HOLLYWOOD ENTERTAINMENT NETWORK INC/CA
10SB12G, 1999-11-16

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10 - SB

GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS

Under Section 12(b) or (g) of the Securities Exchange Act of 1934

Hollywood Entertainment Network, Inc.

(Name of Small Business Issuer in its charter)

Securities to be registered under section 12(g) of the Act:

Common Stock, $0.001 par value per share, 25,000,000 shares authorized, 3,702,000 issued and outstanding as of September 30, 1999.

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TABLE OF CONTENTS

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Part I

Item 1. Description of Business

A. Business Development and Summary

Hollywood Entertainment Network, Inc. ("HENI" or the "Company"), a Nevada corporation incorporated on September 24, 1998, is a development stage company with a principal business objective to operate as an independent film company in the business of motion picture production and distribution. The Company plans to initially focus on the development and final production of motion pictures and full-length video features.

The Company, however, has limited operating history and must be considered a developmental stage company. The success of the Company's business depends upon management's ability to expand upon and develop the Company's motion picture business. Currently, the Company has no material source of revenues. The potential success of the Company's business is unproven, and to be successful, management of the Company must, among other things, develop and distribute movies that achieve broad market acceptance.

B. Business of Issuer

(1) Principal Products and Services and Principal Markets

The Company seeks to produce and distribute motion pictures. The Company also plans to evaluate screenplays on an ongoing basis. In addition, the Company seeks to develop, produce and distribute motion pictures on its own.

The production of a motion picture typically begins with the screenplay adaptation of a popular novel or other literary work acquired by a producer or the development of an original screenplay having its genesis in a story line or scenario conceived by a writer and acquired by the producer. In the development phase, the producer typically seeks production financing and tentative commitments from a director, principal cast members and other creative personnel. Upon completing the screenplay and arranging financing commitments, pre-production of the motion picture would begin. In this phase, the producer usually finalizes the filming schedule; establishes filming locations and secures any necessary studio facilities and stages; and prepares for the start of actual filming. Principal photography (the actual filming of the screenplay) would then begin, generally extending from eight (8) to sixteen (16) weeks for a film produced by a major studio and often for a significantly shorter period (sometimes as short as four (4) to eight (8) weeks) for low budget films and films produced by independent production companies, depending in each case upon such factors as budget, location, weather and complications inherent in the screenplay. Following completion of principal photography (the post-production phase), the motion picture is edited, opticals, dialogue, music and any special effects are added and voice, effects and music sound tracks and pictures are synchronized. This results in the production of a negative from which release prints of the motion picture are made.

Production costs consist primarily of acquiring or developing the screenplay, compensation of creative and other production personnel, film studio and location rentals, equipment rentals, film stock and other costs incurred in principal photography, and post-production costs, including the creation of special effects and music. Distribution expenses, which consist primarily of the costs of advertising and preparing release prints, are not included in direct production costs. Also, substantial overhead costs, consisting largely of salaries and related costs of the production staff and physical facilities maintained by the major studios, must be funded. Independent production companies generally avoid incurring overhead costs as substantial as those incurred by the major studios by hiring creative and other production personnel and retaining the other elements required for pre-production, principal photography and post-production activities on a picture-by-picture basis. As a result, these companies do not own sound stages and related production facilities and, accordingly, do not have the fixed payroll, general administrative and other expenses resulting from ownership and operation of a studio. Independent production companies also may finance their production activities on a picture-by-picture basis. Sources of funds for independent production companies include bank loans, "pre-licensing" of distribution rights, foreign government subsidies, equity offerings and joint ventures. Independent production companies generally attempt to obtain all or a portion of their financing of a motion picture prior to commencement of principal photography, at which point production costs begin to be incurred and require payment.

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The film making industry is rapidly evolving and intensely competitive, which competition the Company expects to intensify in the future. Many of the Company's potential competitors have longer operating histories, larger distribution networks and significantly greater financial, marketing and other resources than the Company. There can be no assurance that the Company will be able to compete successfully against competitors, and competitive pressures faced by the Company may have a material adverse effect on the Company's business, prospects, financial condition and results of operations.

(2) Distribution Methods of the Products or Services

The Company believes that its success depends in part upon the strength of distribution channels. The Company anticipates selling its motion pictures through a network of buyers. Film distribution also occurs by marketing the film product at trade shows and film markets. The Company intends to utilize such avenues to distribute its films, in addition to continuously seeking new distribution methods. The Company, however, is in its developmental stage, and as such, has not yet implemented its marketing strategy.

(3) Status of Any Announced New Product or Service

The Company has limited operating history. The Company was organized on September 24, 1998. Activities to date have been limited primarily to organization, initial capitalization, finding and securing an appropriate, experienced management team and board of directors, the development of a business plan and commencing with initial operational plans.

