UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) August 30, 2000
(August 15, 2000)
iPARTY CORP.
--------------------------------------
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-25507 13-4012236
--------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission IRS Employer
of Incorporation) File Number) Identification No.)
130 West 30th Street, 10th Floor, New York 10001
------------------------------------------ -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 609-4300
-----------------------------
Not applicable
--------------------------------------------------------------------------------
(Former Name or Former Address, if Changes Since Last Report)
<PAGE>
3
Item 2. Acquisition or Disposition of Assets
On August 15, 2000, iParty Corp. (the "Company") through its
wholly-owned subsidiary, iParty Retail Stores Corp. ("iParty Retail"), pursuant
to a Asset Purchase Agreement acquired certain assets from The Big Party
Corporation ("The Big Party"). The Company acquired inventory, fixed assets and
the leases of 33 retail stores from The Big Party in consideration of cash and
assumption of certain liabilities, as described in the Asset Purchase Agreement.
The Big Party filed for bankruptcy protection during the second quarter of 2000
and the acquisition was approved by the United States Bankruptcy Court, District
of Delaware. A copy of the Asset Purchase Agreement and amendments thereto are
filed as Exhibit 2.1, 2.2 and 2.3 hereto, and such documents are incorporated by
reference herein.
The acquisition was financed in part by a private placement as
described in Item 5.
Item 5. Other Events
On August 11, 2000, the Company completed a private placement of Series
E Convertible Preferred Stock, raising $2,000,000. The proceeds from the sale of
the Series E Convertible Preferred Stock was used to financed the acquisition of
certain assets of The Big Party. The financing comprised of 533,333 shares of
Series E Convertible Preferred Stock convertible into an aggregate of 5,333,333
shares of the Company's common stock at a conversion price of $.375 per share.
The Series E Preferred Stock is convertible at anytime into a number of shares
equal to $3.75 divided by the conversion price in effect at the time of
conversion. The initial conversion price is $.375 per share, reflecting an
initial conversion ratio of 1:10. The Series E Convertible Preferred Stock will
have such rights as described in the Certificate of Designation.
This Series E Convertible Preferred Stock financing triggered certain
anti-dilution provisions in Series B, C and D Convertible Preferred Stock and
redeemable common stock purchase warrants attached thereto. The effect of these
anti-dilution provisions were (1) the issuance of 3,731,118 additional shares of
Series B Convertible Preferred Stock and an adjustment to the conversion price
for all outstanding shares of Series B preferred stock to $1.47, (2) the
issuance of 357,061 additional shares of Series C Convertible Preferred Stock
and an adjustment to the conversion price for all outstanding shares of Series C
preferred stock to $1.47, (3) the issuance of 892,653 additional shares of
Series D Convertible Preferred Stock and an adjustment to the conversion price
for all outstanding shares of Series D Convertible Preferred Stock to $1.47, (4)
the issuance of 1,993,504 additional redeemable common stock warrants attached
to Series B Convertible Preferred Stock and an adjustment to the exercise price
for all outstanding redeemable common stock warrants attached to Series B
Convertible Preferred Stock to $1.35, (5) the issuance of 190,774 additional
redeemable common stock warrants attached to Series C Convertible Preferred
Stock and an adjustment to the exercise price for all outstanding redeemable
common stock warrants attached to Series C Convertible Preferred Stock to $1.35,
(6) the issuance of 446,327 additional redeemable common stock warrants attached
to Series D Convertible Preferred Stock and an adjustment to the exercise price
for all outstanding redeemable common stock warrants attached to Series
Convertible Preferred Stock to $1.47, and (7) the issuance of 354,814 additional
<PAGE>
redeemable common stock warrants issued to the placement agent in the Series B
and C preferred stock financing and an adjustment to the exercise price to
$1.35.
A copy of the Certificate of Designation is filed as Exhibit 4.1 hereto
and such document is incorporated by referenced herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statement of Business Acquired
See Index to Financial Statements.
(b) Pro Forma Financial Information
See Index to Financial Statements.
(c) Exhibits
2.1 Asset Purchase Agreement by and between iParty Retail Stores Corp.
and The Big Party Corporation.
2.2 Amendment No. 1 to Asset Purchase Agreement by and between iParty
Retail Stores Corp. and The Big Party Corporation.
2.3 Amendment No. 2 to Asset Purchase Agreement by and between iParty
Retail Stores Corp. and The Big Party Corporation.
2.4 Stock Purchase Agreement by and among iParty Corp., Ajmal Khan and
Robert H. Lessin.
4.1 Certificate of Designation of Series E Preferred Stock of iParty
Corp.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
iPARTY CORP.
