<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-26668
HITSGALORE.COM, INC.
- ------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 65-0036344
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10134 6TH Street, Suite J, Rancho Cucamonga, CA 91730
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (909) 481-8821
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Indicate by check mark whether the registrant (1) has 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
Number of shares outstanding of the issuer's Common Stock, par value .001 per
share, as of June 30, 1999 - 49,203,160 shares.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HITSGALORE.COM, INC.
BALANCE SHEETS
<TABLE>
June 30, December 31,
1999 1998
---------- ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 272,955 $ 1,013
Accounts and notes receivable trade, less
allowance for returns of $11,000 in 1999 1,312,199 --
Accounts receivable from officers and employees 60,500 --
Other current assets 32,688 971
---------- ------
Total current assets 1,678,342 1,984
Property and equipment, net of accumulated
depreciation of $26,675 and $1,883 329,323 29,750
Intangible assets, net of accumulated
amortization of $38,808 in 1999 426,892 --
---------- ------
Total assets $ 2,434,557 $ 31,734
========== ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of notes payable $ 13,609 $ --
Borrowings from affiliated company -- 22,699
Accounts payable 42,872 --
Accrued expenses and other current liabilities 7,500 7,776
Income taxes payable 157,752 252
Merger liabilities assumed 689,976 --
--------- ------
Total current liabilities 911,709 30,727
--------- ------
Long-term portion of notes payable 12,230 --
---------- ------
Total liabilities 923,939 30,727
---------- ------
Commitments and contingencies
Stockholders' equity:
Class A convertible preferred stock, stated
value and liquidation preference - $1.00 per
share; authorized 5,000,000 shares, issued and
outstanding 500,000 shares 55,000 --
Class B convertible preferred stock, stated
value and liquidation preference - $1.00 per
share; authorized 10,000,000 shares, issued and
outstanding 100,000 shares 54,764 --
Common stock, $.001 par value; authorized
50,000,000 shares, issued and outstanding
49,203,160 shares 49,203 --
Common stock, $0.001 value, 2,267,858 shares
to be issued 507,700 --
Additional paid in capital 11,306,716 --
Stock subscription receivable (10,000,000)
Retained earnings (accumulated deficit) ( 462,765) 1,007
---------- ------
Total stockholders' equity 1,510,618 1,007
---------- ------
Total liabilities and stockholders' equity $ 2,434,557 $ 31,734
========== ======
</TABLE>
See Notes to Financial Statements
<PAGE> 3
HITSGALORE.COM, INC.
UNAUDITED STATEMENTS OF OPERATIONS
<TABLE>
Six Months Three Months
Ended Ended
June 30, June 30,
1999 1999
---------- ----------
<S> <C> <C>
Gross revenues $ 1,899,284 $ 1,436,200
Allowances for returns and refunds (212,815) (141,410)
--------- ----------
Net revenues 1,686,469 1,294,790
--------- ---------
Costs and expenses:
Selling, general and administrative expenses 1,202,475 1,021,797
Depreciation and amortization 63,600 59,257
--------- ---------
Total costs and expenses 1,266,075 1,081,054
--------- ---------
Income from operations 420,394 213,736
Interest income 2,415 2,415
Interest expense (378) (378)
--------- ---------
Income before income taxes 422,431 215,773
Provision for income taxes 157,500 78,970
------- ---------
Net income $ 264,931 $ 136,803
========= =========
Basic earnings per share $ 0.01 $ --
========= =========
Diluted earnings per share $ 0.01 $ --
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 4
HITSGALORE.COM, INC.
