ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
“FORWARD-LOOKING” INFORMATION
This report on Form 10-QSB contains certain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Generally, the words “anticipates,” “expects,” “believes,” “intends,” “could,” “may,” and similar expressions identify forward looking statements. Forward-looking statements involve risks and uncertainties. We caution you that while we believe any forward-looking statement are reasonable and made in good faith, expectations almost always vary from actual results, and the differences between our expectations and actual results may be significant.
The following discussion and analysis of our results of operations and our financial condition should be read in conjunction with the information set forth in the financial statements and notes thereto included elsewhere in this report.
Results of Operations
Sales for the three months ended September 30, 2001 decreased approximately 64% to $120,663 from $337,687 for the three months ended September 30, 2000. Sales for the nine months ended September 30, 2001 decreased approximately 17% to $1,433,838 from $1,724,617 for the nine months ended September 30, 2000. The decrease in sales is attributable to the slowdown in sales of two product lines in the three months ended September 30, 2001.
Cost of goods sold for the three months ended September 30, 2001 was $70,122, approximately 58% of sales, as compared to $222,428, approximately 66% of sales, for the comparable period in fiscal year 2000. Cost of goods sold for the nine months ended September 30, 2001 was $824,544, approximately 58% of sales, as compared to $1,020,496, approximately 59% of sales, for the comparable period in fiscal year 2000. The decrease in cost of goods sold as a percentage of sales for the three months ended September 30, 2001 can be attributed to our focus on higher margin products in that we had offered in the three months ended September 30, 2001 than in the prior year. The decrease in the cost of goods sold for the three months ended September 30, 2001 compared to the three months ended September 30, 2000 is attributable to the decrease in the number of products that we offered for sale. We expect our cost of goods sold to increase in the near future as we incur expenses associated with the development and the introduction of up to six new products over the next nine months.
Gross profit on sales for the three months ended September 30, 2001 was $50,541, a decrease of 56%, as compared to gross profit of $115,259 for the three months ended September 30, 2000. Gross profit was approximately 42% of sales for the three months ended September 30, 2001 as compared to gross profit as a percentage of sales for the three months ended September 30, 2000 of 34%. Gross profit on sales for the nine months ended September 30, 2001 was $609,294, a decrease of 13%, as compared to gross profit of $704,121 for the nine months ended September 30, 2000. The decrease in gross profit is attributable to less sales resulting from the slowdown in sales of two product lines in the three months ended September 30, 2001. The increase in gross profit as a percentage of sales is attributable to the decrease in costs associated with the products produced.
For the three months ended September 30, 2001 as compared to the three months ended September 30, 2000, operating expenses decreased to $175,290 from $360,081, which represents a 51% decrease in operation expenses and an increase to 145% of sales from 107% of sales. For the nine months ended September 30, 2001 as compared to the nine months ended September 30, 2000, operating expenses decreased to $1,091,156 from $1,744,038, which represents a 37% decrease in operation expenses and a decrease to 76% of sales from 101% of sales. The decrease in our operating expenses is attributable to a decrease in selling expenses, associated with the slowdown in sales of two product lines in the three months ended September 30, 2001, to $27,831 for the three months ended September 30, 2001, from $126,897 for the three months ended September 30, 2000. The decrease in operating expenses is also attributable to a decrease in general and administrative expenses to $147,459 from $233,184 for the three months ended September 30, 2001 and 2000, respectively, due to a change and reduction in our workforce in the three months ended September 30, 2001. Operating expenses are expected to increase over the next nine months as we introduce up to six new product lines; however, operating expenses are expected to decrease as a percentage of total sales over time as our sales volume grows and as we incur less marketing and selling expenses for a particular product line.
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For the three months ended September 30, 2001, we operated at a net loss of $327,515, or a loss of $0.023 per share basic, as compared to net loss of $300,381, or a loss of $0.022 per share basic for the three months ended September 30, 2000. For the nine months ended September 30, 2001, we operated at a net loss of $730,597, or a loss of $0.052 per share basic, as compared to a net loss of $1,499,006, or a loss of $0.117 per share basic, for the nine months ended September 30, 2000. The increase in net loss for the three months ended September 30, 2001 is mainly due to an impairment charge for unused barter credits of $183,285. Included in the net loss of $327,515 for the three months ended September 30, 2001 are several non-cash charges to income related to non-cash charges related to interest expense and financing costs aggregating approximately $21,089 as compared to approximately $47,452 for the three months ended September 30, 2000. There is no assurance that additional interest expense and financing costs will not be incurred for future transactions. We anticipate the continuance of these types of charges against earnings when we make additional financing arrangements.