As of September 30, 1999, the Company has developed a business plan, recruited and retained a CEO and established what steps need to be taken to achieve the results set forth in this Registration Statement. As a start-up and development stage company, the Company has no new products or services to announce.

(4) Industry Background

The motion picture industry consists of two principal activities: production, which involves the development, financing and production of motion pictures; and distribution, which involves the promotion of feature-length motion pictures in a variety of media.

The motion picture industry is a worldwide industry. In addition to the production and distribution of motion pictures in the United States, motion picture distributors generate revenues internationally. In recent years, there has been a substantial increase in the amount of filmed entertainment revenue generated by U.S. motion picture distributors from foreign sources. This growth has been due to a number of factors, including, among other things, the general worldwide acceptance of and demand for motion pictures produced in the United States, the privatization of many foreign television industries, growth in the number of foreign households with videocassette players, and growth in the number of foreign theater screens.

The entertainment industry is highly competitive. Competition comes both from companies within the same business and from companies in other entertainment media which create alternative forms of leisure entertainment. Many of the Company's present and future competitors are larger and have significantly greater financial, technical, production, marketing and other resources than those of the Company. The Company's ability to compete successfully depends upon its ability to identify and complete development of, and introduce into the marketplace in a timely manner, its proposed products, and to continually enhance and improve upon such products. In the event management is unable to respond to competitive developments, the Company would be materially adversely affected.

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(5) Raw Materials and Suppliers

The Company is a motion picture development and distribution business, and thus does not use raw materials or have any significant suppliers.

(6) Customers

The Company is a motion picture development and distribution business. As of September 30, 1999, the Company has generated no sales revenues. In addition, the Company does not expect to generate any sales revenues in the next approximately six (6) to twelve (12) months. The Company does not anticipate that its revenues will be dependent, however, on any one or even a few major customers once its revenues begin.

(7) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements, or Labor Contracts

The Company plans to rely primarily on trade secret, trademark and copyright laws, treaties and contractual agreements, to protect its proprietary rights. The Company also plans to endeavor to keep results of film development programs proprietary, as well as to protect film products against misappropriation and infringement by third parties, but the Company may not in all instances be able to prevent others from misappropriating or infringing upon the Company's proprietary property and products, without compensation to the Company. The Company intends to maintain the integrity of its proposed tradename, trademarks, copyrights and other proprietary rights against infringement and unfair competition where circumstances warrant and based upon the financial resources of the Company.

(8) Regulation

Distribution rights to motion pictures are granted legal protection under the copyright laws of the United States and most foreign countries, which laws provide substantial civil and criminal sanctions for unauthorized duplication and exhibition of motion pictures. Motion pictures, musical works, sound recordings, art work, still photography and motion picture properties are separate works subject to copyright under most copyright laws, including the United States Copyright Act of 1976, as amended. Motion picture piracy is an industry-wide problem. The Motion Picture Association of America ("MPAA"), an industry trade association, operates a piracy hotline and investigates all reports of such piracy. Depending upon the results of such investigations, appropriate legal action may be brought by the owner of the rights. Depending upon the extent of the piracy, the Federal Bureau of Investigation may assist in these investigations and related criminal prosecutions.

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The Code and Ratings Administration of the MPAA assigns ratings indicating age-group suitability for theatrical distribution of motion pictures. Unrated motion pictures (or motion pictures receiving the most restrictive rating) may not be exhibited by certain theatrical exhibitors or in certain locales, thereby potentially reducing the total revenues generated by such films. United States television stations and networks, as well as foreign governments, impose additional restrictions on the content of motion pictures, which may restrict in whole or in part theatrical or television exhibition in particular territories. There can be no assurance that current and future restrictions on the content of motion pictures may not limit or adversely affect the Company's ability to exploit certain motion pictures in certain territories and media.

(9) Effect of Existing or Probable Government Regulations

The Company believes that the regulations governing the motion picture industry will not have a material effect on its current operations. However, various foreign and domestic government agencies may propose new legislation, which may adversely affect the Company's business, financial condition and results of operations.

(10) Research and Development Activities

Management believes that the Company's future growth and success will be dependent on its ability to develop or acquire services or products to meet the evolving needs of its prospective clients. The Company has yet to incur any research and development costs from September 24, 1998 (date of inception) through September 30, 1999.

(11) Impact of Environmental Laws

The Company is not aware of any federal, state or local environmental laws, which would effect its operations.

(12) Employees

The Company presently has two (2) full-time employees and five (5) part-time employees. The Company's employees are currently not represented by a collective bargaining agreement, and the Company believes that its relations with its employees are good.

