings of the shareholders may be called by (a) the President, the
Board of Directors, the executive committee of the Board of Directors, or such
other persons as may be authorized in the Certificate of Formation of the
Corporation (the "Certificate"); or (b) the holders of at least ten percent
(10%) of all shares entitled to vote at the special meeting, unless the
Certificate provides for a percentage of shares greater or less than ten percent
(10%), in which event a special meeting may be called by the holders of at least
the percentage of shares specified in the Certificate. Upon request in writing
to the President, Vice President or Secretary by any person or persons entitled
to call a meeting of shareholders, the officer shall promptly cause a written
notice to be given to the shareholders entitled to vote that a meeting will be
held on a date and at a time, fixed by the officer, not less than ten (10) days
after the date of receipt of the request. If the notice is not given within
seven (7) days after the date of receipt of the request, the person or persons
calling the meeting may fix the date and time of the meeting and give the notice
in the manner provided in these Bylaws. If not otherwise stated in or fixed in
accordance with these Bylaws, the record date for determining shareholders
entitled to call a special meeting is the date on which the first shareholder
receives the notice of such meeting. Nothing contained in this section shall be
construed as limiting, fixing, or affecting the time or date on which a meeting
of shareholders called by action of the Board of Directors may be held.
2.04 List of Shareholders. At least ten (10) days before each meeting
of shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the address and the number of
voting shares registered in the name of each, will be prepared by the officer or
agent having charge of the stock transfer books. Such list will be kept on file
at the registered office of the Corporation for a period of ten (10) days prior
to such meeting and will be subject to inspection by any shareholder at any time
during usual business hours. Such list will be produced and kept open at the
time and place of the meeting during the whole time thereof, and will be subject
to the inspection of any shareholder who may be present. The original stock
transfer book shall be prima facie evidence as to who are the shareholders
entitled to examine such list or to vote at any such meeting of shareholders.
However, failure to prepare and to make available such list in the manner
provided in this section shall not affect the validity of any action taken at
the meeting.
2.05 Notice. Written or printed notice stating the place, day, and
hour of each meeting of shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) days or more than sixty (60) days before the date of the meeting.
Notice must be delivered either personally or by mail, by or at the direction of
the President, the Secretary, or the officer or person calling the meeting, to
each shareholder of record entitled to vote at such meeting. If mailed, such
notice will be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his or her address as it appears on the stock
transfer books of the Corporation, with postage thereon prepaid. When a meeting
of shareholders is adjourned for thirty (30) days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. When a
meeting is adjourned for less than thirty (30) days, it shall not be necessary
to give any notice of the time and place of the adjourned meeting or of the
business to be transacted thereat, other than by announcement at the meeting at
which the adjournment is taken.
2.06 Quorum. The holders of a majority of the outstanding shares
entitled to vote, present in person or represented by proxy, shall constitute a
quorum at any meeting of shareholders, except as otherwise provided by law, the
Certificate, or these Bylaws. If a quorum shall not be present or represented at
any meeting of shareholders, a majority of the shareholders entitled to vote at
the meeting who are present in person or represented by proxy may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At any reconvening of
an adjourned meeting at which a quorum shall be present or represented, any
business may be transacted that could have been transacted at the original
meeting as originally notified and called if a quorum had been present or
represented. The shareholders present at a duly organized meeting may continue
to transact business notwithstanding the withdrawal of some shareholders prior
to adjournment, provided that the holders of at least one-third (1/3) of the
shares entitled to vote continue to be represented at such meeting.
2.07 Majority Vote. The vote of the holders of a majority of the
shares entitled to vote at a meeting at which a quorum is present shall decide
any question brought before such meeting, unless the question is one on which,
by express provision of law, the Certificate, or these Bylaws, the vote of a
greater number of shares is required, in which case such express provision shall
govern and control the decision of such question.
