As filed with the Securities and Exchange Commission on October 29, 1999
Registration No. 333-
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------------
OUTLOOK SPORTS TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
---------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3949 65-0648808
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer Identification
incorporation or organization) classification code number) No.)
</TABLE>
100 Grand Street, 5th Floor
New York, NY 10013
(212) 966-0400
(Address and telephone number of principal executive offices)
---------------------------
Paul Berger, Chief Executive Officer
100 Grand Street, 5th Floor
New York, NY 10013
(212) 966-0400
(Name, address and telephone number of agent for service)
---------------------------
Copies of all communications to:
Gregory Sichenzia, Esq.
Sichenzia, Ross & Friedman LLP
135 West 50th Street, 20th Floor
New York, New York 10020
Tel: (212) 664-1200
Fax: (212) 664-7329
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective and
concluding 120 days thereafter.
If this Form is a post-effective amendment filed pursuant to Rule 429(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
---------------
The registrant hereby amends the registration statement on such date and
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the securities act of 1933 or until this registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEES
Title of Each Class of Amount to Proposed Maximum Amount of
Securities to be Registered be Registered Proposed Aggregate Registration
Maximum Offering Price(1) Fee
Offering Price
Per
Security(1)(2)
<S> <C> <C> <C> <C> <C>
Common Stock, $.01 par value 4,005,922 $11.25 $45,066,622.50 $12,529
$45,066,622.50 $12,529
Total
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee.
(2) Represents the closing sale price for the Registrant's Class A common stock
on October 26, 1999.
<PAGE>
SUBJECT TO COMPLETION, DATED October 29, 1999
OUTLOOK SPORTS TECHNOLOGY, INC.
4,005,922 Shares of Class A Common Stock
<TABLE>
<CAPTION>
<S> <C>
Outlook Sports Technology, Inc.: The Offering:
Outlook Sports Technology, Inc. This prospectus is prepared in connection
100 Grand Street, 5th Floor with the sale to the public of shares of our
New York, New York 10013 Class A common stock.
(212) 966-0400
Selling shareholders are offering all of
Over-the-Counter Bulletin Board Symbol: the 4,005,922 shares of Class A common stock.
TGRA
There is no underwriter or coordinating
broker acting in connection with this offering.
</TABLE>
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public Offering Price $11.25 $45,066,623
Proceeds to Outlook Sports Technology, Inc. $ 0 $ 0
</TABLE>
This investment involves risk. See "Risk Factors" beginning on page 5.
Neither the SEC nor any state securities commission has determined whether
this prospectus is truthful or complete, nor have they made, nor will they make,
any determination as to whether anyone should buy these securities. Any
representation to the contrary is criminal.
The date of this prospectus is ,1999
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C>
Prospectus Summary.................................3 Executive Compensation............................29
Risk Factors.......................................5 Principal Stockholders............................31
Use of Proceeds...................................11 Certain Transactions..............................32
Dilution..........................................11 Description of Our Securities.....................34
Capitalization....................................12 Shares Eligible for Future Sale...................36
Dividends.........................................12 Selling Stockholders..............................37
Selected Financial Data...........................13 Plan of Distribution..............................42
Management's Discussion and Analysis of Legal Matters.....................................43
Financial Condition and Results of Experts...........................................43
Operations........................................14 Where You Can Find More Information...............43
Business..........................................19 Index to Financial Statements....................F-1
Management........................................28
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
Our Business
We design and market premium quality, technologically innovative golf
drivers under the Tegra brand name. Tegra golf clubs were developed to reduce
slice in the average golfer. In June 1999, we launched a direct response
advertising campaign. This campaign was in the form of a 30 minute infomercial
for the Tegra Driver.
We expended a significant portion of our capital resources on the
development and execution of the infomercial; however, the results of the
campaign were far below our expectations. To date, we have merely broken even
from such endeavors.
As a result, we believe that we will need to raise significant 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. Thus, we have
determined that we will endeavor to seek business opportunities outside the golf
business or, possibly, divest our golf assets.
Our Proposed Operations
We propose to evaluate one or more businesses and ultimately acquire an
interest or otherwise participate in a business. As of the date of this
prospectus, we have investigated several businesses, however, we have no current
arrangements, commitments or understandings to acquire the assets or the
securities of a business.
<TABLE>
<CAPTION>
The Offering
<S> <C>
Common stock offered by selling shareholders:............4,005,922.shares
Common stock to be outstanding after this
offering:............................................8,211,688 shares
Use of Proceeds..........................................We do not expect to receive any proceeds from the sale of
our common stock in this offering. See "Use of Proceeds"
Dividend Policy:.........................................We do not intend to pay dividends on our Class A common
stock. We plan to retain any earnings for use in the
operation of our business and to fund future growth.
</TABLE>
The 8,211,688 shares of common stock to be outstanding after this
offering is based on the 4,468,266 shares outstanding as of the date of this
prospectus. Such amount includes the 4,005,922 shares of Class A common stock
which are being offered by some of our selling shareholders in this offering. Of
the shares being offered by our selling shareholders, 3,743,422 are issuable to
such persons upon the exercise of certain warrants and options. For the purposes
of this calculation, we have assumed that the selling shareholders exercised
such warrants and options immediately prior to the offering. The shares of Class
A common stock to be outstanding after this offering excludes:
* 1,174,506 shares of our Class A common stock that is issuable
upon exercise of certain warrants and options that are
outstanding.
* 1,227,927 additional shares of Class A common stock reserved
for issuance under our existing stock option plans as of July
31, 1999
<PAGE>
Summary Financial Data
Set forth below is summary financial data for the years ended January
31, 1999 and January 31, 1998, which was derived from our audited financial
statements. Also set forth below is financial data for the six month periods
ended July 31, 1999 and July 31, 1998, which has been derived from our unaudited
financial statements. In our opinion, these unaudited statements have been
prepared on the same basis as our audited financial statements and reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of our results of operations and financial condition for these
periods.
<TABLE>
<CAPTION>
Year Ended Six Months Ended
January 31, July 31,
1999 1998 1999 1998
Statements of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenue......................................$ 468,194 $ 741,120 $ 84,193 $ 440,474
Total costs and expenses....................... 6,735,853 5,190,123 3,555,415 3,378,023
Loss from operations........................... (6,267,659) (4,449,003) (3,741,222) (2,937,549)
Interest expense............................... (544,869) (244,648) (40,792) (325,636)
Gain on sale of license........................ 413,997 --- --- 413,997
Net loss....................................... (6,398,531) (4,693,651) (3,512,014) (2,849,188)
Basic and diluted loss per share of
Common Stock.................................. (2.34) (2.21) (.85) (1.17)
Weighted average number of common
shares outstanding........................ 2,739,376 2,120,460 4,126,006 2,425,197
</TABLE>
<TABLE>
<CAPTION>
As of July 31, 1999
Actual As Adjusted
Balance Sheet Data:
<S> <C> <C>
Current assets............................................................... $ 333,532 $ 24,928,326
Working capital (deficiency)................................................. (4,305,687) 20,589,107
Total assets................................................................. 616,898 25,211,692
Total liabilities............................................................ 4,829,219 4,529,219
Stockholders' equity (deficit)............................................... (4,212,321) 20,682,473
</TABLE>
The balance sheet data as at July 31, 1999 in the "As Adjusted" column is
adjusted to reflect:
o 20,000 shares of Class A common stock issued to Sichenzia, Ross &
Friedman LLP in consideration for legal services rendered
o the issuance of an additional 75,000 shares of Class A common stock after
July 31, 1999 which are being offered pursuant to this prospectus
o the issuance of 3,743,422 shares of Class A common stock upon exercise of
options and warrants, such shares of common stock being offered pursuant to
this prospectus. We cannot assure you that such options and warrants, or
any portion of such options or warrants will be exercised
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks described below are not the only risks facing
our company. Additional risks not presently known to us, or risks that we
currently deem immaterial, may also impair our business operations.
Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. The trading price of our
Class A common stock could decline due to any of these risks, and you may lose
all or part of your investment.
Risks Relating to Our Operations
We have a history of losses and do not believe that we will achieve
profitability in our current business.
We have incurred operating losses since our inception and had an
accumulated deficit of $16,982,748 as of July 31, 1999. We incurred a net loss
of $6,398,531 for the year ended January 31, 1999, as compared with a net loss
of $4,693,651 for the year ended January 31, 1998. We incurred a net loss of $
3,512,014 for the six months ended July 31, 1999, as compared with a net loss of
$ 2,849,188 for the six months ended July 31, 1998. Such losses have resulted
principally from expenses incurred from general and administrative costs,
research and development and marketing costs incurred during our development
efforts. In light of our net losses, we do not presently believe that we will be
able to achieve profitability in our current business. We are actively seeking
to acquire or merge into one or more businesses in unrelated industries or,
alternatively, we intend to divest our golf assets. We cannot assure you that
our endeavors to acquire or merge into a business will be successful or, even if
successful, that such business will be profitable. In the event we are unable to
find an acquisition or merger candidate, we cannot assure you that we will be
able to divest our assets. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
We have a substantial lack of cash, are presently unable to pay certain debts
and may seek protection from our creditors under applicable bankruptcy laws.
We do not presently have adequate cash from operations or financing
activities to meet either our short-term or long-term needs. In addition, we are
delinquent on our obligations to repay an aggregate of $325,000 of debt used to
help finance the expenses related to our public offering. Part of this amount
has been due since September 30, 1998, and the remainder has been due since
October 15, 1998.
In December 1998, we terminated several employees because we were
unable to pay such employees' salaries. We owed such employees back salary and
agreed to pay such employees severance package which totaled an aggregate of
$450,000, of which we presently owe approximately $250,000.
We do not have sufficient cash to repay all of these obligations. We
are dependant upon outside sources of financing which we no longer believe will
be available to us in our present line of business. Should our plans to acquire
or merge into one or more businesses, or alternatively to divest our assets, be
unsuccessful, we expect that we will seek protection from our creditors under
the applicable bankruptcy laws.
We do not have adequate cash or revenue sources to meet our long term or short
term needs.
We do not presently have adequate cash from operations to meet either
our long term or short term needs. In order to meet our needs for cash to fund
<PAGE>
our operations, we must obtain additional financing. We are currently in default
under a number of our arrangements, agreements and instruments with creditors.
If this offering is not successful, or if we are unable to obtain significant
additional financing, we may be obligated to seek protection from our creditors
under the bankruptcy laws and you may lose your investment. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources;" and our financial statements which begin on
page F-1 of this prospectus.
Our accountants expressed substantial doubt about our ability to continue as a
going concern.
Our independent certified public accountants have issued their report,
dated October 12, 1999, on our financial statements for the year ended January
31, 1999. Such report includes an explanatory paragraph expressing substantial
doubt about our ability to continue as a going concern based on some of the
following reasons:
we have suffered recurring losses and negative cash flows from
operations through January 31, 1999
we have a shareholders' deficit and working capital deficiency as of
January 31, 1999
we are dependent on raising additional financing in order to fund our
existing level of operations
These factors raise substantial doubt about our ability to continue as
a going concern. If we are unable to secure significant additional financing, we
may be obliged to seek protection under the bankruptcy laws and you may lose
your investment. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources;" and our
financial statements included in this prospectus.
We are dependant on the proceeds from this offering to meet our obligations and
to fund our endeavors to search for potential acquisition candidates.
Our capital requirements have been and will continue to be significant.
We are dependent on and intend to use a substantial portion of the proceeds of
this offering to fund our operations until an acquisition or merger can be
commenced. We will also use the proceeds from this offering to fund our
endeavors to search for potential acquisition or merger candidates. We have no
current arrangements with respect to, or sources of, additional financing and we
cannot assure you that any additional financing will be available to us on
acceptable terms, or at all. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
We have a limited operating history for you to assess the advisability of your
investment.
We have a limited operating and financial history for you to consider
in assessing the advisability of your investment. When considering your
investment, you should take into consideration that, to date, we have achieved
limited sales and we have incurred significant losses. You must also consider
that we no longer believe that we can remain viable in our current business. To
remain economically viable, we believe that we must engage in other businesses,
possibly in unrelated industries. We cannot assure that we will be successful in
addressing these risks and challenges.
<PAGE>
Risks Relating to Our Efforts to Acquire a New Business
Our management lacks experience in seeking potential businesses.
We are substantially dependent on the efforts of our founders and
principal officers. We were founded in 1996 for the purpose of marketing,
designing and distributing golf products. Our management has no proven record of
success in finding or engaging acquisition or merger candidates, or potential
purchasers of assets. We currently have no employment contracts or
non-competition agreements with, nor do we carry key man life insurance for, any
of our principal officers.
Our management may negotiate to be paid a premium for their shares of common
stock as part of a merger or acquisition transaction.
Our officers and directors currently own 41.9% of our presently issued
and outstanding Class A common stock. Our officers and directors may actively
negotiate or otherwise consent to the purchase of any portion of their Class A
common stock as a condition to, or in connection with, a proposed merger or
acquisition transaction. A premium may be paid on this stock in connection with
any such stock purchase transaction and you will not receive any portion of the
premium that may be paid. Furthermore, our shareholders may not be afforded an
opportunity to approve or consent to any particular stock buy-out transaction.
Thus, there is a potential for members of management to consider their own
personal pecuniary benefit rather than the best interests of our other
stockholders. Such conduct may present management with conflicts of interest.
Such conflicts may possibly compromise management's state law fiduciary duties
to our shareholders.
Our management owns a sufficient amount of our Class A common stock to control
the outcome of shareholder votes.
Upon completion of this offering, Paul Berger, our Chief Executive
Officer and Jim Dodrill, our President, will own 21.8% of our outstanding Class
A common stock exclusive of their presently exercisable options. Thus, our
principal stockholders and our current management will be able to exercise
significant control over the outcome of most matters submitted for shareholder
approval. These matters may include the election of directors and amendments to
our certificate of incorporation and otherwise direct the our affairs. See
"Principal and Selling Shareholders."
Shares of Class A common stock reserved for issuance upon exercise of employee
stock options may hinder future financing efforts.
We have reserved an aggregate of 1,950,000 shares of our Class A common
stock for issuances pursuant to certain of our stock option plans. Of such
shares, 1,150,000 shares are issuable upon exercise of options issued pursuant
to our 1996 Incentive and Non-qualified Stock Option Plan and 800,000 shares are
issuable upon exercise of options issued pursuant to our 1998 Incentive and
Non-qualified Stock Option Plan. Such options are issuable to our employees,
officers, directors, and consultants.
To date, we have granted options to purchase a total of 722,023 shares
of Class A common stock. The exercise prices of such options presently range
from $0.225 to $6.67 per share. These options may hinder future equity financing
because of the perception that sales of such shares could depress prevailing
market prices of our Class A common stock.
See "Management -- Stock Option Plans" and "Certain Transactions."
