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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 000-24659
----------------
CYBERIAN OUTPOST, INC.
a/k/a OUTPOST.COM
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 06-1419111
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
23 North Main Street-PO Box 636,
Kent, Connecticut 06757
(Address of principal executive offices) (Zip Code)
</TABLE>
(860) 927-2050
Registrant's telephone number, including area code
----------------
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 [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of July 2, 2000, the registrant had 28,475,610 shares of common stock,
par value $.01 per share, outstanding.
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OUTPOST.COM
FORM 10-Q
For the Quarter Ended May 31, 2000
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<C> <S> <C>
Part I--Financial Information:
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets, May 31, 2000 (Unaudited)
and February 29, 2000.................................. 3
Consolidated Statements of Operations, for the Three
Months Ended May 31, 2000 and 1999 (Unaudited)......... 4
Consolidated Statements of Cash Flows, for the Three
Months Ended May 31, 2000 and 1999 (Unaudited)......... 5
Notes to Consolidated Financial Statements (Unaudited).. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8
Part II--Other Information:
Item 2. Changes in Securities and Use of Proceeds............... 13
Item 6. Exhibits and Reports on Form 8-K........................ 13
Signature........................................................... 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
OUTPOST.COM
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
May 31, February 29,
2000 2000
----------- ------------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash
equivalents.............. $ 33,003 $ 13,293
Short term investments.... 15,048 7,694
Accounts receivable, net.. 6,312 4,350
Inventories............... 12,842 12,168
Prepaid expenses and other
current assets........... 1,049 1,133
-------- --------
Total current assets.... 68,254 38,638
Property and equipment,
net........................ 11,906 10,545
Investment in joint
venture.................... -- 2,709
Other assets................ 896 951
-------- --------
Total assets............ $ 81,056 $ 52,843
======== ========
Liabilities and
Stockholders' Equity
Current Liabilities:
Current portion of capital
lease obligations........ $ 658 $ 666
Accounts payable.......... 21,936 24,381
Accrued expenses.......... 2,603 2,558
-------- --------
Total current
liabilities............ 25,197 27,605
Capital lease obligations,
excluding current portion.. 590 718
-------- --------
Total liabilities....... 25,787 28,323
-------- --------
Minority interest........... 2,809 --
Stockholders' equity:
Common stock.............. 285 237
Additional paid-in
capital.................. 129,179 93,921
Accumulated comprehensive
loss..................... (1) --
Accumulated deficit....... (77,003) (69,638)
-------- --------
Total stockholders'
equity................. 52,460 24,520
-------- --------
Total liabilities and
stockholders' equity... $ 81,056 $ 52,843
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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OUTPOST.COM
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended May 31,
----------------
2000 1999
------- -------
<S> <C> <C>
Net sales.................................................... $64,791 $32,680
Cost of sales................................................ 56,295 29,267
------- -------
Gross profit............................................... 8,496 3,413
Operating expenses:
Sales and marketing........................................ 10,714 9,433
General and administrative................................. 2,768 1,512
Technology and development................................. 2,916 1,995
------- -------
Total operating expenses................................. 16,398 12,940
------- -------
Operating loss............................................. (7,902) (9,527)
Other income, net............................................ 637 672
------- -------
Net loss before minority interest.......................... (7,265) (8,855)
Minority interest............................................ (100) --
------- -------
Net loss................................................... $(7,365) $(8,855)
======= =======
Basic and diluted net loss per share......................... $ (0.26) $ (0.38)
======= =======
Weighted average shares outstanding.......................... 28,014 23,024
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
OUTPOST.COM
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended May 31,
-----------------
2000 1999
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (7,365) $(8,855)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 1,434 673
Amortization of deferred compensation................... 28 51
Minority interest income................................ 100 --
Loss on sales and maturities of short term investments.. (8) 48
(Increase) decrease in operating assets:
Accounts receivable................................... (1,962) 387
Inventories........................................... 572 (602)
Prepaid expenses and other assets..................... 139 (480)
(Decrease) increase in operating liabilities:
Accounts payable...................................... (3,843) 911
Accrued expenses...................................... (91) 2,190
-------- -------
Net cash used in operating activities............... (10,996) (5,677)
-------- -------
Cash flows from investing activities:
Purchases of property and equipment....................... (2,751) (2,651)
Purchases of short term investments....................... (12,397) (5,467)
Proceeds from sales and maturities of short term
investments.............................................. 5,050 8,250
Cash acquired from consolidating joint venture............ 5,706 --
-------- -------
Net cash (used in) provided by investing
activities......................................... (4,392) 132
-------- -------
Cash flows from financing activities:
Repayment of capital lease obligations.................... (179) (122)
Proceeds from issuance of common stock.................... 35,277 79
-------- -------
Net cash provided by (used in) financing
activities......................................... 35,098 (43)
-------- -------
Net increase (decrease) in cash and cash equivalents........ 19,710 (5,588)
-------- -------
Cash and cash equivalents at the beginning of period........ 13,293 26,828
Cash and cash equivalents at the end of period.............. $ 33,003 $21,240
======== =======
Supplemental disclosure of cash paid for interest:
Interest.................................................. $ 43 $ 29
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
Supplemental disclosure of non-cash transactions:
During the three month periods ended May 31, 2000 and 1999, we acquired
office equipment by incurring capital lease obligations of $44 and $158,
respectively.
