UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-28690
Hollywood Productions, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 11-3871821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
14 East 60th Street, Ste 402, New York, NY 10022 (Address of
principal executiveoffices) (Zip Code)
(212) 688-9223
(Registrant=s telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has 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 [xx] No [
] APPLICABLE ONLY TO CORPORATE ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO
CORPORATE ISSUERS
Common stock, par value $.001 per share: 2,345,278 shares outstanding as of
March 31, 1998.
<PAGE>
HOLLYWOOD PRODUCTIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Consolidated balance sheets at March 31,1998 (unaudited)
and December 31, 1997 3
Consolidated statements of operations (unaudited) for the
three months ended March 31, 1998 and 1997. 4
Consolidated statement of stockholders= equity (unaudited)
for the three months ended March 31, 1998 5
Consolidated statements of cash flows (unaudited) for the three months
ended March 31, 1998 and 1997 6
Notes to consolidated financial statements 7 - 10
ITEM 2. Management=s Discussion and Analysis of
Financial Condition and Results of Operations 11-12
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 14
ITEM 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Financial Data Schedule
</TABLE>
<PAGE>
HOLLYWOOD PRODUCTION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
March 31, December 31,
1998 1997
Current assets:
<S> <C> <C>
Cash ....................................................................... $ 120,803 $ 352,981
Cash - restricted .......................................................... 1,500,000 1,500,000
Accounts receivable ........................................................ 25,458 23,317
Prepaid expenses ........................................................... 40,059 41,608
Inventory .................................................................. 1,318,962 2,383,192
Advances to officer and affiliate .......................................... 88,771 67,445
Loan receivable - other .................................................... 225,000 --
----------- -----------
Total current assets .................................................. 3,319,053 4,368,543
----------- -----------
Deferred compensation, net ..................................................... 32,291 54,166
Advances to officer - non-current portion ...................................... 24,667 32,083
Film production and distribution costs, net .................................... 1,762,631 1,745,970
Organizational costs, net ...................................................... 68,750 75,000
Excess of cost over net assets acquired, net ................................... 957,855 975,593
Deferred offering costs ........................................................ 71,385 67,385
Other assets ................................................................... 43,554 41,553
----------- -----------
Total assets ................................................................... $ 6,280,186 $ 7,360,293
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable ........................................................... $ 63,333 $ 133,918
Accrued expenses ........................................................... 136,006 203,461
Due to factor .............................................................. 389,357 1,750,894
Deferred taxes payable ..................................................... 17,161 17,161
----------- -----------
Total current liabilities ............................................. 605,857 2,105,434
----------- -----------
Redeemable preferred stock of subsidiary:
Series A redeemable preferred stock, 5,600 shares
authorized, 0 and 280,000 shares issued and outstanding,
full liquidation value $280,000 ........................................... -- 280,000
Commitments and contingencies .................................................. -- --
Stockholders= equity:
Common stock - $.001 par value, 20,000,000 shares authorized,
2,336,944 and 2,045,278 shares issued and outstanding, respectively ....... 2,337 2,045
Additional paid-in capital ................................................. 5,750,453 5,618,263
Accumulated deficit ........................................................ (78,461) (645,449)
----------- -----------
Total stockholders= equity ............................................ 5,674,329 4,974,859
----------- -----------
Total liabilities and stockholders= equity ..................................... $ 6,280,186 $ 7,360,293
=========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE>
HOLLYWOOD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1998 1997
------------------- -------------
<S> <C> <C>
Net sales ................................................... $ 2,933,113 $ 2,441,081
Cost of sales ............................................... 1,672,913 1,465,799
----------- -----------
Gross profit ................................................ 1,260,200 975,282
----------- -----------
Expenses:
Selling, general and administrative expenses ............ 591,494 714,114
Amortization of excess of costs over net assets acquired 17,738 17,738
----------- -----------