Item 2. Management's Discussion and Analysis or Plan of Operation

A. Management's Plan of Operation

(1) In its initial, approximately twelve (12) month operating period ended September 30, 1999, the Company incurred a net loss of $16,468 for selling, general and administrative expenses related to start-up operations. It has yet to receive any revenues from operations. On September 25, 1998, two (2) founding shareholders purchased three million five hundred thousand (3,500,000) shares of the Company's authorized treasury stock for cash. This original stock offering was made pursuant to Section 4(2) of the Securities Act of 1933, as amended. In December of 1998, the Company completed an offering of two hundred two thousand (202,000) shares of the Common Stock of the Company to approximately fifty-three (53) unaffiliated shareholders. This offering was made in reliance upon an exemption from the registration provisions of Section 4(2) of the Securities Act of 1933, as amended, pursuant to Regulation D, Rule 504 of the Act. As of the date of this filing, the Company has three million seven hundred two thousand (3,702,000) shares of its $0.001 par value common voting stock issued and outstanding which are held by approximately fifty five (55) shareholders of record. The Company currently has no arrangements or commitments for accounts and accounts receivable financing. If the Company's capital requirements are greater than the Company's current financial resources, management plans to raise additional money via a public or private offering or obtain debt financing. There can be no assurance that any such financing can be obtained or, if obtained, that it will be on reasonable terms.

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This is a developmental stage company. The Company's initial revenues will be primarily dependent upon the Company's ability to effectively and efficiently provide motion picture development and distribution services. The Company designates as its priorities for the next six (6) to twelve (12) months of operations as developing and emphasizing its motion picture services to establish its business in the motion picture market.

Realization of sales of the Company's services during the fiscal year ending December 31, 2000, is vital to its plan of operations. There can be no assurance that the Company will be able to compete successfully or that the competitive pressures the Company may face will not have a material adverse effect on the Company's business, results of operations and financial condition. Additionally, a superior competitive service could force the Company out of business.

As of September 30, 1999, the Company has yet to generate any revenues. In addition, the Company does not expect to generate any revenues over the next approximately six (6) to twelve (12) months.

(2) No engineering, management or similar report has been prepared or provided for external use by the Company in connection with the offer of its securities to the public.

(3) Management believes that the Company's future growth and success will be largely dependent on its ability to develop, internally through strategic alliances and research and development, or acquire, externally through licensing or purchasing from third party vendors, products, services or technology to meet the evolving needs of its prospective customers. The Company believes that the long-term success of its service offerings and processes may require substantial research and development.

The Company has yet to incur any research and development costs from September 24, 1998 (date of inception) through September 30, 1999.

(4) The Company currently does not expect to purchase additional facilities or equipment or sell any of its existing facilities or equipment.

(5) The Company currently does not expect to purchase additional facilities or equipment or sell any of its existing facilities or equipment.

B. Segment Data

As of September 30, 1999, the Company has generated no sales revenue. Accordingly, no table showing percentage breakdown of revenue by business segment or product line is included.

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Item 3. Description of Property

A. Description of Property

The Company's corporate headquarters are located at 12400 Ventura Boulevard, Suite 311, Studio City, California 91604. These headquarters consist of three (3) offices and approximately 700 square feet. The Company currently rents this suite for approximately $500 per month. The Company has additional facilities located at 4737 Lankershim Blvd., Suites 212 and 202, North Hollywood, California 91602. These facilities presently consist of two (2) suites with approximately 640 square feet of space per unit. Suite 212 is currently occupied by the president of the Company, Mr. Donald J. Jackson, and Suite 202 will be used for movie editing, as well as storage. The Company rents these suites on a month to month basis for a total monthly rent of $550. The Company does not have any additional facilities. Additionally, there are currently no proposed programs for the renovation, improvement or development of the properties currently being utilized by the Company.

B. Investment Policies

Management of the Company does not currently have policies regarding the acquisition or sale of assets primarily for possible capital gain or primarily for income. The Company does not presently hold any investments or interests in real estate, investments in real estate mortgages or securities of or interests in persons primarily engaged in real estate activities.

Item 4. Security Ownership of Management and Certain Security Holders

A. Security Ownership of Management and Certain Beneficial Owners

The following table sets forth information as of the date of this Registration Statement certain information with respect to the beneficial ownership of the Common Stock of the Company concerning stock ownership by (i) each director, (ii) each executive officer, (iii) the directors and officers of the Company as a group and (iv) each person known by the Company to own beneficially more than five percent (5%) of the Common Stock. Unless otherwise indicated, the owners have sole voting and investment power with respect to their respective shares.

 

The address for Jackson and Allen is as follows: 12400 Ventura Blvd., Suite 311, Studio City, California 91604.

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B. Persons Sharing Ownership of Control of Shares

No person other than Donald J. Jackson and Howard L. Allen owns or shares the power to vote ten percent (10%) or more of the Company's securities.

C. Non-voting Securities and Principal Holders Thereof

The Company has not issued any non-voting securities.

D. Options, Warrants and Rights

There are no options, warrants or rights to purchase securities of the Company.

E. Parents of the Issuer

Under the definition of parent, as including any person or business entity that controls substantially all (more than 80%) of the issuers of common stock, the Company has no parents.