UNAUDITED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<S> <C>
Net cash used in operating activities $ (868,564)
---------
Cash flows from investing activities:
Expenditures for furniture and equipment ( 296,365)
Expenditures for intangible assets ( 98,500)
---------
Net cash used in investing activities ( 394,865)
---------
Cash flows from financing activities:
Proceeds from issuance of common stock
and from exercise of options and warrants 1,849,760
Proceeds from common stock to be issued 138,500
Payments on merger liabilities assumed ( 425,779)
Payment of borrowings from affiliated company ( 22,699)
Payment of borrowings from officers and stockholders ( 2,250)
Payments on notes payable ( 2,161)
---------
Net cash provided by financing activities 1,535,371
---------
Net increase (decrease) in cash 271,942
Cash and cash equivalents at beginning of the
period 1,013
---------
Cash and cash equivalents at end of the period $ 272,955
=========
</TABLE>
Supplemental Disclosure of Cash Flow Information and Non-cash Investing and
Financing Activities:
<TABLE>
<S> <C>
Issuance of common stock upon conversion of notes
payable $ 5,000
Merger liabilities assumed 1,873,722
Non-cash liquidations of merger liabilities assumed 676,304
Stock subscription receivable 10,000,000
Issuance of common stock in exchange for intangible
assets 367,200
Issuance of note payable in exchange for equipment 28,000
Cash paid during the period for:
Interest 378
Income taxes --
</TABLE>
See Notes to Financial Statements
<PAGE> 5
HITSGALORE.COM, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1999
THE REORGANIZATION AND MERGER
On March 19, 1999, the Company (formerly Systems Communications, Inc.) and
Hitsgalore.com, a Nevada corporation ("Old Hitsgalore.com"), completed a
reorganization and merger (the "Reorganization and Merger Agreement",
sometimes referred to herein as the "Reorganization" or "Merger"). Pursuant to
the Reorganization and Merger, (a) the Company transferred its then existing
business, properties and assets to its wholly-owned subsidiary, International
Healthcare Solutions, Inc. ("IHSI"), (b) caused IHSI to assume substantially
all of the obligations, debts and liabilities of the Company and, then, (c)
Old Hitsgalore.com was merged into the Company and the Company changed its
name to Hitsgalore.com, Inc. For accounting purposes, the merger of Old
Hitsgalore.com into the Company was treated as a recapitalization, with Old
Hitsgalore.com as the acquirer. As a result of the Reorganization and Merger,
the historical financial statements and operations of Old Histgalore.com prior
to March 19, 1999 became those of the Company. Old Hitsgalore was incorporated
on July 21, 1998 and was in the development stage until the later part of
1998.
As part of the Reorganization, the Company declared a share consolidation (a
reverse split) of its then issued and outstanding common stock, options,
warrants and other rights to purchase its common stock. The reverse split
reduced each seven shares of common stock outstanding to one share. The
reverse split also applied to all outstanding options, warrants, convertible
securities and other rights to acquire the Company's common stock. The effect
of the reverse split was such that the Company would have approximately
8,000,000 shares of common stock issued and outstanding, assuming exercise of
all such options, warrants and other rights, on the effective date of the
Merger.
In connection with the Merger and Reorganization, the stockholders of Old
Hitsgalore.com received 37,650,000 shares of common stock in conversion of all
of the issued and outstanding shares of common stock (15,000 shares) of Old
Hitsgalore.com.
In consideration for the transfer of the Company's previous business,
properties and assets to IHSI, the Company received twenty million shares of
IHSI, constituting all of the outstanding common stock of IHSI. The Company
also declared a dividend in kind, payable in all of the shares of IHSI common
stock, to the Company's stockholders of record on April 6, 1999. In
furtherance of the dividend, the ISHI common stock was transferred into a
constructive trust for the benefit of the Company's stockholders. The IHSI
common stock is to be distributed to the Company's stockholders entitled to
receive the dividend when a registration statement covering the distribution
under the Securities Act of 1933 becomes effective.
In connection with the transfer of the Company's previous business, properties
and assets to IHSI, IHSI assumed all the obligations, debts and liabilities of
the Company that existed at that time. Accordingly, IHSI became jointly and
severally liable with the Company for such obligations, debts and liabilities.
Until all of such obligations, debts and liabilities are satisfied or the
Company is released therefrom, the Company has a security interest in the
assets transferred to IHSI. The liabilities assumed in connection with the
transfer of the assets to IHSI totaled approximately $1.9 million and the
assets transferred to IHSI totaled approximately $500,000, which consisted
primarily of intangibles. The proceeds received from the exercise of common
stock options, warrants and other rights to purchase the Company's common
stock that were outstanding as of the date of the Merger were used to pay such
obligations, debts and liabilities, subject to certain limitations. As of the
date hereof, the liabilities assumed in the merger have been reduced to
<PAGE> 6
approximately $689,000, which consists primarily of amounts accrued for
unsettled contingencies.