5
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OUTPOST.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
May 31, 2000
Note 1--Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates. In the opinion of management, all adjustments (consisting
primarily of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended May 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending February 28, 2001.
Note 2--Description of the Business and Significant Accounting Policies
Description of Business
Cyberian Outpost, Inc. ("Outpost.com", or the "Company") was incorporated in
the state of Connecticut on March 6, 1995 and reincorporated in the state of
Delaware on July 8, 1998. Outpost.com is a leading global Internet retailer
featuring over 170,000 consumer technology and related products for the home
and office. The Company has one subsidiary, [email protected], LLC, whose
results are consolidated in the accompanying financial statements for the
three month period ended May 31, 2000.
Revenue Recognition
Net sales are comprised of product sales, net of returns and allowances, and
advertising revenue derived from hardware manufacturers and software
publishers that pay for promotional placements on our Web site. Product sales
are comprised of computer hardware, software, accessories, electronics and
high-end consumer products and are recognized when the products are shipped to
customers. The Company records a reserve for estimated sales returns at the
time of shipment based on historical return rates. The majority of our net
sales are merchandise to customers using credit cards. The remainder is to
customers that are invoiced directly under credit terms and amounts received
from vendors for advertising.
Reclassifications
Certain prior year balances have been reclassified to conform with the
current year's presentation.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," (SFAS 133). SFAS 133
establishes accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities. SFAS 133 requires all companies to recognize derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This statement is effective for all fiscal quarters
of fiscal years beginning after July 1, 2000. The Company does not believe
that the adoption of this statement will have a material effect on its
financial position or results of operations.
6
<PAGE>
OUTPOST.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
May 31, 2000
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101). In June 2000 the SEC amended
this bulletin as SAB 101B which extends the time required to adopt this
bulletin. The Company is required to adopt SAB 101B no later than its quarter
ended February 28, 2001. The Company does not believe that the adoption of
this bulletin will have a material effect on its financial position or results
of operations.
In March 2000, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus on EITF Issue 00-2, "Accounting
for Web Site Development Costs." This consensus provides guidance on what
types of costs incurred to develop Web sites should be capitalized or
expensed. The consensus is effective for Web site development costs incurred
for fiscal quarters beginning after June 30, 2000. The Company does not expect
the adoption of this consensus to have a material impact on its financial
position or results of operations.
Note 3--Stockholders' Equity
In March 2000, the Company completed a private equity placement and issued
4,702,900 shares of its common stock to accredited investors at a price of
$7.87 per share. The Company received approximately $35.3 million of proceeds,
net of the underwriting discount and offering expenses.
Note 4--Comprehensive Loss
<TABLE>
<CAPTION>
Three Months
Ended May 31,
----------------
2000 1999
------- -------
(In thousands)
<S> <C> <C>
The components of comprehensive loss, net of tax, are as
follows:
Net loss............................................... $(7,365) $(8,855)
Other comprehensive loss, net of tax:
Change in unrealized holding loss in available for sale
securities............................................ (1) (56)
------- -------
Other comprehensive loss............................. (1) (56)
------- -------
Comprehensive loss....................................... $(7,366) $(8,911)
======= =======
</TABLE>
Note 5--Related Party Transactions
On October 1, 1999, the Company formed a joint venture, [email protected],
LLC with Tweeter Home Entertainment Group, Inc. ("Tweeter").
