<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission File Number 000-24755
HOLLYWOOD PARTNERS.COM, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0379106
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1800 Avenue of the Stars, Suite 480, Los Angeles, CA 90067
(Address of principal executive offices) (Zip Code)
(310) 552-0555
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act of 1934
during the preceding twelve months ended December 31, 1998 (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 ninety days.
Yes: X No:
The number of shares of the Registrant's Common Stock, par value
$.001 per share outstanding on November 15, 1999 is 8,000,000.
1
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HOLLYWOOD PARTNERS.COM, INC.
CONTENTS
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<C> <S>
ITEM 1. Consolidated Financial Statements:
Balance Sheets - September 30, 1999 (unaudited)
and December 31, 1998 3
Statements of Operations (unaudited):
Three Month Periods Ended September 30, 1999 and 1998 5
Nine Month Periods Ended September 30, 1999 and 1998 6
Statement of Stockholders' Equity (Deficit)(unaudited):
Nine Month Period Ended September 30, 19 7
Statements of Cash Flows (unaudited)
Nine Month Periods Ended September 30, 1999 and 1998 8
Notes to the Financial Statements 10
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION
ITEM 5. Other Information 14
Signature 15
</TABLE>
2
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HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED BALANCE SHEET
As of September 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
ASSETS
September 30,
1999 December 31,
(Unaudited) 1998
--------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 427,035 $ 243,834
Accounts receivable, less allowance
for doubtful accounts of $61,803
and $21,472 208,016 819,856
Inventories 258,162 94,932
Prepaid expenses and
other current assets 108,120 111,813
--------- -----------
Total Current Assets 1,001,334 1,270,435
Equipment
Computer equipment 4,804 -
-------- -----------
4,804 -
Less accumulated depreciation - -
-------- ----------
Total Fixed Assets 4,804 -
---------- ----------
Total Assets $1,006,138 $1,270,435
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
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HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED BALANCE SHEET
As of September 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30,
1999 December 31,
(Unaudited) 1998
--------- ---------
<S> <C> <C>
Current liabilities
Loan from related parties $272,343 $953,301
Convertible notes payable 375,000 -
Accounts payable 117,256 252,668
Accrued expenses 90,652 66,127
-------- ---------
Total Current Liabilities 855,252 1,272,096
Stockholders' equity (deficit)
Common stock, $.001 par value;
authorized 1,000,000 shares; issued
and outstanding 1,000 shares 8,000 8,000
Additional paid-in capital 500,000 -
Accumulated deficit (357,114) (9,661)
-------- ---------
Total Stockholders' Equity (deficit) 150,886 (1,661)
------- ---------
Total Liabilities & Stockholders' Equity $1,006,138 $1,270,435
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
-------- -----------
<S> <C> <C>
Net revenues $279,446 $ 553,944
Cost of sales 99,130 286,876
-------- ----------
Gross profit 180,316 267,067
Operating expenses
Research and development 7,594 81,772
Sales and marketing 182,172 193,557
General and administrative 86,313 13,228
-------- ----------
Total operating expenses 276,079 288,557
Loss from operations (95,763) (21,490)
Other income (expense) - 4,502
--------- -----------
Total other income - 4,502
--------- -----------
Net loss allocable to common shareholders $(95,763) $ (16,988)
======== ===========
Basic and diluted net loss per common share $ (0.01) $ (0.002)
======== ==========
Basic and diluted weighted average
shares of common stock 8,000,000 8,000,000
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
5
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HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
----------- ---------
<S> <C> <C>
Net revenues $1,019,155 $708,587
Cost of sales 600,667 398,481
----------- --------
Gross profit 418,488 310,105
Operating expenses
Research and development 12,489 208,291
Sales and marketing 568,965 256,725
General and administrative 269,404 63,125
------- -------
Total operating expenses 850,858 528,141
Loss from operations (432,370) (218,036)