SIGNIFICANT ACCOUNTING POLICIES
The unaudited balance sheet as of June 30, 1999, the unaudited statements of
operations for the six months and three months ended June 30, 1999 and the
unaudited statement of cash flows for the six months ended June 30,1999 have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting of normal and recurring accruals considered necessary
for a fair presentation, have been included. Results of operations for the
six months ended June 30, 1999 are not necessarily indicative of the results
for the full fiscal year.
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
Earnings per Share
The weighted average number of common shares outstanding during the six months
and three months ended June 30, 1999 was approximately 22,675,655 shares and
47,320,875 shares, respectively. As of June 30, 1999, all options and warrants
outstanding on the date of the Merger have been exercised or have expired.
TRANSACTIONS WITH LIFE FOUNDATION TRUST
On April 15, 1999, the Company agreed to issue, in a private placement,
2,000,000 shares of its common stock to Life Foundation Trust ("LFT") in
exchange for a subscription receivable in the amount of $10.0 million. The
Company also granted LFT the right to reserve Local City Editions ("LCEs") for
up to 200 local city areas and the right to use its proprietary software,
programming, website and content in support of the LCEs for a total purchase
price of $10.0 million. The agreement covering the LCEs is unconditional and
irrevocable and provides for, among other things, that the Company bring the
LCEs reserved by LFT on line over a period of twelve months. The 2,000,000
shares of common stock were issued to LFT on May 5, 1999.
LFT's $10.0 million subscription receivable and its obligation to pay $10.0
million for LCEs is collateralized by the assignment of a collection of
postage stamps. A third party holds the collection of postage stamps in
safekeeping. Pursuant to the April 15, 1999 agreement between the Company and
LFT, LFT has an unconditional and irrevocable obligation to pay the $10.0
million subscription receivable and the LCE receivables recognized by the
Company on or before April 15, 2000. As of June 30, 1999, the Company has
outstanding LCE receivables from LFT totaling $1,250,000. The $10.0 million
subscription receivable from LFT is shown as a reduction in stockholders'
equity in the accompanying June 30, 1999 balance sheet.
On May 15, 1999, the Company entered into a non-binding letter of intent to
issue LFT an additional five million shares of its common stock for an
aggregate purchase price of $100.0 million. LFT has delivered to the Company a
Subscription Agreement and Investment Representations for the shares that is
contingent only upon an increase in the Company's authorized shares and due
diligence to the Company's satisfaction on a $900.0 million Promissory Oil
Production Note to be delivered as collateral for LFT's obligation to pay the
purchase price. The Company's security interest in the note is to be limited
to $100.0 million and is to be an undivided interest with LFT, who has agreed
to permit the Company to receive the first $100.0 million paid under the note.
The completion of the related subscription agreement and issuance of the
shares to LFT is subject to stockholder approval of an increase in the
Company's authorized shares. Pending such shareholder approval, the Company's
<PAGE> 7
Chairman of the Board, and a principal stockholder, has transferred shares
from his own account to LFT to hold the transaction. The Company's Chairman
has retained the right to vote the shares transferred to LFT on all matters
requiring the vote of stockholders. Upon completion of the transaction, the
shares transferred by the Company's Chairman to LFT will be returned to him.
PURCHASE OF ASSETS
On April 20, 1999, the Company completed the purchase of all rights, title and
interest in the internet-related development assets, equipment and software,
owned or under development, by Solvere, Inc. ("Solvere"), a closely held
Delaware corporation. The assets acquired included all computer equipment,
software and internet technology, including, but not limited to all of
Solvere'se-commerce, web-based e-mail, multimedia distribution system and
shopping cart technology. The purchase price consisted of $125,000 in cash and a
commitment by the Company to issue 100,000 shares of its common stock. The
common stock which is to be issued to Solvere was assigned a value of $367,200
and is classified as common stock to be issued in the accompanying June 30, 1999
balance sheet. Of the total purchase price, $26,500 was allocated to property
and equipment and $465,700 was allocated to intangible assets. The intangible
assets acquired are being amortized over three years.