[email protected], LLC operates a fully authorized Internet consumer
electronics retail destination. The Company contributed $2.5 million in cash.
At February 29, 2000, both partners held 50% of the voting stock of the joint
venture and the Company had an ownership interest in the joint venture of
approximately 50%.
As of March 1, 2000, the joint venture agreement between the Company and
Tweeter was amended. The effect of this amendment was to change certain
provisions of the Company's interest in the joint venture. As a result,
effective March 1, 2000, the Company began consolidating the financial
statements of [email protected], LLC with those of Outpost.com as a
controlled subsidiary. All intercompany transactions have been eliminated.
7
<PAGE>
OUTPOST.COM
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of our financial condition and results of
operations should be read in conjunction with our Financial Statements,
including the Notes thereto, included elsewhere in this Form 10-Q.
Overview
Outpost.com is a leading global Internet retailer featuring over 170,000
consumer technology and related products for the home and office. With over
720,000 customers world wide, we offer an online "superstore" at
www.Outpost.com that provides one-stop shopping for domestic and international
customers, 24 hours a day, seven days a week. Our superstore features computer
hardware, software, electronics and other consumer technology products.
Although we have grown rapidly since our inception in 1995, we continue to
incur significant net losses. We believe that in order to continue our growth
and expansion, operating expenses will increase as a result of the financial
commitments required to further develop multiple marketing channels and
enhance our Web site's features and functionality. As such, we expect to
continue to incur losses and generate negative cash flows from operations for
the near term. Since computer retailers typically have low product gross
margins, our ability to achieve profitability is dependent upon our ability to
substantially increase net sales and to broaden our range of product offerings
to include higher margin products. To the extent that our marketing efforts do
not result in significantly higher net sales, we will be materially adversely
affected. There can be no assurance that sufficient revenues will be generated
from the sale of our products to enable us to reach or maintain profitability
on a quarterly or annual basis. Although we have experienced significant
revenue growth since inception, such growth rates may not be sustainable in
the future. In view of the rapidly evolving nature of our business and our
limited operating history, we believe that period-to-period comparisons of our
operating results, including our gross profit and operating expenses as a
percentage of net sales, are not necessarily meaningful and should not be
relied upon as an indication of future performance.
We anticipate that international sales will continue to represent a portion
of our overall revenue. Our international sales are denominated in U.S.
dollars and, therefore, those sales are not affected by foreign currency
translation. However, foreign currency fluctuations may affect demand for our
products. In addition, international sales are subject to diverse market
factors such as the economic conditions of a given country or region.
We believe that the key factor affecting our long-term financial success is
our ability to attract and retain customers in a cost effective manner.
Currently, we seek to expand our customer base and encourage repeat buying
through multiple sales and marketing programs. Such programs include: (i)
on-line and off-line marketing and promotional campaigns, (ii) linking
programs with targeted Web sites, (iii) personalized direct marketing programs
designed to generate repeat sales from existing customers, (iv) alliances with
Internet content providers and portal sites and (v) brand development.
We expect to experience significant fluctuations in our future operating
results due to a variety of factors, many of which are outside our control.
Factors that may affect our operating results include the frequency of new
product releases, success of business alliances, mix of product sales and
seasonality of sales typically experienced by retailers. Sales in the computer
retail industry are significantly affected by the release of new products.
Infrequent or delayed new product releases, when they occur, negatively impact
the overall growth in computer retail sales. Gross profit margins for
hardware, software and accessories vary widely, with computer hardware
generally having the lowest gross profit margins. While we have some ability
to affect our product mix through effective upselling and cross-selling of
high-margin products, our sales mix will vary from period to period and our
gross margins will fluctuate accordingly.
8
<PAGE>
Results of Operations: Three Months Ended May 31, 2000 and 1999
The following table sets forth certain items from our statement of
operations data as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months
Ended May 31,
---------------
2000 1999
------ ------
<S> <C> <C>
Net sales..................................................... 100.0 % 100.0 %
Cost of sales................................................. 86.9 89.6
------ ------
Gross profit.............................................. 13.1 10.4
Operating expenses:
Sales and marketing......................................... 16.5 28.9
General and administrative.................................. 4.3 4.6
Technology and development.................................. 4.5 6.1
------ ------
Total operating expenses................................ 25.3 39.6
------ ------
Operating loss............................................ (12.2) (29.2)
Other income, net............................................. 1.0 2.1
------ ------
Net loss before minority interest......................... (11.2) (27.1)
Minority interest............................................. (0.2) --
------ ------
Net loss...................................................... (11.4)% (27.1)%
====== ======
</TABLE>
Net Sales
Net sales are comprised of product sales, net of returns and allowances, and
advertising revenue derived from hardware manufacturers and software
publishers that pay for promotional placements on our Web site. Product sales
are comprised of computer hardware, software, accessories, electronics and
high-end consumer products and are recognized when the products are shipped to
customers. The Company records a reserve for estimated sales returns at the
time of shipment based on historical return rates. The majority of our net
sales are merchandise to customers using credit cards. The remainder is to
customers that are invoiced directly under credit terms and amounts received
from vendors for advertising.