Other income (expense)
Other income (expense) 84,441 5,731
Interest income 476 -
------ -------
Total other income (expense) 84,917 5,731
Net loss allocable to
common shareholders $(347,453) $(212,305)
========= ==========
Basic and diluted net loss
per common share $ (0.04) $ (0.03)
========== ===========
Basic and diluted weighted average
shares of common stock 8,000,000 8,000,000
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
Shares Amount
--------- --------
<S> <C> <C>
Balance, January 1, 1999 8,000,000 $ 8,000
Prior year adjustment
Shareholders' contribution
Net Loss
--------- --------
Balance, September 30, 1999 8,000,000 $ 8,000
========= ========
</TABLE>
<TABLE>
<CAPTION>
Common Stock
Additional
Paid-In Accumulated
Capital Deficit Total
---------- ---------- ---------
<C> <C> <C>
Balance, January 1, 1999 $ - $ (9,661) $ (1,661)
Shareholders' contribution 500,000 500,000
Net Loss (347,453) (347,453)
--------- --------- ---------
Balance, September 30, 1999 $500,000 ($357,114) $150,886
======== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1999 1998
---------- ---------
<S> <C> <C>
Increase (Decrease) in Cash and
Cash Equivalents
Cash flows from operating activities:
Net loss $(347,450) $(212,305)
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable, net 611,840 (141,272)
Inventories (163,231) (236,687)
Prepaid expenses and other current assets 3,693 (74,419)
Loan from related parties (680,958) 411,822
Accounts payable (135,412) 239,219
Accrued expenses 24,526 7,128
-------- -------
Cash and cash equivalents used
in operating activities (686,995) (6,514)
Cash flows from investing activities:
Purchase of computer equipment (4,804) -
-------- ------
Cash and cash equivalents used
in investing activities (4,804) -
Cash flows from financing activities:
Proceeds from additional paid-in capital 500,000 -
Proceeds from convertible notes payable,
short term 375,000 -
------- --------
Cash and cash equivalents provided by
financing activities 875,000 -
------- -------
Increase (decrease) in cash and 183,201 (6,514)
cash equivalents
Cash and cash equivalents, beginning
of period 243,834 -
--------- ---------
Cash and cash equivalents, end of period $ 427,035 $ (6,514)
======== =========
</TABLE>
8
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1999 1998
---------- ----------
<S> <C> <C>
Supplemental disclosure of non-cash
operating, investing, and
financing activities
6 to 1 forward split of common stock $ 7,500 -
</TABLE>
See accompanying notes to consolidated financial statements
9
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
The unaudited consolidated financial statements have been prepared on the
same basis as the audited consolidated financial statements and, in the
opinion of management, reflect all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation for each of the
periods presented. The results of operations for interim periods are not
necessarily indicative of results to be achieved for full fiscal years.
As contemplated by the Securities and Exchange Commission (SEC) under item
310(b) of Regulation S-B, the accompanying consolidated financial statements
and related footnotes do not contain certain information that will be
included in the Company's annual consolidated financial statements and
footnotes thereto.
The Company is presently engaged in developing on line sweepstakes, marketing
and promotions site on the Internet. The Company also licenses intellectual
properties from third parties and develops branded food and confection
products.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All material intercompany accounts and
transactions have been eliminated.
(b) Inventories are stated at the lower of cost (first-in, first-out basis)
or market.
(c) Prepaid assets include product introduction expenses (which are recorded
at cost and amortized over the economic life thereof), but not in excess of
twelve months, consulting and other prepaids.
(d) Fixed assets are composed of computer equipment and are recorded at
cost. Depreciation is computed on a straight-line basis over the estimated
useful life, generally five years or less.
(e) For the purpose of cash flow, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
(f) For the three and nine months ended September 30, 1999, basic loss per
share has been computed using the weighted average number of common shares
outstanding during the period.