Pursuant to the asset purchase agreement, the Company is to pay Solvere $4,000
per month for future systems maintenance costs incurred by Solvere and
$125,000 for future development of the acquired internet software technology.
The Company and Solvere also agreed to co-license certain of Solvere's
proprietary technology in return for the payment to Solvere of 50% of all
marketing costs incurred by Solvere and approved by the Company. The Company
was also granted an unrestricted right to use the proprietary technology.
STOCKHOLDERS' EQUITY
On the effective date of the Merger, the Company had approximately 7,301,262
shares of its common stock issued and outstanding; and, in connection with the
Merger, the Company issued a total of approximately 37,650,000 shares of its
common stock to the former stockholders of Old Hitsgalore.com. The Company is
obligated to issue 2,000,000 additional shares of its common stock for merger
costs and expenses. The issuance of additional shares is subject to
stockholder approval of an increase in the Company's authorized shares. In
August 1999, the Company's Chairman of the Board, and a principal stockholder,
agreed to transfer sufficient shares from his own account back to the Company
to be retired, to enable the additional shares to be issued to the persons
entitled to receive them. Upon stockholder approval of an increase in the
Company's authorized shares, the Company is obligated to issue replacement
shares to the Company's Chairman of the Board.
During the period from the effective date of the merger to June 30, 1999, the
Company received net proceeds of approximately $1,849,762 from the issuance of
approximately 2,547,585 shares of its common stock in private placement
transactions and upon exercise of outstanding warrants and options. As
described above, the Company issued 2,000,000 shares of its common stock to
LFT in exchange for a $10,000,000 subscription receivable. It also issued
approximately 37,071 shares in settlement of merger liabilities assumed and
converted $5,000 of outstanding promissory notes into 5,000 shares.
As a result of the Merger, IHSI assumed liabilities of approximately $1.9
million. The Company recorded the amount of assumed liabilities as "merger
liabilities assumed" in its balance sheet with a corresponding charge to
retained earnings (accumulated deficit). Merger liabilities assumed were
reduced by approximately $1.2 million during the period from the effective
date of the Merger to June 30, 1999. This amount has been reflected as an
increase in retained earnings (decrease in accumulated deficit) and as a
<PAGE> 8
reduction in additional paid in capital in the accompanying June 30, 1999
balance sheet.
The components of accumulated deficit as shown in the accompanying balance
sheet as of June 30, 1999 are summarized as follows:
Accumulated earnings $ 265,912
Merger liabilities assumed (689,027)
Par value of shares issued in the merger (39,650)
--------
$(462,765)
--------
As of June 30, 1999, the Company has recorded, as a component of stockholders'
equity, an aggregate of 2,267,858 shares of common stock to be issued. Of the
aggregate number of shares of common stock to be issued, 2,000,000 are
replacement shares that are to be issued to the Company's Chairman of the
Board, as described above, 100,000 shares are to be issued in connection with
the assets purchase agreement between the Company and Solvere and 167,858
shares are to be issued to persons who have tendered the purchase price for
shares that are unissued as of June 30, 1999.
UNAUDITED PRO FORMA INFORMATION
The results of operations of the Company prior to the Merger are those of Old
Hitsgalore.com. Pro forma operating results for the six months ended June 30,
1999 are the same as those set forth in the accompanying statement of
operations, except for per share data. The Company's pro forma basic and
diluted earnings per share were less than $0.01 per share for the six months
ended June 30, 1999.
COMMITMENTS AND CONTINGENCIES
On May 13, 1999, May 16, 1999 and June 11, 1999, separate class action suits
were filed against the Company, Mr. Steve Bradford and Mr. Dorian Reed (Case
nos.99-05060R, 99-05152R and 99-0203-R, respectively) in the United States
District Court, Central District of California, involving the purchase of the
Company's securities during periods specified in the complaints. These suits
are based primarily on an alleged omission of disclosure in the Company's
report on Form 8-K filed with the Securities and Exchange Commission regarding
Mr. Reed and the action brought against Mr. Reed by the Federal Trade
Commission. On August 16, 1999, the Court consolidated these three actions and
took under advisement the issues of who will be the lead plaintiff and lead
counsel for the consolidated lawsuits. Because of the early stage of the
proceedings, it is not possible to predict the outcome of these cases or the
likelihood or amount of any losses, if any, in the event of an adverse outcome
in any of these cases. No provision has been made in the accompanying
financial statements related to these matters.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As a result of the Merger, the historical financial statements and operations
of Old Hitsgalore.com became those of the Company. Old Hitsgalore.com was
incorporated on July 21, 1998, began beta operations in August 1998 and
launched its website in November 1998. Accordingly, no comparisons can be made
between the results of operations for the six months and three months ended
June 30, 1999 and 1998, as Old Hitsgalore.com had no operations during the
comparable 1998 periods.