2.08 Voting of Shares. Each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
class are limited or denied by the Certificate or the Texas Business
Organizations Code (the "TBOC"). At any election for directors, every
shareholder entitled to vote in such election shall have the right to vote, in
person or by proxy, the number of shares owned by such shareholder for as many
persons as there are director positions to be filled with respect to which the
shareholder has the right to vote, and shareholders are expressly prohibited
from cumulating their votes in any election for directors of the Corporation.
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Treasury shares, shares owned by another corporation that is owned or controlled
by the Corporation, and shares held by the Corporation in a fiduciary capacity
shall not be shares entitled to vote or to be counted in determining the total
number of outstanding shares of the Corporation. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without transfer of such shares into his or her
name so long as such shares form a part of the estate and are in the possession
of the estate being served by him or her. Shares standing in the name of a
trustee may be voted by him or her, either in person or by proxy, only after the
shares have been transferred into his or her name as trustee. Shares standing in
the name of a receiver may be voted by such receiver, and shares held by or
under the control of a receiver may be voted by such receiver without transfer
of such shares into his or her name if authority to do so is contained in the
court order by which such receiver was appointed. Shares standing in the name of
another domestic or foreign corporation of any type or kind may be voted by such
officer, agent, or proxy as the bylaws of such corporation may provide or, in
the absence of such provision, as the board of directors of such corporation may
by resolution determine. A shareholder whose shares are pledged shall be
entitled to vote such shares until they have been transferred into the name of
the pledgee, and thereafter the pledgee shall be entitled to vote such shares.
2.09 Proxies. At any meeting of shareholders, every shareholder having
the right to vote may vote either in person or by a proxy executed in writing by
the shareholder or the shareholder's duly authorized attorney-in-fact. A
telegram, telex, cablegram, or similar transmission by the shareholder, or a
photographic, photostatic, facsimile, or similar reproduction of a writing
executed by the shareholder, shall be treated as an execution in writing for the
purposes of this section. Each such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. If no date is stated on a proxy, such proxy shall be
presumed to have been executed on the date of the meeting at which it is to be
voted. Each proxy shall be revocable unless expressly provided therein to be
irrevocable and if, and only so long as, it is coupled with an interest
sufficient in law to support an irrevocable power. Voting on any question or in
any election may be by voice or show of hands unless the presiding officer
orders or any shareholder demands that voting be by written ballot.
2.10 Presiding Officials at Meetings. At every meeting of the
shareholders, the chairman of the Board of Directors or, in his or her absence,
the President or, in his or her absence, a person appointed at the meeting,
shall preside, and the Secretary shall prepare minutes.
2.11 Election Inspectors. In advance of any meeting of shareholders,
the Board of Directors may appoint any persons, other than nominees for office,
as inspectors of election to act at such meeting or any adjournment thereof. If
inspectors of election are not so appointed, the chairman of any such meeting
may, and on the request of any shareholder or the shareholder's proxy shall,
appoint inspectors of election at the meeting. The number of inspectors shall be
either one or three. If appointed at a meeting on the request of one or more
shareholders or proxies, the majority of shares present shall determine whether
one or three inspectors are to be appointed. In case any person appointed as
inspector fails to appear or fails or refuses to act, the vacancy may be filled
by appointment by the Board of Directors in advance of the meeting, or at the
meeting by the person acting as chairman. The inspectors of election shall (a)
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, and the
authenticity, validity and effect of proxies; (b) receive votes, ballots or
consents; (c) hear and determine all challenges and questions in any way arising
in connection with the right to vote; (d) count and tabulate all votes or
consents and determine the result; and (e) do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The inspectors
of election shall perform their duties impartially, in good faith, to the best
of their ability and as expeditiously as is practical. If there are three
inspectors of election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all. On request
of the chairman of the meeting or of any shareholder or his or her proxy, the
inspectors shall make a report in writing of any challenge or question or matter
3
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them is prima facie evidence of the facts stated
therein.
