U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-
For the quarterly period ended September 30, 2000
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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 No. 0-25507
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iPARTY CORP.
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(Exact name of registrant as specified in its charter)
Delaware 13-4012236
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
130 West 30th Street, 10th Floor, New York, New York 10001
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 609-4300
------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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 X No ___
Transitional small business disclosure format
Yes No X
Page 1
<PAGE>
iPARTY CORP.
Quarterly Report on Form 10-QSB
Table of Contents
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 8
PART II OTHER INFORMATION
Item 6. Exhibits 11
SIGNATURES
Page 2
<PAGE>
<TABLE>
<CAPTION>
iPARTY CORP.
CONSOLIDATED BALANCE SHEET
<S> <C> <C>
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents 7,522,327 18,673,304
Marketable securities - 973,877
Cash, restricted - 51,012
Accounts receivable 265,493 99,476
Inventory 6,315,000 -
Prepaid expenses and other current assets 322,086 428,645
---------- -----------
Total current assets 14,424,906 20,226,314
Property and equipment, net 1,091,246 860,457
Intangible Assets 4,578,466 6,119,734
Other assets 213,961 50,245
---------- ------------
Total assets $ 20,308,579 $ 27,256,750
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,834,185 $ 1,749,806
Accrued severance 75,013 213,987
Accrued expenses 1,273,234 238,889
------------ ------------
Total current liabilities 4,182,432 2,202,682
Other Liabilities:
Line of credit 1,601,000 -
Deferred Payables 453,022 -
------------ ------------
Total Liabilities 6,236,454 2,202,682
Commitments and contingencies
Stockholders' Equity:
Preferred stock - $.001 par value; 10,000,000 shares authorized; Series A
preferred stock - 1,000,000 authorized;
1,000,000 shares issued and outstanding 1,000 1,000
Series B preferred stock - 1,157,257 authorized;
1,517,257 and 1,044,952 shares issued and outstanding 1,517 1,045
Series C preferred stock - 145,198 authorized;
145,198 and 100,000 shares issued and outstanding 145 100
Series D preferred stock - 362,996 authorized;
362,996 and 250,000 shares issued and outstanding 363 250
Series E preferred stock - 533,333 authorized;
533,333 shares issued and outstanding 533 -
Series F preferred stock - 114,286 authorized;
114,286 shares issued and outstanding 114 -
Common stock - $.001 par value; 50,000,000 shares authorized;
11,136,107 and 11,005,691 shares issued and outstanding 11,137 11,006
Additional paid in capital 64,080,855 58,616,431
Accumulated deficit (50,023,539) (33,575,764)
------------ ------------
Total stockholders' equity 14,072,125 25,054,068
------------ ------------
Total liabilities and stockholders' equity $ 20,308,579 $ 27,256,750
============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of this Consolidated Balance Sheet.
Page 3
<PAGE>
<TABLE>
<CAPTION>
iPARTY CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<S> <C> <C>
For the three months ended For the nine months ended
September 30, September 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ----------- ------------ -----------
Revenues $ 3,648,105 $ 4,257 $ 4,054,791 $ 4,257
------------ ----------- ------------ -----------
Operating costs:
Cost of products sold 2,685,984 5,107 3,178,704 5,107
Amortization of partner warrant 377,744 379,262 1,133,233 379,262
Marketing and sales 2,160,959 632,442 7,176,081 878,372
Product/technology development 1,068,973 399,143 4,510,562 893,466
General and administrative 1,000,144 725,653 2,079,287 1,528,614
Loss from abandonment of assets - 92,924 - 366,212
Non-cash compensation expense 88,777 531,900 723,733 761,303
----------- ----------- ------------ -----------
Operating loss (3,734,476) (2,762,174) (14,746,809) (4,808,079)
Interest income 144,039 41,141 644,172 42,688
Interest expense (11,000) (763,463) (11,000) (1,004,452)
----------- ----------- ------------ ------------
Net loss before income taxes (3,601,437) (3,484,496) (14,113,637) (5,769,843)
Provision for income taxes - - 84,784 -
----------- ----------- ------------ ------------
Net loss $ (3,601,437) $ (3,484,496) $ (14,198,421) $(5,769,843)
============= ============ ============= ============
Loss per share:
Basic and diluted $ (0.53) $ (1.72) $ (1.48) $ (1.93)
=========== =========== ============= ============
Weighted Average Shares Outstanding:
