<PAGE>
UNITED STATES
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 June 30, 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. 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 August 17, 2000 is 8,258,000.
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONTENTS
PART 1 - FINANCIAL INFORMATION
------------------------------------------------------------------
ITEM 1. Consolidated Financial Statements:
Balance Sheets
June 30, 2000 (unaudited) and December 31,1999......... 3-4
Statements of Operations (unaudited)
Three Month Periods Ended June 30, 2000 and 1999......... 5
Six Month Periods Ended June 30, 2000 and 1999........... 6
Statement of Stockholders' Equity (unaudited)
Six Month Period Ended June 30, 2000 ................... 7
Statements of Cash Flows (unaudited)
Six Month Periods Ended June 30, 2000 and 1999........... 8
Notes to the Financial Statements......................9-10
ITEM 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................11-15
PART II - OTHER INFORMATION
--------------------------------------------------------------------------------
Signatures.....................................................16
2
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED BALANCE SHEET
As of June 30, 2000 and December 31, 1999
<TABLE>
ASSETS
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
-----------------------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $387,106 $1,086,585
Accounts receivable, less allowance for
doubtful accounts of $61,803 - -
Inventory - -
Marketable securities - 514,150
Other receivables 161,645 -
Prepaid insurance, current 69,736 76,225
Prepaid expenses and other current assets 54,062 68,801
--------------------------------
tal Current Assets 672,549 1,745,761
---------------------------------
Equipment
Computer equipment 45,583 7,517
Less accumulated depreciation (4,989) (502)
--------------------------------
Total Equipment 40,594 7,015
--------------------------------
Prepaid insurance, long term 16,583 49,835
Receivable from related party 110,884 8,995
Other assets - 18,495
--------------------------------
Total Assets $840,610 $1,830,101
================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED BALANCE SHEET
As of June 30, 2000 and December 31, 1999
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
-------------------------
<S> <C> <C>
Current liabilities
Notes payable $ 54,093 $ 87,516
Loan from parent company - 64,295
Accounts payable 25,540 23,838
Accrued expenses 150,042 104,829
------------------------
Total Current Liabilities 229,675 280,478
Notes payable - Long term - 12,693
------------------------
Total liabilities 229,675 293,171
------------------------
Stockholders' equity
Convertible Preferred Stock, cumulative 7%, $.001
par value; authorized 5,000,000 shares; issued and
outstanding. 1 1
Common Stock, $.001 par value; authorized
50,000,000 shares; issued and outstanding 8,324,000
and 8,036,000. 8,324 8,036
Additional paid-in capital 2,565,886 2,387,826
Accumulated deficit (1,963,276) (858,933)
---------------------------
Total Stockholders' Equity 610,935 1,536,930
Total Liabilities & Stockholders' Equity $ 840,610 $1,830,101
===========================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
2000 1999
-----------------------
<S> <C> <C>
Net revenues $ 25,000 $ 576,613
Cost of sales - 234,366
------------------------
Gross profit 25,000 342,247
Operating expenses
Research and development 1,500 2,427
Sales and marketing 181,138 168,560
General and administrative 340,989 2,717
Total operating expenses 523,627 173,704
Income (Loss) from operations (498,627) 168,543
Other income
Total other income 7,769 84,441
-----------------------
7,769 84,441
Net income (loss) (490,858) 252,984
======================
Basic and diluted net income (loss) per common share $ (0.06) $ 0.03
----------------------
Basic and diluted weighted average shares of
common stock 8,275,956 8,010,553
=======================
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
---------------------------------
<S> <C> <C>
Net revenues $ 51,988 $ 739,709
Cost of sales - 501,538
----------------------------------
Gross profit 51,988 238,171
Operating expenses
Research and development 27,421 4,895
Sales and marketing 381,720 386,793
General and administrative 763,118 182,991
----------------------------------
Total operating expenses 1,172,259 574,679
Loss from operations (1,120,271) (336,508)
Other income
Other income - -
Interest income 15,129 477
---------------------------------
Total other income 15,129 477
----------------------------------
Loss, before extraordinary item (1,105,142) (336,031)
Extraordinary gain on extinguishment of debt - 84,441
Net loss $(1,105,142) $ (251,590)
=====================================
Basic and diluted net loss per common share:
Loss before extraordinary item $ (0.13) $ (0.04)
Extraordinary gain on extinguishment of debt - .01
-------------------------------------
Basic and diluted net loss $ (0.13) $ (0.03)