Net sales increased by $32.1 million to $64.8 million in the quarter ended
May 31, 2000 from $32.7 million in the quarter ended May 31, 1999. This
increase was primarily a result of increases in our new customer sales and
repeat purchases from existing customers resulting in higher revenues from
repeat customers. Revenues from advertising and other sources in the three
month periods ended May 31, 2000 and 1999 were not considered significant. As
of May 31, 2000 we had approximately 720,000 customer accounts. International
sales represented approximately 5% of net sales in the quarter ended May 31,
2000 compared to approximately 13% in the quarter ended May 31, 1999. This
decrease in international sales was primarily the result of the Company
expanding its domestic business at a faster rate than internationally and the
development and implementation of certain domestic marketing programs.
Cost of Sales and Gross Profit
Cost of sales consists of the cost of the merchandise we sell. Cost of sales
increased $27.0 million to $56.3 million in the quarter ended May 31, 2000
from $29.3 million in the quarter ended May 31, 1999. This increase was
primarily the result of an increase in product sales volume. Our gross profit
increased by $5.1 million to $8.5 million in the quarter ended May 31, 2000
from $3.4 million in the quarter ended May 31, 1999. This increase was a
result of our growth in revenues and improved margins on those revenues. As a
percentage of net sales, cost of sales decreased to 86.9% from 89.6% and our
gross profit increased to 13.1% from 10.4% in the quarters ended May 31, 2000
and May 31, 1999, respectively. The decrease in cost of sales and the increase
in gross margin is attributable to our ability to successfully market higher
margin products than in the previous year.
9
<PAGE>
Operating Expenses
Operating expenses consist of sales and marketing expenses, general and
administrative expenses and technology and development expenses. These are
further described as follows:
Sales and Marketing. Sales and marketing expenses consist primarily of three
components;
Direct Selling Expenses. These expenses consist primarily of shipping
expense net of shipping revenue under our TruePrice program, contract
warehouse fulfillment expense and bank and credit card fees.
Advertising and Promotional Costs. This consists of both on-line and off-
line advertising. This also consists of expenses related to building our
brand, increasing customer awareness and driving traffic to our Web site. The
types of expenses incurred include costs to design and send personalized
direct marketing e-mail campaigns and maintenance of e-mail customer lists.
Sales, Marketing and Customer Service Personnel Costs. This includes the
salaries and benefits paid to personnel and the incidental expenses incurred
during the course of their business. We do not allocate any material amount of
common expenses to Sales and Marketing.
Sales and marketing expenses increased by $1.3 million to $10.7 million in
the quarter ended May 31, 2000 from $9.4 million in the quarter ended May 31,
1999. The increase in absolute dollars is primarily the result of an increase
in the variable direct selling expenses described above. As part of our
TruePrice program we provide free overnight shipping on most purchases.
Therefore, this expense will increase with additional sales volume. As a
percentage of net sales, sales and marketing expense decreased to 16.5% in the
quarter ended May 31, 2000 from 28.9% in the quarter ended May 31, 1999. The
percentage decrease resulted from our ability to leverage sales and marketing
expenses such that net sales increased at a higher rate than those expenses.
General and Administrative. General and administrative expense includes
administrative, finance, purchasing, and business development personnel and
related costs, general office and related depreciation expenses, as well as
professional fees. General and administrative expense increased by $1.3
million to $2.8 million in the quarter ended May 31, 2000 from $1.5 million in
the quarter ended May 31, 1999. The dollar increase in general and
administrative expense was due to the increases in both executive and
administrative personnel, office expenses associated with such personnel,
depreciation, and professional and consulting fees. As a percentage of net
sales, general and administrative expense decreased to 4.3% in the quarter
ended May 31, 2000 from 4.6% in the quarter ended May 31, 1999. This
percentage decrease was due to our ability to increase revenue without a
commensurate increase in corporate expenses.