<PAGE>
We have no current arrangements, commitments or understandings regarding the
possibility of an acquisition or merger transaction.
We have no present proposals, arrangements or understanding, with any
representatives of the owners of any business or company regarding the
possibility of an acquisition or merger transaction contemplated in this
prospectus. 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 consummate such a transaction with this company or at
all.
Possible acquisitions may not be profitable.
We cannot assure you that we will be able to acquire a favorable
business. In addition, even if we become engaged in a new business, we cannot
assure you that we will generate enough revenues to be profitable.
We may not be able to secure conventional financing for business acquired or
merged.
We expect that any business we acquire will present such a level of
risk that conventional private or public offerings of securities or conventional
bank financing would not be available to us once it acquires said business.
Our management's decisions to acquire into or merge with a business may be made
without extensive evaluation.
Our limited funds will likely make it impracticable to conduct a
complete and exhaustive investigation and analysis of a business. Therefore,
management decisions will likely be made without detailed feasibility studies,
independent analysis, market surveys, and the like which, if we had more funds
available, would be desirable. We will be particularly dependent in making
decisions on information provided by the promoter, owner, sponsor, or others
associated with the businesses seeking our participation, and which will have a
direct economic interest in completing a transaction with us.
Your investment may be diluted in the event of a business reorganization.
It is likely that we will issue additional shares of common stock or
preferred stock in connection with a potential merger, consolidation, or other
business reorganization. The consequences may be a change of control,
significant dilution to your investment and a material decrease in your equity
interest in us. Since we have not made any determination with respect to the
acquisition of any specific business, we cannot speculate on the form of any
potential business reorganization or the amount of securities which we may
issue. Our Board of Directors may issue additional securities on terms and
conditions which the Board of Directors, in its sole discretion, determines to
be in our best interest and without seeking shareholder approval.
Your rights may be limited in an acquisition.
Our shareholders may not be afforded an opportunity specifically to
approve or disapprove any particular business reorganization or acquisition.
Except under certain circumstances, our directors will be able to consummate an
acquisition by or of us without the approval of our shareholders. Under
applicable corporate law, only in the event of a merger, consolidation, or sale
<PAGE>
of all or substantially all of our assets, will our shareholders have the right
to object to the merger, consolidation, or sale and assert his or her
dissenter's right to appraisal of his or her shares. If an acquisition is
consummated in the form of an exchange of securities, our shareholders will not
have the right to object or claim dissenter's rights.
We may be exposed to losses by our possible use of leverage.
A business acquired through a leveraged buy-out will be profitable only
if it generates enough revenues to cover the related debt and expenses. A
leveraged buy-out involves the financing of an acquisition by borrowing on the
assets of the business to be acquired. This practice could increase our exposure
to larger losses. There can be no assurance that any business acquired through a
leveraged buy-out will generate sufficient revenues to cover the related debt
and expenses. The use of leverage to consummate a business combination may
reduce our ability to incur additional debt, make other acquisitions, or declare
dividends, and may subject our operations to strict financial controls and
significant interest expense. We expect that we will have few, if any,
opportunities to utilize leverage in an acquisition. Even if we are able to
identify a business where leverage may be used, there is no assurance that
financing will be available, or if available, on terms acceptable to us.
We may not be able to compete effectively with competitors.
The search for potentially profitable businesses is intensely
competitive. We expect to be at a disadvantage in competing with firms which
have substantially greater financial and management resources than us. It is
expected this competitive condition will exist in any industry in which we may
become engaged.
A business we acquire may be subject to governmental regulation.
The use of assets and/or the conduct of business which we may acquire
could be subject to governmental regulations, including environmental and
taxation matters, which regulations would have a materially adverse affect on
the use of such assets and/or the conduct of such businesses.
Risks Relating to the Trading of Our Common Stock
You may experience difficulty in trading our Class A common stock because of its
listing on the Over-the-Counter Electronic Bulletin Board.
Our Class A common stock is quoted on the Over-the-Counter Electronic
Bulletin Board. The Bulletin Board is a significantly less liquid trading market
than the Nasdaq SmallCap Market or other stock exchanges. At a future date, we
may apply for listing on the Nasdaq SmallCap Market or other exchanges if we are
able to satisfy their quantitative and other listing requirements. However, we
cannot assure you that we will apply for any such listing or that our
application would be accepted. As a result, you may find it more difficult to
dispose of, or obtain accurate quotes on, our Class A common stock.
Our common stock price may be volatile which could result in substantial losses
for investors.
The market price of our securities may be highly volatile. Any
announcements we or our competitors make concerning technological innovations,
new commercial products or procedures, proposed government regulations and
developments, disputes relating to patents or proprietary rights, operating
results, market conditions and economic factors may have a significant impact on
the market price of our common stock. Investors may be unable to resell their
shares of our common stock at or above the offering price.
<PAGE>
Future sales of our Class A common stock pursuant to Rule 144 may have a
depressive effect on our public market.
Upon the completion of this offering, approximately 3,715,599 shares
of our Class A common stock are "restricted securities" as that term is defined
by Rule 144 under the Securities Act of 1933. This amount excludes an additional
1,174,506 shares of Class A common stock that are issuable upon exercise of
certain options and warrants which are presently exercisable. In the future,
such shares may be sold in compliance with Rule 144 or pursuant to an effective
registration statement. Under Rule 144, a person who has beneficially owned
restricted securities for a period of one year may sell such securities in a
brokerage transaction. However, during every three month period, holders of such
securities may only sell an amount of securities that does not exceed the
greater of the following:
1% of the outstanding number of shares of a particular class
of such securities;
or the average weekly trading volume in such securities on
all national exchanges and/or reported through the automated
quotation system of a registered securities association during
the four weeks prior to the filing of a notice of sale by a
securities holder
In the future, sales of restricted stock pursuant to Rule 144 may have
an adverse effect on the market price of our Class A common stock.
Issuances of our preferred stock may effect your rights as a holder of our Class
A common stock.
We are authorized to issue up to 5,000,000 shares of preferred stock,
$0.01 par value per share. The designations, rights, and preferences of such
preferred stock shall be determined at the discretion of our Board of Directors.
Accordingly, our Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividends, liquidation, conversion, voting, or
other rights that could adversely affect the voting power or other rights of the
holders of Class A common stock. Issuances of preferred stock could be used,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in our control. See "Description of Securities."
Our Class A common stock is currently subject to penny stock rules which may
affect its marketability.
Trading in the Over-the-Counter Bulletin Board allows market makers to
enter quotes and trade securities that do not meet listing requirements of the
Nasdaq SmallCap Market or any regional exchange. In such case, sales of our
Class A common stock will be subject to the penny stock rules promulgated by the
Securities and Exchange Commission. The SEC's regulations generally define a
penny stock as any equity security that has a market price (as defined) of less
than $5.00 per share. The rules impose various sales practice requirements on
broker-dealers who sell securities governed by the rules to persons other than
established customers and certain accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The rules further require the delivery by the
broker-dealer of a disclosure schedule prescribed by the SEC relating to the
penny stock market. Disclosure must also be made about all commissions and about
current quotations for the securities. Finally, monthly statements must be
furnished to the SEC disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Although the regulations provide several exceptions to, or exemptions
from, the penny stock rules based on, for example, specified minimum revenues or
asset-value, we may not fall within any of the stated exceptions. Thus, a
transaction in our securities would subject the broker-dealer to sales practice
and disclosure requirements that make trading of the stock more cumbersome which
could materially adversely affect the marketability of the stock.
<PAGE>
This prospectus contains forward-looking statements based on our
current expectations, assumptions, estimates and projections about Outlook
Sports Technology, Inc. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including all the risks and uncertainties discussed in "Risk Factors" and
elsewhere in this prospectus. We do not undertake to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
USE OF PROCEEDS
We will not receive any funds from the sale of the Class A common stock
by the selling shareholders in this offering. The only proceeds we expect to
receive will be from the exercise of the warrants and stock options which some
of the shares of Class A common stock being sold by the selling shareholders
underlie. In the event the holders of all the outstanding options and warrants
elect to exercise such options and warrants by paying the exercise price of such
options and warrants, we will receive a maximum of $24,744,795. Any proceeds
received by us will be applied towards the expenses of this offering which we
estimate to be $150,000. Any remaining funds will be used for working capital.
DILUTION
Our present shareholders have acquired their shares of Class A common
stock and a controlling interest in us, at a cost that is substantially less
than which you may purchase shares. Net tangible book value represents the
amount of our tangible assets, reduced by the amount of our liabilities, and it
is a means to determine the dollar value of our Class A common stock. At July
31, 1999, our net tangible book value (deficit) was ($4,212,321), or ($.96) per
share based on 4,376,266 shares of Class A common stock outstanding. When our
net tangible book value per share is adjusted to take into account the receipt
of $24,594,794 of proceeds from the exercise of certain options and warrants
which shares of our Class A common stock being offered in this offering
underlie, and the issuance of 95,000 shares of Class A common stock issued after
July 31, 1999, our net tangible book value as of July 31, 1999 would be
approximately $20,682,000, or $2.52 per share. This means that you will
experience an immediate dilution per share, or the difference between the market
price of the shares and the net tangible book value per share after the
offering, of approximately $8.73 or 78%.
The following table illustrates the per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Market price per share of Class A common stock as of October 26,
1999............................................................... $ 11.25
Net Tangible deficit per share at July 31, 1999................... $ (.96)
Decrease in net tangible deficit attributable to shares offered
hereby........................................................ 3.48
-----------
Pro forma net tangible book value per share after this offering...
2.52
Dilution of net tangible book value per share to purchasers in
this offering................................................. $ 8.73
===========
</TABLE>
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of July 31, 1999.
The information provided below should be read in conjunction with our financial
statements and the other financial information included in this prospectus
beginning on page F-1.
<TABLE>
<CAPTION>
July 31, 1999
---------------------------------------
Actual As Adjusted
----------------- -----------------
<S> <C> <C>
Cash............................................................... $ -- $ 24,594,794
================= =================
Advances from officers............................................. --- ---
Notes payable to related parties................................... 290,000 290,000
----------------- -----------------
735,641 435,641
Notes payable to unrelated parties.................................
Shareholders' deficit: 45,413 83,797
Common stock, par value $0.01 per share, 15,000,000 shares
authorized, 4,561,266 issued; as adjusted 8,379,688 issued..
Treasury Stock, 168,000 shares at cost.......................... (48,800) (48,800)
Additional paid-in capital...................................... 12,773,814 38,443,722
Accumulated deficit............................................. (16,982,748) (17,796,246)
Total shareholders' equity (deficit)........................ (4,212,321) 20,682,473
================= =================
Total capitalization........................................ $ (3,186,680) $ 21,408,114
================= =================
</TABLE>
The amounts listed in the "As Adjusted" column is adjusted to reflect:
o 20,000 shares of Class A common stock issued to Sichenzia,
Ross & Friedman LLP in consideration for legal services
rendered
o the issuance of an additional 75,000 shares of Class A common
stock after July 31, 1999 which are being offered in this
offering
o the issuance of 3,743,422 shares of Class A common stock upon
exercise of options and warrants, such shares of common stock
being offered pursuant to this prospectus. We cannot assure
you that such options and warrants, or any portion of such
options or warrants will be exercised
DIVIDENDS
To date, we have paid no dividends on our Class A common stock and our
board of directors has no present intention to pay dividends on its Class A
common stock in the foreseeable future. See "Description of Securities." The
payment of dividends in the future, if any, rests solely within the discretion
of our board of directors. Our future dividend policy will depend upon, among
other things, our earnings, capital requirements and financial condition, as
well as other factors deemed relevant by our board of directors. Although we are
not limited to pay dividends by any agreements, we anticipate that future
agreements, if any, with institutional lenders or others may limit our ability
to pay dividends.
<PAGE>
SELECTED FINANCIAL DATA
Set forth below is selected financial data for the years ended January
31, 1999 and January 31, 1998, which has been derived from our audited financial
statements, including the balance sheets at January 31, 1999 and 1998 and the
related statements of operations, of changes in shareholders' deficit and of
cash flows for such periods, and the notes to the financial statements. The data
for the six month periods ended July 31, 1999 and 1998 has been derived from our
unaudited financial statements. In our opinion, these unaudited statements have
been prepared on the same basis as our audited financial statements and reflect
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair statement of our results of operations and financial condition for these
periods. The selected financial data should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements appearing in this prospectus beginning
on page F-1. The results of operations for the six months ended July 31, 1999
are not necessarily indicative of future results.
<TABLE>
<CAPTION>
Year Ended Six Months Ended
January 31, July 31,
1999 1998 1999 1998
Statements of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenue.......................................$. 468,194 $ 741,120 $ 84,193 $ 440,474
Costs of sales.................................. 685,131 859,317 107,268 520,179
Research and development........................ 189,581 451,019 149,246 102,235
Stock-based compensation........................ --- 210,130 --- ---
Selling, general and administrative 5,861,141 3,669,657 3,298,901 2,755,609
expenses...................................
Total costs and expenses........................ 6,735,853 5,190,123 3,555,415 3,378,023
Loss from operations............................ (6,267,659) (4,449,003) (3,741,222) (2,937,549)
Interest expense................................ (544,869) (244,648) (40,792) (325,636)
Gain on sale of license......................... 413,997 --- --- 413,997
Net loss........................................$ (6,398,531) $ (4,693,651) $ (3,512,014) $ (2,849,188)
Basic and diluted loss per share of Common $ $ (2.21) $ (.85) $ (1.17)
Stock........................................... (2.34)
Weighted average number of common 2,739,376 2,120,460 4,126,006 2,425,197
shares outstanding.........................
</TABLE>
<TABLE>
<CAPTION>
As of July 31, 1999
Actual As Adjusted
Balance Sheet Data:
<S> <C> <C>
Current assets............................................................... $ 333,532 $ 24,928,326
Working capital (deficiency)................................................. (4,305,689) 20,589,107
Total assets................................................................. 616,898 25,211,692
Total liabilities............................................................ 4,829,219 4,529,219
Stockholders' equity (deficit)............................................... (4,212,321) 20,682,473
</TABLE>
<PAGE>
The balance sheet data as at July 31, 1999 in the "As Adjusted" column
is adjusted to reflect:
o 20,000 shares of Class A common stock issued to Sichenzia, Ross &
Friedman LLP in consideration for legal services rendered
o the issuance of an additional 75,000 shares of Class A common stock
after July 31, 1999 which are being offered pursuant to this
prospectus
o the issuance of 3,743,422 shares of Class A common stock upon exercise
of options and warrants, such shares of common stock being offered
pursuant to this prospectus. We cannot assure you that such options
and warrants, or any portion of such options or warrants will be
exercised
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
financial statements and notes thereto included at the end of this prospectus,
beginning on page F-1. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include but are not limited to those discussed in "Risk
Factors."