10
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NOTE 3 - INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or
market. Inventory consists of the following:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -------------------
<S> <C> <C>
Finished goods $ 236,967 $ 43,242
Packaging and raw material 21,195 51,690
----------- ----------
$ 258,162 $ 94,932
========== ===========
</TABLE>
NOTE 4 - STOCKHOLDERS' EQUITY
The Company undertook a 6 to 1 forward split of its issued outstanding
common stock to increase its authorized share capital to 50,000,000
shares of common stock, par value $0.001. Under the terms of its Share
Exchange and Reorganization Agreement, the Company issued 5,000,000 shares
of common stock.
NOTE 5 - GOING CONCERN
The Company has prepared the financial statements included herewith assuming
that the Company will continue as a going concern.
NOTE 6 - LITIGATION
The Company is not subject to any pending claims or litigation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AS
RESULTS OF OPERATIONS
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995:
Except for historical facts, all matters discussed in this report which are
forward looking involve a high degree of risks and uncertainties. Potential
risks and uncertainties include, but are not limited to, competitive
pressures from other food companies and within the grocery industry, economic
conditions in the Company's primary markets and other uncertainties detailed
from time to time in the Company's Securities and Exchange Commission
filings.
11
<PAGE>
Three Months and Nine Months Ended September 30, 1999 and 1998
Results of Operations:
In the third quarter, management targeted four critical areas to focus the
Company's resources. The first initiative was to further develop the food
broker infrastructure that would maintain the Company's current distribution
and provide support and momentum for the reintroduction of "The Wizard of Oz"
line with its new packaging, featuring different characters for each
flavors, and the introduction of the white marshmallows. At the beginning of
the quarter, the broker coverage for Hollywood Partners products was less
than 35%. With the appointment of Crossmark Sales and Marketing in 12
Midwest markets, the Company increased its broker representation to over 85%
of U.S. markets.
The Company's product development initiative also included the redesign of
the packaging of "The Wizard of Oz" line of marshmallow snacks. The product
line that had generated a significant percentage of the Company's sales over
the previous two quarters lost momentum the previous quarter due to delays in
the change of packaging and delays in the introduction of a new white
marshmallow. This strategic redesign was implemented to create uniqueness
among each of the five flavors (featuring a different character on each
package) and to conform with Warner Bros. style guide, which was not
available when the Company first introduced this product line. The initial
response to both the new package design and the white marshmallow has been
very positive as the Company shipped its initial orders to Albertsons and
Save-Mart during August.
Logistical inefficiencies were also addressed in the second quarter as the
Company changed the location of its principal public warehouse from Laredo,
TX to Quincy, IL. This location is centrally located to the Company's three
major manufacturing facilities and is also centrally located to its customers
throughout the country. Management believes that changing the location of
the Company's warehouse will enable it to give better service to its
customers and to achieve certain shipping efficiencies.
Net Revenues:
For the three months ended September 30, 1999, net sales were $279,446
compared to $ 553,944 for the same period in 1998, a decrease of $274,498, or
approximately 50%. This decrease in revenue was due to the redesign of the
packaging of "The Wizard of Oz" line of marshmallows to conform with the
Licensor new style guide. Orders were held by customers awaiting the
introduction of the new packaging.
For the nine months ended September 30, 1999, net sales were $1,019,156
compared to $708,587 for the same period in 1998, an increase of $310,568 or
43%. This was due primarily to sales of "The Wizard of Oz" line of
products.
12
<PAGE>
Gross Profit:
Gross profit decreased from $267,067 for the three months ended September 30,
1998 to $180,316 for the three months ended September 30, 1999, a decrease of
$86,751 or 32%. Gross profit was 64.5% of net revenues for the quarter ended
September 30, 1999, compared to 48.2% for the same period of 1998. Part of
this increase is due to free merchandise given to the Company by the
manufacturer in lieu of product shipped in the prior quarter that did not
meet the quality assurance standards of the Company.
Gross profit increased from $310,105 for the nine months ended September 30,
1998 to $418,488 for the nine months ended September 30, 1999, an increase of
$108,383 or 35%. The increase is due to the favorable mix of "The Wizard of
Oz" products sold at much higher profit margins.
