Doll Fails to Make It Out of the Crib : Toys: Cheerful Tearful, though beloved by buyers, could not be manufactured in time for the Christmas season.

NEWPORT BEACH —  As toy companies go, Curiosity Products had gotten off to an enviable start.

It had a blue-ribbon board of directors to watch over the creation of a high-tech baby doll--Cheerful Tearful, which uses a computer chip to laugh, coo, cry or wet. The toy was the hit of the New York toy fair, garnering $15 million in orders. And it got spots in Sears, Roebuck and J.C. Penney’s Christmas catalogues.

What’s happened since then has been enough to make Cheerful Tearful cry and cry. The dolls cannot be produced in time for the crucial Christmas season, and probably won’t be delivered until March. The president has resigned. The company is being renamed and restructured and it is being sued for not paying its rent.

The dream of bringing the new doll to market in time for Christmas went awry because of a lack of financing, said Joseph Whitaker, Curiosity senior vice president.

“In today’s money-raising marketplace, money had gotten pretty tight for some obvious reasons,” he said, referring to the nationwide slump in retail sales. “It made the job (of raising investment money) extremely difficult.”

While Whitaker and Curiosity Chairman Joseph Delaney predict that the reorganized company will come back strong next year, the turn of events represents a steep slide from the early pronouncements of the new company about its cutting-edge toy.

Cheerful Tearful performs some human functions just like some other baby dolls. But the secret that brought so much notice to the new doll was a computer microchip that can change the doll’s emotions at random.

The doll was promoted as catering to the nurturing instinct in children, beckoning them to play. In addition, the doll was designed to set a new standard in realism. Among its innovations was that it would lower its eyelashes.

And Curiosity had a star-studded board, including Mattel Inc. founder Elliot Handler, former CBS Chairman Arthur Taylor and Western Digital Corp. Chairman Roger Johnson. With such clout, the toy seemed certain to turn heads.

It did. When Curiosity executives took a prototype of the doll to the American International Toy Fair in New York last February, they said potential buyers were standing four-deep to get a look.

The doll was featured on the cover of the Playthings trade magazine in May. By summer, the company had racked up a respectable $15 million in orders. Toys R Us alone ordered 150,000, with a spokeswoman saying, “We expect her to do well.”

But the trouble struck over the summer. As the retail environment slowed and concerns about the economy grew, the new company was unable to come up with the money to get the doll manufactured, Delaney said. To make store shelves for Christmas, the doll had to begin coming off the production line in August.

Meanwhile, the doll was displayed in the Sears Christmas “Wish Book” catalogue, retailing for $37.77, and in the J.C. Penney Christmas catalogue. “The J.C. Penney buyer told me the first week the doll was in the catalogue, it was the third best-selling doll” behind two nationally advertised models, Delaney said.

But J.C. Penney spokesman Duncan Muir said orders were not that strong. And he said that people calling to order the doll are told that it will not be available for Christmas and that order takers recommend another doll.

Muir said toys in the catalogue are occasionally unavailable, but “we obviously can’t allow that to happen very often.”

The man who thought up the idea of creating a new toy company while walking his two Airedales one day, John Lynch, abruptly resigned as president in August. Reached at his Irvine home recently, Lynch demurred on why he left the company.

“It was just a whole bunch of reasons,” he said.

He also would not comment about the dispute on rent for the company’s offices. The landlord sued Curiosity in August for $10,044 in back rent. The landlord’s lawyer said Curiosity “never really moved in” to the Newport Beach offices, which were rented for $3,348 a month.

Delaney said that in the wake of Curiosity’s problems, he is folding the toy maker into the financial holding company that he founded, American Patriots Inc. The holding company was a secured creditor of Curiosity and is owed more than $1 million.

Delaney said he believes that the company will be able to retain most of its customers for the Cheerful Tearful doll next year and will introduce other products as well.

Since the doll has not been advertised on television, Delaney said he does not think that children will be disappointed about not being able to receive it in time for Christmas. “Most little girls won’t know about this,” he said.

And he expressed confidence that the toy maker will be back. “I think it will just make more demand for it next year,” he said about recent disappointing events. “This sort of things happens.”