2.12 Closing of Transfer Books; Record Date. For the purpose of
determining shareholders entitled to notice of, or to vote at, any meeting of
shareholders or any reconvening thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the stock transfer books
of the Corporation shall be closed for a stated period but not to exceed in any
event sixty (60) days. If the stock transfer books are closed for the purpose of
determining shareholders entitled to notice of, or to vote at, a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days and, in case of a meeting of shareholders, not less than ten (10) days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed and if
no record date is fixed for the determination of shareholders entitled to notice
of, or to vote at, a meeting of shareholders or entitled to receive payment of a
dividend, the date on which the notice of the meeting is to be mailed or the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders.
ARTICLE THREE: DIRECTORS
3.01 Management. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors, who may exercise
all powers of the Corporation and do all lawful acts and things as are not by
law, the Certificate, or these Bylaws directed or required to be exercised or
done by the shareholders.
3.02 Number; Election; Term; Qualification. The first Board of
Directors shall consist of the number of directors named in the Certificate.
Thereafter, the number of directors that shall constitute the entire Board of
Directors shall be determined by resolution of the Board of Directors at any
meeting thereof or by the shareholders at any meeting thereof, but shall never
be less than one. No decrease in the number of directors will have the effect of
shortening the term of any incumbent director. At each annual meeting of
shareholders, directors shall be elected, and each director shall hold office
until his or her successors is elected and qualified or until his or her earlier
death, resignation, or removal from office. No director need be a shareholder, a
resident of the State of Texas, or a citizen of the United States.
3.03 Removal. At any meeting of shareholders called expressly for that
purpose, any director or the entire Board of Directors may be removed, with or
without cause, by a vote of the holders of a majority of the shares then
entitled to vote on the election of directors. If any or all directors are so
removed, new directors may be elected at the same meeting.
3.04 Vacancies. Any vacancy occurring in the Board of Directors by
death, resignation, removal, or otherwise may be filled by an affirmative vote
of at least a majority of the remaining directors though less than a quorum of
the Board of Directors. A director elected to fill a vacancy will be elected for
the unexpired term of his or her predecessor in office. A directorship to be
filled by reason of an increase in the number of directors may be filled by the
Board of Directors for a term of office only until the next election of one or
more directors by the shareholders.
3.05 First Meeting. Each newly elected Board of Directors may hold its
first meeting, if a quorum is present, for the purpose of organization and the
transaction of business immediately after and at the same place as the annual
meeting of shareholders, and no notice of such meeting shall be necessary.
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3.06 Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such times and places, within or without the State of
Texas, as may be designated from time to time by resolution of the Board of
Directors and communicated to all directors. Regular meetings of the Board of
Directors may be held when and if needed, and no more than one regular meeting
of the Board of Directors shall be required in any calendar year.
3.07 Special Meetings. A special meeting of the Board of Directors
shall be held whenever called by any director at such time and place, within or
without the State of Texas, as such director shall designate in the notice of
such special meeting. The director calling any special meeting shall cause oral
or written notice of such special meeting to be given to each director at least
twenty-four (24) hours before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of the Board of Directors
need be specified in the notice or waiver of notice of any special meeting.
3.08 Quorum; Majority Vote. At all meetings of the Board of Directors,
a majority of the directors fixed in the manner provided in these Bylaws shall
constitute a quorum for the transaction of business. If a quorum is not present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time, without notice other than an announcement at the meeting, until a
quorum is present. The vote of a majority of the directors present at a meeting
at which a quorum is in attendance shall be the act of the Board of Directors,
unless the vote of a different number is required by law, the Certificate, or
these Bylaws.
3.09 Procedure; Minutes. At meetings of the Board of Directors,
business shall be transacted in such order as the Board of Directors may
determine from time to time. The Board of Directors shall appoint at each
meeting a person to preside at the meeting and a person to act as secretary of
the meeting. The secretary of the meeting shall prepare minutes of the meeting
that shall be delivered to the Secretary of the Corporation for placement in the
minute books of the Corporation.