By: /s/ Sal Perisano
---------------------------
Sal Persiano
Chief Executive Officer
By: /s/ Patrick Farrell
---------------------------
Patrick Farrell
Chief Financial Officer
Date: August 30, 2000
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1 Asset Purchase Agreement.*
2.2 Amendment No. 1 to Asset Purchase Agreement by and
between iParty Retail Stores Corp. and The Big Party
Corporation.*
2.3 Amendment No. 2 to Asset Purchase Agreement by and
between iParty Retail Stores Corp. and The Big Party
Corporation.*
2.4 Stock Purchase Agreement by and among iParty Corp.,
Ajmal Khan and Robert H. Lessin.*
4.1 Certificate of Designation of Series E Preferred Stock
of iParty Corp.*
--------------------------------
* Incorporated herein in its entirety by reference to the Company's Current
Report on Form 8-K, as filed with the Securities and Exchange Commission on
August 30, 2000.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors F-1
Statements of Net Assets to be Acquired and Liabilities to be
Assumed as of June 23, 2000 (unaudited), December 25, 1999 and
December 26, 1998 F-2
Statements of Revenues and Expenses for the six months ended
June 23, 2000 and six months ended June 26, 1999 and for the
years ended December 25, 1999 and December 26, 1998 F-3
Notes to Financial Statements F-4
Introduction to Pro Forma Financial Statements (Unaudited) F-9
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the six months ended June 30, 2000 F-10
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1999 F-11
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 1999 F-12
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements F-13
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders of
The Big Party Corporation:
We have audited the accompanying statements of net assets to be acquired and
liabilities to be assumed of the Big Party Corporation and the related
statements of revenues and expenses for the years ended December 25, 1999 and
December 26, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we 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. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1, the accompanying financial statements were prepared in
accordance with an Asset Purchase Agreement as of August 15, 2000 to present the
net assets to be acquired and liabilities to be assumed and the related
statement of revenues and expenses of the Big Party Corporation for the years
ended December 25, 1999 and December 26, 1998 and are not intended to be a
complete presentation of the net assets and liabilities or revenues and expenses
of the Big Party Corporation in accordance with accounting principles generally
accepted in the United States.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets to be acquired and liabilities to be
assumed of the Big Party Corporation and the related statement of revenue and
expenses for the years ended December 25, 1999 and December 26, 1998 in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
October 20, 2000
F-1
<PAGE>
THE BIG PARTY CORPORATION.
Statements of Net Assets to be Acquired and
Liabilities to be Assumed
As of June 23, 2000 (unaudited), December 25,
1999 and December 26, 1998
June 23, 2000 December 25, December 26,
(unaudited) 1999 1998
Assets:
Cash $ 35,900 $ 35,900 $ 38,200
Inventory 5,892,298 6,876,945 10,288,769
Prepaid expenses 169,127 169,127 285,291
Fixed assets, Net - - 6,641,998
Other assets 179,046 238,647 319,173
----------- -------------- --------------
Total assets 6,097,325 7,320,619 17,573,431
----------- -------------- --------------
Liabilities:
Capital lease 426,188 668,423 1,167,295
Other liabilities 97,047 79,922 42,105
----------- -------------- --------------
Total liabilities 523,235 748,345 1,209,400
----------- -------------- --------------
Net assets $ 6,276,371 $ 6,572,274 $ 16,364,031
============== ============== ==============
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
THE BIG PARTY CORPORATION
Statement of Revenues and Expenses
For the Six Months Ended June 23, 2000 and
the Six Months Ended June 26, 1999
(unaudited) and For Years Ended December 25,
1999 and December 26, 1998
<S> <C> <C> <C> <C>
Six Months Six Months Year Ended Year Ended
Ended June Ended June December December
23, 2000 26, 1999 25, 1999 26, 1998
(unaudited) (unaudited)
Revenues $ 21,262,013 $ 23,173,682 $ 48,927,495 $ 47,799,244
Cost of Revenues 14,068,902 14,926,894 30,327,801 30,507,454
-------------- ---------- --------------- ---------------
Gross margin 7,193,111 8,246,788 18,599,694 17,291,790
Operating Expenses:
General and administrative 9,080,679 9,243,886 17,746,519 17,028,344
Impairment of fixed assets - - 5,423,888 -
--------------- --------------- --------------- ---------------
Operating expenses 9,080,679 9,243,886 23,170,407 17,028,344
Net contribution $ (1,887,568) $ (997,098) $ (4,570,713) $ 263,446
============ ============ ================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
THE BIG PARTY CORPORATION
Notes to Financial Statements
December 25, 1999 and December 26, 1998
(1) OPERATIONS
The Big Party Corporation (the Company) was incorporated in Delaware on June 21,
1995. The Company is a retailer of party supplies. On August 15, 2000 the
Company, which was operating under the protection of the Bankruptcy Court of the
State of Delaware, entered into an agreement to sell the leasehold rights, fixed
assets and inventories of 33 stores to iParty Retail Store Corporation (a wholly
owned subsidiary of iParty Corp.) for approximately $4,900,000. In accordance
with the agreement, such assets and certain liabilities existing at the closing
agreement were transferred to iParty Retail Store Corp.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. The significant accounting policies of
the Company are described below.