Item 5. Directors, Executive Officers and Significant Employees

A. Directors, Executive Officers and Significant Employees

The names, ages and positions of the Company's directors and executive officers are as follows:

 

Donald G. Jackson, President, CEO and Director - Mr. Jackson is a motion picture maker who has been making films since 1975 and has created feature films and short features. His "Frogtown" and "Roller Blade" motion pictures are shown on HBO, SHOWTIME, USA NETWORK, and numerous cable and local television stations.

Mr. Jackson's movies have been the subject of articles and reviews in various books and international publications, including "Cinefantastique," "The Phantom Video Guide," "Fangoria," "Femme Fatales," "Imagimovies," "Draculina," "Daily Variety," "Leonard Maltin's Video Guide," "L'Ecran Fantastique" (French filmmaking magazine) and "Creature Features."

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Mr. Jackson worked with Roger Corman shooting special effects for various science fiction epics with Robert and Dennis Skotak. His association with the "Academy Award Winning" Skotak Brothers dates back to the early 70's in Detroit, Michigan. Mr. Jackson is also a Director of Photography who, in addition to photographing many of his own feature films, has shot several rock videos and has done photography for many famous directors including James Cameron. Mr. Jackson also worked on three films with James Cameron as the Cinematographer.

Howard L. Allen, Executive Vice President, Secretary, Treasurer and Director - Mr. Allen previously held the position of EVP and CFO for 10 years with a mortgage-banking firm. Prior, Mr. Allen was the founder and CEO of a distribution company that was written up in "NC" magazine as the 31^st fastest growing private company in America for the period 1980-1986. Preceding that, Mr. Allen was the Corporate Controller for a distribution company, as well as an Accountant for a West Coast motion picture chain. Mr. Allen started his career in Memphis, Tennessee with IBM, where he worked for six years after completing a degree in Computer Science from Memphis State University. Mr. Allen holds a bachelor degree in Accounting from Woodbury University in Los Angeles, as well as an MBA in Finance from California State University Los Angeles, also.

Scott Shaw, Ph.D., Vice President Film Production - Dr. Shaw writes, produces, and directs all types of films but specialized in the action/adventure genre. As a director, Dr. Shaw has created such features as the horror comedy, "Samurai Vampire Bikers from Hell," the action adventure feature, "Atomic Samurai," and most recently, Dr. Shaw has produced, co-written and starred in features including, "The Roller Blade Seven," "Return of the Roller Blade Seven" and "Toad Warrior." Dr. Scott began his career as an actor. He has been seen on such syndicated television series as: "Head of the Class," "Coach" and "Saved by the Bell." Director Robert Altman ("Mash," "Nashville") asked Dr. Shaw to perform a Cameo appearance in his 1992 parody film on Hollywood, "The Player." Dr. Shaw has starred in feature films that received international distribution including: "Capital Punishment," "Divine Enforcer" and "Exploding Angel." 

Christopher D. Roth, Vice President Editing and Post Production - Mr. Roth is a motion picture post-production supervisor and editor whose credits include the 13 hour mini-series "From the Earth to the Moon," executive produced by Ron Howard and Tom Hanks that has been airing on HBO. His other credits include "Kid Cop," "The Dentist," "Leprechaun 2," "Necronomicon," "Return of the Living Dead 3" and the original "Leprechaun" theatrical release. He is experienced with motion picture editing systems such as the Avid and Lightworks systems.

Randall Frakes, Screenplay Advisor - Mr. Frakes co-wrote "Terminator" and wrote the entire "Terminator 2" novel. Mr. Frakes is currently writing a book for James Cameron on the making of "Titanic." Mr. Frakes is the co-writer of "Hell Comes To Frogtown" which was produced by New World Pictures. Mr. Frakes wrote the supernatural thriller, "The Force," wrote the children's fantasy adventure, "Peach Boy," co-wrote with "Masato Harada," the yakuza-in-America action movie "Sixty Six," wrote the political thriller, "Diplomatic Immunity," wrote the screenplay for Marvel Comic's "Deathlok" and the action thriller "Playing Dirty." Mr. Frakes created photographic effects for "Escape From New York," "Battle Beyond The Stars," and "Galaxy Of Terror." Mr. Frakes won the "Stars and Stripes" journalism award for his investigative report on the "Mannheim Stockade," while stationed in Germany with the Army 16th Signal Corps.

Fred Olan Ray, Director and Film Marketing Advisor - Mr. Ray is a producer/director of motion pictures such as "Armed Response," "Invisible Mom," "Little Miss Magic" and "Biohazard." Mr. Ray is also the author of a book on independent filmmaking.

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Jeffrey Hutchinson, Director and Post-Production Music Supervisor - Mr. Hutchinson is a vice-president of an independent record company.

B. Significant Employees

None - Not applicable.

C. Family Relationships

None - Not applicable.

