UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|_| QUARTERLY REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended March 31, 2004
|X| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from Jan. 1, 2004 to March 31, 2004
Commission file number 333-91356
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ZONE 4 PLAY, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 98-0374121
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
103 Foulk Road, Wilmington, DE 19803
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(Address of principal executive offices)
(302)-691-6177
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(Issuer's telephone number)
Former fiscal year: March 31
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(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 10, 2004, the issuer had
19,517,789 outstanding shares of Common Stock.
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Transitional Small Business Disclosure Format (Check One): Yes |_| No |X|
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TABLE OF CONTENTS
Page No.
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PART I. FINANCIAL INFORMATION
Item 1.Financial Statements 1
Item 2.Management's Discussion and Analysis or Plan of Operation 9
Item 3.Controls and Procedures 13
PART II. OTHER INFORMATION
Item 1.Legal Proceedings 13
Item 2.Changes in Securities 13
Item 3.Defaults upon Senior Securities 14
Item 4.Submission of Matters to Vote of Security Holders 14
Item 5.Other Information 14
Item 6.Exhibits and Reports on Form 8-K 14
SIGNATURES 15
ZONE4PLAY INC.
AND ITS SUBSIDIARIES
(A development stage company)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
IN U.S. DOLLARS
UNAUDITED
INDEX
Page
----
Consolidated Balance Sheet 2 - 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 8
- - - - - - - - - -
ZONE4PLAY INC. AND ITS SUBSIDIARIES
(A development stage company)
CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
U.S. dollars
March 31,
2004
-------------
Unaudited
-------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 364,324
Trade receivables 122,242
Other accounts receivable and prepaid expenses 7,125
-------------
Total current assets 493,691
-------------
SEVERANCE PAY FUND 37,521
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PROPERTY AND EQUIPMENT, NET 86,161
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Total assets $ 617,373
=============
The accompanying notes are an integral part of the consolidated financial
statements.
-2-
ZONE4PLAY INC. AND ITS SUBSIDIARIES
(A development stage company)
CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
U.S. dollars
March 31,
2004
-------------
Unaudited
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit $ 13,694
Short-term loans from stockholders and others 61,199
Trade payables 71,367
Employees and payroll accruals 166,395
Advance payments from customers 79,000
Accrued expenses and other liabilities 87,748
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Total current liabilities 479,403
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ACCRUED SEVERANCE PAY 106,950
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COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Common stock of $ 0.001 par value:
Authorized: 75,000,000 shares as of March 31, 2004;
Issued and outstanding:
17,976,190 shares as of March 31, 2004 17,976
Receipts on account of Common stock 997,797
Deficit accumulated during the development stage (984,753)
-------------
Total stockholders' equity 31,020
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$ 617,373
=============
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
ZONE4PLAY INC. AND ITS SUBSIDIARIES
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
U.S. dollars (except share data)
Period from
April 2001
(commencement
of operations)
Three months ended through
March 31, March 31,
--------------------------
2004 2003 2004
------------ ------------ ----------------
Revenues:
Software applications $ 99,280 $ 3,329 $ 338,184
Sale of software applications to related party 196,000 239,399 704,340
------------ ------------ ----------------
Total revenues 295,280 242,728 1,042,524
Cost of revenues 94,324 108,614 386,420
------------ ------------ ----------------
Gross profit 200,956 134,114 656,104
------------ ------------ ----------------
Operating expenses:
Research and development 128,196 51,258 1,141,029
Selling and marketing 45,995 17,491 250,725
General and administrative 62,489 46,048 192,695
------------ ------------ ----------------
Total operating expenses 236,680 114,797 1,584,449
------------ ------------ ----------------
Operating income (loss) (35,724) 19,317 (928,345)
Financial income (expenses), net 1,312 1,099 (42,833)