====================================
Basic and diluted weighted average shares of
of common stock 8,324,000 8,010,553
====================================
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------------ ------------------------
Shares Amount Shares Amount
---------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1, 2000 600 1 8,036,000 $8,036
Issuance of stock for services 288,000 288
Issuance of warrants and
options for services
Net Loss ------------------------------------------------
Balance, June 30, 2000 600 1 8,324,000 $8,324
=================================================
</TABLE>
<TABLE>
<CAPTION>
Additional
Paid-In Accumulated
Capital Deficit Total
------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 2000 $2,387,826 $ (858,134) $1,537,729
Issuance of stock for services 86,272 86,560
Issuance of warrants and
options for services 91,788 91,788
Net Loss (1,105,142) (1,105,142)
-------------------------------------------------
Balance, June 30, 2000 $2,565,886 $(1,963,276) $ 610,935
=================================================
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000 June 30, 1999
--------------------------------------
<S> <C> <C>
Increase (Decrease) in Cash and
Cash Equivalents
Cash flows from operating activities:
Net loss $(1,105,142) $ (251,590)
Allowance for doubtful accounts 40,331
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 4,487 -
Changes in operating assets and liabilities:
Accounts receivable, trade - 627,494
Other receivables (161,645)
Inventories - (55,934)
Prepaid expenses and other current assets 54,480 (456)
Payroll taxes payable (23,838) -
Accounts payable (37,956) (167,576)
Other assets 18,495 -
Accrued expenses 45,213 14,786
---------------------------------
Cash and cash equivalents provided by (used in)
operating activities (1,027,558) 207,055
----------------------------------
Cash flows from investing activities:
Proceeds from sale of marketable securites 514,150 -
Purchase of computer equipment (38,066) (2,975)
---------------------------------
Cash and cash equivalents provided by (used in)
investing activities 476,084 (2,975)
Cash flows from financing activities:
Loan from related parties (101,889) (261,386)
Proceeds from notes payable (46,116) -
-------------------------------
Cash and cash equivalents used in
financing activities (148,005) (261,386)
Decrease in cash and cash equivalents (699,478) (57,306)
Cash and cash equivalents, beginning of period 1,086,585 243,834
--------------------------------
Cash and cash equivalents, end of period $ 387,106 $ 186,528
=================================
</TABLE>
See accompanying notes to consolidated financial statements
8
<PAGE>
HOLLYWOOD PARTNERS.COM, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - GENERAL
The Company has positioned itself to service its client base in the
areas of marketing, branding and distribution. Using the Company's tie-ins to
entertainment and sports properties, the Company provides strategic solutions to
help clients to achieve their marketing and business objectives. The Company
will generate revenue by charging the client base for its promotional packages,
and by utilizing the registered database for back end commerce and demographic
enhancement.
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 reporting periods presented.
The unaudited consolidated financial statements have been prepared on
the same basis as the audited consolidated financial statements for the year
ended December 31, 1999 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 statements 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.
NOTE 3 - RELATED PARTY
As of June 30, 2000, the Company is owed $110,884 from its majority
shareholder, Vitafort International Corporation.
9
<PAGE>
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 second quarter, the Company added 2 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 $3.125 per share, vesting immediately upon grant. These options
expire three years from grant.
NOTE 6 - LITIGATION
The Company is not subject to any pending claims or litigation.
NOTE 7 - SUBSEQUENT EVENTS
On July 1, 2000, Eugene Scher assumed the position of President of the
Company following Lee M. Lambert's resignation at the termination of his
contract on June 30, 2000.
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 quarterly report.
Three Months and Six Months Ended June 30, 2000 and 1999
Results of Operations:
As a result of the rapidly changing dynamics in marketing and the
world of the Internet, the Company has modified its positioning, and as a result
it may not be meaningful to compare at the first half revenues of 1999 and
2000. Although we still believe strongly that the Internet is the
the most cost effective method to produce sales, generate store traffic
and build a stronger back end business, we believe that this strategy must be
incorporated into a larger scheme and not be incorporated as a "stand alone
strategy."