3.10 Presumption of Assent. A director of the Corporation who is
present at any meeting of the Board of Directors at which action on any matter
is taken shall be presumed to have assented to the action unless his or her
dissent shall be entered in the minutes of the meeting or unless he or she shall
file his or her written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof, or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
3.11 Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of the Corporation's directors or officers are
directors or officers or have a financial interest, will be void or voidable
solely for this reason, solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof that
authorizes the contract or transaction, or solely because his, her, or their
votes are counted for such purpose, if: (i) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; (ii) the material facts as to his
or her relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the shareholders. Common or interested directors may be
5
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee that authorizes the contract or transaction.
3.12 Compensation. Directors, in their capacity as directors, may
receive, by resolution of the Board of Directors, a stated salary or a fixed sum
and expenses of attendance, if any, for attending meetings of the Board of
Directors. No director shall be precluded from serving the Corporation in any
other capacity or receiving compensation therefor.
3.13 Chairman of the Board. The Board of Directors may, in its
discretion, choose a Chairman of the Board from among the directors on the Board
of Directors who will preside at all meetings of the shareholders and of the
Board of Directors and will be an ex officio member of all committees of the
Board of Directors. During the absence or disability of the President, the
Chairman will exercise the powers and perform the duties of the President. The
Chairman will have such other powers and will perform such other duties as shall
be designated by the Board of Directors. The Chairman shall serve until a
successor is chosen and qualified, but may be removed at any time by the
affirmative vote of a majority of the Board of Directors.
3.14 Committees. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members
one or more committees, each of which, to the extent provided in such
resolution, shall have and may exercise all of the authority of the Board of
Directors, except that no such committee shall have the authority of the Board
of Directors in reference to (a) amending the Certificate; (b) proposing a
reduction of the stated capital of the Corporation in the manner permitted by
Section 21.253 of the TBOC; (c) approving a plan of merger or share exchange of
the Corporation; (d) recommending to the shareholders the sale, lease or
exchange of all or substantially all of the property and assets of the
Corporation otherwise than in the usual and regular course of its business; (e)
recommending to the shareholders a voluntary dissolution of the Corporation or a
revocation thereof; (f) amending, altering or repealing these Bylaws or adopting
new bylaws of the Corporation; (g) filling vacancies on the Board of Directors
or any such committee; (h) electing or removing officers of the Corporation or
members of any such committee; (i) fixing the compensation of any member of such
committee; or (j) altering or repealing any resolution of the Board of
Directors. Unless the resolution designating a particular committee so provides,
no committee of the Board of Directors shall have the authority to authorize a
distribution or to authorize the issuance of shares of the Corporation.
Vacancies in the membership of any such committee shall be filled by the Board
of Directors at a regular or special meeting of the Board of Directors. Any such
committee shall keep regular minutes of its proceedings and report the same to
the Board of Directors when required. The designation of a committee of the
Board of Directors and the delegation thereto of authority shall not operate to
relieve the Board of Directors, or any member thereof, of any responsibility
imposed by law. Each director shall be deemed to have assented to any action of
the executive committee or any other committee, unless the director shall,
within seven (7) days after receiving actual or constructive notice of such
action, deliver his or her written dissent thereto to the Secretary of the
Corporation. Members of each committee shall serve at the pleasure of the Board
of Directors.
ARTICLE FOUR: GENERAL PROVISIONS RELATING TO MEETINGS
4.01 Notice. Whenever by law, the Certificate, or these Bylaws notice
is required to be given to any shareholder, director, or committee member and no
provision is made as to how such notice shall be given, it shall be construed to
mean that notice may be given, in writing, either (i) in person, receipt
acknowledged; (ii) by certified mail, return receipt requested; or (iii) by
Federal Express, UPS, Airborne Express, or other national carrier, receipt
acknowledged. Any notice required or permitted to be given hereunder (other than
personal notice) shall be addressed to such shareholder, director, or committee
member at his or her address as it appears on the books on the Corporation or,
in the case of a shareholder, on the stock transfer records of the Corporation
or at such other place as such shareholder, director, or committee member is
6
known to be at the time notice is mailed or transmitted. Any notice required or
permitted to be given by mail shall be deemed to be delivered and given at the
time when such notice is deposited in the United States mail, postage prepaid.