Total expenses .............................................. 609,232 731,852
----------- -----------
Income before interest expense
and provision for income taxes ............................. 650,968 243,430
Other income (expense):
Cancellation of stock previously expensed as compensation 62,500 --
Interest and finance expense ............................ (124,748) (122,999)
Interest 20,868 33,604
----------- -----------
Total other income (expense) ....................... (41,380) (89,395)
----------- -----------
Income before provision for
income taxes ............................................... 609,588 154,035
Provision for income taxes .................................. 42,600 26,656
----------- -----------
Net income .................................................. $ 566,988 $ 127,379
=========== ===========
Basic:
Net income ............................................. $ .26 $ .06
=========== ===========
Weighted average number of
common shares outstanding .................................. 2,186,944 2,030,833
=========== ===========
</TABLE>
See notes to consolidated financial statement
<PAGE>
HOLLYWOOD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS= EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Stockholders=
Shares Amount Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1997 2,045,278 2,045 5,618,263 (645,449) 4,974,859
Sale of common stock 300,000 300 194,682 - 194,982
Cancellation of common stock in (8,334) (8) (62,442) - (62,500)
Connection with Senior Management
Incentive Plan
Net income for the three months
ended March 31, 1998 - - - 566,988 566,988
Balances at March 31, 1998 2,336,944 $ 2,337 $ 5,750,453 $ (78,461) $ 5,674,329
</TABLE>
See notes to consolidated financial statements
<PAGE>
HOLLYWOOD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1998 1997
------------------ -----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 566,988 $ 127,379
Adjustments to reconcile net income to
net cash provided by operating activities
Amortization and depreciation 169,050 79,253
Forgiveness of note receivable in lieu of compensation - 30,130
Cancellation of stock issued for compensation (62,500) -
Decrease (increase) in:
Accounts receivable (2,141) 18,196
Prepaid expenses 2,300 25,136
Inventory 1,064,230 1,127,468
Film production costs (138,787) (38,063)
Security deposits - 4,300
Increase (decrease) in:
Accounts payable (70,585) (23,358)
Accrued expenses (67,455) (5,305)
Due to factor (1,361,537) (1,320,604)
------------------ ------------------
Net cash provided by operating activities 99,563 24,532
------------------ -------------------
Cash flows from investing activities:
Acquisition of furniture and fixtures (3,813) (11,614)
Loans receivable - other (250,000) -
Payments received on loans 25,000 -
Subsidiary=s redemption of preferred stock (280,000) (280,000)
------------------ -----------------
Net cash used for investing activities (508,813) (291,614)
------------------ ------------------
Cash flows from financing activities:
Advances to related parties (13,910) (9,366)
Proceeds from issuance of common stock and warrants 194,982 -
Offering costs incurred (4,000) -
------------------ ---------------
Net cash provided by (used for) financing activities 177,072 (9,366)
------------ ------
Net decrease in cash (232,178) (276,448)
Cash, beginning of period 352,981 1,017,629
------------------ -----------------
Cash, end of period $ 120,803 $ 741,181
================== =================
Supplemental disclosure of non-cash flow information: Cash paid during the year
for:
Interest $ 124,748 $ 72,455
================== ===================
Income taxes $ 1,959 $ 2,154
= ===== ================== ===================
Schedule of non-cash operating activities:
In connection with the cancellation of deferred compensation,
8,333 shares of common stock were cancelled $ - $ (62,500)
</TABLE>
See notes to consolidated financial statements
<PAGE>
HOLLYWOOD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
NOTE 1 - ORGANIZATION
Hollywood Productions, Inc. (the "Company") was incorporated in the State
of Delaware on December 1, 1995. The accompanying financial statements include
the accounts of the Company, and its wholly-owned subsidiaries Breaking Waves,
Inc. (ABreaking Waves@) and D.L. Productions, Inc. (ADL@) after elimination of
all significant intercompany transactions and accounts. The year end of the
Company and its subsidiary is December 31. As of November 30, 1997 the motion
picture ADirty Laundry@ was completed and all of DL=s assets and liabilities
were merged into the Company, and accordingly DL was dissolved.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management the interim financial statements include all adjustments necessary in
order to make the financial statements not misleading. The results of operations
for the three months ended is not necessarily indicative of the results to be
expected for the full year. For further information, refer to the Company=s
audited financial statements and footnotes thereto at December 31, 1997,
included in the Company=s Annual Report form 10-KSB, filed with the Securities
and Exchange Commission.
Certain reclassifications have been made to the March 31, 1997 financial
statements in order to conform to the March 31, 1998 presentation.