Results of Operations
Six Months ended July 31, 1999 Compared to Six Months Ended July 31, 1998
During the six months ended July 31, 1999, we achieved $84,193 sales
compared to sales of $440,474 during the same period in 1998. Of the sales
during the six month period ended July 31, 1998, $22,395 were generated by sales
of HiPPO products and $418,079 by sales of Tegra products. In May 1998, we sold
our license to sell HiPPO products in the U.S. back to Hippo Holdings, Ltd.
Thus, we will not receive any additional revenue from such brand. The absence of
sales in the six months ended July 31, 1999 is attributable to our minimal
operating capital position throughout the majority of this period. The absence
of operating capital prevented us from producing and marketing our products.
Cost of sales during the six months ended July 31, 1999 totaled
$107,268 compared to $520,179 during the same period in 1998. Our lack of
operating capital necessitated the delay of sales efforts until after the
completion of our initial public offering. Subsequent to the completion of our
initial public offering our sales efforts recommenced. For the six month period
ended July 31, 1998, $28,895 reflects costs associated with air freighting goods
to a warehouse in Miami, Florida. The cost of air freight was necessitated by
our marginal working capital position which limited our ability to place orders
as far in advance as would otherwise be desirable, or to maintain inventory to
support demand. Our shortage of working capital required us to attempt to
shorten lead times involved in production and shipping of goods in order to
deliver product as quickly as possible to our customers.
Research and development costs totaled $149,246 for the six months
ended July 31, 1999 as compared to $102,235 for the same period in 1998. This
increase is attributed primarily to timing of research and development
expenditures.
Selling, general and administrative expenses totaled $3,298,901 for the
six months ended July 31, 1999 as compared to $2,755,609 for the six months
ended July 31, 1998. This decrease resulted primarily from decreased payroll and
related expenses, advertising and promotion, travel, professional fees and
facilities, supplies and services.
<PAGE>
Year Ended January 31, 1999 Compared to Year Ended January 31, 1998
Sales during the year ended January 31, 1999 totaled $468,194 compared
to sales of $741,120 for the year ended January 31, 1998. Of the sales during
the year ended January 31, 1999, $445,799 were generated by sales of Tegra
products and $22,395 by sales of HiPPO products. This compares to sales during
the year ended January 31, 1998, of $588,514 generated by sales of HiPPO
products and $152,606 by sales of Tegra products.
We introduced the HiPPO line of products in July 1997 and the Tegra
line of products in October 1997. Sales during both the year ended January 31,
1999 and the year ended January 31, 1998 were negatively impacted because we
were not able to purchase inventory to fill customer orders as a result of our
inadequate working capital and lack of open terms with our vendors. We believe
that the absence of sufficient working capital has historically prevented us
from taking full advantage of demand for its products. Likewise, we believe that
the lack of open terms with our vendors contributed to preventing us from
meeting this demand.
In May 1998, we sold our license to sell HiPPO products in the U.S.
back to Hippo Holdings, Ltd., along with all existing HiPPO inventory, marketing
materials and related liabilities. In return, we received a cash payment from
Hippo Holdings, Ltd. of approximately $413,000. In addition, Hippo Holdings,
Ltd. returned to us 50,000 shares of our Class A common stock, and Hippo assumed
over $1 million in commitments. Accordingly, we have ceased selling HiPPO
products and do not expect to receive revenue from such brand in the future.
Costs of sales during the year ended January 31, 1999 totaled $685,131
compared to cost of sales during the year ended January 31, 1998 of $859,317. Of
the total costs of sales incurred during the year ended January 31, 1999,
approximately $48,307 reflects costs associated with air freighting goods from
manufacturing facilities located in Asia to our warehouse in Miami, Florida.
This compares to approximately $89,343 incurred for freighting for the year
ended January 31, 1998. The cost of air freight was necessitated by our marginal
working capital position which limited our ability to place orders as far in
advance as would otherwise be desirable or to maintain inventory to support
demand. Our shortage of working capital required us 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. Other incremental delivery costs of
$47,787 also adversely impacted cost of sales for the year ending January 31,
1998. Additional production cost variances of $52,218 in material and assembly
charges attributed to smaller production runs and manufacturing carrying charges
than expected. We do not believe that we would have incurred such expenses had
we been in a better working capital position. These costs also adversely
impacted cost of sales for the year ending January 31, 1998. Costs of sales in
comparison to sales for the year ended January 31, 1998 was negatively impacted
by the liquidation of apparel for $85,356 with a cost of $151,089. Cost of sales
for the year ended January 31, 1999 were also negatively impacted by $142,157
loss for liquidation of apparel below cost.
Research and development costs totaled $189,581 for the year ended
January 31, 1999 as compared to $451,019 for the year ended January 31, 1998.
This decrease resulted from reduced spending associated with final development
of Tegra golf equipment.
Selling, general and administrative expenses totaled $5,861,141 for the
year ended January 31, 1999 as compared to $3,669,657 for the year ended January
31, 1998. This increase resulted primarily from increased payroll and related
expenses, advertising and promotion, travel, professional fees and facilities,
supplies and services.
<PAGE>
Year Ended January 31, 1998 Compared To Year Ended January 31, 1997
Sales during the year ended January 31, 1998 totaled $741,120. There
were no sales during the period February 8, 1996 (inception) to January 31,
1997. Of the sales generated during the year ended January 31, 1998, $588,514
were generated by sales of HiPPO products and $152,606 by sales of Tegra
products.
We introduced the HiPPO line in July 1997 and the Tegra line in October
1997. Sales during the year ended January 31, 1998 were negatively impacted
because we were not able to purchase inventory to fill customer orders. This was
a result of our inadequate working capital and lack of open terms with our
vendors. We believe that the absence of sufficient working capital has
historically prevented us from taking full advantage of demand for our products.
Likewise, we believe that the lack of open terms with our vendors contributed to
preventing the us from meeting this demand.
Costs of sales during the year ended January 31, 1998 totaled $859,317.
Of this amount, approximately $89,343 reflects costs associated with air
freighting goods from manufacturing facilities in Asia to our warehouse in
Miami, Florida. The cost of air freight was necessitated by our marginal working
capital position which limited our ability to place orders as far in advance as
would otherwise be desirable, or to maintain inventory to support demand. Our
shortage of working capital required us to attempt to shorten lead times
involved in production and shipping of goods in order to deliver product as
quickly as possible to our customers. Other incremental delivery costs of
$47,787 also adversely impacted cost of sales for the year ending January 31,
1998. Additional production cost variances of $52,218 in material and assembly
charges attributed to smaller production runs and manufacturing carrying charges
than expected. Had we been in a better working capital position, we do not
believe we would have incurred such expenses. Such expenses also adversely
impacted cost of sales for the year ending January 31, 1998. Costs of sales in
comparison to sales for the year ended January 31, 1998 was negatively impacted
by the liquidation of apparel for $85,356 with a cost of $151,089.
Research and development costs totaled $451,019 for the year ended
January 31, 1998 as compared to $650,805 for the period ended January 31, 1997.
This 31% decrease resulted from reduced spending associated with final
development of Tegra golf equipment.
Selling, general and administrative expenses totaled $3,669,657 for the
year ended January 31, 1998 as compared to $1,251,009 for the period ended
January 31, 1997. This increase resulted primarily from increased advertising
and promotion spending and development costs and growth in employment and
related costs.
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 $250,000 from Paul
Berger, our Chief Executive Officer, 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 our equity securities resulting in gross proceeds 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
our equity securities resulting in gross proceeds of $5,000,000. During the
quarter ended July 31, 1999, we also raised $215,000 from the private sale of
53,750 shares of our unregistered, restricted Class A Common Stock to
unaffiliated parties.
<PAGE>
Subsequent to the end of July 31, 1999, we borrowed approximately $112,000
from our Chief Executive Officer and 36,500 from our President in exchange for
notes payable bearing interest at the prime rate of interest. These amounts are
due on December 1, 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 prospectus. 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.
On or before the date of this prospectus, we will execute an exchange
agreement with an unaffiliated party. Pursuant to the exchange agreement, we
will issue 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. The 65,000 shares of common stock to be issued in connection
with the exchange agreement will be offered pursuant to this prospectus.
Pursuant to the terms of a factoring agreement, we assign substantially
all of our accounts receivable to a factor with recourse. We are able to borrow
up to 50% of eligible accounts receivable, as defined, up to a maximum amount of
$1 million. Advances from the factor incur interest at 24% per annum.
Receivables assigned to the factor are subject to a charge of 3.0% of the face
amount of the receivable. The advances from the factor are secured by all our
assets. The term of the factoring agreement is through August 1999 and renews
for successive twelve month periods unless we, or the factor, cancel it. During
the year ended January 31, 1998, we incurred interest charges of $10,059 and
factoring charges of $7,739. During the year ended January 31, 1999, we incurred
combined interest and factoring charges of $34,877. At January 31, 1998, we had
received advances of approximately $115,000 in excess of those permitted under
the factoring agreement, resulting in our default of such agreement. As a result
of the default, the factor had the right to terminate the agreement and demand
payment of the funds advanced. Subsequent to year end, we reduced the amounts
outstanding under the factoring agreement and we are currently within the
borrowing base of such agreement.
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. Thus, we have merely broken even
from such endeavors.
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. Thus, we have determined that we will endeavor to seek business
opportunities outside the golf business and, possibly, divest our golf assets.
<PAGE>
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. We rely on our
systems in operating and monitoring many significant aspects of its business,
including:
o financial systems such as general ledger, accounts payable, accounts
receivable, inventory and order management
o customer services
o infrastructure and network and telecommunications equipment
We also rely directly and indirectly on the systems of external
business enterprises such as customers, suppliers, creditors, financial
organizations and domestic and international governments. We currently estimate
that our 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 our business,
financial condition or results of operations. In addition, even if our internal
systems are not materially affected by Year 2000 compliance issues, we could be
affected through disruption in the operation of the enterprises with which we
interact. However, we have not exhaustively investigated and do not believe we
have fully identified the impact of Year 2000 compliance with regard to our own
systems or that of our vendors. We have not concluded that we can resolve any
issues that may arise in complying with Year 2000 without disruption of our
business or without incurring significant expenses.
<PAGE>
BUSINESS
We design and market premium quality, technologically innovative golf
drivers under the Tegra brand name. Tegra golf clubs were developed to reduce
slice in the average golfer. In June 1999, we launched a direct response
advertising campaign for our Tegra brand driver. This campaign was in the form
of a 30 minute infomercial for the Tegra Driver. Purchasers would call a toll
free number to purchase the Tegra driver at a purchase price of $299 per driver.
We expended a significant portion of our capital resources on the
development and execution of the infomercial. However, 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. Thus, we have merely broken even from such endeavors.
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, we do not believe that such capital
resources are available to us in the time frame necessary to continue
operations. Thus, we have determined that we will endeavor to seek business
opportunities outside the golf business and, possibly, divest our golf assets.
History
We were founded as Hippo, Inc. in February 1996. In January 1998, we
changed our name to Outlook Sports Technology, Inc. Our goal was to become a
leading U.S. golf equipment and apparel manufacturer. To that end, we entered
into a licensing agreement with Hippo Holdings, Ltd., a leading manufacturer of
value-priced golf equipment in Europe. Under the licensing agreement we would be
entitled to manufacture, market and distribute the HiPPO brand of golf equipment
in the United States and Canada. We began shipments of HiPPO products in July of
1997 and, for the ten month period ending April 30, 1998, sold approximately
$500,000 of HiPPO clubs.
In May 1998, we discontinued the distribution of value-priced golf
equipment to pursue opportunities in the premium-priced golf equipment and
apparel market through the Tegra brand name. We made this transition because we
believed that the premium priced segment of the golf market offered the
following advantages:
* the premium-priced segment of the golf market captures the
largest portion of consumer spending with respect to golf
equipment
* approximately 70% of consumer dollars being spent on golf
equipment are spent on premium clubs
* manufacturers margins on premium clubs are typically
significantly higher than on value-priced equipment
In June of 1996, we initiated a significant research and development
project to develop new, visibly distinct technology for our golf clubs with
which to enter the U.S. golf market. This research led to our development of our
patent-pending Invisible Inset Hosel and bullet shaped driver technology. A
"hosel" is the cylindrical chamber in a golf club where the shaft is attached to
the club head. These new technologies are the key technological elements of the
Tegra brand of golf equipment. To improve our margins and profits, we added the
Tegra brand of premium golf equipment and accessories at the premium-priced
segment of the market.
<PAGE>
On May 4, 1998, we sold our license to sell HiPPOTM products back to
Hippo Holdings, Ltd., along with all existing HiPPOTM inventory, marketing
materials and related liabilities. In return, we received a cash payment from
Hippo Holdings, Ltd. of approximately $413,000. In addition, Hippo Holdings,
Ltd. returned to us 50,000 shares of our Class A common stock and assumed
certain of our outstanding liabilities and commitments which totaled in excess
of $1,000,000.
Tegra Golf Drivers
The Tegra line of golf drivers are technologically innovative, premium
priced clubs that incorporate our patent-pending Invisible Inset Hosel. The
Invisible Inset Hosel is the cylindrical chamber in a golf club where the shaft
is attached to the club head. Our design moves, or insets, the shaft as close to
the center of the club head as permitted under current USGA rules. As a result,
the club head will rotate to the target faster than conventional designs. Thus,
making it easier to square the club at impact and enabling the golfer to hit
straighter and longer shots. This technology has been designed to be visibly
distinct to the consumer at all times except while the club is being used. Our
purpose in making the technology "invisible" to golfers while hitting the shot
is to enhance the golfers ability to aim the club when addressing the ball. This
technology was introduced into the U.S. market in October 1997.
In addition, we designed the Tegra driver with a "bullet" shape in
which the widest part of the club is the club's face or hitting area. This
"bullet" shape contrasts with conventional club designs, in which the club head
widens out from the face of the club resulting in the widest part of the club
head being half an inch or more behind the face. The club's bullet shape
provides a larger hitting area and sweet spot than would be achieved in a club
having the same volume but a conventional design. An additional result of the
bullet shape is that more weight in the club is distributed directly behind the
hitting area than with conventional designs.
Until March 1999, we also designed and marketed a full line of golf
clubs which also incorporated our developed technology, as well as apparel and
related golf equipment. Such product lines were discontinued to focus our
efforts on the sale of our Tegra driver.
Direct Response Advertising
We began airing a direct response advertising infomercial in June of
1999. This was a long-format, 30-minute, infomercial for Tegra drivers. The
infomercial was hosted by network broadcaster Dan Hicks. The infomercial allows
customers to call a toll free telephone number to purchase the Tegra driver
directly. Our Tegra driver infomercial aired on approximately 12 television
stations in North-East and Mid-Atlantic regions of the U.S.
We hired Mr. Hicks pursuant to a Host Agreement, dated March 5, 1999
where Mr. Hicks agreed to, among other things, host the infomercial and endorse
our products. In consideration for his services, we agreed to pay Mr. Hicks an
aggregate of $50,000, $10,000 per appearance date, plus a royalty equal to 1.5%
of the gross sales generated from the infomercial, of which $125,000 of such
royalty was guaranteed, and is payable in equal quarterly installments.