(a) Basis of Presentation
For the purposes of this presentation, the accompanying special-purpose
financial statements present only those net assets and certain
liabilities of the Company acquired by iParty Retail Store Corp. and the
related revenues and expenses for the years ended December 25, 1999 and
December 26, 1998. The accompanying financial statements are not intended
to be a complete presentation of the assets, liabilities or the results
of operations of the Company on a stand-alone basis in accordance with
generally accepted accounting principles. The financial statements do not
reflect the revaluation of assets to be acquired by iParty Retail Store
Corp. to their fair market value at the date of acquisition. The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles and were derived from historical
accounting records of the Company.
The accompanying statements of net assets to be acquired and liabilities
to be assumed includes the net assets of the Company.
The accompanying statements of revenue and expenses include the revenue
and expenses directly attributable to the stores acquired that have been
historically segregated by the Company in its accounting records.
F-4
<PAGE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(a) Basis of Presentation (Continued)
Full historical financial statements, including certain general and
administrative expenses and other indirect expenses, interest expense and
income taxes, have not been presented because management believes that it
is not practical to determine the portion that is attributable to the 33
stores included in the agreement. The Management of the Company believes
the basis of allocating all other expenses to be reasonable; however, the
amounts could differ from amounts that would be determined if the 33
stores were operated on a stand-alone basis. In addition, centralized
cash accounts for the majority of disbursements exist at the Company. As
a result, a statement of cash flows has been excluded from the
accompanying financial statements.
The accompanying balance sheet as of June 23, 2000 and statements of
Revenues and Expenses for the six months ended June 23, 2000 and the six
months ended June 26, 1999 included herein, have been prepared by the
Company and are unaudited. The information furnished in the unaudited
financial statements referred to above includes all adjustments which
are, in the opinion of management, necessary for a fair presentation of
such financial statements. The results of operations for the six months
ended June 23, 2000 are not necessarily indicative of the results to be
expected for the entire fiscal year.
(b) Fiscal Year-End
The Company uses the Saturday closest to December 31 as its year-end
Fiscal 1999 and 1998 ended on December 25, 1999 and December 26, 1998,
respectively.
(c) Revenue Recognition
Revenue is recognized at the time of sale. Sales returns, which are not
material, are recorded in the period of the return.
(d) Cost of Revenues
Cost of revenues includes the merchandise sold and the Company's buying
and occupancy costs.
(e) Inventory
The Company's inventory consists of party supplies and is valued at the
lower of weighted average cost, which approximates FIFO (first in, first
out) or market.
F-5
<PAGE>
(f) Property and Equipment
Property and equipment are recorded at cost. Expenditures for maintenance
and repairs are charged to operations as incurred. Depreciation of
property and equipment is calculated using the straight-line method based
upon their estimated economic useful lives, as follows:
Asset Classification Useful Life
Furniture and fixtures 7 years
Equipment under capital leases 5-7 years
Computers and equipment 5 years
Motor vehicles 5 years
Leasehold improvements are amortized over the lesser of the length of the
related lease or the estimated useful lives of the assets.
(g) Other Assets
Other assets consist of the following at June 23, 2000, December 25, 1999
and December 26, 1998:
June 23,
2000
(unaudited) 1999 1998
Deposits $ 164,679 $ 209,794 $ 234,586
Lease acquisition costs, net 14,367 28,853 84,587
--------------- ------------ ---------------
$ 179,046 $ 238,647 $ 319,173
=============== ============ ===============
Lease acquisition costs are amortized on the straight-line basis over the
life of the lease.