Basic and diluted 11,136,107 11,005,691 11,114,326 11,005,691
=========== =========== ============= ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
Page 4
<PAGE>
<TABLE>
<CAPTION>
iPARTY CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<S> <C>
For the nine months ended
September 30,
-----------------------------
2000 1999
------------ ----------
Cash flows from operating activities:
Net loss $(14,198,421) $(5,769,843)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,109,181 665,723
Loss resulting from abandonment of assets - 366,213
Amortization of discount on issuance of convertible notes - 948,602
Non-cash compensation expense 723,733 761,303
Decrease (increase) in:
Accounts receivable (166,016) -
Prepaid expenses and other current assets 106,559 (150,292)
Other assets (163,716) (36,981)
Inventory (6,315,000) -
Increase (decrease) in:
Accounts payable 1,084,379 857,606
Accrued severance (138,974) -
Accrued expenses 1,034,346 -
Other Liabilities 453,022 -
------------ ----------
Net cash used in operating activities (15,470,907) (2,357,669)
------------ ----------
Cash flows from investing activities:
Purchase of property and equipment (796,994) (457,811)
Advances to officer - 22,656
Equipment and software development - (695,533)
Purchase of marketable securities 973,877 -
Increase in restricted cash 51,012 (109)
----------- ----------
Net cash provided by (used in) investing activities 227,895 (1,130,797)
----------- ----------
Cash flows from financing activities:
Proceeds from line of credit 1,601,000 -
Proceeds from note payable - 2,000,000
Proceeds from sale of stock, net of offering costs 2,491,035 19,998,483
------------ ----------
Net cash provided by investing activities 4,092,035 21,998,483
------------ ----------
Net (decrease)increase in cash and cash equivalents (11,150,977) 18,510,017
Cash and cash equivalents, beginning of period 18,673,304 346,751
------------ ----------
Cash and cash equivalents, end of period $ 7,522,327 $18,856,768
============ ==========
Cash paid for:
Interest expense $ 11,000 $ -
============ ==========
Income taxes $ 84,784 $ -
============ ==========
Supplemental disclosure of non-cash financing activities:
Conversion of notes payable to Series A preferred
Stock $ - $ 250,000
============ ==========
Conversion of notes payable and accrued interest to
Series B preferred stock $ - $ 2,055,850
============ ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
Page 5
<PAGE>
iPARTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
1. THE COMPANY
iParty LLC, which was created on December 11, 1997 to launch an Internet-based
merchant of party goods and services, commenced operations in January 1998. On
March 12, 1998, iParty Corp. was organized as a wholly owned subsidiary of
iParty LLC and the net assets and operations of iParty LLC were transferred to
iParty Corp. On April 9, 1998, StarGreetings, Inc. ("Star") was incorporated as
a wholly owned subsidiary of iParty Corp. to develop and operate a personalized
celebrity greeting service.
Effective July 2, 1998, iParty Corp. ("iParty" or the "Company") merged into WSI
Acquisition Corp. ("WSI"), an inactive company. The merger was consummated
through an exchange of shares that resulted in iParty LLC receiving 6,000,000
common shares or 54.5% of the outstanding shares of WSI. In connection with the
merger and as a condition thereof, WSI sold, in two private placements, an
aggregate of 4,585,000 shares of common stock of which 3,624,043 shares were
sold for $.01 per share and 960,957 shares, together with warrants to purchase
1,000,000 shares of Series A preferred stock, were sold for $1.00 per share or
aggregate proceeds of $997,197 before related expenses. The merger has been
treated as a re-capitalization for accounting purposes and iParty's historic
capital accounts were retroactively adjusted to reflect the 6,000,000 shares
issued by WSI in the transaction. In addition, as WSI had no assets before the
merger and the private placements, the 420,421 outstanding common shares of WSI
have been recorded at par value with a corresponding charge to additional
paid-in capital. The statement of operations reflects the operations of iParty
from the commencement of its operations from March 12, 1998 and also reflects
the operations of iParty LLC, the predecessor company, from January 1998 through
March 12, 1998. In connection with the merger, WSI changed its name to iParty
Corp. On August 3,2000, iParty Corp. formed a subsidiary corporation, iParty
Retail Stores Corp. On August 15,2000 the subsidiary purchased the fixtures,
leases and inventory of 33 retail party stores.
