Children play April 23 at the Knucklebones in Davis Square. The store is closing. (Photo: Steven & Courtney Johnson & Horwitz)

An emphasis on letting kids play with toys before their parents buy is resulting in the closing of the Knucklebones “epicenter” in Davis Square, although the rest of the business’ athletic services go on and co-founders say they’re looking for a new site — albeit not necessarily in Cambridge.

“We’re technically zoned for retail only, and we’re kind of a hybrid with a play component,” Erin Fleischer, chief operating officer, said Wednesday. “The backyard [play] was a real big issue. It just keeps coming up, so we decided rather than go through the variance process and try to [settle] the variance with the neighbors, we’ll just find another location where we can and close the shop here.”

The process is to start Friday with a flash sale of toy inventory and memberships.

The store, full of those colorful, soft toys and children playing inside the plate glass windows of the former Caning Shoppe, was open only since December at 196 Elm St. North, the very edge of Cambridge’s border with Somerville. City zoning officials and Knucklebones staff agree it was a neighbor’s complaints about use of the backyard that led inspectors to crack down. But with weather only recently allowing for extensive backyard play, founder Mitch Zeisler sees the neighbor as having a pretty low threshold for complaints.

“We had a backyard, so we figured, ‘Why not,’ and since November we’ve had three events out there. One event was 20 minutes, another event was 25 and one was for an hour,” Zeisler said. “My impression is that this person just has some issues, and the city of Cambridge is more willing to listen to one person without understanding who that person is rather than work with a store that just opened up.”

A letter from the business posted on the buzzing Davis Square LiveJournal site said the troubles began three weeks before opening, when an investor backed out and “forced us to alter our original plan of ‘interactive toy store’ to ‘play space with a toy store’ because we simply did not have the funds for shelving, inventory, checkout system, etc.”

“Our vision had to be put on hold but we moved forward with what we could afford and what we thought would be successful. … For the past few months we’ve been in discussions with the city of Cambridge due to a neighbor complaining about our backyard use … this neighbor contacted the police and filed a formal complaint. After coming to an agreement with the city that we will no longer use the backyard for paid activities, we thought our troubles had come to an end. However, a week later the city placed a cease and desist order on all paid activities, essentially ending ‘open play’ and any classes due to zoning regulations. Although we had hoped to be a functioning toy store by this time, we know that testing products is what makes our store unique, and we are not willing to give up that portion of our vision and become ‘just another toy store.’”

Cambridge Commissioner of Inspectional Services and Building Commissioner Ranjit Singanayagam said Zeisler had been given permission for selling toys and “was conducting more kids’ functions … we got complaints he’s not selling any toys at all. We told him he had to sell toys and be a retail store.”

The area is residential, with retail allowed only because of a variance granted during the 1980s, Singanayagam said. (While there are homes on Elm closer to Porter Square and behind the Knucklebones site, immediately across the street is an upscale pizza eatery, Thai restaurant and Subway fast food location.)

Commenters on the LiveJournal site agreed the area may not be perfect for kids parties, although the situation might not be much different from having a home next to a family whose kids play outside. A dialogue between the neighbor and business leading to a mutually agreeable solution would have been better, they said — unaware Knucklebones and neighbor Christopher Barr did, according to Community Development Department files, come to a “gentlemen’s agreement” to end “organized” backyard events after complaints began early this year. In April, though, Barr said he was worried anew by reports of six-week Microsoccer camps to be held there Wednesday and Saturday mornings.

“We are deeply disturbed with this news and are confused to why the owners feel they can ignore the zoning laws,” Barr wrote to city inspectors. A May 6 e-mail warned that Knucklebones was “still not adhering to the gentlemen’s agreement” and said a birthday party had been held outside that day from 3:45 to 5:30 p.m.

On May 14, city inspector Sean O’Grady told Barr that “You were all extremely patient and gave [Knucklebones] every chance” before sending on a complaint to the business’ Lexington-based Realtor. It appeared to be the final straw.

A next location for Knucklebones could be anywhere where there’s a mass of children, Zeisler said. Although staying in Davis was preferable, he said the store could move to another square or outside the Cambridge-Somerville area to such a place as Arlington Center or Coolidge Corner, “so long as there are children around and so long as we have an appropriate space for us to act on our vision.”

Considering the success of Knucklebones in promoting exercise during visits to corporate events, nursing homes and the like, the company is in no rush to find another storefront, he said.

“If it had an outdoor space, that’d be perfect,” he said. “We need to find a place that’s hospitable to certain kinds of playing.”

While a small structure at the rear of the Caning Shoppe parking lot became the home of the cloth diaper shop Diaper Lab, the other half of the furniture shop, some 1,500-plus square feet, hasn’t leased since emptying more than a year ago.

This post was updated May 31, 2012, with information from the city’s Inspectional Services Department.