Looks good...:-)
(parts of) sec.yahoo.com
General
Shopnet.com, Inc. (the "Company") was incorporated in the State of Delaware on December 1, 1995 as Hollywood Productions, Inc. On May 10, 1999, the Company filed an amendment to its Articles of Incorporation effecting a change in its name to Shopnet.com, Inc. On May 12, 1999, the Company incorporated a wholly-owned subsidiary, Hollywood Productions, Inc. ("HPI"), to which the Company shall assign its film production business, thereby rendering the Company a holding company for HPI and its other wholly-owned subsidiary, Breaking Waves, Inc. ("Breaking Waves"). The Company was formed initially for the purpose of acquiring screen plays and producing motion pictures. During September 1996, in connection with the completion of its Initial Public Offering ("IPO"), the Company acquired all of the capital stock of Breaking Waves. Breaking Waves designs, manufactures, and distributes private and brand name label children's swimwear.
Breaking Waves acquired, in November 1998, a 25.4% interest in Play Co. Toys & Entertainment Corp. ("Play Co.") by paying $300,000 in cash and by shipping $204,000 in merchandise. In connection with the $504,000 investment in Play Co., representing 25.4% ownership thereof, Breaking Waves recognized $151,282 of equity loss in Play Co. for the quarter ended March 31, 1999. Play Co.'s operations are highly seasonal with approximately 40% of its net sales historically falling within the last three months of the calendar year.
Liquidity and Capital Resources
At March 31, 1999, the Companies have a consolidated working capital amounting to $1,646,566. The Companies anticipate that their current available cash will be sufficient for the next twelve months, and they do not anticipate any cash shortfalls.
The Company considers highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. Included in cash are certificates of deposit of approximately $1,158,068. The Company maintains cash deposits in accounts which are in excess of Federal Deposit Insurance Corporation limits by approximately $1,058,000. The Company believes that such risk is minimal. The Company maintains a letter of credit with a financial institution as a condition of its factoring agreement. The financial institution requires the Company to maintain $1,150,000 on deposit as collateral for the letter of credit. Accordingly, such cash is designated as restricted.
Investment in Joint Venture
Pursuant to a co-production agreement dated April 17, 1998, the Company invested $200,000 for a 50% interest in a newly formed entity, Battle Studies Productions, LLC ("Battle Studies"), a limited liability company. North Folk Films, Inc. ("NFF"), an unrelated party, also invested $200,000 for the remaining 50% interest in Battle Studies. Battle Studies will be treated as a joint venture in order to co-produce motion pictures and to finance the costs of production and distribution of such motion pictures. The joint venture retains all rights to the motion pictures, the screenplays, and all ancillary rights attached thereto. As of March 31, 1999, Battle Studies had completed filming its first motion picture which will be shown at various upcoming film festivals.
The Company accounts for the investment in Battle Studies on the equity method. Accordingly, as of March 31, 1999, the Company has only recorded its initial $200,000 investment in the joint venture since no operations have yet commenced.
Factoring Arrangements
On August 20, 1997, Breaking Waves entered into a factoring and revolving inventory loan and security agreement (which was subsequently amended in December 1998) with Heller Financial, Inc. ("Heller") pursuant to which Heller agreed to (i) purchase all of Breaking Waves' accounts receivables, (ii) provide advances against such accounts receivables, (iii) provide a revolving loan, and (iv) guarantee letters of credit in excess of $1,500,000 as well as provide certain other services. The Company is a guarantor of Breaking Waves' obligations to Heller. The Company maintains a letter of credit with a financial institution in support of and as a condition to its factoring agreement. The financial institution requires the Company to maintain $1,150,000 on deposit as collateral for such letter of credit. Breaking Waves may take advances of up to 85% of the purchase price of its eligible accounts receivable.
The factoring agreement provides (i) factoring commissions of (a) 0.85% on the first $5 million in accounts sold and assigned to Heller during each year and (b) 0.65% on all accounts in excess of $5 million sold and assigned to Heller during each year, but in no event less than $3 per invoice; and (ii) on accounts bearing terms greater than 90 days, an increase in commission by 0.25% for each 30 days or part thereof that the terms exceed 60 days. Interest expense related to this agreement totaled $75,030 and $86,325, respectively, for the three months ended March 31, 1999 and 1998. Heller has a continuing interest in Breaking Wave's inventory as collateral for the advances. As of March 31, 1999, the net advances to Breaking Waves from the factor amounted to $1,058,330.
Internet Sales
In March 1999, Breaking Waves launched an online wholesale children's swimwear website at www.breakingwaves.com. The website is designed to complement the company's wholesale distribution efforts by providing retailers instant access to more than 200 styles of Breaking Waves swimwear. The entire line of Breaking Waves swimwear, including products marketed under the "Breaking Waves," "All Waves," "Daffy Waterwear," and "Jet Ski" brands, is available for online purchase by retailers. The Breaking Waves website is being hosted by Mindspring and incorporates e-commerce features from Cybercash and Mercantec, Inc. Additionally, a second website was set up (www.smallwavesswimwear.com) which features discounted styles, closeouts, over-runs, and manufacturers' specials at highly discounted prices directly to consumers.
Management believes that these websites will fill the needs of existing and potential customers. Through the Internet, retailers can purchase merchandise online in a matter of minutes, at their own convenience, instead of having to wait for a printed wholesale catalog. Management believes that the advantages and efficiencies created by the websites will assist Breaking Waves in increasing brand awareness as well as market share. Marketing strategies for "driving" retailers to the site include co op trade advertisements, tradeshow exposure, direct mail, and including the site address on all corporate collateral and product labels.
Loans to Play Co.
Pursuant to an unsecured promissory note dated February 1, 1999, the Company loaned $100,000 to Play Co. bearing interest at 9% per annum. Play Co. agreed to repay such note by June 15, 1999 in monthly installments.
Pursuant to an unsecured promissory note dated April 22, 1999, the Company loaned an additional $100,000 to Play Co. bearing interest at 9% per annum. Play Co. agreed to repay such note by August 1999 in monthly installments.
Common Stock Dividend
On January 14, 1999, the Company declared a 100% Common Stock dividend to all shareholders of record as of January 29, 1999. The dividend was paid on February 5, 1999 whereby the Company issued 2,686,027 shares of Common Stock. An additional 917 shares are entitled to the dividend and holders thereof will be issued the dividend shares once they have exchanged their old (i.e., pre-February 1998 reverse split) shares of common stock for post-reverse split shares.
yahoo.marketguide.com
Equity: Common Stock $.001 Par, 3/99, 20M auth., 5,372,971 issd. Insiders own approx. 2%. European Ventures Corp. owns 27%. IPO 9/96, 800,000 shares @ $5 & 1,600,000 Warrants @ $.25 by Euro-Atlantic Securities, Inc. (As of 12/98) LT debt :$57K in capital leases. 2/99, 2-for-1 stock split; 2/98, 3-for-1 reverse stock split.
Analyst Footnotes: 5/99, Name changed from Hollywood Productions, Inc. 6/96 & 6/98 Q's are restated.
----------
Heller gets a pretty big chunk, though, on the swimsuits. |