Additionally, we entered into a spokesperson agreement with Mr. Hicks, dated
March 5, 1999. Pursuant to the spokesperson agreement, Mr. Hicks agreed to make
no more than four public or promotional appearances and attend four social
events as a spokesperson on our behalf for the period commencing the date of the
spokesperson agreement through April 31, 2000.
We believe that for the infomercial to be successful, we needed to
achieve a 1.5 media efficiency ratio. This is the ratio between revenues
generated and capital expended to air the infomercial. To date, we have only
achieved a media efficiency ration of 1.0. Thus, we have only generated revenues
from the infomercial equal to the capital invested in airing the infomercial.
<PAGE>
Expansion or Acquisition of Other Businesses
As a result of our inability to achieve a significant revenue stream
from the sale of our Tegra driver, and in the absence of additional capital from
outside sources, we no longer believe that our business, as is, will continue to
be viable. As such, we intend to expand into unidentified businesses, possibly
in areas unrelated to the golf industry.
We currently have no commitment or arrangement to participate in a
business and cannot now predict what type of business we may enter into or
acquire. We emphasize that our business objectives discussed in this prospectus
are extremely general and are not intended to be restrictive on the discretion
of our management. 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 Madison 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 consummate such a transaction with this company or at
all.
We anticipate that we may be able to participate in only one potential
business venture, due primarily to our limited financing. You should consider
this lack of diversification to be a substantial risk of investing in us because
it will not permit us to offset potential losses from one venture against gains
from another.
Selection of a Business
We anticipate that businesses for possible acquisition will be referred
by various sources. These sources include our officers and directors,
professional advisors, securities broker-dealers, venture capitalists, members
of the financial community, and others who may present unsolicited proposals. We
will seek businesses from all known sources, but will rely principally on
personal contacts of our officers and directors and our affiliates, as well as
indirect associations between them and other business and professional people.
We have engaged Gary A. Rogers and Capital York, Inc., pursuant to
consulting agreements, to render consulting services related to, among other
things, the evaluation of prospective mergers, acquisitions and other business
combinations. The term of the consulting agreement for Mr. Rogers is for five
years commencing on July 1, 1999, and the term of the consulting agreement for
Capital York, Inc. is for six months commencing October 26, 1999. We have agreed
to pay each of Mr. Rogers and Capital York, Inc. $500 per diem for any day that
either of their services are required by us, plus we have issued to Mr. Rogers
an aggregate of 162,500 shares of our Class A common stock and we have issued to
Capital York, Inc. an aggregate of 10,000 shares of our Class A common stock.
Such shares of Class A common stock are being offered for sale by Mr. Rogers and
Capital York, Inc. pursuant to this prospectus.
Compensation to a finder or business acquisition firm may take various
forms, including any one or combination of the following:
* one-time cash payments
* payments based on a percentage of revenues or product sales volume
* payments involving issuance of securities
<PAGE>
Consequently, we are unable to predict the cost of utilizing such services, but
estimate that any fees for such services paid in cash will not exceed 10% of the
gross proceeds of this offering and/or equity securities, excluding debt, equal
to 10% of the amount of the securities issued by us to acquire a business.
We will not restrict our search to any particular business, industry,
or geographical location. We reserve the right to evaluate and enter into any
type of business in any location. We may participate in a newly organized
business venture, or a more established company entering a new phase of growth
or in need of additional capital to overcome existing financial problems.
Participation in a new business venture entails greater risks. In many
instances, management of a new business has not proved its ability, the eventual
market of such business' product or services will likely not be established, and
the profitability of the business will be unproven and cannot be predicted
accurately. If we participate in a more established firm with existing financial
problems, we may be subjected to risk because our financial resources may not be
adequate to eliminate or reverse the circumstances creating such financial
problems.
In seeking a business venture, our decision will not be controlled by
an attempt to take advantage of any anticipated or perceived appeal of a
specific industry, management group, product, or industry. Our decision will be
based on the business objective of seeking long-term capital appreciation in our
real value.
Our officers and directors will undertake the analysis of new
businesses. In analyzing prospective businesses, to the extent applicable, we
will consider the following:
* available technical, financial, and managerial
resources, working capital and other prospects for the
future
* the nature of present and expected competition
* the quality and experience of management services which
may be available
* the depth of management
* the potential for further research, development, or
exploration
* the potential for growth and expansion
* the potential for profit
* the perceived public recognition or acceptance of
products, services, or trade or service marks
* name identification
It is possible that we may propose to acquire a business in the
development stage. A business is in the development stage if it is devoting
substantially all of its efforts to establishing a new business, and either
planned principal operations have not commenced or planned principal operations
have commenced but there has been not significant revenue.
The decision to acquire a specific business may be based on our
analysis of the quality of the business' management, personnel, new products or
marketing concepts, the merit of technological changes, and other factors. These
factors are difficult, if not impossible, to analyze through any objective
criteria. We anticipate that the results of operations of a specific business
may not be indicative of it's future potential. Such business may require a
substantial shift in marketing approaches, expansion plans, product emphasis,
management and other factors.
We will analyze all available factors and make a determination based on
a composite of available facts. However, we will not rely on any single factor.
We cannot predict the time period we will need to find, and participate in, a
business. Such period may be effected by circumstances beyond our control,
including:
* the availability of businesses
<PAGE>
* the time required for us to complete our investigation and
analysis of prospective businesses
* the time required to prepare appropriate documents and
agreements providing for our participation
We anticipate that the analysis of specific proposals and the selection of a
business will take several months.
Acquisition of Business
In implementing a structure for a particular business acquisition, we
may become a party to a transaction, the exact nature of which we cannot now
predict. Such transaction may include a:
* merger, consolidation, or other reorganization with another
corporation or entity joint venture
* license purchase and sale of assets
* purchase and sale of stock
We do not intend to participate in a business through the purchase of minority
stock positions. On the consummation of a transaction, it is likely that our
present management and shareholders will not be in control of the surviving
entity. In addition, as part of the terms of the acquisition transaction the
majority or all of our directors may, resign and be replaced by new directors
without vote of our shareholders.
In connection with our acquisition of a business, our present
shareholders, including officers and directors, may, as a negotiated element of
the acquisition, sell a portion or all of our common stock held by them. Such
sale may be at a significant premium over their original investment. As a result
of such sales, affiliates of the entity participating in the business
reorganization with us would acquire a higher percentage of equity ownership in
us. Our present shareholders did not acquire their shares of Class A common
stock with a view towards any subsequent sale in connection with a business
reorganization. However, it is not unusual for affiliates of the entity
participating in the reorganization to negotiate to purchase shares held by the
present shareholders.
This practice is often done to reduce the number of "restricted
securities" held by our shareholders. Thus, the potential adverse impact on the
public market for our Class A common stock that could result from substantial
sales of such shares after the restrictions no longer apply. In the event of
such transaction, you will not receive any portion of the premium that may be
paid. Furthermore, our shareholders may not be afforded an opportunity to
approve or consent to any particular stock buy-out transaction.
We anticipate that any securities issued in any reorganization would be
issued in reliance on exemptions from registration under applicable federal and
state securities laws. However, in some circumstances, we may agree to register
such securities as a negotiated element of the transaction. The securities may
be registered as a negotiated element of the transaction either at the time the
transaction is consummated, under certain conditions, or at specified times
after a transaction. We cannot predict the terms of such registration rights and
the number of securities, if any, which may be registered. We expect, however,
that registration of securities in these circumstances will entail a substantial
expense. We expect that the potential sale of additionally issued securities
into any trading market which may develop may have a depressive effect on such
market.
<PAGE>
The parties with which we are engaged in a business transaction may
find it desirable to structure an acquisition as a "tax-free" event under
sections 351 or 368(a) of the Internal Revenue Code of 1986. In order to obtain
tax-free treatment under section 351, the owners of the acquired business must
own 80% or more of the stock of the surviving entity. In such event, our
shareholders, including investors in this offering, would retain less than 20%
of the issued and outstanding shares of the surviving entity. Section 368(a)(1)
provides for tax-free treatment for business reorganizations where one
corporation is merged with, or acquires the securities or assets of, another
corporation.
Generally, we will be the acquiring corporation in such a business
reorganization and the tax-free status of the transaction will not depend on our
issuance of any specific amount of securities. It is common in such transactions
for the acquiring corporation issue securities in such an amount that the
shareholders of the acquired corporation will hold 50% or more of the voting
stock of the surviving entity. We expect that there is a substantial possibility
that our shareholders will retain less than 50% of the issued and outstanding
shares of the surviving entity. Thus, regardless of the form of the business
acquisition, we anticipate that the investors in this offering will experience a
significant reduction in their percentage of ownership in Outlook Sports
Technology, Inc.
Although we will be the acquiring entity in the transaction described
above, generally accepted accounting principles will ordinarily require that
such transaction be accounted for as if we had been acquired by the other entity
owning the business and, therefore, will not permit a write-up in the carrying
value of the assets of the other company.
The manner in which we participate in a business will depend on the
nature of the business, our respective needs and desires, the management of the
business, and our relative negotiating strength.
It is possible that we will not have sufficient funds from the proceeds
of this offering to fully undertake such development, marketing, and
manufacturing of products which may be acquired. Accordingly, following the
acquisition of any product rights, we may be required to either seek additional
debt or equity financing, or obtain funding from third parties. In connection
with such financing, we probably will be required to give up a portion of our
interest in any acquired product. We cannot assure you that we will be able to
obtain additional financing, or interest third parties in providing funding for
the further development, marketing, and manufacturing of any products we
acquire.
We will participate in a business only after the negotiation and
execution of appropriate written agreements. Although we cannot predict the
terms of such agreements, generally, such agreements will provide for:
o specific representations and warranties by all of the parties
o certain events of default
o the terms of closing and the conditions which must be satisfied by each
of the parties prior to such closing
o the manner of bearing costs if the transaction is not closed
o remedies on default
We anticipate that the investigation of specific businesses and the
negotiation, drafting, and execution of relevant agreements, disclosure
documents, and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys, and others. If we
decide not to participate in a specific business, the costs incurred in any
related investigation would not be recoverable. Furthermore, even if an
agreement is reached for the participation in a specific business, our failure
to consummate that transaction may result our loss of the related costs
incurred. Such loss could materially adversely affect subsequent attempts to
locate, and participate in, additional businesses.
<PAGE>
Operation of Business After Acquisition
Our operation following our acquisition of a business will depend on
the nature of the business and the interest acquired. We are unable to predict
whether we will be in control of the business or Outlook Sports Technology, Inc.
following the acquisition. We expect that the business will present various
risks to investors in this offering, of which have generally been summarized in
the "Risk Factors" portion of this prospectus. However, at this time, we cannot
predict specific risks of a given business.
Leverage
We may be able to participate in a business through the use of
leverage. Leveraging a transaction involves the acquisition of a business by
incurring indebtedness for a portion of the purchase price of that business.
Generally, the debt is secured by the assets of the business acquired.
One situation where we may use leverage is in a case where we locate
an operating business available for sale and arrange for the financing necessary
to purchase it. This type of acquisition would enable us to purchase a larger
business that our limited funds would permit or require the use of less of our
funds to acquire a business. Thus, we can commit our remaining funds to the
operation of the business acquired.
Leveraging a transaction involves significant risks because the debt
incurred will be secured by our assets combined with the assets of the acquired
business. If the combined enterprises are not able to generate sufficient
revenues to make payments on the debt the lender will be able to exercise
remedies provided by law or by contract. This may include foreclosure on
substantially all of our assets. Consequently, our participation in a leveraged
transaction may significantly increase the risk of loss.
The likelihood of our obtaining a conventional bank loan for a
leveraged transaction would largely depend on the business being acquired and
its perceived ability to generate sufficient revenues to repay the debt.
Generally, businesses suitable for leveraging are limited to those with
income-producing assets that are either in operation or can be placed in
operation relatively quickly. We cannot predict whether we will be able to
locate any such business. As a general matter, we expect that we will have few,
if any, opportunities to examine businesses where leveraging would be
appropriate.
Even if we are able to locate a business where leveraging techniques
may be used, we cannot assure you that financing for the acquisition will be
available or, if available, on terms acceptable to us. Lenders from which we may
obtain funds for purposes of a leveraged transaction may impose restrictions on
our future borrowing, dividend, and operating policies. At this time, we cannot
predict the restrictions, if any, which lenders may impose on us, or what impact
such restrictions may have on us.
Governmental Regulation
It is impossible to predict the government regulation, if any, to which
we may be subject until we have acquired an interest in a business. The use of
assets and/or conduct of businesses which we may acquire could be subject to
environmental, public health and safety, land use, trade, or other governmental
regulations and state or local taxation. In selecting a business to acquire, we
will endeavor to ascertain, to the extent of our limited resources, the effects
of such government regulation on such business. In certain circumstances,
however, such as the acquisition of an interest in a new or start-up business
activity, we may not be able to predict with any degree of accuracy the impact
of government regulation. Our inability to ascertain the effect of government
regulation on a prospective business activity will expose us to higher risk.
<PAGE>
Competition
We will be involved in intense competition with other business entities
in the search for a prospective business opportunity. Many of our competitors
will have a competitive edge over us by virtue of their more substantial
financial resources and prior experience. We cannot assure you that we will be
successful in obtaining suitable investments.
Patents
Where appropriate, we seek patent protection. We have filed patent
applications covering various aspects of our Tegra line of inset golf clubs,
which include both woods and irons. We filed a United States provisional patent
application on December 31, 1996, entitled INSET HOSEL GOLF CLUB. We
subsequently filed a full United States patent application and a Patent
Cooperation Treaty patent application based on the United States provisional
patent application, claiming priority as of the December 31, 1996 date. The
Patent Cooperation Treaty Application designated all states. Based on the
results of a patent search obtained by outside patent counsel, we believe that
various aspects of the TEGRA line of woods and irons may be patentable. The
patent applications include sixty-eight claims of varying scope and
construction. These claims include claims directed to golf clubs having an inset
hosel where the hosel is inset and is hidden from the golfer, as well as claims
directed to methods of making such a golf club. Other claims are directed to
other features or combinations of features of the Tegra golf clubs. We have not
received a substantive office action on the merits from the United States Patent
and Trademark Office.
We cannot assure you that patents will issue from any of our pending or
that any claim allowed from such applications will be of sufficient scope of
strength, or be issued in all countries where our products can be sold, to
provide us meaningful protection or any commercial advantage.
Employees
As of the date of this prospectus, we have four full-time employees, of
which three persons are involved in executive, managerial, supervisory and sales
capacities and one person serves in a clerical capacity. None of our employees
are covered by a collective bargaining agreement or is a member of a union. We
believe that our relationship with our employees is satisfactory.
