UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1999
[ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the Transition Period from _______________ TO _______________.
000-25563
(Commission File Numbers)
OUTLOOK SPORTS TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 3949
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
</TABLE>
100 GRAND STREET, SUITE 5A
NEW YORK, NY 10013
(Address of principal executive offices)
(212) 966-0400
(Registrants' telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. YES [ X ] NO [ ]
As of December 3, 1999 4,636,266 shares of Common Stock, par value $.01 per
share, of Outlook Sports Technology, Inc. were issued and 4,468,266 outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
BALANCE SHEET
OCTOBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Current Assets:
<S> <C>
Cash .......................................................................... $ 46
Accounts receivable (net of allowances of $271,911) ........................... 13,515
Inventories ................................................................... 116,000
Prepaid Expenses .............................................................. 23,400
------------
Total current assets ................................................... 152,961
Property and equipment (net of accumulated depreciation
of $102,757) .................................................................. 85,322
Debt issuance expense (net of accumulated amortization
OF $40,000) ................................................................... --
------------
$ 238,283
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable .............................................................. $ 1,729,013
Accrued expenses .............................................................. 1,030,951
Accrued wages and related expenses ............................................ 655,759
Accrued interest payable ...................................................... 44,863
Notes payable ................................................................. 401,238
Notes payable - related parties - current portion ............................. 270,296
------------
Total current liabilities .............................................. 4,132,120
Notes payable - related parties - long-term ..................................... 190,000
------------
4,322,120
Commitments and contingencies
Shareholders' Deficit:
Preferred stock; $.01 par value, 5,000,000 shares authorized,
none issued and outstanding ................................................. --
Common stock; Class A, $.01 par value, 15,000,000
shares authorized; 4,636,266 shares issued .................................. 46,363
Common stock; Class B, $.01 par value, 5,000,000
shares authorized; none issued and outstanding .............................. --
Treasury stock; 168,000 Class A shares at cost ................................ ( 48,800)
Additional paid-in capital .................................................... 14,184,175
Accumulated deficit ........................................................... (18,265,575)
------------
Total shareholders' deficit ............................................ ( 4,083,837)
------------
$ 238,283
</TABLE>
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenue ...................................... $ 88,474 $ 479,463 $ 4,281 $ 38,989
----------- ----------- ----------- -----------
Costs and expenses:
Costs of sales ............................. 208,882 688,100 101,614 167,921
Research and development ................... 172,828 164,487 23,582 62,252
Selling, general and administrative expenses 4,449,493 4,749,687 1,150,592 1,994,078
----------- ----------- ----------- -----------
Total costs and expenses ............ 4,831,203 5,602,274 1,275,788 2,224,251
----------- ----------- ----------- -----------
Loss from operations ......................... (4,742,729) (5,122,811) (1,271,507) (2,185,262)
----------- ----------- ----------- -----------
Other income (expense):
Gain on sale of license .................... -- 413,997 -- --
Interest expense ........................... ( 52,112) ( 495,943) ( 11,320) ( 170,307)
----------- ----------- ----------- -----------
( 52,112) ( 81,946) ( 11,320) ( 170,307)
----------- ----------- ----------- -----------
Net loss ..................................... $(4,794,841) $(5,204,757) $(1,282,827) $(2,355,569)
=========== =========== =========== ===========
Net loss per common share - basic and diluted $ (1.14) $ (2.10) $ (.29) $ (.95)
=========== =========== =========== ===========
Weighted average common shares outstanding ... 4,221,288 2,483,509 4,378,326 2,467,104
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31,
1999 1998
----------- -----------
Operating activities:
<S> <C> <C>
Net loss ........................................... $(4,794,841) $(5,204,757)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization .................. 147,821 112,050
Stock issued for services and to vendors ....... 1,745,290 --
Stock based compensation ....................... 432,248 --
Stock issued as debt issuance expense .......... 481,250 --
Write down of property and equipment ........... 147,108 --
Write down of inventories ...................... 52,394 --
Increase in allowances for doubtful accounts and
sales returns and allowances ................. 124,306 --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ... ( 137,821) 142,700