Technology and Development. Technology and development expense includes
systems personnel and related costs, software support, technology development
costs, Web site hosting, communications expenditures and related depreciation
expenses. Technology and development expense increased by $0.9 million to
$2.9 million in the quarter ended May 31, 2000 from $2.0 million in the
quarter ended May 31, 1999. The dollar increases in technology and development
expense was primarily a result of systems costs including maintenance and
support fees required to support the growth in visitors to our Web site, as
well as increases in systems personnel to maintain and improve our Web site
and technology infrastructure and depreciation. As a percentage of net sales,
technology and development expense decreased to 4.5% in the quarter ended May
31, 2000 from 6.1% in the quarter ended May 31, 1999. The percentage decrease
resulted from our ability to leverage technology and development expenses such
that net sales increased at a higher rate than those expenses.
Other Income, Net
Other income, net consists of interest income we earned on short-term
investments and overnight investments of our cash balances in money market
accounts, offset by interest expense attributable to lease financing
agreements. Other income, net decreased by $35,000 to $637,000 in the quarter
ended May 31, 2000
10
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from $672,000 in the quarter ended May 31, 1999, primarily as a result of
lower interest income on lower short-term investment balances during the
quarter.
Minority Interest
Minority interest consists of our partner's share (Tweeter Home
Entertainment Group, Inc.) of the net income of [email protected], LLC. The
Company began consolidating these results as of March 1, 2000. The minority
interest equaled $100,000 for the quarter which is a result of profitable
operations by the joint venture.
Net Loss
As a result of the foregoing factors, we incurred a net loss of $7.4 million
in the quarter ended May 31, 2000 compared to a net loss of $8.9 million in
the quarter ended May 31, 1999.
Liquidity and Capital Resources
At May 31, 2000 the Company's total cash and short-term investment balance
was $48.0 million compared to $21.0 million at February 29, 2000.
Cash Inflows and Outflows
During the quarter ended May 31, 2000, the net increase in cash and cash
equivalents was $19.7 million. Details of the Company's cash inflows and
outflows are as follows:
Operating Activities: We used $11.0 million in cash to fund operations
during the quarter ended May 31, 2000. During this period, our principal
operating cash requirements were to fund our net loss and for increases in
accounts receivable and decreases in accounts payable and accrued expenses,
offset in part, by decreases in inventories and prepaid expenses and other
assets. The increase in accounts receivable represents the increase in our on-
account credit sales to small business, college and university customers, as
well as the increase in receivables from our Web site advertisers.
Investing Activities: We used $4.4 million in cash from investing activities
during the quarter ended May 31, 2000. This consists of proceeds from the
sales and maturities of short term investments of $5.1 million and proceeds of
the consolidation of the Tweeter joint venture of $5.7 million, offset by
purchases of short term securities of $12.4 million and the purchases of
property and equipment of $2.8 million.
Financing Activities: We generated $35.1 million in cash from financing
activities during the quarter ended May 31, 2000. Financing activities
included proceeds from issuance of common stock of $35.3 million, offset by
repayment of capital lease obligations in the amount of $200,000.
Cash, Cash Equivalents and Commitments
As of May 31, 2000, we had $33.0 million in cash and cash equivalents
compared to $13.3 million at February 29, 2000. Our cash is currently invested
in A1/P1 or better grade commercial paper. Of this amount, $15.0 million is
invested in short term corporate bonds with a minimum AA rating.
As of May 31, 2000, our material capital commitments consisted of $1.2
million in obligations outstanding under capital leases.
In March 2000, the Company completed a private equity placement and issued
4,702,900 shares of its common stock to institutional investors at a price of
$7.87 per share. The Company received approximately $35.3 million of proceeds,
net of the underwriting discount and offering expenses.