D. Involvement on Certain Material Legal Proceedings During the Last Five Years

(1) No director, officer, significant employee or consultant has been convicted in a criminal proceeding, exclusive of traffic violations.

(2) No director, officer or significant employee has been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.

(3) No director, officer or significant employee has been convicted of violating a federal or state securities or commodities law.

Item 6. Executive Compensation

Remuneration of Directors and Executive Officers

The Company does not currently have employment agreements with its executive officers but expects to sign employment agreements with each in the next approximately six (6) months. All executive officers of the Company prior to September 30, 1999, did not draw a formal salary from the Company. Over the next twelve (12) months, however, each executive officer is expected to draw the following annual compensation. The Company does not currently have an employee stock option plan.

(1) Shaw, Roth, Frakes, Ray and Hutchinson are paid on a per project basis. These individuals receive remuneration based upon their activity related to the production and distribution of films.

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(2) Compensation of Directors

There were no arrangements pursuant to which any director of the Company was compensated for the period from September 24, 1998 to September 30, 1999, for any service provided as a director.

Item 7. Certain Relationships and Related Transactions

On September 25, 1998, the initial meeting of the Board of Directors convened. At this meeting, the Company accepted a written offer from the following individuals: Donald G. Jackson to purchase a total amount of 1,750,000 shares of Common Stock of the Company and Howard L. Allen to purchase a total amount of 1,750,000 shares of Common Stock of the Company. These shares were issued by the Company under Section 4(2) of the Securities Act of 1933.

On November 13, 1998, the Company initiated a public offering of securities pursuant to Regulation D, Rule 504, and sold exactly 202,000 shares of Common Stock of the Company, $0.001 par value, to 53 individuals at $0.10 per share. The offering was formally closed and all subscriptions were accepted on or before December 4, 1998.

Because of the development stage nature of the Company and its relatively recent inception, September 24, 1998, the Company has no other relationships or transactions.

Item 8. Description of Securities

A. Common Stock

(1) Description of Rights and Liabilities of Common Stockholders

i. Dividend Rights - the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefore at such times and in such amounts as the board of directors of the Company may from time to time determine.

ii. Voting Rights - each holder of the Company's common stock are entitled to one vote for each share held of record on all matters submitted to the vote of stockholders, including the election of directors. All voting is noncumulative, which means that the holder of fifty percent (50%) of the shares voting for the election of the directors can elect all the directors. The board of directors may issue shares for consideration of previously authorized but unissued common stock without future stockholder action.

iii. Liquidation Rights - upon liquidation, the holders of the common stock are entitled to receive pro rata all of the assets of the Company available for distribution to such holders.

iv. Preemptive Rights - holders of common stock are not entitled to preemptive rights.

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v. Conversion Rights - no shares of common stock are currently subject to outstanding options, warrants or other convertible securities.

vi. Redemption rights - no redemption rights exist for shares of common stock.

vii. Sinking Fund Provisions - no sinking fund provisions exist.

viii. Further Liability For Calls - no shares of common stock are subject to further call or assessment by the issuer. The Company has not issued stock options as of the date of this Registration Statement.

(2) Potential Liabilities of Common Stockholders to State and Local Authorities

No material potential liabilities are anticipated to be imposed on stockholders under state statues.

B. Debt Securities

The Company is not registering any debt securities, nor has any outstanding.

C. Other Securities To Be Registered

The Company is not registering any security other than its common stock.

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Part II

Item 1. Market Price of and Dividends on the Registrants Common Equity and Other Shareholder Matters

A. Market Information

(1) The common stock of the Company is currently not traded on the OTC Bulletin Board or any other formal or national securities exchange. Being a start-up company, there is no fiscal history to disclose.

(2)(i) There is currently no Common Stock that is subject to outstanding options or warrants to purchase, or securities convertible into, the Company's common stock.

(ii) There is currently no common stock of the Company that could be sold under Rule 144 under the Securities Act of 1933, as amended, or that the registrant has agreed to register for sale by security holders.

(iii) There is currently no common equity that is being or is proposed to be publicly offered by the registrant, the offering of which could have a material effect on the market price of the issuer's common equity.

B. Holders

As of September 30, 1999, the Company had approximately 55 stockholders of record.

C. Dividend Policy

The Company has not paid any dividends to date. In addition, it does not anticipate paying dividends in the foreseeable future. The board of directors of the Company will review its dividend policy from time to time to determine the desirability and feasibility of paying dividends after giving consideration to the Company's earnings, financial condition, capital requirements and such other factors as the board may deem relevant.

D. Reports to Shareholders

The Company intends to furnish its shareholders with annual reports containing audited financial statements and such other periodic reports as the Company may determine to be appropriate or as may be required by law. Upon the effectiveness of this Registration Statement, the Company will be required to comply with periodic reporting, proxy solicitation and certain other requirements by the Securities Exchange Act of 1934.