Properties and Facilities
Our corporate headquarters are located in a 1,200 square foot facility
in New York, NY. This facility accommodates our corporate, administrative and
marketing personnel. The lease on this facility is month to month with a monthly
rent of $2,950.
Litigation
We were a defendant in a lawsuit filed by Vardon Golf Company, Inc.
Vardon alleged in its complaint that our Tegra woods and irons infringe one of
the claims of Vardon's patent issued on April 12, 1994. Vardon's patent includes
claims directed to a number of aspects of a golf club head and hosel, including
claims directed to an extended radius of gyration, which includes an aspect of
the club head extending behind the hosel. Vardon filed its complaint in the
Northern District of Illinois, Eastern Division, on May 13, 1998, in which
Vardon alleges that six golf club manufacturers, including us, have
manufactured, sold, offered to sell and distributed in the United States,
specifically in the Northern District of Illinois, wood-type and iron golf clubs
that are covered by at least one claim of Vardon's patent and a related design
patent. Although we did not believe that the Tegra line of clubs infringed any
of the claims of Vardon's patents, we settled the lawsuit for $20,000. Such
amount remains unpaid and, if we default on such payment, Vardon may decide to
reinstate its claim against us. If Vardon is successful with its claim, we
cannot assure you that a court will conclude that we do not violate these
patents. If Vardon is successful in asserting its patent, it could require us to
alter or withdraw existing products, delay or prevent the introduction of new
products, or force us to pay damages. See "Business -- Legal Proceedings."
<PAGE>
We had extensive negotiations with an entity representing professional
golfer Ian Woosnam for in excess of one year. The negotiations were an attempt
to reach an agreement on the terms of a long-term endorsement contract under
which Mr. Woosnam would endorse Tegra golf equipment, apparel and accessories.
While these negotiations were ongoing, Mr. Woosnam used Tegra golf equipment,
apparel and accessories while competing on the US and European PGA Tours. We
have not been able to reach agreement with Mr. Woosnam on the terms of the
endorsement contract. As of approximately January 1999, negotiations have
stopped.
We have made offers to Mr. Woosnam in an attempt to compensate Mr.
Woosnam for the value of the services he rendered during 1998. Should we be
unable to amicably reach an agreement with Mr. Woosnam, he may decide to pursue
legal action against us. In the event that Mr. Woosnam does file a lawsuit
against us, we will assert our defenses vigorously. However, we cannot assure
you that we will prevail or estimate damages which a court may assess against us
if Mr. Woosnam were to prevail in any such action.
On August 3, 1999, Merrill Corporation filed a complaint with Supreme
Court of the State of New York, Index No. 603672/99, naming us as a defendant.
Merrill Corporation's complaint alleged, among other things, that we failed to
pay Merrill Corporation for certain printing services rendered on our behalf in
connection with our initial public offering. In its complaint, Merrill
Corporation seeks damages of $97,518.54. We filed an answer to Merrill
Corporation's compliant on September 13, 1999, in which we asserted various
affirmative defenses to Merrill Corporation's claims. As of the date this
prospectus, we have reached a tentative agreement to settle this lawsuit for
$71,250; however, no settlement agreement has been executed.
On September 29, 1999, Clifford Muney, Robert Smiddy and Kim Baccus,
three of our former employees, filed a claim with the Supreme Court of the State
of New York alleging, among other things, that we owe 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 Outlook Sports
Technology, Inc. and such parties' subsequent termination. As of the date of
this prospectus, we have not filed any responsive pleadings, however, we intend
to vigorously contest such claim.
From time to time we have been threatened with, or named as a defendant
in, lawsuits in the ordinary course of its business. We do not believe that any
of these lawsuits are material. We cannot assure you that one or more future
lawsuits, if decided adversely against us, would not have a material adverse
effect on our business, financial condition or results of operations.
<PAGE>
MANAGEMENT
Directors And Executive Officers
The following table sets forth the names, ages and positions, as of the
date of this prospectus, of all of our officers and directors. Also set forth
below is information as to the principal occupation and background for each
person in the table.
<TABLE>
<CAPTION>
Name Age Position and Office
<S> <C> <C>
Paul H. Berger.................................. 31 Chairman of the Board and Chief Executive Officer
Jim G. Dodrill II............................... 33 President, General Counsel and Director
William Barthold................................ 31 Vice President
</TABLE>
Mr. Berger was one of our co-founders along with Mr. Dodrill and Mr.
Barthold. Mr. Berger has served as our Chairman of the Board and Chief Executive
Officer since our inception. From 1994 to 1995, Mr. Berger was the Special
Projects Manager for Designs, Inc., of which his father is the Chairman of the
Board. Mr. Berger assisted in repositioning Designs from a single brand apparel
chain to a multi-brand operation. He also assisted with the acquisition by
Designs of Boston Trading Ltd., a high quality men's and women's apparel
manufacturer. From 1993 to 1994, Mr. Berger served as an attorney with Designs.
Mr. Berger is a graduate of the George Washington University and the University
of Miami School of Law. Mr. Berger is licensed to practice law in the
Commonwealth of Massachusetts and the State of Florida.
Mr. Dodrill was one of our co-founders along with Mr. Berger and Mr.
Barthold. Mr. Dodrill has served our President, General Counsel and director
since our inception. From 1993 to 1996, Mr. Dodrill was an associate at the law
firm of Latham & Watkins, practicing in the corporate area with an emphasis on
securities offerings, acquisitions, finance and general corporate
representation. From 1988 to 1990, Mr. Dodrill worked for Davis Polk & Wardwell
conducting research and coordinating administrative efforts regarding corporate
reorganization and recapitalization transactions and mergers and acquisitions.
Mr. Dodrill graduated from Brown University and the University of Miami School
of Law, magna cum laude. Mr. Dodrill is licensed to practice law in the States
of New York and Florida.
Mr. Barthold was one of our co-founders along with Mr. Dodrill and Mr.
Berger. Mr. Barthold has served as our Vice President since August 1999, and has
been our Logistics Manager since November 1996. From 1994 to 1996, Mr. Barthold
was the Purchasing Manager of S&K Products International, Inc. From 1992 to
1994, Mr. Barthold was the Purchasing Manager of Quark, Inc.
We currently have two directors, Paul Berger and Jim Dodrill. Our Board of
Directors is divided into three classes. One class of directors is elected each
year at the annual meeting of stockholders. Each class serves for a three-year
term of office. All directors hold their positions until the annual meeting of
stockholders at which their term expires, and until their respective successors
are elected and qualified. Paul Berger serves in the class whose term expires in
2000. Jim Dodrill serves in the class whose term expires in 2002. Our executive
officers are elected annually by our Board of Directors and serve at the
discretion of the Board of Directors or until their successors are elected and
qualified. We have not entered into employment agreements with any of our
executive officers.
Compensation of Directors
Our directors will be reimbursed for any out-of-pocket expenses
incurred by them for attendance at meetings of the Board of Directors or
committees thereof.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation received by the our
Chief Executive Officer and each other executive officer whose total annual
salary and bonus exceeded $100,000 during the fiscal year ended January 31,
1999.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Securities
Annual Compensation Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation Options
Paul H. Berger, Chairman of the Board
<S> <C> <C> <C> <C> <C>
and Chief Executive Officer...............1999.. $ 31,249 --- $ --- ---
1998 32,721 --- 7,800 ---
Jim G. Dodrill II, President, General
Counsel and Director......................1999.. $ 31,249 --- $ --- ---
1998 32,721 --- 7,800 166,666
</TABLE>
"Other Annual Compensation" consisted of life insurance premiums we
paid on behalf of named executive officers.
During fiscal year end 1999, Mr. Berger deferred an additional $93,751
in compensation and Mr. Dodrill deferred an additional $93,751 in compensation.
In March 1998, Mr. Dodrill received options to purchase 166,666 shares of Class
A common stock at $3.00 per share in lieu of $92,279 in defered compensation.
Benefit Plans
Stock Option Plans. The 1996 Incentive and Non-Qualified Stock Option Plan
was adopted by our Board of Directors and our shareholders. Under the 1996 plan,
1,150,000 shares of Class A common stock have been reserved for issuance upon
exercise of options designated as either:
* incentive stock options under the Internal Revenue Code, or
* non-qualified options.
Incentive stock options may be granted under the 1996 plan to our employees and
officers. Non-qualified options may be granted to consultants, directors and
other persons who render services to us or any subsidiary corporation whether or
not they are employees.
The 1998 Incentive and Non-Qualified Stock Option Plan was adopted by our
Board of Directors and shareholders in June 1998. Under the 1998 plan, 800,000
shares of Class A common stock have been reserved for issuance upon exercise of
options designated as either:
* incentive stock options ("ISOs") under the Internal Revenue Code, or
* non-qualified options
Incentive stock options may be granted under the 1998 Plan to our employees and
officers. Non-qualified options may be granted to consultants and other persons
who render services to us or any subsidiary corporation, whether or not they are
employees, and to all our directors.
<PAGE>
The purpose of the these plans is to provide additional incentive to
our officers and other employees, as well as other persons providing services on
our behalf. Options granted under the plans afford these people an opportunity
to acquire or increase their proprietary interest us through the acquisition of
shares of our Class A common stock. Our Board of Directors is responsible for
administering the plans. The 1998 plan may also be administered by a committee
consisting of at least two disinterested directors. The Board, within the
limitations of each plan, may determine the following:
* option grants, including to whom grants will be made
* the number of shares to be covered by each option
* whether the options granted are intended to be incentive
stock options
* the duration and rate of exercise of each option
* the option purchase price per share and the manner of
exercise
* the time, manner and form of payment upon exercise of an
option
* whether restrictions such as repurchase rights are to be
imposed on shares underlying options.
Incentive stock options granted under the plans may not be granted at a
price less than the fair market value of our Class A common stock on the date of
grant, or 110% of fair market value in the case of persons holding 10% or more
of the voting power of all classes of our stock). The aggregate fair market
value at the time of grant of shares for which incentive stock options granted
to any person are exercisable for the first time by any person during any
calendar year may not exceed $100,000. Options under the plans may not be
granted more than 10 years after each plans' respective effective date. Options
granted to date have seven (7) year terms. The term of each incentive stock
option granted under the plans will expire not more than ten years from the date
of grant. Incentive stock options granted to persons holding 10% or more of the
voting power of all classes of our stock expire in five (5). Options granted
under the plans are not transferable during an Optionee's lifetime but are
transferable at death by will or under the laws of descent and distribution.
Including the options summarized in the table below, incentive stock options and
non-qualified options to purchase 722,073 shares of Class A common stock have
been granted to our employees and certain advisors and remain outstanding.
The following table sets forth as to each named executive officer:
* the total number of shares subject to options granted during the fiscal
year ended January 31, 1999
* exercise prices for such options
* the percentage such grants represent of the total option grants to
employees in the fiscal year ended January 31, 1999
* the expiration date of such option grants
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Name Number of Exercise Price Percentage of Expiration
Shares Subject Total Options Date
to Granted to
Option Grants Employees
----------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Paul H. Berger................... 0 -- -- --
Jim G. Dodrill II................ 166,666 $3.00/share 23% 3/16/05
William Barthold................. 0 -- -- --
</TABLE>
The following table sets forth certain information concerning the value
of unexercised stock options held by the named executive officers:
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at January 31, 1999 Options at January 31, 1999
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Paul H. Berger...............................19,577 0 $ 215,836.40 $0
Jim G. Dodrill II............................58,733 0 647,531.33 $0
111,111 0 1,169,998.83 $0
166,666 0 1,374,994.50 $0
</TABLE>
The value of the unexercised in-the-money options is based upon a market
price of $11.25 per share of Class A common stock.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock immediately prior to this offering, and
as adjusted to reflect the sale of the shares of common stock pursuant to this
offering by
* each person known by us to beneficially own more than five
percent of the Common Stock
* each director and our Chief Executive Officer
* all directors and executive officers as a group each selling
stockholder
<TABLE>
<CAPTION>
Name and Address Beneficial Ownership Beneficial Ownership
Prior to Offering Immediately After
Offering
Number Percent Percent
<S> <C> <C> <C>
Paul H. Berger.................................. 1,327,947 29.7% 15.7%
Outlook Sports Technology, Inc.
100 Grand Street
5th Floor
New York, NY 10013
Jim G. Dodrill II............................... 525,277 11.8% 6.1%
Outlook Sports Technology, Inc.
100 Grand Street
5th Floor
New York, NY 10013
All directors and executive officers as a
group (3 persons)............................... 1,871,382 41.9% 22.0%
</TABLE>
The shares of common stock owned by Messrs. Berger and Dodrill
represent shares of Class A common stock received by Messrs. Berger and Dodrill
on or about June 22, 1999 in exchange for an equal number of shares of Class B
common stock owned by them. The shares of Class B common stock previously owned
by Messrs. Berger and Dodrill automatically converted into shares of Class A
common stock when, by the terms of the Class B common stock, the closing market
price for the Class A common stock was greater than $8 for a period of 10
consecutive trading days.
<PAGE>
The amounts shown in the "Beneficial Ownership Prior to Offering"
column for Paul H. Berger include 58,702 shares of common stock issuable to Mr.
Berger upon the exercise of options and warrants which are immediately
exercisable. The amounts shown in the "Beneficial Ownership Prior to Offering"
column for Jim G. Dodrill include 359,977 shares of common stock issuable to Mr.
Dodrill upon the exercise of options and warrants which are immediately
exercisable.
The amounts shown in the "Beneficial Ownership Immediately After the
Offering" column assume that all securities offered in this offering are sold.
CERTAIN TRANSACTIONS
Amendment of Certificate of Incorporation and Conversion of Common Stock
On October 7, 1998, we amended our certificate of incorporation to
create two classes of common stock:
* 15,000,000 shares of Class A common stock, and
* 5,000,000 shares of Class B common stock
All shares of common outstanding prior to the amendment were converted
into shares of Class A common stock, except for 1,464,953 shares of common
equity owned by Paul Berger and Jim Dodrill, which were converted into Class B
common stock. The Class A and Class B common stock have identical rights,
including voting rights. Each share of Class B common stock held by Messrs.
Berger and Dodrill automatically converted into a share of Class A common stock
on or about June 22, 1999.