In the nine months ended September 30, 2001, we entered into six new license agreements for the introduction of six new products. We have begun developing these new product lines and anticipate that we will launch four products in the next two to three months. We expect to launch an additional two new products in the second or third quarter of fiscal year 2002. We have reorganized our company personnel and intend to focus our efforts on new product lines which we believe may have broader appeal in all classes of trade. While the addition of new product lines may also create liquidity issues and demands on our limited resources, it is anticipated that our focus on these products may have a favorable impact on income and liquidity. The successful launch of all six new product lines is closely tied to our ability to raise additional capital or restructure our current debts.
Our food sales business is not seasonal in nature. Inflation is not deemed to be a factor in our operations.
Financial Condition or Liquidity and Capital Resources
To date, we have funded our operations through a line of credit, bank borrowings, and borrowings from, and issuances of warrants and sales of securities to, stockholders, and from operating revenues. Our inability to obtain sufficient credit and capital financing has limited our operations and growth from inception.
In October 1999, we entered into agreements pursuant to which certain investors agreed to purchase an aggregate of $550,000 principal amount of 5% convertible debentures due October 19, 2002 and 139,152 warrants to purchase shares of our common stock. At the initial closing date, we received gross proceeds of $450,000, and in February 2000, we received the remaining $100,000 when a registration statement in connection with the resale of the underlying common stock became effective. The warrants are exercisable between October 30, 1999 and October 30, 2004 at a purchase price of $.494 per share, which was 125% of the market price on the closing date. Through September 30, 2001, debenture holders have converted debentures with an aggregate of $526,032 in principal and interest into 3,136,279 shares of common stock.
In March 2000, we entered into an agreement pursuant to which certain investors agreed to purchase an aggregate of $1,000,000 principal amount of 0% convertible debentures due March 13, 2005 and warrants to purchase 2,500,000 shares of our common stock. We received gross proceeds of $1,000,000 from the transaction. The holders of the convertible debentures were entitled to convert the debentures into shares of common stock at a conversion price of $.40 per share. The warrants are exercisable before March 13, 2005 at a purchase price of $.75 per share. In October 2000, we entered into an agreement for the sale of $1,500,000 principal amount of 4% convertible debentures pursuant to which the outstanding principal amount of the 0% convertible debentures were surrendered.
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In October 2000, we entered into an agreement pursuant to which certain investors agreed to purchase an aggregate of $1,500,000 principal amount of 4% convertible debentures and warrants to purchase 250,000 shares of common stock. The principal amount of the 4% convertible debentures of $1,500,000, consists of principal in the amount of $500,000 and the surrender of outstanding 0% convertible debentures with a principal amount of $1,000,000 issued in March 2000. The 4% convertible debentures matured unpaid on August 7, 2001 with a 5% premium on the principal and the accrued unpaid interest. To date, we have not paid any accrued interest in cash. The investors have the right to convert the interest into shares of common stock based on the average of the 5 lowest closing bid prices of the common stock over a 22 trading day period immediately prior to the interest payment date. The warrants are exercisable before November 7, 2003 at a purchase price per share of $0.0588. We agreed to enter into an equity line of credit type of transaction within 10 days of this transaction. If we are unable to pay the amounts due on the maturity date but we can draw down on the equity line of credit, we are to draw down the maximum amount each draw down period to pay the investors the full amount due. To date, we are unable to draw down upon the equity line of credit. Beginning August 7, 2001, the investors may convert the 4% convertible debentures into shares of common stock because a registration statement for the equity line of credit was not effective on the maturity date and because we are not able to draw down the maximum amount permitted each month under the equity line under an effective equity line of credit registration statement. The conversion price shall equal the lesser of $0.054 or 85% of the average of the 5 lowest closing bid prices during the 22 trading days preceding the applicable conversion date. At the investors' election, we shall redeem the 4% convertible debentures, including interest and a redemption premium of 30%, using up to 50% of the net proceeds received pursuant to the equity line of credit and any other equity financing permitted under the agreement, and all proceeds received in an equity financing not permitted under the future financing restrictions. At the closing of the transaction, we received gross proceeds of $500,000, less payment to the escrow agent of $10,000 for the investors' legal, administrative and escrow costs, and less payment of a 10% placement agent fee. We also issued to the placement agent 75,000 shares of restricted common stock and a warrant to purchase 100,000 shares of common stock as part of the placement agent fee. The warrants are exercisable before November 7, 2003 at a purchase price per share of $0.0588.