(h) Accounting for the Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 121, Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, effective December 31, 1995. In
accordance with the requirements of SFAS No. 121, the Company
periodically assesses whether events or circumstances have occurred that
may indicate the carrying value of its long-lived assets may not be
recoverable. When such events or circumstances indicate the carrying
value of an asset may be impaired, the Company uses an estimate of the
future undiscounted cash flows to be derived from the asset over the
remaining useful life of the asset to assess whether or not the asset is
recoverable. If the future undiscounted cash flows to be derived over the
life of the asset do not exceed the asset's net book value, the Company
recognizes an impairment loss for the amount by which the net book value
F-6
<PAGE>
of the asset exceeds its estimated fair market value. The Company
recognized an impairment loss of approximately $5,424,000 during the year
ended December 25, 1999 related to events and circumstances that
indicated the carrying value of certain long-lived assets may not be
recoverable. The impairment loss has been classified as a separate
component of operating expenses for the year ended December 25, 1999 and
included in accumulated depreciation. No other impairment loss was
recognized during the years ended December 25, 1999 or December 26, 1998.
(i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-7
<PAGE>
(3) FIXED ASSETS
A summary of fixed assets as of June 23, 2000, December 25, 1999 and
December 26, 1998 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
June 23,
2000 1999 1998
(unaudited)
Leasehold improvements $ 2,810,766 $ 2,810,766 $ 2,753,601
Equipment 1,047,818 1,047,818 1,020,554
Furniture and fixtures 2,463,268 2,463,268 2,195,457
Computers 2,608,746 2,608,746 2,515,066
Leased equipment and furniture 2,948,976 2,948,976 2,743,525
Vehicles 35,626 35,626 35,626
--------------- --------------- ---------------
11,915,200 11,915,200 11,263,828
Less accumulated depreciation
And amortization 11,915,200 (11,915,200) (4,621,830)
---------- ----------- ----------
$ - $ - $ 6,641,998
=============== =============== ===============
</TABLE>
Depreciation and amortization expense for the six months ended June 23,
2000 and six months ended June 26, 1999 and for the years ended December
25, 1999 and December 26, 1998 was approximately $0, $929,000, $7,281,888
and $2,022,000 respectively.
(4) COMMITMENTS AND CONTINGENCIES
The Company is obligated under operating leases, principally for its retail
stores. Total rental expense for the six months ended June 23, 2000 and the six
months ended June 26, 1999 and for the years ending December 25, 1999 and
December 26, 1998 was approximately $2,498,000, 2,653,000, 4,124,000 and
3,922,000 respectively.
The Company is not a party to any material pending legal proceedings, other than
ordinary litigation incidental to the business. Management believes that none of
these proceedings, if adversely determined, would have a material adverse effect
on its financial position.
F-8
<PAGE>
IPARTY CORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements for the six months ended June 30, 2000 and the fiscal year ended
December 31, 1999 have been derived from the application of pro forma
adjustments to the historical financial statements of iParty Corp ("iParty") and
The Big Party Corporation ("The Big Party"). The unaudited pro forma condensed
consolidated statement of operations information for the six months ended June
30, 2000 and for the year ended December 31, 1999, gives effect to the
acquisition as if it had occurred on January 1, 1999. The unaudited pro forma
condensed consolidated balance sheet gives effect to the acquisition of The Big
Party as if it had occurred on June 30, 2000.
The unaudited pro forma condensed consolidated financial statements do not
necessarily reflect what our actual financial results would have been had the
acquisition been completed on these dates, nor does it purport to be indicative
of future financial results.
The acquisition has been accounted for using the purchase method of
accounting. The purchase method of accounting allocates the aggregate purchase
price to the assets acquired and liabilities assumed based upon their respective
fair values.