Operating Expenses:
Research and Development - Total expenses for product development in the
three months ended September 30, 1999 were $7,594 compared to $81,772 for the
same period in 1998, a decrease of $74,178. This is in line with the
Company's on-going strategy to source from existing manufacturers and use
their internal research and technical staff to develop the new products.
Research and Development - Total expenses for product development in the nine
months ended September 30, 1999 were $12,489 compared to $208,291 for the
same period in 1998, a decrease of $195,802.
Sales and Marketing:
Total sales and marketing expenses for the three months ended September 30,
1999 were $182,172 compared to $193,557 for the three months-ended September
30, 1998, a decrease of $11,305. This decrease in expenses was primarily due
to lower sales promotion costs.
Total sales and marketing expenses for the nine months ended September 30,
1999 were $568,965 compared to $256,725 for the nine months ended September
30, 1998, an increase of $312,240. This was due to higher slotting costs paid
to new customers, increase in freight out expenses and the cost of additional
sales consultants.
General and Administrative:
For the three months ended September 30, 1999, total general and
administrative expenses were $86,313 compared to $13,228 for the same quarter
ended September 30, 1998, an increase of $73,085.
For the nine months ended September 30, 1999, total general and
administrative expenses were $269,404 compared to $63,125 for the same period
ended September 30, 1998, an increase of $206,279. The increase of
administrative expenses in 1999 were caused by management's decision to
establish a fully integrated organization to sustain the planned growth of
the Company, and to support a change in business focus to transition the
Company to an Internet marketing and promotions company (See Item 5 - Other
Information).
13
<PAGE>
Liquidity and Capital Resources:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
------------------
<S> <C> <C>
Net Cash Used for Operations $(686,995) $ (6,514)
Net Cash Provided by Financing Activities 875,000 -
Net Cash (Used in) Investing Activities (4,804) -
Working Capital Surplus (Deficit) 146,082 (1,661)
</TABLE>
The Company is increasing spending levels to allow for the transition of
focus from the prior business formulating, marketing and distributing food
products to a new business strategy to develop a marketing and promotions
Web site on the Internet (See Item 5 - Other Information). The Company
received a $2 million funding commitment to support this change in focus and
to allow for increased expenditures. As of September 30, 1999, $500,000
of this commitment was received, and as of November 12, 1999, all $2 million
of this commitment was received. Due this to transition of focus and the
requirements to initiate and grow the new business strategy, the Company
expects to incur operating losses for the foreseeable future and requirements
for additional financing.
The Company continues to expend resources in the product development area for
the scheduled introduction of new products. However, there is no guarantee
that these products, once introduced in the market, will achieve the
anticipated level of sales forecast by the Company nor reach the gross profit
margin targeted by the Company for each of the products.
PART II - OTHER INFORMATION
ITEM 2 - Changes in Securities and Use of Proceeds
Effective September 13, 1999, pursuant to a Share and Reorganization
Agreement, the Company acquired all the issued and outstanding shares of
Hollywood Partners, Inc., a California corporation ("Operating Company") that
previously operated as a wholly owned subsidiary of Vitafort International
Corporation, a publicly traded Delaware corporation ("Vitafort"). In
consideration of the shares of the Operating Company, the Company issued an
aggregate of 5,000,000 shares of its common stock to Vitafort. The shares
were issued pursuant to the exemption from registration provided by Section
4(2) of the Securities Act of 1933.
ITEM 5 - Other Information
Effective September 13, 1999, pursuant to a Share and Reorganization
Agreement, the Company acquired all the issued and outstanding shares of
Hollywood Partners, Inc., a California corporation ("Operating Company") that
previously operated as a wholly owned subsidiary of Vitafort International
14
<PAGE>
Corporation, a publicly traded Delaware corporation ("Vitafort"). In
consideration of the shares of Operating Company, the Company issued an
aggregate of 5,000,000 shares of its common stock to Vitafort. Operating
company is now a wholly owned subsidiary of Company and Vitafort is the
majority stockholder of Company, holding 62.5% of company's issued and
outstanding common stock. In connection with the transaction, the Company
also changed its name to "Hollywood Partners.com, Inc."