In October 2000, we entered into an agreement for the future issuance and purchase of shares of our common stock which establishes what is sometimes termed an equity line of credit or an equity drawdown facility. In general, the drawdown facility operates as follows: the investor has committed to provide us with up to $5 million as we request it over a 24 month period, in return for shares of common stock we issue to the investor. Subject to a maximum of 16 draws, once every 29 trading days, we may request a draw of up to $5 million of that money, however, no single draw can exceed $5 million. We must wait at least 7 trading days after each 22 trading day drawdown period before requesting another drawdown. The maximum amount we actually can draw down upon each request will be determined by 4.5% of the volume-weighted average daily price of our common stock for the 3 month period prior to our request and the total trading volume for the 3 months prior to our request. Each draw down must be for at least $100,000. The number of shares registered under the registration statement for the resale of the common stock upon each drawdown may limit the amount of money we receive under the common stock purchase agreement. Moreover, the funds we may receive could be further limited by a provision of the common stock purchase agreement that prevents us from issuing shares to the investor to the extent the investor would beneficially own more than 9.9% of our then outstanding common stock. At the end of a 22-day trading period following the drawdown request, the final drawdown amount is determined based on the volume-weighted average stock price during that 22-day period. We then use the formulas contained in the common stock purchase agreement to determine the number of shares we will issue to the investor in return for that money. The per share dollar amount the investor pays for our common stock for each drawdown includes a 17.5% discount to the average daily market price of our common stock for the 22-day period after our drawdown request, weighted by trading volume. We will receive the amount of the drawdown less an escrow agent fee equal to $1,500 per drawdown and less a 10% placement fee. In lieu of making a commitment to the investor to draw a minimum aggregate amount, on October 31, 2000, we issued to the investor a stock purchase warrant to purchase up to 500,000 shares of our common stock and we also agreed to issue additional warrants to purchase a number of shares equal to 50% of the shares purchased by the investor on the settlement date of each drawdown. The warrants to purchase 500,000 shares of common stock have an exercise price of $0.0636 and expire on October 31, 2003. The additional warrants issuable at each settlement date will be exercisable for 35 calendar days and have an exercise price equal to the weighted average of the purchase prices of the common stock during the applicable settlement period. At the closing we paid the escrow agent $10,000 for the investor's legal, administrative and escrow costs. A registration statement for the shares underlying the equity line of credit is presently not effective. Until an effective registration statement is in place, we cannot use and will not receive any funds from the equity line.
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We believe that the funds from the 4% convertible debentures, in conjunction with revenues from our operations, will be sufficient to fund our operations for the next three months, subject to our ability to resolve the repayments due on maturity of existing obligations, including the 4% convertible debentures with a principal amount of $1.5 million which matured on August 7, 2001 without repayment. The $5 million equity line of credit may be sufficient to fund our operations for the next twelve to twenty four months, depending upon our ability to draw down on the equity line, which we are not presently able to do, and if we are able to draw down on a substantial portion of the $5 million equity line of credit to fund our operations as well as to repay the 4% convertible debentures with a principal amount of $1.5 million, if the debentures are not converted into equity. If we do not resolve the debts on the matured obligations, and if the creditors elect to foreclose on existing debts, which is likely to occur, we will not have sufficient funds to operate.
We believe that our future growth is dependent on the degree of success of current operations in generating revenues, borrowings under our current credit facility, the ability to resolve our unfulfilled obligations under the contractual terms of our existing debts, which matured on August 7, 2001 without repayment, in part due to our inability to satisfy the contractual terms of, and draw down on, a substantial portion of the $5 million equity line of credit, and the ability to obtain additional credit facilities. We are exploring various options to resolve our existing debt burden, including by merger, consolidation, sale of assets, reorganization or restructuring, as well as by trying to obtain additional financing. There can be no assurance that we will be able to obtain any additional financing that we require.
The auditors’ report to our financial statements for the year ended December 31, 2000 cites factors that raise substantial doubt about our ability to continue as a going concern. The factors include that we have incurred substantial operating losses since inception of operations and as at December 31, 2000 reflect deficiencies in working capital and stockholders’ equity. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about June 2000, Site2Shop.com, Inc. commenced an action against us in the Circuit Court of the 17th Judicial Circuit, in and for Broward County, Florida, in which Site2Shop claims that it is entitled to payment of $19,700 pursuant to a written agreement for advertising services, plus interest, costs and attorneys' fees. We interposed an answer denying the claim. Subsequently, in August 2001, we made an offer of judgment for $6,500, which was accepted but has not yet been paid.