F-9
<PAGE>
<TABLE>
<CAPTION>
IPARTY CORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<S> <C> <C> <C> <C>
iParty Corp Big Party
Historical for the Historical for the
Six Months Ended Six Months Ended
June 30, 2000 June 23, 2000 Pro Forma Pro Forma as
(unaudited) (unaudited) Adjustments Adjusted
Revenues $ 406,685 $21,262,013 $21,668,698
Operating costs:
Cost of goods sold 492,720 14,068,902 14,561,622
Selling, General and
Administrative 11,011,082 9,080,679 20,091,761
----------- ---------- ----------
Operating loss
(11,097,117) (1,887,568) (12,984,685)
Interest Income, Net
500,133 - 500,133
-------- ----------
Net Loss
$(10,596,984) (1,887,568) (12,484,552)
============= =========== ============
Loss per share $ (0.95) $ (1.12)
====== ======
Weighted Average Shares
Outstanding 11,103,436 11,103,436
========== ==========
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
IPARTY CORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<S> <C> <C> <C> <C>
Big Party
iParty Corp Historical for
Historical for the
the Twelve
Twelve Months Months
Ended Ended
December 31, December 25
1999 1999 Pro Forma Pro Forma as
Adjustments Adjusted
Revenues $ 138,545 $ 48,927,495 $49,066,040
Operating costs:
Cost of goods sold 111,961 30,327,801 30,439,762
Selling, General and
Administrative 10,567,669 17,746,519 33,738,076
Impairment Charge - 5,423,888 ----------
------------ ---------
-
Operating loss (10,541,085) (4,570,713) (15,111,798)
Interest Expense, Net
714,330 - 714,330
-------- -------------- -------
-
Net Loss $ (11,255,415) $ (4,570,713) (15,826,128)
============ =========== ============
-
Loss per share $ (1.02) $ (1.44)
====== ======
Weighted Average Shares
Outstanding 11,005,421 11,005,421
========== ==========
</TABLE>
The accompanying notes to unaudited pro forma condensed consolidated
financial statements are an integral part of this statement
F-11
<PAGE>
<TABLE>
<CAPTION>
IPARTY CORP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000
<S> <C> <C> <C> <C>
June 30, 2000 June 23, 2000 Adjustments Adjusted
Current Assets
Cash and cash equivalents $10,542,816 $ 35,900 $ (3,975,000) (1) 6,567,816
(35,900) (3)
Marketable securities 1,644,313 1,644,313
Inventory - 5,892,298 (1,032,298) (2) 4,860,000
Prepaid expenses and
other current assets 378,517 169,127 (169,127) (3) 378,617
------- ------- --------------
Total Current Assets 12,565,646 6,097,325 13,450,646
Property and equipment 939,355 - 939,355
Intangible assets 5,092,222 - 5,092,222
Other assets 56,594 179,046 (179,046) (3) 56,594
--------------- --------------- --------------
Total assets $ 18,653,817 $ 6,276,371 $ 19,538,817
============ =============== =============
$ 650,000 (1)
235,000 (1)
Accounts payable and accrued
liabilities $ 3,561,777 $ 97,047 (97,047) (3) $4,446,777
----------- --------------- -------------- --------------
Total current liabilities
commitments and contingencies $ 3,561,777 $ 97,047 $4,446,777
----------- --------------- --------------
Capital Leases - 426,188 (426,188) (3) -
--------------- --------------
Total Liabilities 3,561,777 523,235 4,446,777
---------------
Stockholders' Equity 15,092,040 5,753,136 (5,753,136) (4) 15,092,040
---------- --------------- ---------------
Total Liabilities and
Stockholders' Equity $ 18,653,817 $ 6,276,371 $ 19,538,817
========== ============== ==========
</TABLE>
The accompanying notes to unaudited pro forma condensed consolidated financial
statements are an integral part of this statement
F-12
IPARTY CORP AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated statements of operations have
been prepared to reflect the acquisition of The Big Party as if this acquisition
occurred on January 1, 1999. The unaudited pro forma condensed consolidated
balance sheet was prepared to reflect the acquisition as of June 30, 2000. The
Big Party's historical financial statements were derived from its books and
records and reflect:
- the statement of operations of The Big Party for the six month period ended
June 23, 2000, - the statement of operations of The Big Party for the 12 month
period ended December 25, 1999; and - the balance sheet of The Big Party as of
June 23, 2000.
The acquisition has been accounted for under the purchase method of accounting.
The following is a summary of the adjustments reflected in the
unaudited pro forms condensed consolidated balance sheet:
1. Represents the preliminary allocation of purchase price to the net
assets acquired as follows--
Purchase price:
Cash paid $ 3,975,000
Payable to seller 650,000
Accrued transaction costs 235,000
Total purchase price $4,860,000
Net tangible assets acquired
Inventory $4,860,000
In addition to acquiring inventory, iParty purchased leasehold
improvements at the acquired stores. The fair value of the acquired inventory
and leaseholds exceeded the purchase price. As a result, due to the fact that
the purchase price approximated the fair value of the inventory, no value could
be assigned to the long term assets.
Additionally, the Asset Purchase Agreement requires iParty Corp. to
pay additional amounts to the seller if certain amounts are met over calendar
years 2001, 2002 and 2003. The earnout payments, as defined in the agreement,
are based on the performance of the acquired stores. As defined in the
agreement, a minimum of $250,000 in earnout payments is guaranteed and therefore
this amount has been included in Payable to Seller in the preliminary purchase
price allocation.
<PAGE>
iParty believes that all significant assets and liabilities have been
identified and, accordingly, that the final determination of the allocation of
the purchase price should not vary materially from the preliminary estimate.
2. Represents an adjustment to record purchased inventory at its
estimated fair value.
3. Reflects the adjustments to eliminate certain assets not acquired
and certain liabilities not assumed in the acquisition.
4. Reflects the adjustment to eliminate The Big Party equity.