------------ ------------ ----------------
Net income (loss) $ (34,412) $ 20,416 $ (971,178)
============ ============ ================
Basic and diluted net income (loss) per share $ (0.003) $ 204 $ (0.08)
============ ============ ================
Weighted average number of shares of Common stock used
in computing basic and diluted net loss per share 11,784,391 100 11,784,391
============ ============ ================
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
ZONE4PLAY INC. AND ITS SUBSIDIARIES
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars
Period from
April 2001
Three months ended (commencement
March 31, of operations)
--------------------------- through
2004 2003 March 31, 2004
-------------- ------------- -----------------
Cash flows from operating activities:
Net income (loss) $ (34,412) $ 20,416 $ (971,178)
Adjustments required to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation 7,037 5,199 35,069
Loss from sale of property - 1,702 1,702
Decrease (increase) in accounts receivable and
prepaid expenses (72,173) 10,189 (128,513)
Increase (decrease) in trade payables (6,180) (47,726) 71,367
Increase in employees and payroll accruals 4,508 34,497 166,395
Increase in accrued expenses and other
liabilities 60,923 2,364 87,748
Increase (decrease) in advance payment from
customer (164,500) - 79,000
Accrued severance pay, net 1,653 11,188 69,430
-------------- ------------- -----------------
Net cash provided by (used in) operating activities (203,144) 37,829 (588,980)
-------------- ------------- -----------------
Cash flows from investing activities:
Purchase of property and equipment (37,502) (8,264) (122,932)
-------------- ------------- -----------------
Net cash used in investing activities (37,502) (8,264) (122,932)
-------------- ------------- -----------------
Cash flows from financing activities:
Issuance of shares in respect of reverse
acquisition (1) 3,546 - 3,546
Receipts on account of Common stock 997,797 - 997,797
Short-term bank credit, net (23,159) (12,231) 13,694
Receipt of short-term loans from stockholders
and others 50,000 - 534,295
Proceeds from short-term loans from stockholders
and others (473,096) (17,361) (473,096)
-------------- ------------- -----------------
Net cash provided by (used in) financing activities 555,088 (29,592) 1,076,236
-------------- ------------- -----------------
Increase (decrease) in cash and cash equivalents 314,442 (27) 364,324
Cash and cash equivalents at the beginning of the
period 49,882 816 -
-------------- ------------- -----------------
Cash and cash equivalents at the end of the period $ 364,324 $ 789 $ 364,324
============== ============= =================
Supplemental disclosure of cash flows information: Cash paid during the period
for:
Interest $ 563 $ 711 $ 8,974
============== ============= =================
Supplemental disclosure of non-cash activities:
Issuance of Common stock $ - $ - $ 10
============== ============= =================
(1) On February 1, 2004, the Company was acquired by Zone4Play Inc. (Nevada)
through a reverse purchase acquisition (see Note 1b).
Working capital excluding cash and cash $ (845)
equivalent (unaudited)
Equity 4,391
--------------
$ 3,546
==============
*) Represents an amount lower than $ 1.
The accompanying notes are an integral part of the consolidated financial
statements.
-5-
ZONE4PLAY INC. AND ITS SUBSIDIARIES
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars
NOTE 1:- GENERAL
a. Zone4Play Inc. ("the Company") was incorporated under the laws of
the State of Delaware on April 2, 2001. The Company develops and
markets interactive games applications for Internet, portable
devices and interactive TV platforms.
The Company conducts its operations and business with and through
its wholly-owned subsidiaries, Zone4Play Limited, an Israeli
corporation incorporated in July 2001, which is engaged in research
and development and marketing of the applications, Zone4Play (UK)
Limited, a United Kingdom corporation, incorporated in November
2002, which is engaged in marketing of the applications.
The Company generates revenues from sale of software applications.
The Company signed an agreement with its wholly-owned subsidiary,
Zone4Play Limited, according to which the subsidiary provides
research and development services, as a subcontractor, to the
Company, based on a fee of cost plus 8%.
b. On February 1, 2004, the Company was acquired by Old Goat
Enterprises, Inc. ("Old Goat"), through a reverse purchase
acquisition. Old Goat is a publicly traded company subject to the
reporting requirements set forth in Section 12 of the Securities and
Exchange Act of 1934. As a result of the transaction between the
Company and Old Goat, Old Goat changed its name to Zone4Play, Inc.