Any notice required or permitted to be given by telegram, telex, cable, telecopy
or facsimile transmission, or similar means, shall be deemed to be delivered and
given at the time transmitted.
4.02 Waiver of Notice. Whenever by law, the Certificate, or these
Bylaws any notice is required to be given to any shareholder, director, or
committee member of the Corporation, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
notice should have been given, shall be equivalent to the giving of such notice.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.
4.03 Telephone and Similar Meetings. Shareholders, directors, or
committee members may participate in and hold a meeting by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such a
meeting shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
4.04 Action by Written Consent. Any action that may be taken, or is
required by law, the Certificate, or these Bylaws to be taken, at a meeting of
shareholders, directors, or committee members may be taken without a meeting,
without prior notice, and without a vote, if a consent in writing setting forth
the action so taken shall be (a) in the case of shareholders, signed and bear
the date of signature by shareholders having not less than the minimum number of
votes that would be necessary to take such action at a meeting at which the
holders of all shares entitled to vote on the action were present and voted with
respect to the subject matter thereof; or (b) in the case of directors or
committee members, signed by all directors or committee members, as the case may
be, entitled to vote with respect to the subject matter thereof. Any such
consent shall have the same force and effect as a vote of such shareholders,
directors, or committee members, as the case may be, and may be stated as such
in any document filed with the Secretary of State of Texas or in any certificate
or other document delivered to any person. The consent may be in one or more
counterparts, and the signed consent shall be placed in the minute book of the
Corporation.
ARTICLE FIVE: OFFICERS AND OTHER AGENTS
5.01 In General. The officers of the Corporation will be elected by
the Board of Directors and will be a President and a Secretary. The Board of
Directors may also elect Vice Presidents, Assistant Vice Presidents, a
Treasurer, Assistant Secretaries and Assistant Treasurers, and such other
officers and agents as the Board of Directors may deem desirable. Any two or
more offices may be held by the same person. No officer or agent need be a
shareholder, a director, a resident of the State of Texas, or a citizen of the
United States.
5.02 Election. The Board of Directors, at its first meeting after each
annual meeting of shareholders, shall elect a President, a Secretary, and such
other officers as they deem appropriate, none of whom must be a member of the
Board of Directors. The Board of Directors then, or from time to time, may also
elect or appoint one or more other officers or agents as it shall deem
advisable. Each officer or agent shall hold office for the term for which he or
she is elected or appointed and until his or her successor has been elected or
appointed and qualified. Unless otherwise provided in the resolution of the
Board of Directors electing or appointing an officer or agent, his or her term
of office shall extend to and expire at the meeting of the Board of Directors
7
following the next annual meeting of shareholders or, if earlier, at his or her
death, resignation, or removal.
5.03 Removal. Any officer or agent elected or appointed by the Board
of Directors may be removed by a majority of the Board of Directors only if, in
the judgment of a majority of the Board of Directors, the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not of itself create contract rights.
5.04 Vacancies. Any vacancy occurring in any office of the Corporation
may be filled by the Board of Directors.
5.05 Authority. Officers shall have such authority and perform such
duties in the management of the Corporation as are set forth in these Bylaws or,
to the extent not inconsistent with these Bylaws, as specifically designated in
the resolution of the Board of Directors creating such position and appointing
or electing such person.
5.06 Compensation. The compensation, if any, of officers shall be
fixed, increased, or decreased from time to time by the Board of Directors;
provided, however, that the Board of Directors may, by resolution, delegate to
any one or more officers of the Corporation the authority to fix such
compensation.
5.07 Employment and Other Contracts. The Board of Directors may
authorize any officer or officers or agent or agents of the Corporation to enter
into any contract or execute and deliver any instrument in the name or on behalf
of the Corporation, and such authority may be general or confined to specific
instances. The Board of Directors may, when it believes the interest of the
Corporation will best be served thereby, authorize executive employment
contracts that will have terms no longer than ten years and contain such other
terms and conditions as the Board of Directors deems appropriate. Nothing herein
will limit the authority of the Board of Directors to authorize employment
contracts for shorter terms.