NOTE 2 - ADVANCES TO RELATED PARTIES
During October 1996, pursuant to two promissory notes, the Company loaned
two of its then officers a total of $87,000 bearing interest at six and one-half
percent (62%) payable over three years. During January 1997, the balance of one
of the notes amounting to $30,130 was written off as part of a severance package
for one of its previous officers. As of March 31, 1998, the remaining note
amounted to $47,000 of which, $22,333 has been classified as current with the
remaining balance of $24,667 classified as non-current.
As of March 31, 1998, the Company=s President had been advanced additional
funds totaling $32,278 which are non interest bearing and due on demand.
The remaining balance, amounting to $34,160 represents advances to
employees and an affiliate of the majority stockholder of the Company which are
non-interest bearing and are due on demand.
NOTE 3 - LOAN RECEIVABLE - OTHER
On March 1, 1998, Breaking Waves loaned funds to a company affiliated with
the Company=s president in return for an unsecured promissory note in the amount
of $250,000. Such note calls for monthly payments beginning March 31, 1998 of
$25,000 principal plus interest at 15% per annum. The balance of the note at
March 31, 1998 amounted to $225,000. Interest has been paid through March 31,
1998. <PAGE> NOTE 4 - DUE TO FACTOR
On August 20, 1997, Breaking Waves entered into a factoring and revolving
inventory loan and security agreement with Heller Financial, Inc. (AHeller@) to
sell their interest in all present and future receivables without recourse.
Breaking Waves submits all sales offers to Heller for credit approval prior to
shipment, and pays Heller 1% of the net amount of the receivable. Heller retains
from amount payable to Breaking Waves a reserve for possible obligations such as
customer disputes and possible credit losses on unapproved receivable. Breaking
Waves may take advances of up to 85% of the purchase price on the receivable,
with interest charges at the rate of 1:% over prime. Interest charged to expense
totaled approximately $91,949 for the three months ended March 31, 1998. Heller
has a continuing interest in Breaking Waves=s inventory as collateral for the
advances. As of March 31, 1998, the net advances to Breaking Waves from the
factors amounted to $389,357.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
a) Lease commitments
The Company and its subsidiary have entered into lease agreements for
administrative offices. The Company leases its administrative office pursuant to
a 5 year lease expiring November 30, 2001 at annual rent amounting to $69,657.
Breaking Waves leased administrative offices through approximately February 1998
pursuant to a lease requiring annual payments of approximately $64,000. During
October 1997, Breaking Waves cancelled such lease and simultaneously entered
into a new one with the same landlord requiring annual payments of $71,600
expiring December 2004.
The Company and its subsidiary approximate future minimum rentals under
non-cancelable operating leases in effect on March 31, 1998 are as follows:
<TABLE>
<CAPTION>
Year ended
December 31,
<S> <C>
1998 $ 123,357
1999 141,257
2000 141,257
2001 135,452
2002 71,600
Thereafter 143,200
--------------
$ 756,123
</TABLE>
Rent expense charged to operations for the three months ended March 31,
1998 and 1997 amounted to approximately $22,265 and $36,171, respectively.
b) Significant vendors and customers
Breaking Waves purchases the majority of its inventory from two vendors in
Indonesia and Korea. For the three months ended March 31, 1998 and 1997,
Breaking Waves had four and two customers which comprise 16%, 15%, 11%, and 10%;
and 23% and 14% of net sales, respectively.
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Cont=d)
c) Seasonality
Breaking Waves= business may be considered seasonal with a large portion of
its revenues and profits being derived between December and June for shipments
being made between November and May. Each year from May to September, Breaking
Waves engages in the process of designing and manufacturing the following
seasons swimwear lines, during which time it incurs the majority of its
expenses, with limited revenues. <PAGE>
d) License agreements
i) On October 16, 1995, Breaking Waves entered into a license agreement
with Beach Patrol, Inc. (ABeach@) for the exclusive use of certain trademarks in
the United States. The agreement expires June 30, 1998 with options to extend to
June 30, 2001. The agreement calls for minimum annual royalties of $75,000 to
$200,000 over the life of the agreement with options. The Company recorded
royalties and advertising under this agreement totaling $30,000 and $25,500
during the three months ended March 31, 1998 and 1997, respectively.
