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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] 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.
incorporation or organization) Employer
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 May 19, 2000 is 8,324,000.
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HOLLYWOOD PARTNERS.COM, INC.
CONTENTS
PART 1 - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements:
Balance Sheets - March 31, 2000 (unaudited)
and December 31, 1999 3-4
Statements of Operations (unaudited)
Three Month Periods Ended
March 31, 2000 and 1999 5
Statement of Stockholders' Equity (unaudited)
Three Month Period Ended March 31, 2000 6
Statements of Cash Flows (unaudited)
Three Month Periods Ended March 31, 2000 and 1999 7
Notes to the Financial Statements 8-10
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
PART II - OTHER INFORMATION
Signature........................ 15
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HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED BALANCE SHEET
As of March 31, 2000 and December 31, 1999
ASSETS
March 31, December 31,
2000 1999
(Unaudited)
Current assets
Cash and cash equivalents $ 901,160 $ 1,086,585
Marketable securities 162,145 514,150
Prepaid insurance, current 76,225 76,225
Prepaid expenses
and other current assets 91,505 68,801
Total Current Assets 1,231,035 1,745,761
Equipment
Computer equipment 32,095 7,517
Less accumulated depreciation (1,910) (502)
Total Equipment 30,185 7,015
Prepaid insurance, long term 29,964 49,835
Receivable from related party 81,681 8,995
Other assets - 18,495
Total Assets $ 1,372,865 $ 1,830,101
See accompanying notes to consolidated financial statements.
3
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HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED BALANCE SHEET
As of March 31, 2000 and December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2000 1999
(Unaudited)
Current liabilities
Notes payable $76,435 $87,516
Payroll taxes payable - 23,838
Accounts payable 61,497 64,295
Accrued expenses 133,940 104,829
Total Current Liabilities 271,872 280,478
Notes payable - 12,693
Total liabilities 271,872 293,171
Stockholders' equity
Convertible Preferred Stock,
cumulative 7%, $.001 par value;
authorized 5,000,000 shares;
issued and outstanding 600 shares 1 1
Common stock, $.001 par value;
authorized 50,000,000 shares;
issued and outstanding
8,036,000 shares 8,324 8,036
Additional paid-in capital 2,565,886 2,387,826
Accumulated deficit (1,473,217) (858,933)
Total Stockholders' Equity
(Deficit) 1,100,994 1,536,930
Total Liabilities
& Stockholders' Equity $1,372,865 $1,830,101
See accompanying notes to consolidated financial statements
4
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HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
2000 1999
Net revenues $ 26,988 $ 576,613
Cost of sales - 234,366
Gross profit 26,988 342,247
Operating expenses
Research and development 25,921 2,427
Sales and marketing 200,582 168,560
General and administrative 422,129 2,717
Total operating expenses 498,367 173,704
Income (Loss) from operations (621,644) 168,543
Other income 7,360 84,441
Total other income 7,360 84,441
Net income (loss) (614,284) 252,984
Basic and diluted net income
(loss) per common share $ (0.07) $ 0.03
Basic and diluted weighted average
shares of common stock 8,275,956 8,010,553
See accompanying notes to consolidated financial statements.
5
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HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 2000
(Unaudited)
Additional
Preferred Stock Common Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
Balance,
Jan 1, 2000 600 1 8,036,000 $8,036 $2,387,826 $(858,933)$1,536,930
Issuance
of Stock
for services 288,000 288 86,272 86,560
Issuance of
Warrants and
Options for
Services 91,788 91,788
Net Loss (614,284) (614,284)
Balance,
Mar 31, 2000 600 1 8,324,000 $8,324 $2,565,886 $(1,473,217)$1,100,994
See accompanying notes to consolidated financial statements.