5.08 President. The President will be the chief executive officer of
the Corporation and, subject to the control of the Board of Directors, will
supervise and control all of the business and affairs of the Corporation. He or
she will, in the absence of the Chairman of the Board, preside at all meetings
of the shareholders and the Board of Directors. The President will have all
powers and perform all duties incident to the office of President and will have
such other powers and perform such other duties as the Board of Directors may
from time to time prescribe.
5.09 Vice Presidents. Each Vice President will have the usual and
customary powers and perform the usual and customary duties incident to the
office of Vice President, and will have such other powers and perform such other
duties as the Board of Directors or any committee thereof may from time to time
prescribe or as the President may from time to time delegate to him or her. In
the absence or disability of the President and the Chairman of the Board, a Vice
President designated by the Board of Directors, or in the absence of such
designation the Vice Presidents in the order of their seniority in office, will
exercise the powers and perform the duties of the President.
5.10 Secretary. The Secretary will attend all meetings of the
shareholders and record all votes and the minutes of all proceedings in a book
to be kept for that purpose. The Secretary will perform like duties for the
Board of Directors and committees thereof when required. The Secretary will
give, or cause to be given, notice of all meetings of the shareholders and
special meetings of the Board of Directors. The Secretary will keep in safe
custody the seal of the Corporation. The Secretary will be under the supervision
8
of the President. The Secretary will have such other powers and perform such
other duties as the Board of Directors may from time to time prescribe or as the
President may from time to time delegate to him or her.
5.11 Assistant Secretaries. The Assistant Secretaries in the order of
their seniority in office, unless otherwise determined by the Board of
Directors, will, in the absence or disability of the Secretary, exercise the
powers and perform the duties of the Secretary. They will have such other powers
and perform such other duties as the Board of Directors may from time to time
prescribe or as the President may from time to time delegate to them.
5.12 Treasurer. The Treasurer will have responsibility for the receipt
and disbursement of all corporate funds and securities, will keep full and
accurate accounts of such receipts and disbursements, and will deposit or cause
to be deposited all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. The Treasurer will render to the Directors whenever they may
require it an account of the operating results and financial condition of the
Corporation, and will have such other powers and perform such other duties as
the Board of Directors may from time to time prescribe or as the President may
from time to time delegate to him or her.
5.13 Assistant Treasurers. The Assistant Treasurers in the order of
their seniority in office, unless otherwise determined by the Board of
Directors, will, in the absence or disability of the Treasurer, exercise the
powers and perform the duties of the Treasurer. They will have such other powers
and perform such other duties as the Board of Directors may from time to time
prescribe or as the President may from time to time delegate to them.
5.14 Bonding. The Corporation may secure a bond to protect the
Corporation from loss in the event of defalcation by any of the officers, which
bond may be in such form and amount and with such surety as the Board of
Directors may deem appropriate.
ARTICLE SIX: CERTIFICATES AND SHAREHOLDERS
6.01 Certificated and Uncertificated Shares. The shares of the
Corporation may be either certificated shares or uncertificated shares. As used
herein, the term "certificated shares" means shares represented by instruments
in bearer or registered form, and the term "uncertificated shares" means shares
not represented by such instruments and the transfers of which are registered
upon books maintained for that purpose by or on behalf of the Corporation.
6.02 Certificates for Certificated Shares. The certificates for
certificated shares of capital stock of the Corporation shall be in such form as
shall be approved by the Board of Directors in conformity with law. The
certificates shall be consecutively numbered, shall be entered as they are
issued in the books of the Corporation or in the records of the Corporation's
designated transfer agent, if any, and shall state the shareholder's name, the
number of shares, and such other matters as may be required by law. The
certificates shall be signed by the President or any Vice President and also by
the Secretary, an Assistant Secretary, or any other officer, and may be sealed
with the seal of the Corporation or a facsimile thereof. If any certificate is
countersigned by a transfer agent or registered by a registrar, either of which
is other than the Corporation itself or an employee of the Corporation, the
signatures of the foregoing officers may be a facsimile.