10
<PAGE>
Our Website offers visitors opportunities to win free prizes
and receive entertainment-oriented information in exchange for simple
opt-in registration. We intend to utilize the demographic and psychographic
information collected by the registration to generate store traffic and
allow us to send appropriate offers from our marketing partners. Once our
Website generates sufficient traffic, we can also utilize it as a source for
branding, advertising and back-end business development.
The experience of our managemente team and the support of our eclectic
advisory board, enables us to create unique and functional programs combining
various components from the fields of entertainment, sports and business
that will keep our customer base pleased with the results. To date revenues
are minimal because of the changes in the base model, but we are now focused
on retaining retailers, manufacturers and Fortune 2000 companies as clients
for the upcoming quarters.
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:
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 education capabilities than are generally offered on
other sweepstakes Websites.
BigTimeHollywood.com (launched May 2000) - a new e-magazine that offers
original content plus news, games and reference information about the
entertainment industry, with a primary focus toward movies and
television. The features and other information provided on this
Website are aimed to both entertain and inform the visitor
about the entertainment industry.
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 PlanetFree, 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
11
<PAGE>
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, Warner Bros., Jam Productions, GiftCertificates.com(TM),
Sony, Best Buy, Lions Gate and MyIvan.com.
Net Revenues
For the three months ended June 30, 2000, net sales were $25,000 compared
to $576,613 for the same period in 1999, a decrease of $551,613 or approximately
96%. 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.
For the six months ended June 30, 2000, net sales were $51,988 compared
to $739,709 for the same period in 1999, a decrease of $687,721 or approximately
93%. 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.
Gross Profit
Gross profit decreased from $342,247 for the three months ended June 30,
1999 to $25,000 for the three months ended June 30, 2000, a decrease of $317,247
or 93%. Gross profit was 100% of net revenues for the quarter ended June 30,
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.
Gross profit decreased from $238,171 for the six months ended June 30,
1999 to $51,988 for the six months ended June 30, 2000, a decrease of $186,183
or 78%. Gross profit was 100% of net revenues for the six months ended June 30,
2000, compared to 32% 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.
Research and Development
Total research and development expenses for product development in the
three months ended June 30, 2000 were $1,500 compared to $2,427 for the same
period in 1999, a decrease of $927, or 38%. 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.
12
<PAGE>
Total research and development expenses for product development in the
six months ended June 30, 2000 were $27,421 compared to $4,895 for the same
period in 1999, an increase of $22,526, or 460%. For the six month 1999 period,
these expenses were for the development of food products. For the six 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 June 30,
2000, were $181,138 compared to $168,560 for the three months ended June 30,
1999, an increase of $12,578, or 7%. 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.
Total sales and marketing expenses for the six months ended June 30,
2000, were $381,720 compared to $386,793 for the six months ended June 30, 1999,
a decrease of $5,073, or 1%. This decrease 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 which was greater than the amounts
spent in the prior year.
General and Administrative
For the three months ended June 30, 2000, total general and
administrative expenses were $340,989 compared to $2,717 for the same quarter
ended June 30, 1999, an increase of $338,272. This increase is due to the
increase of staffing and administrative expenses to execute the Company's
business strategy to marketing and promotions on the Internet.
For the six months ended June 30, 2000, total general and
administrative expenses were $763,118 compared to $182,991 for the six months
ended June 30, 1999, an increase of $580,127. This increase is due to the
increase of staffing and other administrative expenses to execute the Company's
business strategy to marketing and promotions on the Internet.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
--------------------------
<S> <C> <C>
Net Cash Provided by (Used in) for Operations $(1,027,558) $ 207,055
Net Cash Used in Financing Activities (148,005) (261,386)
Net Cash Used in Investing Activities 476,084 (2,975)
Working Capital (Deficit) 442,874 (255,426)
</TABLE>
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
Website 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.
13
<PAGE>
Subsequent Events
On July 1, 2000 Eugene Scher, Chief Executive Officer, assumed the
position of President following Lee M. Lambert's resignation effective June 30,
2000.
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/ Eugene Scher
Eugene Scher
President
/s/ Fred Rigaud
Fred Rigaud
Acting Chief Financial Officer
Date: August 21, 2000