ITEM 5. OTHER INFORMATION
We entered into a non-exclusive license agreement, dated May 30, 2001, and as
amended July 31, 2001, with Hershey Foods Corporation. Under the license, we
have the right to use the names, symbols, trademarks and associated trade dress
colors, copyrighted material and logos of "Hershey's" and "Jolly Rancher" in
connection with the manufacture, retail sale and distribution of lip balm. The
license territory is the United States, its territories and possessions, and
Canada. As consideration, we are to pay Hershey royalties equal to seven percent
of net sales, without deduction for our costs. The minimum royalty payment is
$5,000 and we paid a $2,500 non-refundable advance when we entered into the
license, which is credited against royalty payments. The license term is June 1,
2001 to May 31, 2003. The license may be earlier terminated, including for the
following reasons:
o we fail to make any royalty payment or deliver any sales statements or
to perform any term or condition of the license;
o we use the licensed property in a manner likely to deceive or mislead
the public or endanger the validity of the licensed property;
o any transfer of our interest in the license is made by execution or
similar legal process;
o a petition is filed to adjudicate us a bankrupt or insolvent, or for a
corporate reorganization or any arrangement with our creditors;
o a receiver or trustee is appointed for our business or assets;
o we make an assignment or deed of trust for the benefit of our
creditors; or
o our interest under this license shall pass to another by operation of
law.
Under the license, we agreed to indemnify Hershey from, and to be solely
responsible for, any claims, demands, suits, causes of action, loss or damage
arising out of the design, use, manufacture, sale, storage or advertising of the
licensed articles. Either party may renew the license for an additional twelve
months upon thirty days notice, subject to the other party's right to reject,
provided that the license was not already terminated and we have paid royalty
payments of at least the minimum royalty payment for the term just ended. If we
do not begin commercial production within 180 days from entering the agreement,
Hershey has the right to terminate this license. We may not assign, sublicense
or otherwise transfer the license.
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We entered into a non-exclusive merchandise license agreement, dated as of March
15, 2001, with MTV Networks, Trans Continental Television Productions, Inc. and
Trans Continental Records, Inc. Under the license, we have the right to
manufacture, distribute, sell and advertise the O-Town name, trademark and logo,
and the names, images, likeness, symbols, and designs of the musical group
O-Town in connection with lip balm and sour sprays or sour drops. The license
territory is the United States. As consideration, we are to pay royalties on a
quarterly basis equal to ten percent of net sales, without deduction for our
costs. The guaranteed minimum royalty payment is $15,000, of which $8,000 was
payable upon execution of the license agreement and $7,000 is payable by
December 31, 2002, which are to be credited against royalty payments. The
license term expires on May 31, 2003. The license may be earlier terminated if
we are in default of certain provisions of the license agreement, which includes
for the following reasons:
o we fail to actively manufacture, advertise, distribute or sell the
licensed products;
o we fail to make a payment or furnish a sales report;
o we fail to comply with the approval, quality, and safety requirements
under the license or the products do not comply with such requirement,
or the products become the subject matter of adverse or negative
publicity due to such failure;
o we fail to comply with any other of the material obligations under the
license agreement or we breach any warranty or representation we made
in the license agreement;
o we sell or otherwise dispose of all or substantially all of our
business or assets to a third party, or control or ownership of Famous
Fixins is changed or transferred;
o we sell or cause others to sell the products outside of the authorized
channels of distribution outside of the United States;
o we fail to obtain or maintain the requisite insurance;
o we contest or assist others to contest the licensor's rights or
interests in the licensed property;
o we fail to comply with any provision of any other agreement with the
licensor;
o if a petition in bankruptcy is filed by or against us;
o we are adjudicated bankrupt;
o we make any assignment for the benefit of creditors or becomes
insolvent;
o we are placed in the hands of a trustee or receiver;
o we fail to satisfy any judgment against us; or
o we are unable to pay our debts as they become due.
Under the license, we agreed to indemnify the other parties, and their
respective officers, directors and employees harmless from and against any and
all claims, damages, liabilities, costs and expenses, including reasonable
counsel fees, arising out of or relating to any breach or alleged breach by
Famous Fixins of any representation, warranty or undertaking made herein, or out
of any defect, latent or patent, in the licensed products. We may not assign,
sublicense or otherwise transfer the license without the prior approval of the
licensor.