ii) On October 31, 1996, Breaking Waves entered into a license agreement
with North-South Books, Inc. (AN-S@) for the exclusive use of certain art work
and text in the making of swimsuits and accessories in the United States and
Canada. The agreement expires March 1, 1999. The Company recorded $2,663 and $0
royalties under this agreement during the three months ended March 31, 1998 and
1997, respectively.
iii) On October 17, 1997, Breaking Waves entered into a license agreement
with Kawasaki Motors Corp. (AKMC@) for the exclusive use of certain trademarks
in the making of swimwear in the United States. The agreement expires May 31,
1999. No royalties were paid under the agreement during the three months ended
March 31, 1998.
e) Co-production and property purchase agreements
Pursuant to co-production and property purchase agreements dated March 15,
1996, as amended, the Company acquired the rights to co-produce a motion picture
and to financed the costs of production and distribution of such motion picture
with the co-producer agreeing to finance $100,000 of the costs of production.
The Company retains all rights to the motion picture, the screenplay, and all
ancillary rights attached thereto. As of March 31, 1998, the motion picture was
completed and, accordingly, the Company has commenced the marketing and
distribution process, and the sale of the motion picture to certain foreign
countries.
As of March 31, 1998, the Company invested $1,826,023 for the co-production
and distribution of such motion picture whereas the co-producers have invested
$100,000. For the three months ended March 31, 1998, revenue and related costs
associated with the motion picture amounted to $120,000 and $118,921,
respectively.
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Cont=d)
f) Employment agreements
On November 27, 1996, the Company entered into employment agreements with
two officers of Breaking Waves. Such employees are responsible for the
designing, marketing and sales of Breaking Waves. The employment agreements are
each for a term of three years with an annual salary of $110,000. In addition to
the salary, the Company agreed to issue on each of November 27, 1996, 1997 and
1998, common stock in the amount equal to the market value of $25,000 on the
date of each issuance, subject to a vesting schedule.
g) Letter of Intent
On June 17, 1997, Breaking Waves entered into a letter of intent with an
underwriter to proceed on a firm commitment basis with an Initial Public
Offering (A IPO@) with estimated proceeds of $4,000,000. As of March 31, 1998,
Breaking Waves has incurred $71,385 of costs associated with the IPO.
NOTE 6 - STOCKHOLDER=S EQUITY
a) Breaking Waves, Inc.
During January 1998, 2,800 shares of the Series A Preferred Stock of
Breaking Waves was redeemed for a total of $280,000.
<PAGE>
b) Reverse stock split
Effective February 5, 1998, the Company effected a 1 for 3 reverse stock
split.
c) Private placement
During February 1998, pursuant to a private transaction, the Company sold
300,000 shares of its common stock for a total of $194,982
Cancellation of shares
During the first quarter of 1998, 8,334 shares of common stock, previously
issued to a former officer of the Company and recorded as a compensation expense
of $62,500 during 1996 and 1997, were cancelled by the Company.
NOTE 7 - RELATED PARTIES TRANSACTIONS
For the three months ended March 31, 1998, $15,500 of financial consulting
fees were paid to a relative of the Company=s President.
<PAGE>
MANAGEMENT=S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Hollywood Productions, Inc. (the "Company") was incorporated in the State
of Delaware on December 1, 1995. The accompanying financial statements include
the accounts of the Company, and its wholly-owned subsidiaries Breaking Waves,
Inc. (ABreaking Waves@) and D.L. Productions, Inc. (ADL@) after elimination of
all significant intercompany transactions and accounts. The year end of the
Company and its subsidiary is December 31. As of November 30, 1997 the motion
picture ADirty Laundry@ was completed and all of DL=s assets and liabilities
were merged into the Company, and accordingly D.L. was dissolved.
RESULTS OF OPERATIONS
For the three months ended March 31, 1998 as compared to the three months
ended March 31, 1997
For the three months ended March 31, 1998 and 1997 the Company=s
subsidiary, Breaking Waves, generated sales amounting to $2,813,113 and
$2,441,081 with cost of sales amounting to $1,550,787 and $1,465,799. Breaking
Waves generated net income before taxes amounting to approximately $714,000 and
$442,000. Of the total selling, general and administrative expenses amounting to
$591,494 and $714,114; $429,889 and $414,279 were incurred by Breaking Waves
with the remainder amounting to $161,605 and $299,835 incurred by the Company.