E. Transfer Agent and Registrar

The Transfer Agent for the shares of common voting stock of the Company is Shelley Godfrey, Pacific Stock Transfer Company, 5844 S. Pecos, Suite D, Las Vegas, Nevada 89120, (702)-361-3033.

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Item 2. Legal Proceedings

The Company is not currently involved in any legal proceedings nor does it have knowledge of any threatened litigation.

Item 3. Changes in and Disagreements with Accountants

None - Not applicable.

Item 4. Recent Sale of Unregistered Securities

In December of 1998, the Company completed a public offering of shares of Common Stock of the Company pursuant to Regulation D, Rule 504 of the Securities Act of 1933, as amended, whereby it sold two hundred two thousand (202,000) shares of the Common Stock of the Company to fifty three (53) shareholders of record. As of September 30, 1999, the Company has 3,702,000 shares of Common Stock issued and outstanding held by 55 shareholders of record.

Item 5. Indemnification of Directors and Officers

The Bylaws of the Company provide for indemnification of its directors, officers and employees as follows: Every director, officer or employee of the Corporation shall be indemnified by the Corporation against all expenses and liabilities, including counsel fees, reasonably incurred by or imposed upon him/her in connection with any proceeding to which he/she may be made a party, or in which he/she may become involved, by reason of being or having been a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of the Corporation, partnership, joint venture, trust or enterprise, or any settlement thereof, whether or not he/she is a director, officer, employee or agent at the time such expenses are incurred, except in such cases wherein the director, officer, employee or agent is adjudged guilty of willful misfeasance or malfeasance in the performance of his/her duties; provided that in the event of a settlement the indemnification herein shall apply only when the Board of Directors approves such settlement and reimbursement as being for the best interests of the Corporation.

The Bylaws of the Company further states that the Company shall provide to any person who is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of the corporation, partnership, joint venture, trust or enterprise, the indemnity against expenses of a suit, litigation or other proceedings which is specifically permissible under applicable Nevada law. The Board of Directors may, in its discretion, direct the purchase of liability insurance by way of implementing the provisions of this Article. However, the Company has yet to purchase any such insurance and has no plans to do so.

The Articles of Incorporation of the Company states that a director or officer of the corporation shall not be personally liable to this corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, but this Article shall not eliminate or limit the liability of a director or officer for (i) acts or omissions which involve intentional misconduct, fraud or a knowing violation of the law or (ii) the unlawful payment of dividends. Any repeal or modification of this Article by stockholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the corporation for acts or omissions prior to such repeal or modification.

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The Articles of Incorporation of the Company further states that every person who was or is a party to, or is threatened to be made a party to, or is involved in any such action, suit or proceeding, whether civil, criminal, administrative or investigative, by the reason of the fact that he or she, or a person with whom he or she is a legal representative, is or was a director of the corporation, or who is serving at the request of the corporation as a director or officer of another corporation, or is a representative in a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the laws of the State of Nevada from time to time against all expenses, liability and loss (including attorneys' fees, judgments, fines, and amounts paid or to be paid in a settlement) reasonably incurred or suffered by him or her in connection therewith. Such right of indemnification shall be a contract right which may be enforced in any manner desired by such person. The expenses of officers and directors incurred in defending a civil suit or proceeding must be paid by the corporation as incurred and in advance of the final disposition of the action, suit, or proceeding, under receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the corporation. Such right of indemnification shall not be exclusive of any other right of such directors, officers or representatives may have or hereafter acquire, and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any bylaw, agreement, vote of stockholders, provision of law, or otherwise, as well as their rights under this article.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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Part F/S

Item 1. Financial Statements

The following documents are filed as part of this report:

Item 2. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None - Not Applicable.

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HOLLYWOOD ENTERTAINMENT NETWORK, INC.

 

FINANCIAL STATEMENTS

 

SEPTEMBER 30,1999

 

WITH INDEPENDENT AUDITOR'S REPORT

 

 

 

 

 

 

Prepared By:

Michael F. DeLuca

Certified Public Accountant

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Michael F. De Luca

Certified Public Accountant

Independent Auditor's Report

The Board of Directors Hollywood Entertainment Network, Inc. Studio City, Ca.

I have audited the accompanying balance sheet of Hollywood Entertainment Network, Inc. company (a Nevada corporation) as of September 30, 1999 and the related statements of income, stockholders' equity, and cash flows for the period then ended. These financial statements ar e the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hollywood Entertainment Network, Inc. as of September 30, 1999, and the results of its operations and its cash flows for the period then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the company will continue as a going concern. As discussed in Note 3 to the financial statements. The company has had limited operations and has not established a long-term source of revenue. This raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

October 15, 1999

Yorba Linda, California

f-1

HOLLYWOOD ENTERTAINMENT NETWORK, INC.