The following discussion should be read in conjunction with the Financial
Statements and notes thereto, appearing elsewhere herein.
<PAGE> 9
Net revenues-
The Company had gross revenues of $1,899,284 and $1,463,200 for the six months
and three months ended June 30, 1999, respectively. Gross revenues in the
first quarter totaled $463,084. The increase in second quarter revenues as
compared to the first quarter is the result of revenues recognized from the
LCE agreement with LFT. LCE revenues from LFT recognized in the second quarter
totaled $1,250,000. Revenues from quarter to quarter also reflect an increase
of approximately 54% in revenues from sponsorship rights and the Company's bid
and rank program.
Returns and allowances-
The Company provides an allowance for returns and refunds based on estimates.
Amounts provided are subject to change. For the six months and three months
ended June 30, 1999, the Company provided allowances for returns and refunds
totaling $212,815 and $141,410, respectively, or approximately 11.2% and 9.8%
of total revenues, respectively.
Selling, general and administrative expenses-
Selling, general and administrative expenses for the six months ended June 30,
1999 totaled $1,202,475, or 63.3% of gross revenues, compared to $180,678, or
39% of gross revenue, in the first quarter. In the three-month period ended
June 30, 1999, the Company spent heavily on the development and expansion of
its core technology and on research and development, expanded its
administrative and sales employee base almost two-fold and conducted a
national radio advertising campaign and purchased website advertising banners
from other internet companies. In the second quarter, research and
development costs totaled approximately 10% of gross revenues; advertising
costs approximated 29% of gross revenues; and, personnel costs, including
benefits, approximated 19% of gross sales.
Depreciation and Amortization-
Depreciation and amortization for the six months and three months ended June
30, 1999 totaled $63,600 and 59,257, respectively. The increase in the 1999
second quarter compared to the first quarter is the result of a higher
investment in property and equipment.
Income Taxes
For the six months and three months ended June 30, 1999, the provision for
income taxes was approximately 37.3% and 36.6% of pre-tax income. The
principal reason for the difference between the Federal income tax rate of 34%
and the effective tax rates during the respective periods were the effects of
state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1999, the Company used approximately
$868,564 of cash in operations and approximately $394,865 of cash in investing
activities. Net cash provided from financing activities for the six months
ended June 30, 1999 totaled approximately $1,535,371. Cash provided from
financing activities principally reflects proceeds from the issuance of common
stock and from the exercise of options and warrants, offset by cash reductions
in merger liabilities assumed. See the accompanying unaudited statements of
cash flows.
As of June 30, 1999, the Company does not have any used or unused lines of
credit or any other committed and unused financing facilities. The Company has
entered into various transactions with The Life Foundation Trust ("LFT") for
the sale of its common stock and the purchase by LFT of Local City Editions
("LCEs"). The transactions with LFT that have been completed, call for the
<PAGE> 10
payment of up to $20.0 million to the Company, subject to certain limitations,
on or before April 15, 2000. These payments are collateralized by the
assignment of certain assets to the Company by LFT.
The Company believes that cash flows from operations will be sufficient to
meet its liquidity needs for the foreseeable future.