As of May 31, 2000, our "flooring" credit agreement with Deutsche Financial
Services Corporation ("DFS") was $10.0 million. Pursuant to this agreement,
DFS may, at its option, extend credit to us from time to time to purchase
inventory from DFS approved vendors or for other purposes. Under this
agreement, we can
11
<PAGE>
purchase inventory from certain vendors and elect to have these vendors invoice
DFS instead of us. DFS pays this invoice and in turn bills us on a periodic
basis throughout the month. If we pay this note within 30 days, we pay no
interest. If the note remains outstanding after 30 days, we must pay a .25% fee
and interest accrues at a variable rate based on the prime rate plus 2.5%. If
the note remains outstanding after 181 days, interest begins to accrue at the
prime rate plus 6.5%. To date, we have paid all notes within 30 days and have
incurred no interest expense under this facility. The amount of cash
instruments pledged under this agreement was $5.5 million. This pledge, in
addition to all of our assets, secures this facility. For the periods ended May
31, 2000 and February 29, 2000 we had an outstanding balance of $6.8 million
and $8.5 million, respectively, under this facility. These amounts are included
in accounts payable.
We believe that our current cash and cash equivalents and short term
investments will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. If available
cash and cash generated from operations is insufficient to satisfy our
liquidity requirements, we may seek to sell additional equity or debt
securities or obtain a credit facility. The sale of additional equity or
convertible debt securities could result in dilution to our stockholders. There
can be no assurance that financing will be available in amounts or on terms
acceptable to us, if at all.
Forward-Looking Statements
This report may contain forward-looking statements. Such statements are based
on management's current expectations and are subject to a number of factors and
uncertainties that could cause actual results or outcomes to differ materially
from those described in such forward-looking statements. These statements
address or may address the following subjects: our expectation of continued
losses and negative cash flows from operations for the near term; our
expectation of significant fluctuations in future operating results; and the
sufficiency of our cash and cash equivalents. We caution investors that there
can be no assurance that actual results, outcomes or business conditions will
not differ materially from those projected or suggested in such forward-looking
statements as a result of various factors, including, among others, our limited
operating history, unpredictability of future revenues and operating results,
the continued growth of online commerce, risks associated with international
sales, system failure and capacity constraints and competitive pressures. For
further information, refer to the more specific factors and uncertainties
discussed throughout this report.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Not Applicable
Item 2. Changes in Securities and Use of Proceeds
On March 10, 2000, we sold an aggregate of 4,702,900 shares of our common
stock for $7.87 per share and raised aggregate gross proceeds of approximately
$37 million in a private placement to 59 accredited investors. C.E. Unterberg,
Towbin acted as placement agent and received a fee of 4.5% of the aggregate
gross proceeds. The offer and sale of these shares was made in reliance upon
the exemption from the registration provisions of the Securities Act of 1933
set forth in Rule 506 of Regulation D thereof. These shares are restricted
securities. On June 13, 2000, a Registration Statement on Form S-3 that we
filed relating to the resale of these shares was declared effective by the
Securities and Exchange Commission.
In connection with our initial public offering, we sold 4,000,000 shares of
Common Stock, par value $.01 per share, and received net offering proceeds of
approximately $65.5 million. On July 30, 1998, the Securities and Exchange
Commission declared our Registration Statement on Form S-1 (File No. 333-
55819) effective. The following table sets forth our cumulative use of the net
offering proceeds as of May 31, 2000:
<TABLE>
<S> <C>
Building, leasehold improvements and facilities.............. $ 2,128,000
Computers, software and office equipment..................... 11,623,000
Investment in joint venture.................................. 2,809,000
Repayment of indebtedness.................................... 836,000
Working capital.............................................. 42,450,000
Temporary investments........................................ 0
Cash and cash equivalents.................................... 5,454,000
All other purposes, net...................................... $ 200,000
</TABLE>
The foregoing use of net proceeds does not represent a material change in
the use of net proceeds described in the Registration Statement.
Item 3. Defaults Upon Senior Securities. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable
Item 5. Other Information. Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits
<TABLE>
<S> <C>
Exhibit No. 11 Computation of Loss per Share
Exhibit No. 27 Financial Data Schedule
</TABLE>
(B) Reports on Form 8-K.
The Company filed with the Securities and Exchange Commission on March 8,
2000 a Current Report on Form 8-K for the March 7, 2000 event reporting the
private placement of shares of its common stock and gross proceeds of
approximately $37 million therefrom.
13
<PAGE>
SIGNATURE
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.
Date: July 14, 2000
CYBERIAN OUTPOST, INC.
/s/ Katherine N. Vick
By: _________________________________
Katherine N. Vick
Executive Vice President for
Business Development &
Chief Financial Officer
(Principal Accounting and
Financial Officer)
14
<PAGE>
EXHIBIT INDEX
Exhibit
-------
11 Computation of Loss Per Share
27 Financial Data Schedule
15