6
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HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, 2000 March 31, 1999
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net income (loss) $(614,284) $252,984
Adjustment to reconcile net income
(loss) to net cash provided
by (used in) operating activities
Stock, warrants and options
issued for services 178,348 -
Depreciation & Amortization 1,408 17,184
Changes in operating assets and liabilities:
Other receivable (162,145) 396,111
Inventories - (172,678)
Prepaid expenses and
other current assets (2,833) 2,427
Other assets 18,495 -
Payroll taxes payable (23,838) -
Accounts payable (2,799) (200,559)
Accrued expenses 29,111 48,756
Cash and cash equivalents
provided by (used in)
operating activities (578,537) 344,225
Cash flows from investing activities:
Proceeds from sale of Marketable
Securities 514,150 -
Purchase of computer equipment (24,578) -
Cash and cash equivalents
provided by (used in)
investing activities 489,572
Cash flows from financing activities:
Loan from related parties (72,686) (207,515)
Proceeds from notes payable (23,774) -
Cash and cash equivalents
provided by (used in)
financing activities (96,460) (207,515)
Increase (decrease) in cash
and cash equivalents (185,425) 136,710
Cash and cash equivalents,
beginning of period 1,086,585 243,834
Cash and cash equivalents,
end of period $901,160 $380,544
See accompanying notes to consolidated financial statements.
7
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HOLLYWOOD PARTNERS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
The Company is presently engaged in developing an
online sweepstakes, marketing and promotions Website on the
Internet. The Company also licenses intellectual
properties from third parties and develops branded food and
confection products.
Effective September 13, 1999, the Company acquired all the
issued and outstanding shares of Hollywood Partners, Inc.
that previously operated as a wholly-owned subsidiary of
Vitafort International Corporation. The Company issued
5,000,000 shares of its common stock to Vitafort International
Corporation in connection with this acquisition and changed
its name to Hollywood Partners.com, Inc.
Previous to the acquisition, the Company had 3,000,000
shares of common stock outstanding and had only nominal
operations.
The accompanying financial statements have been
prepared on the basis that Hollywood Partners, Inc.
has been the acquirer for accounting purposes for the
entire reporting periods.
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 financial statements include
the results of Hollywood Partners, Inc., a wholly owned
subsidiary of Hollywood Partners.com, Inc. In addition,
all significant intercompany accounts have been eliminated.
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 accompanying
consolidated financial statement should be read in
conjunction with the more detailed financial statements,
and the related footnotes thereto, filed with the
Company's Annual Report on form 10-KSB for the year ended
December 31, 1999.
NOTE 2 - OTHER RECEIVABLES
Other receivables include a receivable from the sale
of marketable securities.
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NOTE 3 - RELATED PARTY
As of March 31, 2000, the Company is owed $81,681 from
its majority shareholder, Vitafort International Corporation.
NOTE 4 - NOTES PAYABLE
Represents primarily the amount of insurance costs
being financed by a financial institution. The note has
monthly payments of $6,347, bears interest at 8.92%, and
matures in February 2001.
NOTE 5 - STOCKHOLDERS' EQUITY
During the first quarter, the Company granted 140,000 warrants to purchase
common shares and 68,000 common shares to various consultants in
consideration for past and future services. The warrants were granted
at an exercise price of $1.37 and expire three years from grant. Of
the 140,000 warrants, 107,000 have been vested and 33,000 will be
vested at discretion of the Board of Directors. On January 13, 2000,
the Company issued 200,000 shares for services rendered to a consultant
to the predecessor company.
During the first quarter, the Company granted and vested 1,500,000 warrants
to purchase common shares at $1.37 per share and 20,000 common shares to
three strategic partners. The warrants were granted at an exercise price
of $1.37 and expire three years from grant.
During the first quarter, the Company added 12 persons to its Advisory
Board who have special expertise, knowledge and contacts that are
valuable for the Company. To attract and encourage participation form
these Advisory Board members, the Company offered each a package granting
25,000 warrants to purchase common shares at $1.37 per share vesting
immediately upon grant. These options expire three years from grant.
Based upon the fair value of the warrants and the shares upon the
respective dates of issuance, the Company recorded $166,910 in
consulting and compensation expenses during the first quarter of 2000,
and capitalized $11,150 in prepaid consulting services to be amortized
during the next four quarters.