("Zone4Play (Nevada)").
Zone4Play Inc. (Nevada) shares are currently traded on the OTC
Bulletin Board under the trading symbol "ZFPI.OB."
The acquisition has been accounted for as a reverse acquisition,
whereby Zone4Play Inc. (Nevada) was treated as the acquiree and the
Company as the acquirer, primarily because the Company's
shareholders owned a majority, approximately 58% of Zone4Play Inc.'s
(Nevada) Common stock, upon completion of the acquisition.
c. On February 6, 2004, Zone4Play Inc. (Nevada), filed a Current Report
on Form 8-K with the Securities and Exchange Commission reporting
the acquisition of the Company with Zone4Play Inc. (Nevada). As
described in the Current Report, for accounting purposes, the
acquisition was accounted for as a reverse acquisition, with the
Company as the acquirer. The historical financial statements of
Zone4Play Inc. (Nevada), became the historical financial statements
of the Company, and the assets and liabilities of Zone4Play Inc.
(Nevada) are accounted for as required under the purchase method of
accounting. Results of operations of Zone4Play Inc. (Nevada) are
included in the financial statements from February 1, 2004, the
effective date of the acquisition.
-6-
ZONE4PLAY INC. AND ITS SUBSIDIARIES
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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U.S. dollars
NOTE 1:- GENERAL (Cont.)
d. The Company and its subsidiaries are devoting substantially all of
their efforts toward conducting research, development and marketing
of their software. The Company's and its subsidiaries' activities
also include raising capital and recruiting personnel. In the course
of such activities, the Company and its subsidiaries have sustained
operating losses and expect such losses to continue in the
foreseeable future. The Company and its subsidiaries have not
generated sufficient revenues and have not achieved profitable
operations or positive cash flow from operations. The Company's
accumulated deficit aggregated to $ 984,753 as of March 31, 2004.
There is no assurance that profitable operations, if ever achieved,
could be sustained on a continuing basis.
The Company plans to continue to finance its operations with a
combination of stock issuance and private placements and revenues
from product sales.
e. Concentration of risk that may have a significant impact on the
Company:
The Company derived all of its revenues from two major customers
(see Note 3b).
NOTE 2:- BASIS OF PRESENTATION
The accompanying interim consolidated financial statements have been
prepared by the Company in accordance with accounting principles generally
accepted in the United States and the rules and regulations of the
Securities and Exchange Commission, and include the accounts of the
Company and its subsidiaries. Certain information and footnote
disclosures, normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States, have been condensed or omitted pursuant to such rules and
regulations. In the opinion of the Company, the unaudited financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the financial position
at March 31, 2004 and the operating results and cash flows for the three
months ended March 31, 2004 and 2003.
The results of operations for the three months ended March 31, 2004 are
not necessarily indicative of results that may be expected for any other
interim period or for the full fiscal year ending December 31, 2004.
NOTE 3:- SEGMENTS, CUSTOMERS AND GEOGRAPHIC INFORMATION
Summary information about geographic areas:
The Company manages its business on the basis of one reportable segment
(see Note 1 for a brief description of the Company's business) and follows
the requirements of SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information".
-7-
ZONE4PLAY INC. AND ITS SUBSIDIARIES
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars
NOTE 3:- SEGMENTS, CUSTOMERS AND GEOGRAPHIC INFORMATION (Cont.)