The Company's efforts are devoted to developing the Internet resources to
provide consumers a comprehensive web site where they can seek party planning
advice and information and locate and contract for party goods and services.
2. UNAUDITED INTERIM FINANCIAL INFORMATION
The interim consolidated financial statements as of September 30,2000 have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC") for interim financial reporting. These
consolidated statements are unaudited and, in the opinion of management, include
all adjustments (consisting of normal recurring adjustments and accruals)
necessary to present fairly the consolidated balance sheets, consolidated
operating results, and consolidated cash flows for the periods presented in
accordance with generally accepted accounting principles. The consolidated
balance sheet at December 31,1999 has been derived from the audited consolidated
financial statements at that date. Operating results for the three months ended
September 30, 2000 may not be indicative of the results for the year ending
December 31, 2000. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted in accordance with the rules and
regulations of the SEC. These consolidated financial statements should be read
in conjunction with the audited consolidated financial statements, and
accompanying notes, included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999. Certain prior period amounts have been
reclassified to conform to the current period presentation.
Page 6
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2a. Segment Reporting
Segment information provided below divides revenues and expenses by
corporation. iParty Corp. income and expenses relate to the on-line and
catalogue sales. iParty Retail Stores Corp. income and expenses relate to
retail operations exclusively.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Three Months Ending September iParty Retail
30,2000 iParty Corp Stores Corp Total
----------- -------------- -----
Net Revenue $348,105 $3,300,000 $3,648,105
========== ========= ==========
Net (Loss) $(2,911,438) $(689,999) $(3,601,437)
========== ========= ==========
</TABLE>
On August 15,2000, iParty Retail Stores Corp. acquired the leases, inventory and
fixtures of 33 retail party good stores. The following schedule gives
comparative information reported as if the investment had been made on January
1, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues $7,410,105 $9,652,257 $29,078,791 $3,2826,257)
Operating (Loss) $(4,630,440) $(4,993,174) $(17,530,773) $(8,036,079)
Net (Loss) $(4,501,401) $(5,715,496) $(16,986,385) $(8,997,843)
Preferred Stock $2,249,354 $(15,492,000) $(2,249,354) $(15,492,000)
beneficial conversion ------------- ------------- ------------- -------------
feature
Net (Loss) Available $(6,750,755) $(21,207,496) $(19,235,739) $(24,489,843)
to Common Stockholders
Per Share Information
Net (Loss) per share:
Basic and Diluted $(.61) $(1.93) $(1.73) $(2.23)
====== ====== ======= ======
Weighted Average Shares:
Basic and Diluted $11,136,107 $11,005,691 $11,114,326 $11,005,691
=========== =========== ========== ===========
</TABLE>
2b. Earnings Per Share
The company has computed net income(loss) per share in accordance with Statement
of Financial Accounting Standards No. 128, Earnings per Share ("SFAS No. 128").
Under the provisions of SFAS No. 128, basic net income(loss) per common share
(Basic EPS") is computed by dividing net income(loss) by the weighted average
number of common shares outstanding. Dilutive net income(loss) per common shares
(Diluted EPS") is computed by dividing net income (loss) by the weighted average
number of common shares and dilutive common share equivalents then outstanding
using the treasury-stock method.