The Company is implementing a new strategy to create an online sweepstakes,
direct marketing and promotions capabilities to leverage the Company's
current relationships in both the food and entertainment industries. This
strategy will co-brand Hollywood Partners.com sweepstakes and services with
other companies and their products or services, and offer opportunities for
the Company to promote its own products. The Hollywood Partners.com initial
web site, launched at the end of September, features sweepstakes and
promotions that consumers may enter to win prizes such as shopping sprees,
gift certificates and other goods and services. The Company plans
significant enhancements to the Hollywood Partners.com and associated Web
sites during the first two quarters of year 2,000. In addition, the Company
will continue to develop and market licensed snack foods, utilizing these
products to promote sweepstakes opportunities on the Company's Web site.
Effective October 1, 1999, the Company changed its business model to phase
out its food manufacturing and distribution activities. The Company entered
into a master manufacturing and distribution agreement with Vitafort
which provides for Vitafort to oversee contract manufacturing, and to market
and distribute all existing Company food products in exchange for a royalty
based upon net product sales. Inventories will be reduced significantly over
the next two quarters as this transition of the business model is
implemented.
The Company will continue to develop licensed food products on a limited
basis, and intends to enter into similar master manufacturing and
distribution arrangements, which may or may not be made through Vitafort.
On October 12, 1999, the Company retired a convertible note in the amount
of $375,000 plus accrued interest of $6,512.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
2.0 Share Exchange Agreement and Plan of Reorganization (incorporated by
reference to exhibit 2.0 to the Company's current report on Form 8-K
filed September 28, 1999, FILE NO. 000-24755.)
3.0 Restated and Amended Certificate of Incorporation (incorporated by
reference to exhibit 3.0 to the Company's current report on Form 8-K
filed September 28, 1999, FILE NO. 000-24755.)
15
<PAGE>
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on September 28, 1999. The
Company reported items 1, 2, 5 and 7 with respect to the acquisition
described above under item 5. The current report on Form 8-K included
the following financial statements:
(1) Financial Statements of Business Acquired
The financial statements of Hollywood Partners, Inc. a California
corporation for the years ended December 31, 1998 and 1997 and for
the six months ended June 30, 1999, 1998 and 1997 (unaudited).
(2) Pro Forma Financial Information
Certain pro forma financial information relating to Hollywood
Partners.com, Inc., a Delaware corporation and giving effect to the
transactions described in the current report.
HOLLYWOOD PARTNERS.COM, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HOLLYWOOD PARTNERS.COM, INC.
(Company)
/s/ Lee M. Lambert
Lee M. Lambert
Chief Executive Officer
/s/ Fred Rigaud
Fred Rigaud
Acting Chief Financial Officer
Date: November 15, 1999
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 427,035
<SECURITIES> 0
<RECEIVABLES> 269,819
<ALLOWANCES> 61,803
<INVENTORY> 258,162
<CURRENT-ASSETS> 1,001,334
<PP&E> 4,804
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,006,138
<CURRENT-LIABILITIES> 855,252
<BONDS> 0
0
0
<COMMON> 8,000
<OTHER-SE> 142,886
<TOTAL-LIABILITY-AND-EQUITY> 1,006,138
<SALES> 1,019,155
<TOTAL-REVENUES> 1,019,155
<CGS> 600,667
<TOTAL-COSTS> 850,858
<OTHER-EXPENSES> 84,917
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (347,453)
<INCOME-TAX> 0
<INCOME-CONTINUING> (347,453)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (347,453)
<EPS-BASIC> (.04)
<EPS-DILUTED> 0
</TABLE>