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We entered into a non-exclusive license agreement, effective as of June 30,
2001, with Marvel Enterprises, Inc. and Marvel Characters, Inc. Under the
license, we have the right to use certain property of Marvel in connection with
the manufacture, promotion, sale and distribution of liquid candy drops. The
property of Marvel that we can use includes: certain X-Men characters, certain
Spider Man and Friends characters, certain Generation X characters, certain
Fantastic Four characters, The Incredible Hulk, The Avengers, Captain America,
Iron Man and Friends, Thor and Friends, and certain other Marvel characters. The
license territory is the United States and Canada. As consideration, we are to
pay Marvel royalties, payable each quarter, equal to 7.5% of net sales, without
deduction for our costs. The minimum royalty payment is $25,000, of which a
nonrefundable advance of $10,000 was due with the execution of the license
agreement, $7,500 is due by March 1, 2002, and $7,500 is due by December 15,
2002. The license term expires December 31, 2003. The license may be earlier
terminated, including for the following reasons:
o we fail to make any royalty payment or furnish any royalty reports;
o we become insolvent or fail to pay our debts and obligations on a
current basis;
o we make an assignment for the benefit of creditors;
o we become involved in a receivership, bankruptcy or other insolvency
or debtor relief proceedings, or any similar proceedings, voluntary or
forced;
o we cease to do business;
o we attempt to assign any of our rights under the license;
o if the license agreement is held invalid or unenforceable by the
determination of any government or any court of competent
jurisdiction; or
o if any licensed articles become the subject of a recall by the Federal
Consumer Product Safety Commission or any corresponding state or
federal agency and Licensee fails to take immediate action to recall
such products.
Under the license, we agreed to defend, indemnify and hold Marvel, its parents,
subsidiaries, associate and affiliate companies, harmless of, from and against
any charges, suits, damages, costs, expenses, judgments, penalties, claims,
liabilities or losses of any kind or nature, which may be sustained or suffered
by or secured against Marvel in connection with the licensed articles, or
arising out of the unauthorized use of any patent, trade secret, process, idea,
method or device, or any copyright or trademark, other than under this license,
or the packaging, distribution, promotion, sale or exploitation of the licensed
articles, any actual or alleged defect in the licensed articles or their
packaging, including failure of said licensed articles or their packaging,
distribution, promotion, sale or exploitation to meet any Federal, State or
local, or other applicable laws or standards; or any other actual or alleged
unauthorized action of Famous Fixins, including a breach of any term of the
license agreement. Marvel agreed to defend, indemnify and hold us harmless of,
from and against any charge, suits, damages, costs, expenses, judgments,
penalties, claims, liabilities or losses of any kind or nature, which may be
sustained or suffered by or secured against us based upon or arising out of any
actual or alleged trademark or copyright infringement arising solely out of the
use by us of the licensed property. Marvel has the rights to any of the artwork
that we use in connection with the license agreement. We may not assign,
sublicense or otherwise transfer the license.
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We entered into a non-exclusive license agreement, effective July 31, 2001 with
PRIMEDIA Magazines, Inc. and PRIMEDIA Magazines Finance, Inc. Under the license,
we have the right to use the names, symbols, designs, logos, artwork,
copyrights, trade dress and trademarks associated with SEVENTEEN in connection
with the distribution, sale and marketing of candles. The license territory is
the United States and Canada. As consideration, we are to pay Primedia royalties,
to be paid quarterly, equal to eight percent of net sales, without deduction for
our costs. The minimum royalty payment is $20,000, of which a nonrefundable
advance payment of $10,000 was due upon signing the license agreement, $5,000 is
due September 1, 2002, and $5,000 is due June 30, 2003. The minimum royalty is
to be credited against royalty payments. The license agreement provides that we
must maintain minimum net sales per annual period of $125,000 with a minimum
royalty per unit sold of $.092. The license term is through December 31, 2003.
The license may be earlier terminated by Primedia, including for the following
reasons:
o we fail to make any payment;
o we discontinue our business;
o we make any assignment for the benefit of creditors;
o we file any petition under Chapters 10, 11 or 12 of Title 11, United
States Code;
o we file a voluntary petition in bankruptcy;
o we are adjudicated a bankrupt or insolvent;
o if any receiver is appointed for our business or property;
o if any trustee in bankruptcy, or insolvency is appointed under the
laws of the United States government or of the several states;
o we fail to maintain minimum net sales;
o we fail to perform any other material term or condition of the
license;
o we fail to diligently and commercially distribute and sell the product
for any three month period; or
o we do not begin the bona fide manufacture, distribution and sale of
the product on a national basis on or before January 2002.
