FORM 10-Q

Securities and Exchange Commission

Washington, D.C.  20549

(Mark One)

[**X**]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:  **September 30, 2002**
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE 

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission File No. **0-22372.****GRAND TOYS INTERNATIONAL, INC.**
(Exact Name of Registrant as Specified in its Charter)	

		
**Nevada	 	      					**98-0163743  
(State or other jurisdiction of					(I.R.S. Employer 

incorporation or organization					Identification No.)
**1710 Route Transcanadienne, Dorval, Quebec, Canada, H9P 1H7**
(Address of principal executive offices)
**(514) 685-2180**
(Registrant's telephone number, including Area Code)

 

(Former name, former address and former fiscal year, 

if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act during the preceding 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    _____

Indicate the number of shares outstanding of each of the Issuer's classes of common equity, as of November 14, 2002: 2,685,887
** 

GRAND TOYS INTERNATIONAL, INC.
 
Index to Quarterly Report on Form 10 - Q
Filed with the Securities and Exchange Commission**Period ended September 30, 2002
 **ITEMS IN FORM 10 - Q**PAGE**Part I - Financial Information

Item 1.  Consolidated Financial Statements:  
Consolidated Balance Sheets 

at September 30, 2002 and December 31, 2001
2-3
Consolidated Statements of Operations

For The Three Month and Nine Month periods ended September 30, 2002 and 2001
4
Consolidated Statements of Stockholders' Equity and Comprehensive 

Income For the Nine Month period ended September 30, 2002 
5
Consolidated Statements of Cash Flows

For The Nine Month period ended September 30, 2002 and 2001
6
Notes to Consolidated Financial Statements
7-16
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
17-23
Item 3. Quantitative and Qualitative Disclosures About Market Risks
23
Item 4. Controls and Procedures
23**Part II - Other Information   
Item 1.  Legal proceedings
23-24
Item 2.  Changes in Securities and Use of Proceeds
24
Item 3.  Defaults Upon Senior Securities
24
Item 4.  Submission of Matters to a Vote of Security Holders
24
Item 5.  Other Information
24
Item 6.  Exhibits and Reports on Form 8-K
24 
Signatures
25
Certifications
26-31
 

 
**GRAND TOYS INTERNATIONAL, INC.
**Part I. - Financial Information
***Item 1. Financial Statements

Consolidated Balance Sheets
 
September 30, 2002
December 31, 2001

(Unaudited)    **Assets     
Current assets:  
Short-term deposit (note 12(c))
	$        500,000
$         250,000
Accounts receivable (net of allowance for   
doubtful accounts of $12,601; 2001 - $12,556)
1,985,985
1,183,175
Current portion of loan receivable (note 2)  
(net of provision Nil;  2001 - $146,269)
208,024
194,494
Due from employees and affiliated company
1,670
2,034
Income taxes recoverable
-
143,668
Inventory
2,387,931
1,373,094
Prepaid expenses
446,053
698,597
Current assets of discontinued operation (note 15)
-
752,103
Total current assets
5,529,663
4,597,165   
Loan receivable (note 2)
390,967
548,721   
Note receivable (note 15)
1,060,878
-   
Other assets (note 3)
44,686
133,826   
Other assets of discontinued operation (note 15)
-
102,610   
Equipment and leasehold improvements, net (note 4)
285,776
360,275         
Total assets
	$     7,311,970
$      5,742,597**GRAND TOYS INTERNATIONAL, INC.

Consolidated Balance Sheets
 
 

September 30, 2002
 

December 31, 2001 
(Unaudited)    **Liabilities and Stockholders' Equity     
Current liabilities:  
Bank indebtedness (note 5)
$     1,497,918
$     630,136
Trade accounts payable
1,758,933
1,483,506
Other accounts payable and accrued liabilities
600,145
297,470
Shortfall on share conversions (note 6)
-
581,310
Royalties payable
22,645
8,297
Current liabilities of discontinued operation (note 15)
-
485,275
Total current liabilities
3,879,641
3,485,994   
Deferred gain (note 15)
612,006
-   
Minority interest
100
100   
Stockholders' equity:  
Capital stock (note 7):  
Voting common stock, $0.001 par value:  
12,500,000 shares authorized,  
2,685,887 shares issued and outstanding  
(2001 - 1,285,119 shares)
2,686
1,285
Series B preferred stock, $0.001 par value:  
915,000 shares authorized,  
Nil shares issued and outstanding  
(2001 - 915,000)
-
800 
2,686
2,085   
Additional paid-in capital
22,481,700
21,496,788
Deficit
(18,694,370)
(18,253,908)
Accumulated other comprehensive income-  
cumulative currency translation adjustment
(969,793)
(988,462) 
2,820,223
2,256,503   
Commitments and contingencies (notes 11 and 12)     
Total liabilities and stockholders' equity
$      7,311,970
$    5,742,597* 

See accompanying notes to unaudited consolidated financial statements.
** 

GRAND TOYS INTERNATIONAL, INC.

Consolidated Statements of Operations, (Unaudited)
 
For the three months ended September 30
For the nine months ended September 30 
2002
2001
2002
2001     
Net sales
$ 3,244,053
$ 1,902,910
$ 8,926,608
$ 5,954,769     
Cost of goods sold
2,007,983
1,225,151
5,602,170
4,191,922
Gross profit
1,236,070
677,759
3,324,438
1,762,847     
Operating expenses:    
Selling, general and administrative
1,081,630
852,043
3,719,419
3,167,937
Bad debt expense (recovery)
9,810
(663)
24,532
36,465
Depreciation and amortization
22,836
28,955
67,420
86,795
Foreign exchange loss
11,896
18,649
16,500
68,727
Interest expense
19,572
-
56,527
-
Interest income
(15,940)
(20,919)
(52,113)
(70,086)
Unusual items
-
(214,089)
-
(737,484) 
1,129,804
663,976
3,832,285
2,552,354
Earnings (loss) from continuing operations    
before income taxes
106,266
13,783
(507,847)
(789,507)
Income taxes recovery (expense):
-
82,823
(15,664)
(130,991)     
Earnings (loss) from continuing operations
106,266
96,606
(523,511)
(920,498)     
Discontinued operation (note 15):    
Loss from discontinued operation 
-
(38,837)
(66,492)
(348,193)
Gain on sale of discontinued operation 
-
-
149,541
-
Earnings (loss) before extraordinary item
106,266
57,769
(440,462)
(1,268,691)     
Gain on forgiveness of long term debt,    
net of deferred income taxes of $499,585
-
-
-
695,538     
Net earnings (loss) 
$  106,266
$   57,769
$   (440,462)
$ (573,153)     
Earnings per share (note 9):
Basic and diluted EPS    
From continuing operations
$      0.04
$    0.08
$    (0.28)
$     (0.80)
Discontinued operation
-
(0.03)
0.04
(0.30)
Extraordinary item:    
Gain on debt forgiveness
-
-
-
0.61
Basic 
0.04
0.05
(0.24)
(0.49)     
Diluted EPS    
From continuing operations
$      0.03
$    0.08
$    (0.28)
$     (0.80)
Discontinued operation********************************