Decrease in inventories ...................... 57,410 132,459
Decrease in prepaid expenses ................. 10,347 145,913
Decrease in deposits and other current assets -- 56,113
Decrease in prepaid royalties ................ -- 133,319
Increase (decrease) in accounts payable and
Accrued expenses ........................... ( 719,240) 1,339,126
----------- -----------
Net cash used in operating activities ................ (2,453,728) (3,143,077)
----------- -----------
Investing activities:
Capital expenditures ............................... ( 3,933) ( 302,074)
----------- -----------
Net cash used in investing activities ................ ( 3,933) ( 302,074)
----------- -----------
Financing activities:
Proceeds from line of credit ....................... 1,138 --
Advances from officers ............................. -- 44,147
Payments of advances from officers ................. ( 25,000) --
Proceeds from issuance of unsecured notes payable .. 665,000 3,805,000
Payments to factor ................................. ( 2,744) ( 270,490)
Proceeds from issuance of notes payable -
related parties .................................. 420,296 --
Repayment of unsecured notes payable ............... ( 725,000) ( 115,500)
Proceeds from sale of common stock pursuant
to initial public offering ....................... 2,543,300 --
Expenses of initial public offering ................ ( 604,783) --
Proceeds from sale of common stock ................. 215,000 --
Purchase of treasury stock ......................... ( 29,500) ( 19,300)
----------- -----------
Net cash provided by financing activities ............ 2,457,707 3,443,857
----------- -----------
Net increase in cash ................................. 46 ( 1,294)
Cash, beginning of period ............................ -- 1,367
----------- -----------
Cash, end of period .................................. $ 46 $ 73
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest ............................. $ 14,856 $ 60,079
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Supplemental disclosure of noncash investing and financing activities:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31,
1999 1998
-------------- ---------------
<S> <C> <C>
Issuance of 104,784 shares of common stock to a
professional golfer as consideration for debt owed
to such golfer $ - $ 220,047
============ ===================
Issuance of 11,500 shares of common stock in
connection with endorsement contracts $ - $ 67,500
============ ===================
Issuance of 125,000 shares of common stock for
financial and investment services $ - $ 125,000
============ ===================
Issuance of 44,669 shares of Class A common stock
as consideration for accrued liabilities $ 223,345 $ -
============ ===================
Issuance of 65,000 shares of Class A common stock
for payment of unsecured note payable $ 300,000 $ -
============ ===================
Warrants granted as payment of accrued interest $ 212,813 $ -
============ ===================
Expenses of stock offering $ 77,500 $ -
============ ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the periods presented.
The results for interim periods are not necessarily indicative of the
results to be obtained for a full fiscal year.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Components parts $ 42,422
Clubs 67,130
APPAREL, GOLF ACCESSORIES AND OTHER 6,448
--------------
$ 116,000
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consists of the following:
<S> <C>
Furniture and fixtures $ 157,146
EQUIPMENT 30,933
-------------
188,079
ACCUMULATED DEPRECIATION 102,757
$ 85,322
</TABLE>
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
(Unaudited)
NOTE 4 - NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Unsecured notes payable to private investors,
due September 1998 $ 325,000
Unsecured line of credit, interest at the bank's
prime rate plus 2%, guaranteed by the
Company's President and Chief Executive
Officer, due on demand 36,238
Unsecured note payable, interest at 10.5%,
Due December 1999. 40,000
$ 401,238
</TABLE>
NOTE 5- NOTES PAYABLE - RELATED PARTIES
Notes payable to related parties consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Unsecured notes payable to the Company's
President and Chief Executive Officer, due
December 1999, interest at prime rate $ 170,296
Long-term unsecured notes payable to the
Company's Chief Executive Officer, due
April 2004, interest at prime rate 150,000
Long-term unsecured notes payable to the Company's
Chief Executive Officer, due March 2000, interest at
prime rate 100,000
Long-term unsecured notes payable to the
Company's President and Chief Executive
OFFICER, INTEREST AT 7.5%, DUE BY SEPTEMBER 2002 40,000
--------------
460,296
CURRENT PORTION 270,296
-------------
LONG-TERM PORTION $ 190,000
============
</TABLE>
In April 1999 the Company's Chief Executive Officer advanced $250,000 to
the Company in exchange for notes payable bearing interest at the prime rate of
interest. The first $100,000 of this advance is due on the earlier of March 1,
2000 or within five days following the closing of a public offering of equity
securities of the Company resulting in gross proceeds to the Company of
$5,000,000. The remaining $150,000 of this advance is due on the earlier of
April 20, 2004 or within five days following the closing of a public offering of
equity securities of the Company resulting in gross proceeds to the Company of
$5,000,000.