6.03 Lost, Stolen, or Destroyed Certificates. The Corporation shall
issue a new certificate in place of any certificate for certificated shares
previously issued if the registered owner of the certificate satisfies the
following requirements:
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(a) Claim. The registered owner makes proof in affidavit
form that a previously issued certificate for certificated shares has
been lost, destroyed, or stolen;
(b) Timely Request. The registered owner requests the
issuance of a new certificate before the Corporation has notice that
the certificate has been acquired by a purchaser for value in good
faith and without notice of an adverse claim;
(c) Bond. The registered owner gives a bond in such form,
and with such surety or sureties, with fixed or open penalty, as the
Board of Directors may direct, in its discretion, to indemnify the
Corporation (and its transfer agent and registrar, if any) against any
claim that may be made on account of the alleged loss, destruction, or
theft of the certificate; and
(d) Other Requirements. The registered owner satisfies any
other reasonable requirements imposed by the Board of Directors.
When a certificate has been lost, destroyed, or stolen and the
shareholder of record fails to notify the Corporation within a reasonable time
after he or she has notice of it, if the Corporation registers a transfer of the
shares represented by the certificate before receiving such notification, the
shareholder of record is precluded from making any claim against the Corporation
for the transfer or for a new certificate.
6.04 Transfer of Shares. With respect to certificated shares, upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
agent shall issue a new certificate to the person entitled thereto, cancel the
old certificate, and record the transaction upon its books. With respect to
uncertificated shares, upon delivery to the Corporation of proper evidence of
succession, assignment, or authority to transfer, the Corporation or its agent
shall record the transaction upon its books. When a transfer of shares is
requested and there is reasonable doubt as to the right of the person seeking
the transfer, the Corporation or its transfer agent, before recording the
transfer of the shares on its books or issuing any certificate therefor, may
require from the person seeking the transfer reasonable proof of such person's
right to the transfer. If there remains a reasonable doubt of the right to the
transfer, the Corporation may refuse a transfer unless the person gives adequate
security or a bond of indemnity executed by a corporate surety or by two
individual sureties satisfactory to the Corporation as to form, amount and
responsibility of sureties. The bond shall be conditioned to protect the
Corporation, its officers, transfer agents and registrars, or any of them,
against any loss, damage, expense or other liability to the owner of the shares
by reason of the recordation of the transfer or the issuance of a new
certificate for shares.
6.05 Registered Shareholders. The Corporation shall be entitled to
treat the shareholder of record as the shareholder in fact of any shares and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have actual or other notice thereof, except as otherwise provided by law.
6.06 Legends. If the Corporation is authorized to issue shares of more
than one class, each certificate representing shares issued by the Corporation
(a) shall conspicuously set forth on the face or back of the certificate a full
statement of (i) all of the designations, preferences, limitations, and relative
rights of the shares of each class authorized to be issued; and (ii) if the
Corporation is authorized to issue shares of any preferred or special class in
series, the variations in the relative rights and preferences of the shares of
each such series to the extent they have been fixed and determined and the
authority of the Board of Directors to fix and determine the relative rights and
preferences of subsequent series; or (b) shall conspicuously state on the face
or back of the certificate that (i) such a statement is set forth in the
Certificate on file in the office of the Secretary of State; and (ii) the
Corporation will furnish a copy of such statements to the record holder of the
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certificate without charge upon written request to the Corporation at its
principal place of business or registered office.
If the Corporation issues any shares that are not registered under the
Securities Act of 1933, as amended, the transfer of any such shares shall be
restricted in accordance with an appropriate legend.