For the three months ended March 31, 1998, the Company realized $120,000
from sales of its motion picture, Dirty Laundry. In connection with such
revenue, the Company recorded costs of $122,126.
The major components of the total selling, general and administrative
expenses of the Company for the three months ended March 31, 1998 are composed
of the following: $15,500 of consulting paid to a relative of the Company=s
President; $21,875 of compensation paid to officers of the Company in the form
of stock, and amortization of organization costs of $6,250. The remainder of
expenses, amounting to $547,869, is composed of officer salaries of $81,510;
other salaries of $61,208; related payroll taxes and benefits of $24,509; rent
of $20,367; stock related costs of $34,568; commissions of $102,231; warehousing
of $102,596; miscellaneous office expenses of $40,596 and selling expenses of
$80,284.
The major components of the total selling, general and administrative
expenses of the Company for the three months ended March 31, 1997 are composed
of the following: $23,600 of consulting expenses paid to an officer of the
Company; $55,209 of consulting and compensation expenses paid to officers of the
Company paid in the form of common stock; $30,130 of officer=s compensation by
forgiveness of note receivable; and amortization of organization costs of
$6,250. The remainder of expenses, amounting to approximately $598,925, composed
of rent amounting to $34,000; officer=s salaries of $89,016; other salaries of
$77,939; related payroll taxes and benefits of $29,907; legal and professional
fees of $11,801; commissions of $90,277; warehousing of $73,578; miscellaneous
office expenses of $120,873 and miscellaneous selling expenses of $71,534.
For the three months ended March 31, 1998 and 1997, the Company reported a
consolidated net income amounting to $566,988 and $127,379 after estimated
provisions for income taxes amounting to approximately $42,600 and $26,656.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company has a consolidated working capital amounting
to $2,713,196. It is not anticipated that the Company will be required to raise
any additional capital within the next twelve months, since no material change
in the number of employees or any other material events are expected to occur.
<PAGE>
Prior to the consummation of the Company=s IPO, during September 1996,
Breaking Waves performed a recapitalization and exchanged all its common stock
for new common stock, and for a series of preferred stock. Pursuant to the
Agreement, Breaking Waves issued 5,600 shares of its newly authorized Series A
Preferred Stock to its previous stockholders in proportion to their respective
holdings, which shares are 2 redeemable on each of January 1, 1997 and 1998
subject to legally available funds, at a redemption price of $100 per share on a
pro rata basis. During January 1997 and 1998, Breaking Waves redeemed 2,800 and
2,800 shares of its Series A preferred stock for a total of $560,000
On August 20, 1997, Breaking Waves entered into a factoring and revolving
inventory loan and security agreement with Heller Financial, Inc. (AHeller@) to
sell their interest in all present and future receivables without recourse.
Breaking Waves submits all sales offers to Heller for credit approval prior to
shipment, and pays Heller 1% of the net amount of the receivable. Heller retains
from amount payable to Breaking Waves a reserve for possible obligations such as
customer disputes and possible credit losses on unapproved receivable. Breaking
Waves may take advances of up to 85% of the purchase price on the receivable,
with interest charges at the rate of 1:% over prime. Interest charged to expense
totaled approximately $91,949 for the three months ended March 31, 1998. Heller
has a continuing interest in Breaking Waves=s inventory as collateral for the
advances. As of March 31, 1998, the net advances to Breaking Waves from the
factors amounted to $389,357.
On October 16, 1995, Breaking Waves entered into a license agreement with
Beach Patrol, Inc. ("BPI") for the exclusive use of certain trademarks in the
United States. For the three months ended March 31, 1998 and 1997, Breaking
Waves incurred royalty and advertising expenses amounting to approximately
$30,000 and $25,500, respectively.
During May, 1996, the Company established the 1996 Senior Management
Incentive Plan ("Incentive Plan") pursuant to which 250,000 of common stock are
reserved for issuance. The Incentive Plan is designed to serve as an incentive
for retaining qualified and competent key employees, officers and directors of
the Company.
During June 1996, pursuant to such plan the Company issued 16.667 shares to
each of two officers of the Company. 50% of such shares issued vesting 12 months
from the issuance date and the remaining 50% vesting 24 months from the issuance
date. Such shares were valued at 50% of the IPO price of $2.50. Accordingly, the
Company recorded a deferred compensation amounting to $250,000, which is being
amortized as the shares vest. During January 1997, 8,333 of these shares were
cancelled and the vesting schedule for the remaining shares terminated whereby
the shares became fully vested. During the first quarter of 1998, 8,334 of the
shares previously issued were cancelled. For the three months ended March 31,
1998 and 1997, $15,625 and $46,875 has been amortized as compensation expense.