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
(Unaudited)
NOTE 6 - SHAREHOLDERS' DEFICIT
In March 1999, the Company agreed to reacquire 125,000 shares of Class A
common stock for $31,250. These shares were originally issued to Argent
Securities, Inc. in April 1998 in connection with a two year consulting
agreement.
As at October 31, 1999 the Company purchased 118,000 of these shares for
$29,500.
During March and April 1999 the Company completed an initial public
offering of its Class A common stock. The Company sold 438,500 shares of Class A
common stock at $5.80 per share. Net proceeds to the Company were approximately
$1,768,000 inclusive of certain unpaid offering expenses. In connection with the
offering, the Underwriters were granted for a nominal fee Common Stock Purchase
Warrants entitling the Underwriters to purchase up to 40,000 shares of Class A
common stock at $9.57 per share.
In June 1999 the Class B common stock was automatically exchanged into
shares of Class A common stock in accordance with the applicable provisions
which call for such conversion to take place at such time as the closing price
of the Class A common stock shall equal or exceed $8.00 for a period of ten
consecutive trading days.
On July 1, 1999 the Company entered into a five year consulting agreement
for management and financial advisory services. The agreement calls for the
issuance of 162,500 shares of the Company's common stock. Accordingly, the
Company recognized a charge of $1,381,250 in the current period as complete
payment for the five year period.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
In August 1999 the Company entered into a Letter of Intent with Madison &
Wall Financial Services, Inc. ("Madison"), a privately held full service,
financial public relations company. Under the Letter of Intent the Company and
Madison have agreed, subject to certain conditions, for the Company to acquire
100% of the outstanding shares of Madison in exchange for 9,000,000 shares of
the Company's Class A Common Stock. Among other conditions, the acquisition is
conditioned on the satisfactory completion of due diligence by both the Company
and Madison as well as approval by the Company's shareholders. If this
acquisition is consummated, the Company's primary business focus will become
providing financial public relations services. The letter of intent has since
expired. While the Company hopes to engage in a similar transaction with this or
another business, there is no assurance that the Company will be able to
consummate such a transaction with this Company or at all.
On September 29, 1999 three former employees filed a claim with the Supreme
Court of the State of New York alleging, among other things, that the Company
owes such persons back pay and benefits. Such persons have alleged aggregate
damages in an amount that exceeds $600,000. The claims relate to such parties'
employment with the Company and such parties' subsequent termination. The
Company has yet to file any responsive pleadings, however, intends to vigorously
contest such claim.
NOTE 8 - SUBSEQUENT EVENTS
In November 1999 the Company borrowed $145,000 from its president. The
loans bear interest at prime rate and was due December 1, 1999 but was extended
to December 31, 1999.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
General
The statements contained in this report that are not historical are
forward looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, including statements regarding the
Company's expectations, intentions, beliefs or strategies regarding the future.