BALANCE SHEET

SEPTEMBER 30 1999

The accompanying notes are an

integral part of this statement

f-2

HOLLYWOOD ENTERTAINMENT NETWORK, INC.

STATEMENT OF INCOME AND RETAINED EARNINGS

FOR THE PERIOD ENDED

SEPTEMBER 30,1999

The accompanying notes are an

integral part of this statement

 

f-3

HOLLYWOOD ENTERTAINMENT NETWORK, INC.

CONSOLIDATED STATEMENT

OF CASH FLOWS

FOR THE PERIOD ENDED

SEPTEMBER 30,1999

The accompanying notes are an

integral part of this statement

f-4

HOLLYWOOD ENTERTAINMENT NETWORK, INC.

STATEMENT OF STOCKHOLDERS'EQUITY

FOR THE PERIOD ENDED

SEPTEMBER 30,1999

The accompanying notes are an

integral part of this statement

f-5

HOLLYWOOD ENTERTAINMENT NETWORK, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30,1999

Note A - Summary Of Significant Accounting Policies

The company was organized under the laws of the State of Nevada September 24, 1998 as Hollywood Entertainment Network, Inc. (the "company"), The company produces movies for distribution internationally and has not had revenue as of September 30, 1999.

A summary of the Company's significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:

Property and Equipment - Depreciation on property and equipment is provided by charges to income using the straightline method over the estimated life of the respective assets, ranging generally from 5 to 7 years. Amortization of leasehold improvements is provided over life of t respective leasehold.

Income Taxes - Timing differences in reporting transactions for financial and tax purposes result in the recognition of deferred income taxes.

Cash and Cash Equivalents - For the purpose of the statement of cash flows, the Company considers all cash -and certificates of deposit with an original maturity of months or less to be cash equivalents.

Advertising - The company accounts for its advertising costs as non-direct response advertising. Accordingly, advertising costs are expensed ad incurred.

Earnings Per Share - The company computes earnings per share using the weighted average number of shares of common stock outstanding.

Dividends - The company has not yet adopted any policy regarding the payment of dividends. No dividends have been paid since inception.

Use of Estimates - Management of the company has made certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of continent assets and liabilities to prepare these financial statements in accordance with gene fly accepted accounting principles. Actual results could differ from these estimates.

Start-Up Costs - The company has accounted for certain start-up costs such as Website design, accounting, etc. as expenses per Statement of Position 98-5.

Note B - Related Party Transactions

The shareholders had previously produced certain movies that are either near completion or complete and ready for distribution. They have contributed these to the company at a cost of $187,000 in exchange for common stock, Note E. The company has estimated that future revenue from these movies will be approximately $950,000.

This shareholder has also placed production equipment, cameras, editing equipment valued at $25,000 and office furniture and equipment valued at $2,000 into the company in exchange for common stock.

Note B - Related Party Transactions (continued)

This company neither owns nor leases any real or personal property at this time. The Officers and directors of the company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict In selecting between the company and their other business interests. The company has not formulated a policy for the resolution of such conflicts.

Note C - Property And Equipment

Property and equipment is stated at cost and consists of the following:

Production equipment	$25,000
Office furniture	2,000
	27,000
Accumulated depreciation	-0-
	27,000

Note D - Common Stock

The company is authorized to issue 25,000,000 of common stock having a par value of $.001. 3,500,000 shares have been issued to officers of the corporation in exchange for certain assets, Note B.

On November 21, 1998 the company conducted a limited public offering of common stock pursuant to Regulation D, Rule 504 of the Securities Act of 1933 and sold 202,000 shares of its $.001 Par value common stock for cash of $20,200.00.

Note E - Going Concern

The company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the company has had limited sources of revenue. Without realization of additional capital, it would be unlikely for the company to continue as a going concern. It is management's plan to seek additional capital through a State of Nevada registered public offering of securities pursuant to Chapter 90.490 of Nevada revised statutes, pursuant to Regulation D, rule 504 public offering of the Securities Act of 1933, as amended.

Note F - Movie Costs

Movie costs consist of costs for movies that are in various stages of production. As noted in Note B the shareholder contributed these at cost in exchange for stock in the company. Production costs in the amount of $187,000 were incurred ~ the shareholder as a sole proprietor; costs of $6,321 were incurred by the Company. W en revenues are earned on these movies, costs will be amortized under the individual film forecast method. Estimated loss revenues will be determined based on the particular markets that the films are s9own in. To date estimated gross revenue has not been determined and no revenue has been collected on these movies. Because no revenue has been collected no amortization has been deducted in these financial statements.

Originally these movies were contributed to the Company by the shareholder at an estimated market value instead of cost. To make the financial statements easier to understand the shareholder and Company agreed to restate the amount to the costs expended by the shareholder.