The following table sets forth the calculation on a pro-forma basis of the
diluted earnings per share for the periods noted.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the three months ended For the nine months ended
September 30 September 30,
------------ -------------
2000 1999 2000 1999
---- ---- ---- ----
Net Loss $(3,601,437) (3,484,496) ($14,198,421) $(5,769,843)
Preferred Stock beneficial ($2,249,354) (15,492,000) ($2,249,354) $(15,492,000)
------------ ------------ ------------ -------------
conversion feature
Net(Loss) available to common ($5,850,791) (18,976,496) ($16,447,775) $(21,261,843)
============= ============ ============ ============
shareholders
Weighted Average Shares
Outstanding:
Basic and diluted 11,136,107 11,005,691 11,114,326 11,005,691
========== ========== ========== ==========
Loss per share - basic and diluted: ($.53) ($1.72) ($1.48) ($1.93)
====== ======= ======= =======
</TABLE>
Page 7
<PAGE>
Safe Harbor Statement
Certain statements in this Form 10-QSB, including information set forth
under Item 2 "Management's Discussion and Analysis" constitute or may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Act"). We desire to avail ourself of certain
"safe harbor" provisions of the Act and are therefore including this special
note to enable us to do so. Forward-looking statements included in this Form
10-QSB or hereafter included in other publicly available documents filed with
the Securities and Exchange Commission, reports to our stockholders and other
publicly available statements issued or released by us involve known and unknown
risks, uncertainties, and other factors which could cause our actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) achievements expressed or implied
by such forward-looking statement. Such factors include, but are not limited to:
(i) our insignificant historical revenues; (ii) our reliance of third-party
suppliers; (iii) our ability to expand our website; (iv) our ability to manage
growth; (v) our ability to develop our brand; (vi) competition; (vii) our
ability to adapt evolving technologies; and (viii) governmental regulation of
the Internet. Such future results are based upon management's best estimates
based upon current conditions and the most recent results of operations.
Item 2. Management's Discussion and Analysis
Overview
We intend to become the premier multi-channel party supply resource
with distribution on-line, through catalogues and in retail stores.
Our web site was launched in February 1999. On October 12, 1999, we
launched the new iParty.com site, a destination for party goods and party
planning. From Pokemon costumes to birthday party packs to fog machines, an
online party magazine to party safety tips, iParty.com presents consumers with
what we believe to be a sophisticated, yet fun and easy-to-navigate online party
resource. Offering convenience and an extensive assortment of merchandise, we
believe iParty.com is refocusing the party goods industry back to the needs of
the consumer. At the click of a mouse, party givers can enjoy one-stop shopping
and easy-to-find pricing while purchasing all their party needs for birthday
bashes, Super Bowl parties, Halloween festivals and more.
In April 2000, we launched our catalogue operation, specializing in the
seasonal party needs of the consumer.
On August 15,2000 iParty Retail Stores Corp. purchased assets
consisting of 33 store leases, fixtures and inventory from The Big Party
Corporation. This enabled us to set up retail operations and to become a
multi-channel outlet for party supplies.
Results of Operations
Three months ended September 30, 1999 compared to three months ended September
30, 2000
Revenue for the three months ended September 30, 2000, includes the
selling price of party goods sold by us, net of returns and discounts, as well
as outbound shipping and handling charges. Revenue for the three months ended
September 30, 2000 and 1999 were approximately $ 3,648,000 and $ 4,000
respectively. Revenue is recognized at the time products are shipped to
customers.
Cost of products sold consists of the cost of merchandise sold to
customers, store rent, warehousing costs, store payroll and outbound shipping
and handling costs charged to us by our fulfillment partner, Taymark. Cost of
products sold the three months ended September 30, 2000 and 1999 were
approximately
Page 8
<PAGE>
$2,686,000 and $ 5,000 respectively. Taymark began fulfilling
orders placed on our web site on October 1, 1999.
Amortization of fulfillment partner warrant expense consists of the
amortization of the estimated fair value of the warrant issued to Taymark to
provide inventory and fulfillment services to deliver merchandise ordered on the
site, or directly through a toll-free telephone number, directly to consumers.
On July 8, 1999, we entered into a product fulfillment agreement with Taymark.
The initial term of the agreement runs through December 31, 2002. The agreement
contains certain restrictions on competition by the direct marketer. As
additional consideration for such restrictions and services, we issued a warrant
to purchase 3,000,000 shares of common stock at an exercise price of $3.75. The
warrant expires on October 1, 2002. The estimated fair value of the warrant on
the date of issue was approximately $5.3 million as determined using the
Black-Scholes option pricing model. The value of the warrant is included in
intangible assets on the accompanying Balance Sheet as of September 30, 2000 and
is being amortized over the initial term of the fulfillment agreement. For the
three months ended September 30, 2000 and 1999, amortization of fulfillment
partner warrant expense was approximately $378,000 resulting from the
amortization of this warrant.
Marketing and sales expenses consist primarily of advertising, public
relations and promotional expenditures, and all related payroll and related
expenses for personnel engaged in marketing and selling activities. Marketing
and sales expenses for the three months ended September 30, 2000 and 1999 were
approximately $2,161,000 and $632,000, respectively. Included in the September
30, 2000 expense was approximately $135,000 resulting from the amortization of
the Margaritaville warrant.