All forward looking statements include the Company's statements regarding
liquidity, anticipated cash needs and availability and anticipated expense
levels. All forward looking statements included in this report are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward looking statement. It is important to
note that the Company's actual results could differ materially from those in
such forward looking statements.
The following analysis of the Company's financial condition as of and
for the nine months ended October 31, 1999 and October 31, 1998 and for the
quarter ended October 31, 1999 and October 31, 1998 should be read in
conjunction with the Company's financial statements and notes thereto included
elsewhere in this report.
Results of Operations
Nine Months ended October 31, 1999 compared to Nine Months ended October 31,
1998
During the nine months ended October 31, 1999, the Company achieved
$88,474 sales compared to sales of $479,463 during the same period in 1998. Of
the sales during the nine month period ended October 31, 1998, $22,395 were
generated by sales of HiPPO products and $457,068 by sales of Tegra products.
Because the Company sold its license to sell HiPPO products in the U.S. back to
Hippo Holdings, Ltd. in May of 1998, the Company does not expect to receive on a
going forward basis, any revenue from such brand and all sales since that point
have been generated by sales of Tegra products. Sales during the nine month
period ended October 31, 1999 were adversely affected due to the Company's
minimal operating capital position throughout the majority of this period. The
absence of operating capital prevented the Company from producing and from
marketing its products.
Cost of sales during the nine months ended October 31, 1999 totaled
$208,882 compared to $688,100 during the same period in 1998. The Company's lack
of operating capital necessitated the delay of sales efforts until after the
completion of the Company's initial public offering. Subsequent to the
completion of the Company's initial public offering sales efforts at the Company
recommenced, but at a lower level. For the period in 1998, $48,307 reflects
costs associated with air freighting goods to the Company's warehouse in Miami,
Florida. The cost of air freight was necessitated by the Company's marginal
working capital position which limited the Company's ability to place orders as
far in advance as would otherwise be desirable or to maintain inventory to
support demand. The Company's shortage of working capital required the Company
to attempt to shorten lead times involved in production and shipping of goods in
order to deliver product as quickly as possible to its customers. Cost of sales
for the nine months ended October 31, 1998 were also impacted by $142,157 loss
for liquidation of apparel below our cost.
Research and development costs totaled $172,828 for the nine months
ended October 31, 1999 as compared to $164,487 for the same period in 1998. This
increase is attributed primarily to timing of research and development
expenditures.
Selling, general and administrative expenses totaled $4,449,493 for the
nine months ended October 31, 1999 as compared to $4,749,687 for the nine months
ended October 31, 1998. This decrease resulted primarily due to decreased
payroll, advertising, promotion, travel, professional fees and supplies and
services which was offset by non-cash charges primarily resulting from the
issuance of common stock under a five year management agreement entered into by
the Company on July 1, 1999 with an unrelated third party and by charges the
Company incurred in connection with a writedown of property, equipment and
inventories.
<PAGE>
Quarter ended October 31, 1999 compared to Quarter ended October 31, 1998
During the quarter ended October 31, 1999, the Company achieved $4,281
sales compared to sales of $38,989 during the same period in 1998. All sales
during both periods came from the sale of Tegra products. Sales during the
quarter ended October 31, 1999 were adversely affected due to the Company's
minimal operating capital position throughout much of this period.
Cost of sales during the quarter ended October 31, 1999 totaled $101,614
compared to $167,921 during the same period in 1998. The reduced cost
corresponds to the Company's reduced sales staff and minimal ability to seek
sales. For the period in 1998, $19,412 reflects costs associated with air
freighting goods to the Company's warehouse in Miami, Florida. The cost of air
freight was necessitated by the Company's marginal working capital position
which limited the Company's ability to place orders as far in advance as would
otherwise be desirable or to maintain inventory to support demand. The Company's
shortage of working capital required the Company to attempt to shorten lead
times involved in production and shipping of goods in order to deliver product
as quickly as possible to its customers.