<PAGE> 11
HITSGALORE.COM, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
All material pending legal proceedings to which the Registrant is a party and
proceedings which have been terminated are described in the notes to financial
statements included elsewhere herein and in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 and Quarterly Report on Form
10-Q for the quarterly period ended March 31,1999. In addition thereto, the
Company has filed a Complaint, against one identified and five anonymous
internet posters for Libel, Tortious Interference with Business Relations and
Civil Conspiracy, in the United States District Court for the Middle District
of Florida. The Complaint, entitled Hitsgalore.com, Inc. v. Janice Shell, et
al., Case NO. 99-1387-CIV-T-26C, seeks damages in excess of twenty million
dollars. The Complaint alleges that, beginning at least as early as May 1999,
the Defendants intentionally and maliciously published and republished a
variety of false and defamatory statements about Hitsgalore.com, Inc. in a
nationwide "cybersmear" campaign on electronic bulletin boards on the
internet. These statements either explicitly stated or implied that the
Company engaged in illegitimate, illegal, dishonest, fraudulent and criminal
business operations, when, in truth and fact, the Defendants knew or should
have known that such statements were false and libelous per se. At the present
time, the Company is seeking to ascertain the identity of the anonymous
Defendants through discovery.
Item 5. Other Items
On June 30, 1999, the Company filed amended Annual Reports on Form 10-K for
the 1998 and 1997 fiscal years. The amended annual reports reflected the
removal of the audit report of Ernst & Young LLP for the 1996 fiscal year from
the previously filed annual reports and included disclosure regarding the
facts and circumstances relative to the Company's failure to include audited
financial statements for the 1996 fiscal year in such amended annual reports.
The Securities and Exchange Commission has informed the Company that its
amended Annual Reports on Form 10-K for the 1998 and 1997 fiscal years do not
comply with the requirements of Form 10-K, because of the inclusion of
unaudited financial statements for fiscal 1996 in each of the amended annual
reports. The Securities and Exchange Commission has requested that the
Company correct the deficiencies by filing amendments to include audited
financial statements and related audit reports for 1996.
On July 26, 1999, the Registrant received written notice from Moore Stephens
Lovelace, P.A. that it was withdrawing as auditor of record for
Hitsgalore.com, Inc. and was unwilling to be associated with any financial
statements of the Registrant. See Item 6 "Exhibits and Reports on Form 8-K."
As of the date hereof, the Registrant has not engaged an accounting firm to
audit and report on its financial statements for the current fiscal year or
any preceding fiscal year.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2.1 * Reorganization and Merger Agreement, dated February 11, 1999,
between Systems Communications, Inc. and Hitsgalore.com.
10.44.** Letter of Intent, Subscription for Stock dated April 15, 1999,
between Hitsgalore.com, Inc and The Life Foundation Trust.
10.45.** Subscription Agreement and Investment Representations dated
April 15, 1999 between Hitsgalore.com, Inc. and The Life
Foundation Trust.
<PAGE> 12
10.46.** Purchase Agreement dated March 29, 1999 between Hitsgalore.com,
Inc. and Solvere, Inc.
16.2 *** Letter Re: Change in certifying accountants
27.**** Financial Data Schedule ( Six Months Ended June 30, 1999).
* Incorporated by reference to the Company's Current Report on Form 8-K
as filed on February 16, 1999.
** Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
*** Incorporated by reference to the Company's Current Report on Form 8-K
as filed on July 27, 1999.
**** Filed herewith.
(b) Reports on Form 8-K:
The following reports were filed on Form 8-K for the three months ended June
30, 1999, and prior to the filing date hereof:
The Company filed a Form 8-K on July 27, 1999. The event reported was the
withdrawal of Moore Stephens Lovelace, P.A. as auditor of record for
Hitsgalore.com, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HITSGALORE.COM, INC. Date: August 23, 1999.
By /s/ Steve Bradford
----------------------------
President, Principal Accounting
Officer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HITSGALORE.COM, INC. FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 272,955
<SECURITIES> 0
<RECEIVABLES> 1,323,199
<ALLOWANCES> (11,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,678,342
<PP&E> 355,998
<DEPRECIATION> (26,675)
<TOTAL-ASSETS> 2,434,557
<CURRENT-LIABILITIES> 911,709
<BONDS> 0
0
109,764
<COMMON> 49,203
<OTHER-SE> (1,351,651)
<TOTAL-LIABILITY-AND-EQUITY> 2,434,557
<SALES> 1,899,284
<TOTAL-REVENUES> 1,899,284
<CGS> 0
<TOTAL-COSTS> 1,266,075
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378
<INCOME-PRETAX> 422,431
<INCOME-TAX> 157,500
<INCOME-CONTINUING> 264,931
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 264,931
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