Transactions Involving Paul Berger
From August 21, 1996 to the date of this prospectus, Paul Berger, our
Chairman of the Board of Directors and Chief Executive Officer, made a number of
advances to us. The advances include the following:
o On August 21, 1996, Mr. Berger advanced $10,000 to us and
received a note with a term of six years, earning 7.5%
interest annually and an option to purchase 19,577 shares of
our Class A common stock at a price of $0.225 per share.
o Mr. Berger made four advances to us using proceeds from sales
of his own stock to other individuals, some of whom were
affiliates, at lower prices than contemporaneous sales of
stock by us to third-party investors.
o On October 17, 1997, Mr. Berger advanced $50,000 to us after
selling 100,000 shares of his stock to Synergy Group
International, Inc. at the price of $0.50 per share. We
issued to Mr. Berger a promissory note for this advance
bearing an annual interest rate of 12.5%.
o On October 28, 1997, Mr. Berger advanced $50,000 to us after
selling 100,000 shares of his stock to Carol Dodrill, Jim
Dodrill's mother, and Bill Powell at the price of $0.50 per
share. We issued to Mr. Berger a promissory for this advance
bearing an annual interest rate of 12.5%.
o On November 11, 1997, Mr. Berger advanced $2,500 to us after
selling 3,333 shares of his stock to Rodger Berman at the
price of $0.75 per share. We issued to Mr. Berger a promissory
note for this advance bearing an annual interest rate of
12.5%.
o On January 23, 1998, Mr. Berger advanced $50,000 to us after
selling 50,000 shares of his stock to Andrew Holder and Marc
Roberts at the price of $1.00 per share. We issued to Mr.
Berger a promissory note for this advance bearing an annual
interest rate of 12.5%.
<PAGE>
o The preceding four transactions were contemporaneous with our
sale of our Class A common stock at $2.10 per share.
o On July 31, 1998, Mr. Berger advanced $17,500 to us. We
issued to Mr. Berger a promissory note for this advance
bearing an annual interest rate of 12.5%.
o In January 1999, Mr. Berger exchanged an aggregate of $170,000
principal amount of indebtedness plus accrued interest for an
aggregate of 39,125 shares of Class A common stock and 39,125
warrants.
o In April 1999, Mr. Berger advanced $250,000 to us in exchange
for notes payable bearing interest at the prime rate of
interest. The first $100,000 of this advance is due on of
March 1, 2000 and the remainder of this advance is due on the
earlier of April 20, 2004. However, the whole amount is
payable to Mr. Berger within five days following the closing
of a public offering of our equity securities resulting in
gross proceeds equal to or greater than $5,000,000.
o Between July 1999 and August 1999, we borrowed an aggregate
of approximately $112,000 from Mr. Berger in exchange for
notes payable at an interest rate equal to the prime rate.
These notes are payable on December 1, 1999. See
"Underwriting."
Transactions Involving Jim Dodrill
Between September 5, 1996 and January 23, 1998, Jim Dodrill, our
President and General Counsel, made a number of advances to us, which include
the following:
o On September 5, 1996, Mr. Dodrill advanced $30,000 to us and
we issued to him a note with a term of six years, earning 7.5%
interest annually and an option to purchase 58,731 shares of
the Class A common stock at a price of $0.225 per share.
o Mr. Dodrill made the following three advances to us using
proceeds from sales of his own stock to other individuals at
lower prices than contemporaneous sales of stock by us to
third-party investors. These three transactions were
contemporaneous with our sale of our Class A common stock at
$2.10 per share. We issued to Mr. Dodrill notes for all three
advances with an annual interest rate of 12.5%:
1. On October 17, 1997, Mr. Dodrill advanced $50,000 to
us after selling 100,000 shares of his stock to
Synergy Group International, Inc. at a price of $0.50
per share.
2. On November 11, 1997, Mr. Dodrill advanced $2,500 to
us after selling 3,333 shares of his stock to Rodger
Berman at the price of $0.75 per share.
3. On January 23, 1998, Mr. Dodrill advanced $50,000 to
us after selling 50,000 shares of his stock to Andrew
Holder and Marc Roberts at the price of $1.00 per
share.
o In January 1999, Mr. Dodrill exchanged an aggregate of
$102,500 principal amount of indebtedness plus accrued
interest for an aggregate of 23,467 shares of Class A common
stock and 23,467 warrants. See "Underwriting."
Transactions Involving Stanley Berger
Between August 13, 1996 and January 16, 1998, Stanley Berger, Paul
Berger's father, made a number of advances to us. The following table summarizes
the loans made. For each loan, Mr. Berger received a note with the loan amount
and interest rate set forth in the table. In addition, for all but the two
repaid loans and one loan on October 1, 1997, Mr. Berger also received a warrant
to purchase the number of shares set forth in the table and at the exercise
price set forth in the table. All of these notes, aggregating $510,000, plus
interest, were exchanged in November 1998 for 102,000 shares of Class A common
stock and 102,000 warrants. See "Underwriting."
<PAGE>
<TABLE>
<CAPTION>
Amount of Loan Interest Rate Number of Shares Warrant
Purchasable Upon Exercise Price
Exercise of
Warrant
<S> <C> <C> <C> <C>
August 13, 1996(1)....................... $35,000 --- --- ---
September 26, 1996....................... $40,000 12.50% 4,400 $1.13
October 8, 1996.......................... $25,000 12.50% 2,750 $1.13
April 30, 1997........................... $25,000 12.50% 3,437 $0.75
May 27, 1997............................. $50,000 15.00% 27,708 $0.75
June 19, 1997............................ $50,000 15.00% 27,708 $0.75
July 3, 1997............................. $30,000 12.50% 6,000 $2.10
July 10, 1997............................ $15,000 12.50% 3,000 $2.10
August 27, 1997(1)....................... $50,000 --- --- ---
September 12, 1997....................... $50,000 12.50% 8,333 $2.10
October 1, 1997(2)....................... $25,000 12.50% ---' ---
October 14, 1997......................... $50,000 12.50% 8,333 $2.10
November 14, 1997........................ $50,000 12.50% 8,333 $2.10
November 28, 1997........................ $30,000 12.50% 2,400 $2.10
December 3, 1997......................... $20,000 12.50% 1,600 $2.10
January 16, 1998......................... $50,000 12.50% 4,000 $4.00
------------- ------------------
Total................................ $595,000 108,002
- ----------------------
</TABLE>
(1) This note was repaid.
(2) For this loan, we granted Mr. Berger a security interest in all of our
accounts receivable.
DESCRIPTION OF SECURITIES
We have authorized capital stock consisting of:
* 15,000,000 shares of Class A common stock, par value $0.01
per share
* 5,000,000 shares of Class B common stock, par value $0.01 per
share
* 5,000,000 shares of Preferred Stock, par value $0.01 per share
As of the date of this prospectus, 4,468,266 shares of Class A common
stock, no shares of Class B common stock and no shares of preferred stock were
issued and outstanding.
Common Stock
The holders of Class A and Class B common stock are entitled to one
vote per share. The holders of common stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of legally
available funds. Upon our liquidation, dissolution or winding up, the holders of
the common stock are entitled to share ratably in all our assets which are
legally available for distribution, after payment of or provisions for all debts
and liabilities. Holders of common stock have no preemptive, subscription, or
redemption rights. The shares of common stock offered pursuant to this
prospectus will be, when and if issued, fully paid and non-assessable.
In connection with our public offering on March 16, 1999, we agreed
with the underwriter of the offering that, for a period of 24 months from such
date, we will not sell or issue any securities (with certain limited exceptions)
without such underwriter's prior written consent. Additionally, we have agreed
<PAGE>
not to register any shares of Class B common stock under the Securities Exchange
Act of 1934, as amended, until March 16, 1999.
Preferred Stock
The Board of Directors is authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 5,000,000 shares of preferred stock in one or more
series. Each such series of preferred stock shall have such number of shares,
designations, preferences, voting powers, qualifications and special or relative
rights or privileges, which may include, among others, dividend rights, voting
rights, redemption and sinking fund provisions, liquidation preferences and
conversion rights, as shall be determined by the Board of Directors in a
resolution or resolutions providing for the issuance of such series. Any such
series of preferred stock, if so determined by the Board of Directors, may have
full voting rights with the common stock or superior or limited voting rights,
and may be convertible into common stock or another security.
We have granted to the Board of Directors the authority to issue
preferred stock and to determine its rights and preferences in order to
eliminate delays associated with a stockholder vote on specific issuances. The
issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding our voting stock. We
have no present plans to issue any shares of preferred stock. In connection with
our public offering on March 16, 1999, we agreed with the underwriter of the
offering that, for a period of 24 months from such date, we will not sell or
issue any securities (with certain limited exceptions) without such
underwriter's prior written consent.
Trading Information
Since our initial public offering on March 16, 1999, our common stock
has traded publicly on the Over-the-Counter Bulletin Board under the symbol
TGRA. The Over-the-Counter Bulletin Board is a regulated quotation service that
captures and displays real-time quotes and/or indications of interest in
securities not listed on The NASDAQ Stock Market or any U.S. exchange. As of
October 26, 1999, the closing price for our Class A common stock was $11.25. For
the period commencing March 16, 1999 through July 31, 1999, the highest price
for our Class A common stock was $11.86 and the lowest price was $5.75.
Information as to trading volumes, and bid and asked prices, for our Class A
common stock may be obtained directly from the Over-the-Counter Electronic
Bulletin Board.
The following table sets forth the high and low bid (price which a
market maker is willing to pay for our Class A common stock) quotations for our
Class A common stock, as reported to us by the Over-the-Counter Bulletin Board.
These quotations are between dealers, do not include retail mark-ups, markdowns
or other fees and commissions, and may not represent actual transactions.
Quarter Low Bid High Bid
April 30, 1999 $5.50 $6.63
July 31, 1999 $6.00 $11.50
<PAGE>
Delaware Law
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date that the person became
an interested stockholder is approved in a prescribed manner. Generally, a
"business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
As a result of the requirements of Section 203, the acquisition of us
by means of a tender offer, a proxy contest or otherwise and the removal of
incumbent officers and directors could be made more difficult. These provisions
are expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control to
negotiate with us first. We believe that the benefits of increased protection of
our potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire us or restructure us outweigh the disadvantages
of discouraging such proposals because, among other things, negotiation of such
proposals could result in an improvement of their terms.
Certain Effects of Authorized but Unissued Stock
The authorized but unissued shares of common stock and preferred stock
are available for future issuance without shareholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans.
The existence of authorized but unissued and unreserved common stock
and preferred stock may enable the Board of Directors to issue shares to persons
friendly to current management which could render more difficult or discourage
an attempt to obtain control by means of a proxy contest, tender offer, merger,
or otherwise, and thereby protect the continuity of our management.
Transfer Agent
The Transfer Agent and Registrar for our Class A common stock is
Continental Stock Transfer and Trust Company
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of this offering, we will have outstanding 8,211,688
shares of Class A common stock. All of the shares of Class A common stock
offered will be freely tradeable by persons other than "affiliates" of Outlook
Sports Technology, Inc. without restriction or further registration under the
Securities Act.
Of the shares of our Class A common stock outstanding after the
offering, approximately 3,715,599 were sold by us in reliance on exemptions from
the registration requirements of the Securities Act of 1933 and are "restricted
securities" within the meaning of Rule 144 promulgated under the Securities Act
of 1933and will become eligible for resale in the public market in reliance on
Rule 144.
Persons who are deemed affiliates are generally entitled under Rule 144
as currently in effect to sell within any three-month period a number of shares
that does not exceed:
<PAGE>
* 1% of the number of shares of the Class A common stock then outstanding, or
* the average weekly trading volume of Class A common stock during the four
calendar weeks preceding the making of a filing with the Securities
and Exchange Commission with respect to such sale.
Such sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us. We are unable to estimate accurately the number of shares of Class A
common stock that ultimately may be sold under Rule 144 because the number of
shares will depend in part on the market price for the Class A common stock, the
personal circumstances of the sellers and other factors.
SELLING STOCKHOLDERS
The following table sets forth the holders of our Class A common stock
who are offering their shares of Class A common stock pursuant to this
prospectus, and the number of shares of Class A common stock being offered by
each person. The amounts set forth below assume that, before the offering, all
selling shareholders exercised the options and warrants which shares of common
stock being offered pursuant to this prospectus underlie:
<TABLE>
<CAPTION>
Selling Stockholders Shares Owned Prior Shares Owned After the
to the Offering Offering
Number Percent Number of Number Percent
Shares
Offered
<S> <C> <C> <C> <C> <C>
Paul Berger.......................... 1,308,370 15.9% 39,125 1,269,245 15.5%
Jim Dodrill.......................... 188,767 2.3% 23,467 165,300 2.0%
Stanley Berger....................... 239,236 2.9% 119,618 119,618 1.5%
Greg Cohen........................... 309,834 3.8% 233,332 76,502 *
G.A.R., Inc.......................... 162,500 2.0% 162,500 - *
Afzal Ahmad.......................... 432,310 5.3% 323,655 108,655 1.3%
Capital York, Inc.................... 10,000 * 10,000 - -
Lynn Chidester....................... 50,150 * 25,000 25,150 *
Jim Mulholland....................... 918,333 11.2% 788,333 130,000 1.6%
Tyrone Adams......................... 21,600 * 17,500 4,100 *
Joel Benowitz........................ 12,500 * 12,500 - -
Ron Berk............................. 25,000 * 25,000 - *
Allan Cohen.......................... 25,947 * 24,447 1,500 *
Communications Enterprise............ 45,000 * 35,000 10,000 -
Lee Corbin........................... 12,500 * 12,500 - *
John Costino......................... 382,500 4.7% 297,500 85,000 1.0%
Eugene Crittenden.................... 163,380 2.0% 106,690 56,690 -
Jenkins Cromwell..................... 12,500 * 12,500 - *
Gilbert Dementis..................... 45,000 * 35,000 10,000 *
John Dichiara........................ 54,627 * 36,677 17,950 *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(continued)
Selling Stockholders Shares Owned Prior Shares Owned After the
to the Offering Offering
Number Percent Number of Number Percent
Shares
Offered
<S> <C> <C> <C> <C> <C>
Dan Drykerman........................ 73,624 * 36,812 36,812 *
Mike Eberts.......................... 27,000 * 21,000 6,000 *
Kelly Flynn.......................... 90,000 1.1% 70,000 20,000 *
Ron Gagnon........................... 90,000 1.1% 70,000 20,000 *
Nelson Garjian....................... 18,500 * 17,500 1,000 *
Esther Golub......................... 12,500 * 12,500 - *
Jim Gordon........................... 73,624 * 36,812 36,812 *
Richard Grant........................ 45,000 * 35,000 10,000 *
Andrew Holder........................ 85,850 1.0% 35,000 50,850 *
David Hingerford..................... 157,500 1.9% 122,500 35,000 *
Robert Hurley........................ 90,000 1.1% 70,000 20,000 *
Integrated Capital................... 22,500 * 17,500 5,000 *
Ryaz Jinnah.......................... 67,500 * 52,500 15,000 *
Ed Kalinowski........................ 45,000 * 35,000 10,000 *
Jay Kobrin........................... 12,500 * 12,500 - *
Paul Kuehn........................... 22,500 * 17,500 5,000 *
Martin Lesh.......................... 45,000 * 35,000 10,000 *
LG Trust............................. 45,000 * 35,000 10,000 *
Gary Markman......................... 185,000 2.3% 155,000 30,000 *
MECA, Inc............................ 45,000 * 35,000 10,000 *
Milton Chawasky Trust................ 22,500 * 17,500 5,000 *
Dan Oliker........................... 11,994 * 5,997 5,997 *
Pafco Insurance...................... 45,000 * 35,000 10,000 *
Joe Pitts............................ 45,000 * 35,000 10,000 *
George Rizos......................... 49,027 * 24,513 24,514 *
Roy Roberts.......................... 45,000 * 35,000 10,000 *
Barry Robbins........................ 22,500 * 17,500 5,000 *
Neil Robinson........................ 18,298 * 9,149 9,149 *
Ben Russell.......................... 45,000 * 35,000 10,000 *
Kenneth Santiamo..................... 88,572 1.1% 71,642 16,930 *
Ron Sawchuck......................... 11,980 * 5,990 5,990 *
Dan Schwartz......................... 18,298 * 9,149 9,149 *
Superior Insurance................... 45,000 * 35,000 10,000 *
Doug Symons.......................... 90,000 1.1% 70,000 20,000 *
Alex Theriot......................... 25,000 * 25,000 - *
Jane Trudeau......................... 25,000 * 25,000 - *
Milan Tyburec........................ 22,500 * 17,500 5,000 *
Martin Watz.......................... 135,000 1.6% 105,000 30,000 *
Mark Weiner ......................... 45,000 * 35,000 10,000 *
Kal Zeff............................. 184,028 2.2% 129,514 54,514 *
- ----------------------------
</TABLE>
* Represents less than 1% of the outstanding Class A common stock outstanding.