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NOTE 6 - LITIGATION
The Company is not subject to any pending claims or litigation.
NOTE 7 - SUBSEQUENT EVENTS
Lee M. Lambert, the President, CEO and Treasurer of the Company,
has indicated to the Company that he does not intend to continue as an
officer or director of the Company upon expiration of his contract on
June 30, 2000. On May 16, 2000, Mr. Lambert resigned his positions as
CEO and Treasurer, and Eugene Scher, a Director of the Company, assumed
these positions.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
(Unaudited)
Cautionary Statement for Purposes of "Safe Harbor
Provisions" of the Private Securities Litigation Reform Act
of 1995. Certain statements contained in this Quarterly Report
on Form 10-QSB ("Form 10-QSB") constitute "forward-looking
statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve
known and unknown risks, uncertainties and other factors
that may cause our or our industry's actual results, levels
of activity, performance or achievements to be materially
different than any expressed or implied by these forward-
looking statements. These statements may be contained in
our filings with the Securities and Exchange Commission,
press releases, and written or oral presentations made by
our representatives to analysts, rating agencies,
stockholders, news organizations and others. In some cases,
you can identify forward-looking statements by terminology
such as "may," "will," "should," "intend", "expects,"
"plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue," or the negative of
these terms or other comparable terminology. Although we
believe that the expectations in the forward-looking
statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements.
See also the information set forth in Exhibit 99.1 on our
Form 8-K dated January 21, 2000 titled "RISK FACTORS,"
incorporated herein to this annual report.
Three Months Ended March 31, 2000 and 1999
Results of Operations:
Because the Company changes its focus from marketing
Snack foods to an Internet strategy, comparisons of the
Company's first quarter of 1999 and 2000 may not be
meaningful. Hollywood Partners.com (the "Company") is a
marketing and promotions company building a family of
content, community and commerce opportunities offered to
Website visitors. Using entertainment-themed Websites, we
present both proprietary and sourced content to build
relationships with Website visitors and to collect their
demographic and lifestyle information. We expect to obtain
revenues from many sources including sweepstakes
sponsorships, Website sponsorships and allowing access to
our registered users ("Members") who have given permission
for us to send them offers from marketing partners. To
date, revenues from these sources have been minimal as the
Company's website was not presenting all of its planned
features during the quarter and sales cycles based on the
new site have just begun.
We launched our initial Website in September 1999
under the URL www.HollywoodPartners.com. This Website was
used to post and manage a number of sweepstakes contests
for various customers and partners, coming from industries
such as food manufacturing, entertainment, publishing,
sporting goods and concert promotion. In the second
quarter, we are re-launching our Internet offerings with
two new Websites under a HollywoodPartners.com brand
umbrella:
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PlanetFree.com (launched May 2000) - a new sweepstakes Website
that replaced the sweepstakes functions of the prior
hollywoodpartners.com Website and that initially can host
up to 20 sweepstakes at one time. This Website is designed
to host sweepstakes and promotions for retailers and
manufacturers who we believe are seeking a higher level of
branding and capability to educate than generally offered
on other sweepstakes Websites.
BigTimeHollywood.com - a new e-magazine that will offer
original content plus news, games and reference information
about the entertainment industry, primarily focused toward
movies and television. The features and other information
we provide on this Website are aimed to both entertain and
inform the visitor about the entertainment industry, how it
works and why.
As part of our mission, we also strive to be a
socially responsible company. In our normal course of
business, we attempt to integrate environmental
organizations and charitable causes into our content. For
example, PlanetFree.com contains links to environmental
organizations and many of our sweepstakes are expected to
have tie-ins to charities. We promote support of charities
and encourage co-sponsorship of charities as a part of our
regular sales program.
We intend to use the Hollywood Partners.com brand
as an "umbrella" to build, partner or acquire additional
complementary Websites that offer unique content for our
visitors. As this group of associated Websites builds, we
plan to increase the relationship we have with our visitors
and increase our ability to effectively conduct direct
marketing activities with them.