Product and technology development expenses consist principally of
payroll and related expenses for product development, editorial, systems and
operations personnel and consultants, and systems infrastructure. Operating and
development expenses for the three months ended September 30, 2000 and 1999 were
approximately $1,069,000 and $399,000 respectively.
General and administrative ("G&A") expenses consist of payroll and
related expenses for executive, finance and administrative personnel,
professional fees and other general corporate expenses. G&A expenses for the
three months ended September 30, 2000 and 1999 were approximately $1,000,000 and
$726,000, respectively.
We incurred approximately $89,000 and $532,000 for the three months
ended September 30, 2000 and 1999 respectively, in non-cash compensation
expenses. The non-cash compensation expenses resulted from stock options granted
to consultants and stock options granted to celebrities who provided services to
StarGreetings.
Interest income on cash and cash equivalents for the three months ended
September 30,2000 and 1999, was approximately $144,000 and $41,000,
respectively.
The increase in income was due to higher cash and investment balances resulting
from our financing activities, principally the private placement of Series B, C,
D, E, and F Preferred Stock completed in 1999 and 2000.
Interest expense for the three months ended September 30, 2000 and
1999, was approximately $ 11,000 and $763,000, respectively. The interest
expense in 2000 was related to the line of credit in our subsidiary iParty
Retail Stores Corp. The interest expense in 1999 was related to convertible
notes payable that were converted to preferred stock in September 1999.
Nine months ended September 30, 1999 compared to nine months ended September 30,
2000
Revenue for the nine months ended September 30, 2000, includes the
selling price of party goods sold by us, net of returns and discounts, as well
as outbound shipping and handling charges. Revenue for the nine months ended
September 30, 2000 and 1999 was approximately $4,055,000 and $4,000. Revenue is
recognized at the time products are shipped to customers.
Page 9
<PAGE>
Cost of products sold consists of the cost of merchandise sold to
customers and outbound shipping and handling costs charged to us by our
fulfillment partner, Taymark. For the nine months ended September 30, 2000 and
1999 the cost of products sold was approximately $3,179,000 and $ 5,000
respectively. Taymark began fulfilling orders placed on our web site on October
1, 1999.
Amortization of fulfillment partner warrant expense consists of the
amortization of the estimated fair value of the warrant issued to Taymark to
provide inventory and fulfillment services to deliver merchandise ordered on the
site, or directly through a toll-free telephone number, directly to consumers.
On July 8, 1999, we entered into a product fulfillment agreement with Taymark.
The initial term of the agreement runs through December 31, 2002. The agreement
contains certain restrictions on competition by the direct marketer. As
additional consideration for such restrictions and services, we issued a warrant
to purchase 3,000,000 shares of common stock at an exercise price of $3.75. The
warrant expires on October 1, 2002. The estimated fair value of the warrant on
the date of issue was approximately $5.3 million as determined using the
Black-Scholes option pricing model. The value of the warrant is included in
intangible assets on the accompanying Balance Sheet as of September 30, 2000 and
is being amortized over the initial term of the fulfillment agreement. For the
nine months ended September 30, 2000 and 1999, amortization of fulfillment
partner warrant expense was approximately $1,133,000 and $379,000 respectively;
resulting from the amortization of this warrant.
Marketing and sales expenses consist primarily of advertising, public
relations and promotional expenditures, and all related payroll and related
expenses for personnel engaged in marketing and selling activities. Marketing
and sales expenses for the nine months ended September 30, 2000 and 1999, were
approximately $7,176,000 and $878,000. Included in this expense was
approximately $408,000 resulting from the amortization of the Margaritaville
warrant recorded in the period ending September 30, 2000
Product and technology development expenses consist principally of
payroll and related expenses for product development, editorial, systems and
operations personnel and consultants, and systems infrastructure. Operating and
development expenses for the nine months ended September 30, 2000 and 1999 were
approximately $4,511,000 and $893,000 respectively.
General and administrative ("G&A") expenses consist of payroll and
related expenses for executive, finance and administrative personnel,
professional fees and other general corporate expenses. G&A expenses for the
nine months ended September 30, 2000 and 1999 were approximately $2,079,000 and
$1,529,000 respectively.