<PAGE>
Paul Berger is our Chairman of the Board and Chief Executive Officer. The
amounts shown for Mr. Berger include 39,125 shares of Class A common stock
issuable upon exercise of warrants held by Mr. Berger at an exercise price of
$6.67 per share. Such amounts exclude 19,577 shares of Class A common stock
issuable upon exercise of certain options held by Mr. Berger at an exercise
price of $.225 per share
Jim Dodrill is our President, General Counsel and a director. The amounts
shown for Mr. Dodrill include 23,467 shares of Class A common stock issuable
upon exercise of warrants held by Mr. Berger at an exercise price of $6.67 per
share. Such amounts exclude:
o 58,733 shares of Class A common stock issuable upon exercise of certain
options held by Mr. Dodrill at an exercise price of $.225 per share
o 111,111 shares of Class A common stock issuable upon exercise of certain
options held by Mr. Dodrill at an exercise price of $.72 per share
o 166,666 shares of Class A common stock issuable upon exercise of certain
options held by Mr. Dodrill at an exercise price of $3.00 per share
Stanley Berger is Paul Berger's father. The amounts shown for Mr.
Berger include 119,618 shares of Class A common stock issuable upon exercise of
warrants held by Mr. Berger at an exercise price of $6.67 per share. Such
amounts exclude 108,002 shares of Class A common stock issuable upon exercise of
certain options held by Mr. Berger at exercise prices ranging from $.72 and
$4.00 per share.
The shares being sold by Mr. Cohen are issuable to Mr. Cohen upon
exercise of certain options, of which 116,666 are exercisable at $2.10 per share
and 116,666 are exercisable at $6.67 per share. The amounts shown for Mr. Cohen
include 76,502 shares of Class A common stock held by Michelle Cohen, Mr.
Cohen's wife.
Of the shares of Class A common stock being sold by Afzal Ahmad,
258,665 shares are issuable to Mr. Ahmad upon the exercise of certain warrants
at an exercise price of $6.67 per share. The amounts shown for Mr. Ahmad do not
include an aggregate of 227,499 shares of Class A common stock issuable to Mr.
Ahmad upon exercise of additional warrants held by Mr. Ahmad, at exercise prices
ranging from $.75 to $3.00 per share.
The Amounts shown for Lynn Chidester are exclusive of 18,500 shares of
Class A common stock held by Scott Chidester, Mr. Chidester's son, and 2,500
shares of Class A common stock held by Brook Chidester, Mr. Chidester's
daughter.
The shares being offered by Jim Milholland are issuable upon exercise
of certain warrants, of which 533,333 are exercisable at $7.25 per share and
255,000 are exercisable at $6.67 per share.
The amounts shown for Tyrone Adams include 17,500 shares of Class A
common stock issuable upon exercise of warrants held by Tyrone Adams at an
exercise price of $6.67 per share.
The amounts shown for Joel Benowitz include 12,500 shares of Class A
common stock issuable upon exercise of warrants held by Joel Benowitz at an
exercise price of $6.67 per share.
The amounts shown for Ron Berk include 25,000 shares of Class A common
stock issuable upon exercise of warrants held by Ron Berk at an exercise price
of $6.67 per share.
The amounts shown for Allan Cohen include 24,447 shares of Class A
common stock issuable upon exercise of warrants held by Allan Cohen at an
exercise price of $6.67 per share but does not include 34,583 shares of common
stock issuable upon exercise of warrants held by Mr. Cohen at an exercise price
of $.75 per share.
The amounts shown for Communications Enterprise include 35,000 shares
of Class A common stock issuable upon exercise of warrants held by
Communications Enterprise at an exercise price of $6.67 per share.
The amounts shown for Lee Corbin include 12,500 shares of Class A
common stock issuable upon exercise of warrants held by Lee Corbin at an
exercise price of $6.67 per share.
<PAGE>
The amounts shown for John Costino include 297,500 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Costino at an
exercise price of $6.67 per share.
The amounts shown for Eugene Crittenden include 106,690 shares of Class
A common stock issuable upon exercise of warrants held by Mr. Crittenden at an
exercise price of $6.67 per share but does not include 41,458 shares of common
stock issuable upon exercise of warrants held by Mr. Crittenden at an exercise
price of $.75 per share
The amounts shown for Jenkins Cromwell include 12,500 shares of Class A
common stock issuable upon exercise of warrants held by Jenkins Cromwell at an
exercise price of $6.67 per share.
The amounts shown for Gilbert Dementis include 35,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Dementis at an
exercise price of $6.67 per share.
The amounts shown for John Dicharia include 36,667 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Dicharia at an
exercise price of $6.67 per share, but does not include 41,458 shares of Class A
common stock issuable upon exercise of warrants at an exercise price of $.75.
The amounts shown for Dan Drykerman include 36,812 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Drykerman at an
exercise price of $6.67 per share, but does not include 41,458 shares of Class A
common stock issuable upon exercise of warrants at an exercise price of $.75.
The amounts shown for Mike Eberts include 21,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Eberts at an
exercise price of $6.67 per share.
The amounts shown for Kelly Flynn include 70,000 shares of Class A
common stock issuable upon exercise of warrants held by Kelly Flynn at an
exercise price of $6.67 per share.
The amounts shown for Ron Gagnon include 70,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Gagnon at an
exercise price of $6.67 per share.
The amounts shown for Nelson Garjian include 17,500 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Garjian at an
exercise price of $6.67 per share.
The amounts shown for Esther Golub include 12,500 shares of Class A
common stock issuable upon exercise of warrants held by Esther Golub at an
exercise price of $6.67 per share.
The amounts shown for Jim Gordon include 36,812 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Gordon at an
exercise price of $6.67 per share, but does not include 41,458 shares of Class A
common stock issuable upon exercise of warrants at an exercise price of $.75.
The amounts shown for Richard Grant include 35,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Grant at an exercise
price of $6.67 per share.
The amounts shown for Andrew Holder include 35,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Holper at an
exercise price of $6.67 per share.
The amounts shown for David Hingerford include 122,500 shares of Class
A common stock issuable upon exercise of warrants held by Mr. Hingerford at an
exercise price of $6.67 per share.
The amounts shown for Robert Hurley include 70,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Hurley at an
exercise price of $6.67 per share.
The amounts shown for Integrated Capital include 17,500 shares of Class
A common stock issuable upon exercise of warrants held by Integrated Capital at
an exercise price of $6.67 per share.
<PAGE>
The amounts shown for Ryaz Jinnah include 52,500 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Jinnah at an
exercise price of $6.67 per share.
The amounts shown for Ed Kalinowski include 35,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Kalinowski at an
exercise price of $6.67 per share.
The amounts shown for Jay Kobrin include 12,500 shares of Class A
common stock issuable upon exercise of warrants held by Jay Kobrin at an
exercise price of $6.67 per share.
The amounts shown for Paul Kuehn include 17,500 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Kuehn at an exercise
price of $6.67 per share.
The amounts shown for Martin Lesh include 35,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Lesh at an exercise
price of $6.67 per share.
The amounts shown for LG Trust include 35,000 shares of Class A common
stock issuable upon exercise of warrants held by LG Trust at an exercise price
of $6.67 per share.
The amounts shown for Gary Markman include 155,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Markman at an
exercise price of $6.67 per share.
The amounts shown for MECA, Inc. include 35,000 shares of Class A common
stock issuable upon exercise of warrants held by MECA, Inc. at an exercise price
of $6.67 per share.
The amounts shown for Milton Chawasky Trust include 17,500 shares of
Class A common stock issuable upon exercise of warrants held by Milton Chawasky
Trust at an exercise price of $6.67 per share.
The amounts shown for Dan Oliker include 5,997 shares of Class A common
stock issuable upon exercise of warrants held by Mr. Oliker at an exercise price
of $6.67 per share, but does not include 3,437 shares of Class A common stock
issuable upon exercise of warrants at an exercise price of $.75.
The amounts shown for Pafco Insurance include 35,000 shares of Class A
common stock issuable upon exercise of warrants held by Pafco Insurance at an
exercise price of $6.67 per share.
The amounts shown for Joe Pitts include 35,000 shares of Class A common
stock issuable upon exercise of warrants held by Mr. Pitts at an exercise price
of $6.67 per share.
The amounts shown for George Rizos include 24,514 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Rizos at an exercise
price of $6.67 per share, but does not include 13,750 shares of Class A common
stock issuable upon exercise of warrants at an exercise price of $.75 per share.
The amounts shown for Roy Roberts include 35,000 shares of Class A
common stock issuable upon exercise of warrants held by Roy Roberts at an
exercise price of $6.67 per share.
The amounts shown for Barry Robbins include 17,500 shares of Class A
common stock issuable upon exercise of warrants held by Barry Robbins at an
exercise price of $6.67 per share.
The amounts shown for Neil Robinson include 9,149 shares of Class A
common stock issuable upon exercise of warrants held by Neil Robinson at an
exercise price of $6.67 per share, but does not include 10,364 shares of Class A
common stock issuable upon exercise of warrants at an exercise price of $.75 per
share.
The amounts shown for Ben Russell include 35,000 shares of Class A
common stock issuable upon exercise of warrants held by Ben Russell at an
exercise price of $6.67 per share.
<PAGE>
The amounts shown for Kenneth Santiamo include 71,642 shares of Class A
common stock issuable upon exercise of warrants held by Kenneth Santiamo at an
exercise price of $6.67 per share, but does not include 41,458 shares of Class A
common stock issuable upon exercise of warrants at an exercise price of $.75 per
share.
The amounts shown for Ron Sawchuck include 5,990 shares of Class A
common stock issuable upon exercise of warrants held by Ron Sawchuck at an
exercise price of $6.67 per share, but does not include 3,437 shares of Class A
common stock issuable upon exercise of warrants at an exercise price of $.75 per
share.
The amounts shown for Dan Schwartz include 9,149 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Schwartz at an
exercise price of $6.67 per share, but does not include 10,364 shares of Class A
common stock issuable upon exercise of warrants at an exercise price of $.75.
The amounts shown for Doug Symons include 70,000 shares of Class A
common stock issuable upon exercise of warrants held by Doug Symons at an
exercise price of $6.67 per share.
The amounts shown for Alex Theriot include 25,000 shares of Class A
common stock issuable upon exercise of warrants held by Alex Theriot at an
exercise price of $6.67 per share.
The amounts shown for Jane Trudeau include 25,000 shares of Class A
common stock issuable upon exercise of warrants held by Jane Trudeau at an
exercise price of $6.67 per share.
The amounts shown for Superior Insurance include 35,000 shares of Class
A common stock issuable upon exercise of warrants held by Superior Insurance at
an exercise price of $6.67 per share.
The amounts shown for Doug Symons include 70,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Symons at an
exercise price of $6.67 per share.
The amounts shown for Milan Tyburec include 17,500 shares of Class A
common stock issuable upon exercise of warrants held by Milan Tyburec at an
exercise price of $6.67 per share.
The amounts shown for Martin Watz include 105,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Watz at an exercise
price of $6.67 per share.
The amounts shown for Mark Weiner include 35,000 shares of Class A
common stock issuable upon exercise of warrants held by Mr. Weiner at an
exercise price of $6.67 per share.
The amounts shown for Kal Zeff include 129,514 shares of Class A common
stock issuable upon exercise of warrants held by Kal Zeff at an exercise price
of $6.67 per share, but does not include 13,750 shares of Class A common stock
issuable upon exercise of warrants at an exercise price of $.75.
PLAN OF DISTRIBUTION
Each stockholder selling securities pursuant to this offering is free to
offer and sell his or her shares of Class A common stock at such times, in such
manner and at such prices as he or she shall determine. Such common shares may
be offered by selling stockholders in one or more types of transactions, which
may or may not involve brokers, dealers or cash transactions. The selling
stockholders may also use Rule 144 under the Securities Act, to sell such
securities, if they meet the criteria and conform to the requirements of such
Rule.
There is no underwriter or coordinating broker acting in connection with
the proposed sale of Class A common stock by the selling stockholders. The
selling stockholders have advised us that sales of Class A common stock may be
effected from time to time in by the following events:
<PAGE>
* transactions in the Over-the-Counter Bulletin Board, including block
transactions and/or negotiated transactions
* through the writing of options on the Class A common stock
* a combination of such methods of sale at fixed prices which may be changed,
at market prices prevailing at the time of sale, or at negotiated prices
The selling stockholders may effect such transactions by selling Class A
common stock directly to purchasers or to or through broker/dealers which may
act as agents or principals. Such broker/dealers may receive compensation in the
form of discounts, concessions, or commissions from the selling stockholders.
The selling stockholders and any broker/dealers that act in connection with
the sale of the Class A common stock might be deemed to be "underwriters" within
them meaning of Section 2(11) of the Securities Act, and any commissions
received by them and any profit on the resale of the Class A common stock as
principal might be deemed to be underwriting discounts and commissions under the
Securities Act. The selling stockholders may agree to indemnify any agent,
dealer or broker/dealer that participates in transactions involving sales of the
shares against certain liabilities, including liabilities arising under the
Securities Act. Because selling stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities, they will be subject to
prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a distribution of his or her Class A common
stock, any selling stockholder, any selling broker/dealer and any affiliated
purchasers may be subject to Regulation M which prohibits any "stabilizing bid"
or "stabilizing purchase" for the purpose of pegging, fixing or stabilizing the
price of the Class A common stock in connection with the offering.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for us by our counsel, Sichenzia, Ross & Friedman LLP, 135 West 50th Street,
20th Floor, New York, New York, 10020.