In the event any restriction on the transfer, or registration of the
transfer, of shares shall be imposed or agreed to by the Corporation, each
certificate representing shares so restricted (a) shall conspicuously set forth
a full or summary statement of the restriction on the face of the certificate;
(b) shall set forth such statement on the back of the certificate and
conspicuously refer to the same on the face of the certificate; or (c) shall
conspicuously state on the face or back of the certificate that such a
restriction exists pursuant to a specified document and (i) that the Corporation
will furnish to the record holder of the certificate without charge upon written
request to the Corporation at its principal place of business or registered
office a copy of the specified document; or (ii) if such document is one
required or permitted by law to be and has been filed, that such specified
document is on file in the office of the Secretary of State and contains a full
statement of such restriction.
ARTICLE SEVEN: MISCELLANEOUS PROVISIONS
7.01 Dividends. Subject to any restrictions of law or in the
Certificate, dividends may be declared by the Board of Directors at any meeting
and may be paid in cash, in property, or in shares of capital stock of the
Corporation. Such declaration and payment shall be at the discretion of the
Board of Directors.
7.02 Reserves. The Board of Directors may create out of funds of the
Corporation legally available therefor such reserve or reserves as the Board of
Directors from time to time, in its discretion, considers proper to provide for
contingencies, to equalize dividends, or to repair or maintain any property of
the Corporation, or for such other purpose as the Board of Directors shall
consider beneficial to the Corporation. The Board of Directors may modify or
abolish any such reserve in the same manner.
7.03 Indemnification and Insurance. The Corporation will indemnify its
directors, officers, and other persons referenced in the Certificate to the
fullest extent permitted by the TBOC and may, if and to the extent authorized by
the Board of Directors, so indemnify any other person whom it has the power to
indemnify against liability, reasonable expenses, or any other matters
whatsoever. The Corporation may, at the discretion of the Board of Directors,
purchase and maintain insurance on behalf of the Corporation and any person whom
it has the power to indemnify under the TBOC, the Certificate, these Bylaws, or
otherwise.
7.04 Books and Records. The Corporation shall keep correct and
complete books and records of account, shall keep minutes of the proceedings of
its shareholders, Board of Directors, and any committee thereof, and shall keep
at its registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held by each
shareholder.
7.05 Fiscal Year. The fiscal year of the Corporation shall be fixed by
the Board of Directors, provided, however, that if such fiscal year is not fixed
by the Board of Directors and the Board of Directors does not defer its
determination of the fiscal year, it shall be the calendar year.
7.06 Seal. The seal, if any, of the Corporation shall be in such form
as may be approved from time to time by the Board of Directors.
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7.07 Checks. All checks, drafts, or other orders for payment of money,
notes, or other evidences of indebtedness issued in the name of or payable to
the Corporation may be signed or endorsed by the President and/or such officer
or officers or such other person or persons as the Board of Directors may from
time to time designate.
7.08 Resignation. A director, committee member, officer, or agent may
resign by so stating at any meeting of the Board of Directors or by giving
written notice to the Board of Directors, the President, or the Secretary. Such
resignation shall take effect at the time specified therein, or immediately if
no time is specified. Unless it specifies otherwise, a resignation is effective
without being accepted.
7.09 Securities of Other Corporations. The President, or, in his or
her absence, any Executive Vice President, shall have the power and authority to
transfer, endorse for transfer, vote, consent, or take any other action with
respect to any securities of another issuer that may be held or owned by the
Corporation and to make, execute, and deliver any waiver, proxy, or consent with
respect to any such securities.
7.10 Amendment. The power and authority to alter, amend, or repeal
these Bylaws or to adopt new bylaws is vested in the Board of Directors, subject
to the power of the shareholders to change or repeal any bylaws so made.
7.11 Invalid Provisions. If any part of these Bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as possible
and reasonable, shall remain valid and operative.
7.12 Headings. The headings used in these Bylaws are for convenience
only and do not constitute matter to be construed in the interpretation of these
Bylaws.
ADOPTED by the Board of Directors on May 30, 2006.
/s/ Lance Dean
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Lance Dean, Secretary
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