We incurred approximately $724,000 and $761,000 for the nine months
ended September 30, 2000 and 1999, respectively, in non-cash compensation
expenses. The non-cash compensation expenses resulted from stock options granted
to consultants, stock options granted to celebrities who provided services to
StarGreetings and the compensation expense associated with the cash-less
exercise of stock options.
Interest income on cash and cash equivalents for the nine months ended
September 30, 2000 and 1999, was approximately $644,000 and $43,000,
respectively. The increase in income was due to higher cash and investment
balances resulting from our financing activities, principally the private
placement of Series B, C, and D Preferred Stock completed in 1999, and Series E
and F completed in 2000.
Interest expense for the nine months ended September 30, 2000 and
1999, was approximately $11,000 and $1,004,000, respectively. The interest
expense in 2000 was related to a line of credit in our subsidiary iParty Retail
Stores Corp. The interest expense in 1999 was related to convertible notes
payable that were converted to preferred stock in September 1999.
Page 10
<PAGE>
Liquidity and Capital Resources
We used cash in operating activities for the nine months ended
September 30, 2000 and 1999 totaling $15,471,000 and $2,357,669, respectively.
In addition, we invested cash in property and equipment, including web site
development expenditures for the nine months ended September 30, 2000 and 1999
totaling $797,000 and $1,152,000, respectively. During 1999, we raised
$21,593,000, net of offering expenses, in financing with the proceeds being used
for working capital and capital expenditures. For the nine months ending
September 30, 2000 we raised $2,491,035 net of offering expenses.
In 1999, we raised an aggregate of $28.5 million in equity financing.
In January and February of 1999, we received net proceeds of $650,000 from the
exercise of warrants for Series A convertible preferred stock. In August,
September and December of 1999, we sold an aggregate of $27.9 million of
convertible preferred stock and redeemable common stock purchase warrants in
private offerings. The financings included the conversion of our $2.0 million of
outstanding senior debt. Net proceeds to us from the financings were
approximately $26.3 million (including the conversion of the $2.0 million in
debt and interest thereon). In September 2000, Paragon Capital issued a $7.5
million line of credit, secured by inventory, to the iParty Retail Stores Corp.
As of September 30,2000, the portion of the line of credit in use was $1.6
million.
We believe, based on currently proposed plans and assumptions relating
to its operations, that the net proceeds from the financings and related
interest income, together with anticipated revenues from operations and the line
of credit, will be sufficient to fund our operations and working capital
requirements for at least twelve months. In the event that our plans or
assumptions change or prove inaccurate (due to unanticipated expenses, increased
competition, unfavorable economic conditions, or other unforeseen circumstances)
we could be required to seek additional financing sooner than currently
expected. There can be no assurance that such additional funding will be
available to us, or if available, that the terms of such additional financing
will be acceptable to us.
Acquisition
On August 3,2000 iParty Corp formed a subsidiary corporation, iParty Retail
Stores Corp. On August 15, 2000, iParty Retail Stores Corp. paid $4,858,289 for
33 building leases, fixtures and inventory from The Big Party Corporation.
PART II OTHER INFORMATION
Item 6. Exhibits.
(a) Exhibit 27.1 Financial Data Schedule
(b) During the period commencing last quarter of the period covered by
this report to date, the following reports on Form 8-K were filed by the
Registrant:
Date of Report Item Reported Descriptioned Item
-------------- ------------- ------------------
August 30, 2000 Item 2. Acquisitioned The Company acquired certain
Assets assets from the Big Party
Item 5. Other Events Corporation that involved
33 retail stores. The
Company completed a private
placement of Series E
Convertible Preferred Stock
raising $2,000,000. The
proceeds of the private
placement were used to
finance the acquisition.
September 15, 2000 Item 5. Other Events The Company completed a
private placement of Series
F Convertible Preferred
Stock raising $500,000. The
proceeds of the private
placement were used in part
to finance the acquisition
of certain assets by the
Company of the Big Party
Corporation.
Page 11
<PAGE>
SIGNATURES
In accordance with requirements of the Securities Exchange Act, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
iPARTY CORP.
Dated: November 14,2000 By: /s/ Sal Perisano
-----------------------
Sal Perisano
Chief Executive Officer
By: /s/ Patrick Farrell
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Patrick Farrell
Page 12