Note G - Change in Accounting Principle

The Company previously recorded movie costs that were contributed by a shareholder at an estimated market value. To make the financial statements easier to understand the Company has restated this amount to the actual costs that the shareholder expended and retitled the amount as "movie costs". Previously the Company reported "movie rights" of $500,000, these have been reduced to an amount of $187,000 with a corresponding reduction in common stock issued. This change does not affect net income earnings. It will affect future years net income because the amortization of these costs will be lower due to a lower book value.

f-6

END PART F/S

---

Part III

Item 1. Index to Exhibits (Pursuant to Item 601 of Regulation SB)

Exhibits:

1. Underwriting Agreement

Not applicable

2. Plan of Acquisition, Reorganization, Arrangement, Liquidation, or Succession

Not applicable

3. Articles of Incorporation & By-Laws

(a) Articles of Incorporation of the Company filed September 24, 1998

(b) By-Laws of the Company adopted September 25, 1998

4. Instruments Defining the Rights of Security Holders

No instruments other than those included in Exhibit 3

5. Opinion on Legality

Not applicable

6. No Exhibit Required

Not applicable

7. Opinion on Liquidation Preference

Not applicable

8. Opinion on Tax Matters

Not applicable

9. Voting Trust Agreement and Amendments

Not applicable

10. Material Contracts

Not applicable

11. Statement Re Computation of Per Share Earnings

Not applicable - Computation of per share earnings can be clearly determined

from the Statement of Operations in the Company's financial statements

12. No Exhibit Required

Not applicable

13. Annual or Quarterly Reports - Form 10-Q

Not applicable

14. Material Foreign Patents

None. Not applicable

15. Letter on Unaudited Interim Financial Information

Not applicable

16. Letter on Change in Certifying Accountant

Not applicable

17. Letter on Director Resignation

Not applicable

18. Letter on Change in Accounting Principles

Not applicable

19. Reports Furnished to Security Holders

Not applicable

20. Other Documents or Statements to Security Holders

None - Not applicable

21. Subsidiaries of Small Business Issuer

None - Not applicable

22. Published Report Regarding Matters Submitted to Vote of Security Holders

Not applicable

23. Consent of Experts and Counsel

Consents of independent public accountants

24. Power of Attorney

Not applicable

25. Statement of Eligibility of Trustee

Not applicable

26. Invitations for Competitive Bids

Not applicable

27. Financial Data Schedule

Financial Data Schedule of Hollywood Entertainment Network, Inc. ending September 30, 1999

28. Information from Reports Furnished to State Insurance Regulatory Authorities

Not applicable

29. Additional Exhibits

Not applicable

<PAGE>

Item 2. Description of Exhibits

Exhibits:

1. Underwriting Agreement

Not applicable

2. Plan of Acquisition, Reorganization, Arrangement, Liquidation, or Succession

Not applicable

3. Articles of Incorporation & By-Laws

(a) Articles of Incorporation of the Company filed September 24, 1998

(b) By-Laws of the Company adopted September 25, 1998

4. Instruments Defining the Rights of Security Holders

No instruments other than those included in Exhibit 3

5. Opinion on Legality

Not applicable

6. No Exhibit Required

Not applicable

7. Opinion on Liquidation Preference

Not applicable

8. Opinion on Tax Matters

Not applicable

9. Voting Trust Agreement and Amendments

Not applicable

10. Material Contracts

Not applicable

11. Statement Re Computation of Per Share Earnings

Not applicable - Computation of per share earnings can be clearly determined

from the Statement of Operations in the Company's financial statements

12. No Exhibit Required

Not applicable

13. Annual or Quarterly Reports - Form 10-Q

Not applicable

14. Material Foreign Patents

None. Not applicable

15. Letter on Unaudited Interim Financial Information

Not applicable

16. Letter on Change in Certifying Accountant

Not applicable

17. Letter on Director Resignation

Not applicable

18. Letter on Change in Accounting Principles

Not applicable

19. Reports Furnished to Security Holders

Not applicable

20. Other Documents or Statements to Security Holders

None - Not applicable

21. Subsidiaries of Small Business Issuer

None - Not applicable

22. Published Report Regarding Matters Submitted to Vote of Security Holders

Not applicable

23. Consent of Experts and Counsel

Consents of independent public accountants

24. Power of Attorney

Not applicable

25. Statement of Eligibility of Trustee

Not applicable

26. Invitations for Competitive Bids

Not applicable

27. Financial Data Schedule

Financial Data Schedule of Hollywood Entertainment Network, Inc. ending September 30, 1999

28. Information from Reports Furnished to State Insurance Regulatory Authorities

Not applicable

29. Additional Exhibits

Not applicable

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SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

Hollywood Entertainment Network, Inc.

(Registrant)

Date: September 30, 1999

By:

/s/ Donald J. Jackson

Donald J. Jackson, President, Chief Executive Officer and Director

By:

/s/ Howard L. Allen

Howard L. Allen, Secretary, Treasurer and Director

 

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