a. The following is a summary of operations within geographic areas,
based on the location of the customers:
Period ended March 31,
-------------------------------
2004 2003
--------------- ---------------
Total revenues
-------------------------------
England $ 288,405 $ -
Israel 952 -
Cyprus - 239,399
Holland 3,376 -
Others 2,548 -
--------------- ---------------
$ 295,281 $ 239,399
=============== ===============
b. Major customer data as a percentage of total revenues:
2004 2003
--------------- ---------------
Customer A - 100%
=============== ===============
Customer B 27% -
=============== ===============
Customer C 66% -
=============== ===============
NOTE 4:- SUBSEQUENT EVENTS
a. In April 2004, Zone4Play Inc. (Nevada) completed a $ 1.2 million
private placement, consisting of 1,500,000 shares of its Common
stock of $ 0.001 par value and two warrants to purchase one share of
common stock each. One warrant is exercisable for 24 months at a
price of $1.85 per share and one warrant is exercisable for 36
months at a price of $2.50 per share. The purchase price for each
common stock and two warrants was $ 0.80. The privet placement
agreement was signed with a group of institutional and individual
investors. In March 2004, the Company received approximately $ 1
million out of the $ 1.2 million. This amount was recorded as
receipts on account of Common Stock.
b. In April 2004, the Company issued 44,348 shares to a service
provider, regarding its service agreements.
- - - - - - - - - -
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue," the negative of
such terms, or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially from those in the
forward-looking statements as a result of various important factors. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, such should not be regarded as a representation by the Company, or
any other person, that such forward-looking statements will be achieved. The
business and operations of the Company are subject to substantial risks, which
increase the uncertainty inherent in the forward-looking statements contained in
this report.
We undertake no duty to update any of the forward-looking statements, whether as
a result of new information, future events or otherwise. Readers are cautioned
not to place undue reliance on the forward-looking statements contained in this
report.
OVERVIEW
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles. You should read the following discussion of our financial condition
and results of operations together with the unaudited financial statements and
the notes to unaudited financial statements included elsewhere in this filing
prepared in accordance with accounting principles generally accepted in the
United States. This discussion contains forward-looking statements that reflect
our plans, estimates and beliefs. Our actual results could differ materially
from those anticipated in these forward-looking statements.
COMPANY HISTORY
Zone4Play, Inc. (hereinafter referred to as "Zone4Play", "the Company", "us" or
"we") is a corporation duly organized under the laws of the State of Nevada on
April 23, 2002, as Old Goat Enterprises, Inc. ("Old Goat"). On February 1, 2004,
the Company acquired Zone4Play, Inc., a Delaware corporation ("Zone4Play
Delaware"), through a reverse purchase acquisition. The acquisition has been
accounted for as a reverse acquisition, whereby Old Goat was treated as the
acquiree and the Zone4play Delaware as the acquiror. The historical financial
statements of Zone4play Delaware became the historical financial statements of
the Company, and the assets and liabilities of Old Goat are accounted for as
required under the purchase method of accounting. The results of operations of
Old Goat are included in the financial statements from February 1, 2004, the
effective date of the acquisition. The Company conducts its operations and
business with and through Zone4Play Delaware's wholly-owned subsidiaries,
Zone4Play Limited, an Israeli Corporation incorporated in July 2001, and
Zone4Play (UK) Limited, a United Kingdom corporation incorporated in November
2002. The Company's shares are currently traded on the OTC Bulletin Board under
the trading symbol "ZFPI."
COMPANY BUSINESS
Zone4Play is a U.S.-based company with an R&D center in Israel and operations in
the U.K. Zone4Play aims to become a worldwide brand in online cross-platform
betting and gaming applications. In parallel, it plans to maintain its dominant
position and aggressively expand its market share in the interactive Digital TV
(iTV), Mobile gaming applications, and internet betting portals.
Zone4Play employs unique end-to-end technology and industry know-how, offering
Media Service Operators (MSO's) unmatched cross-platform flexibility and access
possibilities for their clients. Zone4Play is the only company offering a single
9
user account that enables switching from one network to another (i.e., from
mobile to iTV and vice versa) with the same virtual balance and the same user
information.
The Company currently employs 24 professionals in software design, client-server
applications, graphic layouts and cross-platform deployments.
Zone4Play has demonstrated its technological and marketing strength by signing
contracts with premium cellular operators, content providers, Satellite and
Digital cable operators which have already begun to generate a growing stream of
revenues. A number of existing customers have already expressed their high
satisfaction by placing orders for additional applications.