During December 1996, the Company entered into an employment agreement with
two of the officers of Breaking Waves, whereby $25,000 of common stock of the
Company was issued as compensation for services to each of the officers in
December 1996 and 1997. Accordingly, the Company recorded deferred compensation
amounting to $25,000, which is being amortized as the shares vest. For the three
months ended March 31, 1998 and 1997, $6,250 and $8,334 has been amortized as
compensation expense.
During March 1997, pursuant to the Senior Management Incentive Plan, the
Company issued 100,000 options to the Company President and 50,000 options to an
officer.
As of March 31, 1998, the Company has invested $1,826,023 in the movie
Dirty Laundry for the co-production, talent participation and distribution of
such motion picture whereas the co-producers have invested $100,000 which has
been recorded as a capital contribution to the Company. <PAGE>
For the three months ended March 31, 1998 and 1997, the Company provided
cash for operating activities amounting to $99,563 and $24,532, respectively.
The major components of such provision of cash was the use of cash for payment
of amounts due Breaking Waves= factor of $1,361,537 and $1,320,604,
respectively. The majority of cash for operating activities amounting to
$1,064,230 and $1,127,468, respectively was provided from sales of inventory and
from net income of $504,488 and $127,379, respectively. For the three months
ended March 31, 1998 and 1997, the Company used $232,178 and $276,448,
respectively, of cash which was primarily for the partial redemption of Breaking
Waves= preferred stock, pursuant to the purchase agreement.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings: None
ITEM 2 - Changes in Securities: None
ITEM 3 - Defaults Upon Senior Securities: None
ITEM 4 - Submission of Matters to a Vote of Security Holders:
On January 28, 1998, the Company held a special meeting during which it
proposed to elect four Directors to the Board and to authorize a reverse split
of the Company=s outstanding shares of Common Stock on a 1 for 3 basis. The
reverse split proposal was adopted, and the following were elected Directors of
the Board for a term of one year: Harold Rashbaum, Robert DiMilia, Alain A. Le
Guillou, and James Frakes.
The results of the proposal to elect four (4) Directors to the
Company=s Board of Directors to hold office for a period of one year or until
their successors are duly elected and qualified are as follows:
<TABLE>
<CAPTION>
Votes Cast
For Abstentions
<S> <C> <C>
Harold Rashbaum 5,762,907 500
Robert DiMilia 5,762,907 500
Alain A. Le Guillou 5,762,907 500
James B. Frakes 5,762,907 500
</TABLE>
The results of the proposal to authorize a reverse split of the
Company=s outstanding shares of Common Stock on a 1 for 3 basis, are as follows:
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstentions
<S> <C> <C> <C>
5,762,907 500 0
</TABLE>
ITEM 5 - Other Information: None
ITEM 6 - Exhibits and Reports on Form 8-K:
Exhitit 27 - Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hollywood Productions, Inc.
(Registrant)
Dated: April 15, 1998 /s/ Harold Rashbaum
Harold Rashbaum
President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
HOLLYWOOD PRODUCTIONS, INC.
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in Part I, Item 1 of this Form 10-QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> dec-31-1998
<PERIOD-END> mar-31-1998
<CASH> 1,620,803
<SECURITIES> 0
<RECEIVABLES> 25,458
<ALLOWANCES> 0
<INVENTORY> 1,318,962
<CURRENT-ASSETS> 3,319,053
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,280,186
<CURRENT-LIABILITIES> 605,857
<BONDS> 0
0
0
<COMMON> 2,337
<OTHER-SE> 5,671,992
<TOTAL-LIABILITY-AND-EQUITY> 6,280,186
<SALES> 2,933,113
<TOTAL-REVENUES> 2,933,113
<CGS> 1,672,913
<TOTAL-COSTS> 1,972,913
<OTHER-EXPENSES> 609,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124,748
<INCOME-PRETAX> 609,588
<INCOME-TAX> 42,600
<INCOME-CONTINUING> 566,988
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 566,988
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