Under the license, each party agreed to hold the other harmless and indemnify
the other, its controlling persons and their respective officers, directors,
employees and agents from and against any and all losses, claims, damages,
liabilities and expenses incurred in the investigating, preparing, or defending
any litigation, proceeding, investigation or governmental inquiry, commenced
threatened or any claim arising out of a material breach of the license
agreement. We assigned all of our rights to any of the artwork that we use in
connection with the license agreement to Primedia. We may not assign or
sublicense the license.
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In September 2001, we entered into a non-exclusive license agreement with
Signatures Network, Inc. as agent for members of the musical group The Doors.
Under the license, we have the right to use the names, symbols, images and
likenesses of The Doors in connection with the distribution, sale and marketing
of disposable lighters in the United States. As consideration, we are to pay
Signatures Network royalties, to be paid quarterly, equal to twelve percent of net
sales. The minimum royalty payment is $20,000, inclusive of an advance of
$20,000, of which a nonrefundable advance payment of $10,000 was due upon
signing the license agreement, and $10,000 is due by June 30, 2003. The license
term expires on June 30, 2003. The license may be earlier terminated by
Signatures Network, including for the following reasons:
o we make, sell, offer for sale, use or distribute any product without
prior written approval or continue to make, sell, offer for sale, use
or distribute any product after receipt of notice withdrawing
approval;
o we become subject to any voluntary or involuntary order of any
government agency involving the recall of any of the products because
of safety, health or other hazard or risks to the public;
o we fail to immediately discontinue the advertising, distribution or
sale of products which do not contain the appropriate legal legend or
notice;
o we breach any of the provisions of the license relating to the
unauthorized assertion of rights in the licensed subject matter;
o we fail to make timely royalty payments;
o we fail to obtain or maintain insurance;
o we fail to distribute, ship and sell the product by December 1, 2001,
and to use best efforts in distribution, shipment and sale;
o we fail to timely submit preliminary samples of the product for
approval;
o a petition in bankruptcy is filed by or against us; we are adjudicated
bankrupt or insolvent, or make an assignment for the benefit of
creditors or an arrangement pursuant to any bankruptcy law; we
discontinue our business; or a receiver is appointed for us or our
business and such receiver is not discharged within 30 days;
o our corporation or any of our controlling shareholders, officers,
directors or employees take any actions in connection with the
manufacture, sale, distribution or advertising of the product which
damages or reflects adversely upon licensor or the licensed subject
matter; or
o we violate any of our other obligations or breach any of our
covenants, agreements, representations or warranties.
The licensor is to indemnify, hold harmless and defend us and our affiliates,
officers, directors and employees against any claims, liabilities, demands, and
expenses arising solely out of our use of the licensed subject matter. It is not
liable for any consequential damages or loss of profits that we may suffer from
the use of the licensed subject matter. We are to indemnify and hold harmless
the licensor, including its respective parents, subsidiaries, affiliates,
officers, directors, representatives, employees and agents from and against any
and all claims, liabilities, demands, causes of action, judgments, settlements
and expenses that arises in connection with the design, manufacture, packaging,
distribution, shipment, advertising, promotion, sale, or exploitation of the
products, our breach of any representation, warranty, or covenant, or our
failure to perform any covenants or obligations contained in the license. The
intellectual property rights in the product and the marketing materials that use
the licensed subject matter belong to the licensor. We may not assign the
license unless otherwise previously agreed in writing by the licensor.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibits are filed with this report:
| Exhibit Number | Description of Exhibit |
| Exhibit 10.1 | License Agreement with Hershey Foods Corporation, as Amended |
| Exhibit 10.2 | License Agreement with MTV |
| Exhibit 10.3 | License Agreement with Marvel |
| Exhibit 10.4 | License Agreement with PRIMEDIA Magazine |
| Exhibit 10.5 | License Agreement with Signature Networks, Inc. as agent for The Doors |
| Exhibit 11 | Statement Concerning Computation of Per Share Earnings is hereby incorporated by reference to “Financial Statements” of Part I - Financial Information, Item 1 – Financial Statements, contained in this Form 10-QSB. |
(b) Reports on Form 8-K.
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: December 3, 2001 | By: /s/ Jason Bauer
Jason Bauer
Chief Executive Officer and President |
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