ZONE4PLAY'S CUSTOMERS INCLUDE: AVAGO TV (Sky UK), NTL (UK), Telewest (UK), UPC
iTV (Austria & Holland), Orange (Israel), O2 (UK), Hutchison (China), YES
Satellite (Israel), and others.
The Company intends to invest additional efforts in broadening its marketing
efforts and customer service operations, and penetrate aggressively to
additional markets.
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104,
"Revenue Recognition," ("SAB No. 104") which revises or rescinds certain
sections of SAB No. 101, "Revenue Recognition," in order to make this
interpretive guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. The changes noted in SAB No.
104 did not have a material effect on the Company's consolidated results of
operations, consolidated financial position or consolidated cash flows.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our unaudited financial statements and accompanying notes have been prepared in
conformity with generally accepted accounting principles in the United States of
America for interim financial statements. Preparing financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue, and expenses. These estimates and
assumptions are affected by management's application of accounting policies. We
believe that understanding the basis and nature of the estimates and assumptions
involved with the following aspects of our financial statements is critical to
an understanding of our financials.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE
MONTHS ENDED MARCH 31, 2003
REVENUES
Revenues for the three months ended March 31, 2004 increased by 22% to $295,280
from $242,728 for the three months ended March 31, 2003. Revenues from Software
applications for the three Months ended March 31, 2004 increased dramatically by
2,882% to $99,280, from $3,329 for the three months ended March 31, 2003.
Software application sales decreased by 18% to $196,000 compared to $239,399 in
the same period in 2003. The increase in the software applications was enabled
by new contracts, mainly in the UK.
10
RESEARCH AND DEVELOPMENT
Research and development expenses for the three months ended March 31, 2004
increased by 150% to $128,196 from $51,258 for the three months ended March 31,
2003. The increase was primarily attributable to an increase in employee
recruiting during 2003 and expenses allocated to sales of software.
SALES AND MARKETING
Sales and Marketing expenses for the three months ended March 31, 2004 increased
by 163% to $45,995 from $17,491 for the three months ended March 31, 2003. In
2004, the Company increased its marketing efforts mainly in the UK using its
Israeli marketing team. Sales and marketing expenses consist mainly of labor
costs and travel expenses in the UK and the US.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the three months ended March 31, 2004
increased by 36% to $62,489 from $46,048 for the three months ended March 31,
2003. The increase is primarily attributable to the recruitment of employees and
an increase in the Company's legal expenses.
CASH
As of March 31, 2004, cash increased to 364,324 from $789 for the three months
ended March 31, 2003. The increase was primarily attributable to the Company's
private placement, which is described more fully below in Part II of this report
under Item 2. Changes in Securities. An additional $200,000 was received from
the private placement after the date of the financial statements included in
this report.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2004, we incurred a net loss of $34,412,
as compared to net income of 20,416 during the three months ended March 31,
2003.
On April 1, 2004, we closed a private placement for gross proceeds of $1,200,000
through the issuance of an aggregate amount 1,500,000 Units, with each Unit
consisting of one share of common stock and two warrants to purchase one share
of common stock each (see note 4(a) of the financial statements).
We believe that we have sufficient funds to operate for the next 12 months, with
additional funds anticipated from the performance of agreements that we have
entered with our current customers, and from future contracts that we expect to
execute in the near future. Nonetheless, the Company intends to raise additional
funds in order to broaden its financial strength and liquidity. The Company's
cash and cash equivalents were $364,324 as of March 31, 2004, and an additional
$200,000 was received after the date of the financial statements contained in
this report in connection with the private placement (see note 4(a) of the
financial statements).
OUTLOOK
We believe that our future success will depend upon our ability to enhance our
existing products and systems and introduce new commercially viable products and
systems addressing the demands of the evolving markets. As part of the product
development process, we work closely with current and potential customers,
distribution channels and leaders in our industry segments to identify market
needs and define appropriate product specifications. The Company's current
anticipated levels of revenue and cash flow are subject to many uncertainties
and cannot be assured. In order to have sufficient cash to meet our anticipated
requirements for the next twelve months, the Company may be dependent upon its
11
ability to obtain additional financing. The inability to generate sufficient
cash from operations or to obtain the required additional funds could require
the Company to curtail operations.