Revenues to date have been minimal for the Company's
new business model. Prior to the launch of Planet Free,
we have used our Website as a demonstration to prove
our capabilities to successfully conduct sweepstakes
promotions, to collect registration information from our
visitors and to refer visitors to information or e-commerce
opportunities. Companies we have worked with or who have
committed to working with us in the next twelve months as
sweepstakes licensors, sweepstakes or product sponsors
include Rite-Aid, Johnson & Johnson, eMap Publishing,
Warner Bros., Jam Productions, GiftCertificates.com(TM), S3
and Vitafort International Corporation, an affiliated
company.
Net Revenues
For the three months ended March 31, 2000, net
sales were $26,988 compared to $576,613 for the same period
in 1999, a decrease of $549,625 or approximately 95%. This
decrease in revenue was due to the Company's change in
strategy to exit the snack food manufacturing and
distribution businesses and to develop its marketing and
promotions business on the Internet. Revenues for the
period reflect sweepstakes services performed for Vitafort
International Corporation, the majority owner of the
Company.
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Gross Profit
Gross profit decreased from $342,247 for the three
months ended March 31, 1999 to $26,988 for the three
months ended March 31, 2000, a decrease of $315,259 or 1,168%.
Gross profit was 100% of net revenues for the quarter ended
March 31, 2000, compared to 59% for the same period of
1999. The decrease of the amount of gross profit is due to
the change in Company strategy, and reflects the decrease
in net revenues from this change. The increase in the
gross margin percentage reflects the new business strategy
to exit the manufacturing and distribution business model
and to initiate a technology-based business model.
Operating Expenses
Research and Development - Total expenses for product
development in the three months ended March 31, 2000 were
$25,921 compared to $2,427 for the same period in
1999, a decrease of $23,494, or 968%. For the three month
1999 period, these expenses were for the development of
food products. For the three month 2000 period, these
expenses were primarily for the development of our Website
offerings and technology underlying the Website.
Sales and Marketing
Total sales and marketing expenses for the three
months ended March 31, 2000, were $200,582 compared to
$168,560 for the three months ended March 31, 1999, an
increase of $32,022, or 19%. This increase is primarily due
to the cost of design and development of the Company's new
Websites on the Internet and the cost of promoting its new
business strategy was greater than the amounts spent
marketing snacks in the prior year.
General and Administrative
For the three months ended March 31, 2000, total
general and administrative expenses were $271,864 compared
to $2,717 for the same quarter ended March 31, 1999, an
increase of $269,147 or 990%. This increase is due to
the change of the Company's business strategy to marketing
and promotions on the Internet.
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Liquidity and Capital Resources
Three Months Ended
March 31,
2000 1999
Net Cash Provided by
(Used in) Operations $(578,537) $ 334,225
Net Cash Provided by
Financing Activities 489,572 -
Net Cash Used in
Investing Activities (96,460) -
Working Capital 959,163 1,465,283
The Company is increasing spending levels to allow
for the transition of focus from the prior business of
formulating, marketing and distributing food products to a
new business strategy to develop a marketing and promotions
Web site on the Internet. The Company received a $2 million
funding commitment during 1999 to support this change in
focus and to allow for increased expenditures. The Company
has suffered recurring losses from operations. The Company
is attempting to raise additional capital to meet future
working capital requirements, but may not be able to do so.
Should the Company not be able to raise additional capital,
it may have to severely curtail operations.
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.
Subsequent Events
Lee M. Lambert, the President, CEO and Treasurer of
the Company, has indicated to the Company that he does not
intend to continue as an officer or director of the Company
upon expiration of his contract on June 30, 2000. On May 16,
2000, Mr. Lambert resigned his positions as CEO and
Treasurer, and Eugene Scher, a Director of the Company,
assumed these positions.
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PART II - OTHER INFORMATION
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
President
/s/ Fred Rigaud
Fred Rigaud
Acting Chief Financial Officer
Date: May 19, 2000