Research and development costs totaled $23,582 for the quarter ended
October 31, 1999 as compared to $62,252 for the same period in 1998. This
decrease is attributed primarily to timing of research and development
expenditures.
Selling, general and administrative expenses totaled $1,150,592 for the
quarter ended October 31, 1999 as compared to $1,994,078 for the same period in
1998. This decrease resulted primarily due to decreased payroll, advertising,
promotion, travel, professional fees and supplies and services which was offset
by charges the Company incurred in connection with a writedown of property,
equipment and inventories. .
Forecast
The Company sees softness in the golf market and believes that the best way
to protect shareholder value in the Company is to diversify its interests. We
previously entered into a non-binding letter of intent with a privately held
full service, financial public relations company. Under the letter of intent we
agreed, subject to certain conditions, to acquire 100% of the outstanding shares
of such company in exchange for 9,000,000 shares of our Class A common stock.
The letter of intent has since expired. While we hope to engage in a similar
transaction with this or another business, we cannot assure you that we will be
able to consummate such a transaction with this company or at all.
Year 2000 Compliance
Many existing computer systems and applications and other control devices
use only two digits to identify a year in the date field, without considering
the impact of the upcoming change in the century. As a result, as year 2000
approaches, computer systems and applications used by many companies may need to
be upgraded to comply with "Year 2000" requirements. The Company relies on its
systems in operating and monitoring many significant aspects of its business,
including financial systems (such as general ledger, accounts payable, accounts
receivable, inventory and order management), customer services, infrastructure
and network and telecommunications equipment. The Company also relies directly
and indirectly on the systems of external business enterprises such as
customers, suppliers, creditors, financial organizations and domestic and
international governments. The Company currently estimates that its costs
associated with Year 2000 compliance, including any costs associated with the
consequences of incomplete or untimely resolution of Year 2000 compliance
issues, will not have a material adverse effect on the Company's business,
financial condition or results of operations. However, the Company has not
exhaustively investigated and does not believe it has fully identified the
impact of Year 2000 compliance and has not concluded that it can resolve any
issues that may arise in complying with Year 2000 without disruption of its
business or without incurring significant expense. In addition, even if the
Company's internal systems are not materially affected by Year 2000 compliance
issues, the Company could be affected through disruption in the operation of the
enterprises with which the Company interacts.
<PAGE>
Liquidity and Capital Resources
Our primary source of liquidity has historically consisted of sales of
equity securities and high yield debt borrowings. In March 1999, we completed an
initial public offering of our Class A common stock. Through this offering, we
sold a total of 438,500 shares of our Class A common stock. Net proceeds of this
offering, were approximately $1,768,000, inclusive of certain unpaid offering
expenses. Additionally, during this period, we borrowed approximately $384,000
from Paul Berger, our Chief Executive Officer, and approximately $181,000 from
Jim Dodrill, our President in exchange for notes payable bearing interest at the
prime rate of interest. The first $100,000 of Mr. Berger's advance is due on the
earlier of March 1, 2000 or within five days following the closing of a public
offering of our equity securities resulting in gross proceeds of $5,000,000.
Another $150,000 of this advance is due on the earlier of April 20, 2004 or
within five days following the closing of a public offering of our equity
securities resulting in gross proceeds of $5,000,000. The remainder of this
advance was due on December 1, 1999, but has been extended to December 15, 1999.
The entirety of the advance from Mr. Dodrill was due on December 1, 1999, but
has been extended to December 31, 1999.
During the year ended January 31, 1999, we borrowed $4,205,000 from
unaffiliated individuals at interest rates ranging from 7.5% to 12% and with a
weighted average rate of 9.3% Additionally, we borrowed $19,147 from Paul
Berger, our Chief Executive Officer, at an interest rate of 12.5%.