FACTORS WHICH MAY AFFECT FUTURE RESULTS
In evaluating our business, prospective investors and shareholders should
carefully consider the following risks factors, any of which could have a
material adverse impact on our business, operating results and financial
condition and result in a complete loss of your investment.
FAILURE TO PROPERLY MANAGE GROWTH AND EXPANSION COULD ADVERSELY AFFECT THE
COMPANY'S BUSINESS AND SHAREHOLDER'S EQUITY
The Company anticipates future internal growth and expansion. Such growth will
increase the demands on the Company's management, operating systems and internal
controls. Consequently, the Company's existing management resources and
operational, financial, human and management information systems and controls
may be inadequate to support its future operations. The Company cannot be sure
that it will be able to manage the Company's growth successfully. As a result of
these concerns, the Company also cannot be sure that it will be able to grow,
or, if it does grow, at what growth rate.
NO PRESENT INTENTION TO PAY DIVIDENDS
The Company has never paid dividends or made other cash distributions on its
common stock, and does not expect to declare or pay any dividends in the
foreseeable future. The Company intends to retain future earnings, if any, for
working capital and to finance current operations and expansion of its business.
SUBSTANTIAL COMPETITION
The gaming industry is highly competitive, fragmented and subject to rapid
change. There are numerous other companies that provide these services, a number
of which are as large or larger than the Company on a national or regional basis
and thousands of which are small, independent and serve local populations.
Certain of these competitors operate in several of the Company's existing or
target markets, and others may choose to enter those markets in the future. The
majority of the Company's competition is made up of smaller regional or local
operators with a strong presence in their respective local markets. As a result
of these factors, the Company may in the future lose customers or have
difficulty acquiring new customers, or the Company may consider acquiring these
smaller competitors.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is largely dependent on the efforts and active
participation of the current management. The loss of the services of any of
these individuals could be detrimental to the Company as there is no assurance
that the Company could replace them at affordable compensation levels. The
Company currently has no employment agreements with these individuals.
POSSIBLE RULE 144 SALES
There are presently 19,517,789 shares of common stock and no shares of preferred
stock issued and outstanding. All of the issued and outstanding shares, except
7,500,000 common shares offered under a SB-2 Registration Statement effective
December 24, 2002, are deemed "restricted securities" under Rule 144 of the
Securities Act of 1933. Rule 144 prescribes the manner of sale of restricted
shares. Unless registered pursuant to the Securities Act, under Rule 144,
limited sales of "Restricted Securities" may be made by the holders thereof
after a minimum of one (1) year has elapsed between the date of acquisition and
resale. Sales may be made only in ordinary broker transactions, but only if
information about the Company has been published through one of several SEC
approved reporting means. No more than 1% of the Company's outstanding Common
Stock may be sold by the owner every three months until the restriction is
lifted, and all such sales must be preceded by a Notice of Sale filed with the
SEC. The possibility that substantial amounts of "restricted securities" may be
sold in the public market after the one-year holding period may adversely affect
12
prevailing market prices, if any shall then exist, for the Common Stock. This
could impair the Company's ability to raise additional capital through the sale
of its equity securities.
PENNY STOCK REGULATION.
The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on the Nasdaq system, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system). Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature and
significance of risks of the penny stock market. A broker-dealer must also
provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer, and our sales person in the transaction, and
monthly account statements indicating the market value of each penny stock held
in the customer's account. In addition, the penny stock rules require that,
prior to a transaction in a penny stock not otherwise exempt from those rules,
the broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the trading activity in the secondary market for stock that becomes
subject to those penny stock rules. If any of our securities become subject to
the penny stock rules, holders of those securities may have difficulty selling
those securities.