In November 1998, we executed exchange agreements with certain unaffiliated
note holders where such note holders exchanged an aggregate of $5,210,236
principal amount of indebtedness, inclusive of accrued interest, for 1,042,047
shares of Class A common stock and 1,042,047 warrants. Holders of $375,000
principal amount of indebtedness refused to execute the exchange agreement and
$325,000 of this amount remained outstanding as of the date of this report. We
are attempting to negotiate settlement of this amount with the note holders. In
addition, in November 1998, we converted $911,048 which we had borrowed from
certain officers or persons affiliated to officers into 182,210 shares of Class
A common stock and 182,210 warrants.
During the quarter ended October 31, 1999, we executed an exchange
agreement with an unaffiliated party. Pursuant to the exchange agreement, we
issued to such party 65,000 shares of our Class A common stock in exchange for a
$300,000 principal amount 12 month non-transferable 5% note which was due and
payable on May 26, 2000, a running two percent (2%) royalty on our gross sales
of Tegra titanium drivers and warrants to purchase 50,000 shares of Class A
common stock.
To date, we expended a significant portion of our capital resources on the
development and execution of an infomercial to market and sell Tegra Brand
Drivers. The results of the campaign were far below our expectations. Upon the
airing of the infomercial, we projected that we would have revenues equal to
150% of the amount of capital invested to air the infomercial. To date, revenues
generated from the airing of our infomercial have only been equal to the amount
of capital invested to air the infomercial.
As a result, we believe that we will need to raise significant additional
capital from outside sources to execute our business plan and continue golf
operations. Presently, however, we do not believe that such capital resources
are available to us in the time frame necessary to continue operations
exclusively in our present line of business. Thus, we have determined that we
will endeavor to seek business alliances outside the golf business.
The Company has filed a Registration Statement on Form SB-2 that was
declared effective on November 16, 1999 under which the Company registered
3,955,922 shares of its Class A Common Stock all of which are held by
shareholders of the Company and none of which are held by the Company. Of these
shares, 3,693,422 are issuable to such shareholders upon the exercise of certain
warrants and options. If all warrants and options are exercised the Company
would receive approximately $24,000,000 in exchange for the issuance of
3,693,422 shares of Class A Common Stock. Accordingly, if all or any portion of
these warrants or options are exercised, existing shareholders will experience
dilution to the extent of the shares issued. There can be no assurance that all
or any portion of these warrants or options will be exercised.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 3, 1999, Merrill Corporation ("Merrill") filed a complaint with
the Supreme Court of the State of New York, Index no. 603672/99, naming the
Company as a defendant. Merrill's complaint alleged, among other things, that
the Company failed to pay Merrill for certain printing services rendered on the
Company's behalf in connection with our initial public offering. In its
complaint, Merrill seeks damages of $97,518.54. The Company filed an answer to
Merrill's complaint on September 13, 1999, in which we asserted various
affirmative defenses to Merrill's claim. As of the date of this report, we have
reached a tentative agreement to settle the lawsuit for $71,250; however, no
settlement agreement has been executed.
On September 29, 1999, Clifford Muney, Robert Smiddy and Kim Backus, three
of the Company's former employees, filed a claim with the Supreme Court of the
State of New York alleging, among other things, that the Company owes such
persons back pay and benefits. Such persons have alleged aggregate damages in an
amount that exceeds $600,000. The claims relate to such parties' employment with
the Company and such parties' subsequent termination. As of the date of this
report we have not filed any responsive pleadings, however, we intend to
vigorously contest such claim.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
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.
OUTLOOK SPORTS TECHNOLOGY, INC.
Date: December 14, 1999
By: /s/ Jim Dodrill
------------------------------------------
Jim Dodrill, President and General Counsel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
ARTICLE 5 OF REGULATION S-X
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> jan-31-2000
<PERIOD-END> oct-31-1999
<CASH> 46
<SECURITIES> 0
<RECEIVABLES> 13,515
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0
0
<COMMON> 46,363
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<EPS-DILUTED> (1.14)
</TABLE>