ITEM 3. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report, Zone4Play conducted an
evaluation, under the supervision and with the participation of its principal
executive officer and principal financial officer; of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the
Exchange Act). Based upon this evaluation, Zone4Play's principal executive
officer and principal financial officer concluded that the Company's disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission's rules and forms. There was no significant
change in Zone4Play's internal controls or in other factors that could
significantly affect these controls subsequent to the date of the evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On April 1, 2004, we sold to accredited investors an aggregate of 1,500,000
Units, with each Unit consisting of one share of common stock and two warrants
to purchase one share of common stock each. One warrant is exercisable for 24
months at a price of $1.85 per share and one warrant is exercisable for 36
months at a price of $2.50 per share. The purchase price for each Unit was $.80,
with the total aggregate offering price equal to $1,200,000. The issuance of the
shares and the warrants was exempt from registration requirements of the
Securities Act of 1933 pursuant to Regulation S and/or Section 4(2) of such
Securities Act and Regulation D promulgated thereunder based upon the
representations of each of the Investors that it was an "accredited investor"
(as defined under Rule 501 of Regulation D) and that it was purchasing such
securities without a present view toward a distribution of the securities. In
addition, there was no general advertisement conducted in connection with the
sale of the securities. The offerings and sales were made to accredited
investors and transfer was restricted in accordance with the requirements of the
Securities Act of 1933.
On April 2004 the company issued 44,348 shares to a service provider regarding
its service agreement.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On May 2, 2004, the Company retained Idan Miller as Executive Vice
President.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
2.1 Stock Purchase Agreement by and among Old Goat
Enterprises, Inc., a Nevada corporation, Zone 4 Play,
Inc., a Delaware corporation, and Shimon Citron, Pini
Gershon, Yariv Citron, Natan Lerer, Dov Berger, Nachman
Berger, Eyal Leshem, Akiva fratkin, Sayex Trading
Company 1982, Ltd., an Israeli corporation, Azriel
Zolti, Roni Shatan, Sachin Mehta, Giora Grinberg,
Shachar Schalka, Gil Levy, Erez Lahav, Ira Vinitzki,
Haim Tabak, Avi Abramovich, Ehud Zadokya, Rivka Shmuely,
Abramovich Trust Company, an Israeli corporation, and
Leah Baruch. (1)
3.1 Articles of Incorporation (2)
3.2 Certificate of Amendment to Articles of Incorporation
(3)
3.2 By-Laws (2)
31.1 Certification by Shimon Citron, President and Chief
Executive Officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification by Uri Levy, Chief Financial Officer,
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification by Shimon Citron, President and Chief
Executive Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification by Uri Levy, Chief Financial Officer,
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
_______________________________
(1) Incorporated by reference to the Company's Form 8-K/A filed with the
Securities and Exchange Commission on April 5, 2004.
(2) Incorporated by reference to the Company's Registration Statement on
SB-2 filed with the Securities and Exchange Commission on June 27,
2002.
(3) Incorporated by reference to the Company's Form 8-K filed with the
Securities and Exchange Commission on February 6, 2004.
(b) Reports on Form 8-K:
On February 6, 2004, Zone4Play filed a Form 8-K reporting: (i) under Item 4, the
appointment of Ernst & Young, Israel, as its new principal independent
accountant; (ii) under Item 5, the purchase of 100% of the common stock of Zone
4 Play, Inc., a Delaware corporation; and (iii) under Item 6, the resignation of
Jean Blanchard, Laurel Blanchard and Dennis Cox as directors of the Company.
On March 31, 2004, Zone4Play filed a Form 8-K reporting under Item 8 a change in
the Company's fiscal year end from March 31 to December 31.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, registrant has duly caused this report to be signed in its behalf
by the undersigned thereunto duly authorized.
ZONE 4 PLAY, INC.
DATED: May 17, 2004 BY: /s/ Shimon Citron
-----------------------------
Shimon Citron
President and Chief Executive
Officer
DATED: May 17, 2004 BY: /s/ Uri Levy
-----------------------------
Uri Levy
Chief Financial Officer
15