EXPERTS
Our financial statements for each of the two fiscal years ended January 31,
1999 and 1998, appearing in this prospectus have been audited by Wolinetz,
Gottlieb & Lafazan, P.C., to the extent and for the periods set forth in their
reports appearing elsewhere herein and in the Registration Statement and are
included in reliance upon such reports given upon the authority of said firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement with the SEC on Form SB-2 relating to the
shares offered in this prospectus. This prospectus does not contain all of the
information included in the registration statement. For further information
about us and the shares we are offering in this prospectus, refer to the
registration statement and its exhibits. The statements we make in this
prospectus regarding the content of any contract or other document are
necessarily not complete, and you may examine the copy of the contract or other
document that we filed as an exhibit to the registration statement. All our
statements about those contracts or other documents are qualified in their
entirety by referring you to the exhibits to the registration statement.
<PAGE>
You should rely only on the information contained in this document or that
we have referred you to. We have not authorized anyone to provide you with
information that is different. The information contained in this document is
current as of the date this document was filed with the SEC. If any material
changes occur after such date, then we will notify you of the changes by an
amendment to this document. We are not offering to sell you securities if you
live in a jurisdiction where such an offer would be unlawful.
After the effective date of this offering, we intend to furnish to our
stockholders annual reports containing audited financial statements and interim
reports. We currently file annual, quarterly and special reports, proxy
statements and other information with the SEC. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facility of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's Regional Offices located at Seven World
Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained by
mail from the Public Reference Section of the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Our Class A
common stock is traded in the over-the-counter market and is quoted on the
Over-the-Counter Bulletin Board and such reports, proxy statements and other
information concerning us may be inspected and copied at the offices of the
National Association of Securities Dealers, Inc., 9801 Washingtonian Boulevard,
Gaithersburg, Maryland 20878. In addition, we are required to file electronic
versions of these documents with the SEC through the SEC's Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. The SEC maintains a World
Wide Web site at http://www.sec.gov that contains reports, proxy statements and
other information regarding registrants that file electronically with the SEC.
<PAGE>
_________, 1999
Outlook Sports Technologies, Inc.
4,005,922 Shares of Class A Common Stock
------------------------
PROSPECTUS
------------------------
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants F-2
Balance Sheets, January 31, 1999 and July 31, 1999 (Unaudited) F-3
Statements of Operations, Years Ended January 31, 1999 and 1998
and Six Months Ended July 31, 1999 and 1998 (Unaudited) F-4
Statements of Changes in Shareholders' Deficit, Years Ended January 31, 1999
and 1998 and Six Months Ended July 31, 1999 (Unaudited) F-5
Statements of Cash Flows, Years Ended January 31, 1999 and 1998 and Six Months
Ended July 31, 1999 and 1998 (Unaudited) F-6
Notes to Financial Statements F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Outlook Sports Technology, Inc.
We have audited the accompanying balance sheet of Outlook Sports Technology,
Inc. as of January 31, 1999, and the related statements of operations, changes
in shareholders' deficit, and cash flows for each of the two years in the period
ended January 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Outlook Sports Technology, Inc.
as of January 31, 1999, and the results of its operations and its cash flows for
each of the two years in the period ended January 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred recurring losses and negative
cash flows from operations and has a working deficiency capital and
shareholders' deficit at January 31, 1999. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are described in Note 1. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
Rockville Centre, New York
October 12, 1999
F-2
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 1999
(UNAUDITED)
ASSETS
Current Assets:
Accounts receivable (net of allowances of $242,192 at
<S> <C> <C> <C> <C> <C> <C> <C>
July 31, 1999 and $147,605 at January 31, 1999) ............................ $ 51,413 $ -
Inventories .................................................................. 258,719 225,804
PREPAID EXPENSES ............................................................. 23,400 33,747
Total current assets .................................................. 333,532 259,551
Property and equipment (net of accumulated depreciation of $235,740
at July 31, 1999 and $160,855 at January 31, 1999) ........................... 283,366 354,318
Debt issuance expense - net .................................................... -- 22,000
DEFERRED OFFERING COSTS ........................................................ -- 170,706
$ 616,898 $ 806,575
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable ............................................................. $ 1,599,571 $ 1,674,384
Accrued expenses ............................................................. 1,383,719 1,571,899
Accrued wages and related expenses ........................................... 560,295 1,058,879
Accrued interest payable ..................................................... 259,993 233,322
Advances from officer ........................................................ -- 25,000
Notes payable - related parties - current portion ............................ 100,000 --
NOTES PAYABLE - CURRENT PORTION .............................................. 735,641 762,844
------------ ------------
Total current liabilities ............................................. 4,639,219 5,326,328
NOTES PAYABLE - RELATED PARTIES - LONG-TERM .................................... 190,000 40,000
------------ ------------
4,829,219 5,366,328
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; 4,541,266
shares issued at July 31, 1999
and 2,334,075 shares issued at January 31, 1999 ............................ 45,413 23,341
Common stock; Class B, $.01 par value, 5,000,000 shares
authorized; 1,464,953 shares issued and outstanding ........................ -- 14,650
Treasury stock; at cost; 168,000 Class A shares at July 31, 1999
and 50,000 Class A shares at January 31, 1999 .............................. (48,800) (19,300)
Additional paid-in capital ................................................... 12,773,814 8,892,290
ACCUMULATED DEFICIT .......................................................... (16,982,748) (13,470,734)
TOTAL SHAREHOLDERS' DEFICIT .............................................. (4,212,321) ( 4,559,753)
------------ ------------
$ 616,898 $ 806,575
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 31, JANUARY 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE ...................................... $ 84,193 $ 440,474 $ 468,194 $ 741,120
----------- ----------- ----------- -----------
Costs and expenses:
Costs of sales ............................. 107,268 520,179 685,131 859,317
Research and development ................... 149,246 102,235 189,581 451,019
Stock-based compensation ................... -- -- -- 210,130
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,298,901 2,755,609 5,861,141 3,669,657
----------- ----------- ----------- -----------
TOTAL COSTS AND EXPENSES ............ 3,555,415 3,378,023 6,735,853 5,190,123
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS ......................... (3,741,222) (2,937,549) (6,267,659) (4,449,003)
----------- ----------- ----------- -----------
Other income (expense):
Interest expense ........................... ( 40,792) ( 325,636) ( 544,869) ( 244,648)
GAIN ON SALE OF LICENSE .................... -- 413,997 413,997 --
----------- ----------- ----------- -----------
( 40,792) 88,361 ( 130,872) ( 244,648)
----------- ----------- ----------- -----------
NET LOSS ..................................... $(3,512,014) $(2,849,188) $(6,398,531) $(4,693,651)
=========== =========== =========== ===========
Net loss per common share -
Basic and Diluted .......................... $ ( .85) $ ( 1.17) $ ( 2.34) $ (2.21)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ... 4,126,006 2,425,197 2,739,376 2,120,460
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
AND FOR THE SIX MONTHS ENDED JULY 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
TOTAL
COMMON STOCK TREASURY PAID IN
ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT STOCK CAPITAL
DEFICIT DEFICIT
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1997 ....... 1,118,488 $ 11,185 $ -- $ 1,221,159 $ (2,378,552) $ (1,146,208)
Issuance of common stock ........ 1,205,583 12,056 -- 932,218 -- 944,274
Stock option compensation ....... -- -- -- 153,166 -- 153,166
NET LOSS ........................ -- -- -- -- (4,693,651) (4,693,651)
------------ ------------ ------------ ------------ ------------ ------------
Balance, January 31, 1998 ....... 2,324,071 23,241 -- 2,306,543 (7,072,203) (4,742,419)
Issuance of common stock
for payment of services ....... 242,700 2,427 -- 411,786 -- 414,213
Issuance of common stock
upon conversion of debt ....... 1,224,257 12,243 -- 6,109,041 -- 6,121,284
Issuance of common stock
as debt issuance expense ...... 8,000 80 -- 39,920 -- 40,000
Issuance of stock purchase
warrants as payment of
accrued interest .............. -- -- -- 25,000 -- 25,000
Treasury stock, 50,000 shares ... -- -- (19,300) -- -- (19,300)
NET LOSS ........................ -- -- -- -- (6,398,531) (6,398,531)
------------ ------------ ------------ ------------ ------------ ------------
Balance, January 31, 1999 ....... 3,799,028 37,991 (19,300) 8,892,290 (13,470,734) (4,559,753)
Issuance of common stock as
payment for accrued liabilities 44,669 447 -- 222,898 -- 223,345
Issuance of common stock, pursuant
to initial public offering, net
of offering costs ............. 438,500 4,385 -- 1,763,426 -- 1,767,811
Treasury stock, 168,000 shares .. -- -- (29,500) -- -- (29,500)
Issuance of common stock ........ 53,750 537 -- 214,463 -- 215,000
Issuance of common stock for
payment of services ........... 195,319 1,953 -- 1,630,837 -- 1,632,790
Issuance of common stock as
debt issuance expense ......... 10,000 100 -- 49,900 -- 50,000
NET LOSS ........................ -- -- -- -- (3,512,014) (3,512,014)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE , JULY 31, 1999 (UNAUDITED) 4,541,266 $ 45,413 $ (48,800) $12,773,814 $(16,982,748) $(4,212,321)
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 31, JANUARY 31,
1999 1998 1999 1998
(UNAUDITED)
Operating activities:
<S> <C> <C> <C> <C>
Net loss ....................................... $(3,512,014) $(2,849,188) $(6,398,531) $(4,693,651)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization .............. 96,885 74,700 167,400 8,100
Stock-based compensation ................... -- -- -- 210,130
Increase in allowance for doubtful accounts
and sales returns and allowances ......... 94,587 -- 112,605 35,000
Stock issued for services and to vendors ... 1,632,790 -- 194,166 --
Stock issued as debt issuance expense ...... 50,000 -- -- --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ( 146,000) ( 111,408) 55,095 (202,700)
(Increase) decrease in inventories ....... ( 32,915) ( 110,238) 191,254 (417,058)
Increase (decrease) in prepaid expenses .. 10,347 14,731 ( 20,893) (12,854)
(Increase) decrease in deposits and
other current assets .................... -- 15,307 51,813 (44,004)
Decrease in prepaid royalties ............ -- 133,319 133,319 16,681
Increase in accounts payable and
ACCRUED EXPENSES ....................... ( 511,561) 152,762 2,428,832 2,156,941
----------- ----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES ............ (2,317,881) (2,680,015) (3,084,940) (2,943,415)
----------- ----------- ----------- -----------
Investing Activities:
CAPITAL EXPENDITURES ........................... ( 3,933) ( 301,905) ( 302,074) ( 178,547)
----------- ----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES ............ ( 3,933) ( 301,905) ( 302,074) ( 178,547)
----------- ----------- ----------- -----------
Financing activities:
Proceeds from line of credit ................... 542 -- 100 35,000
Advances (payments) from (to) officers ......... ( 25,000) 17,500 44,147 255,000
Proceeds from issuance of unsecured notes
payable ...................................... 665,000 3,555,000 4,205,000 2,265,500
` Proceeds (payments) from (to) factor .......... ( 2,744) ( 280,138) ( 277,394) 280,138
Repayment of unsecured notes payable ........... ( 690,000) ( 115,500) ( 415,500) (30,000)
Proceeds from exercise of stock options and sale
of common stock .............................. 215,000 -- -- 298,650
Debt issuance costs ............................ -- ( 194,688) -- --
Proceeds from issuance of notes payable -
related parties .............................. 250,000 -- -- --
Proceeds from sale of common stock pursuant to
Initial public offering ...................... 2,543,300 -- -- --
Expenses of initial public offering ............ ( 604,784) -- -- --
Purchase of treasury stock ..................... ( 29,500) -- -- --
DEFERRED OFFERING COSTS ........................ -- -- (170,706) --
----------- ----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........ 2,321,814 2,982,174 3,385,647 3,104,288
----------- ----------- ----------- -----------
Net increase (decrease) in cash .................. -- 254 ( 1,367) (17,674)
CASH, BEGINNING OF PERIOD ........................ -- 1,367 1,367 19,041
----------- ----------- ----------- -----------
CASH, END OF PERIOD .............................. $ -- $ 1,621 $ -- $ 1,367
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 31, JANUARY 31,
1999 1998 1999 1998
--------- ---------- -------- --------
(UNAUDITED)
Supplemental disclosure of cash flow information:
<S> <C> <C> <C> <C>
CASH PAID FOR INTEREST ....................... $ 1,218 $ 47,924 $ 77,422 $ 1,868
============ =========== ========= =============
Supplemental disclosure of noncash investing
and financing activities:
Issuance of 104,784 shares of common stock to a
professional golfer as consideration for debt
OWED TO SUCH GOLFER .......................... $ -- $ 220,047 $ 220,047 $ --
============ =========== ========= =============
Issuance of 1,024,800 shares of common stock
In February 1997 in exchange for the
forgivness of $588,660 of advances due
to the Company's Chief Executive Officer ...... $ -- $ -- $ -- $ 588,660
============ =========== ========= =============
Issuance of 8,000 shares of Class A common
STOCK AS DEBT ISSUANCE EXPENSE ............... $ -- $ -- $ 40,000 $ --
============ =========== ========= =============
Return to the Company of 50,000 shares
of common stock as treasury stock
originally issued to a licensor in
connection with sale of license back
to licensor .................................. $ -- $ 19,300 $ 19,300 $ --
============ =========== ========= =============
Issuance of 1,161,666 shares of Class
A common stock and 1,161,666 warrants to
purchase Class A common stock in connection
with conversion of notes payable
and accrued interest on notes,
PURSUANT TO EXCHANGE AGREEMENT .............. $ -- $ -- $5,808,327 $ --
============ =========== ========= =============
Issuance of 62,591 shares of Class A
common stock and 62,591 warrants to
purchase Class A common stock to the
Company's President and Chief Executive
Officer in connection with conversion
of advances made to the Company and
accrued interest on such advances,
PURSUANT TO EXCHANGE AGREEMENT ............... $ -- $ -- $ 312,957 $ --
============ =========== ========= =============
Issuance of 10,000 shares of Class A common
STOCK AS DEBT ISSUANCE EXPENSE ............... $ 50,000 $ -- $ -- $ --
============ =========== ========= =============
Issuance of 44,669 shares of Class A common
STOCK AS CONSIDERATION FOR ACCRUED LIABILITIES $ 223,345 $ -- $ -- $ --
============ =========== ========= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Outlook Sports Technology, Inc. (the "Company") was
incorporated on February 8, 1996 in the State of Delaware. The Company is a
designer and marketer and, through the use of contracted parties, a manufacturer
of golf equipment, apparel and accessories under the TEGRA(TM) brand name.
TEGRA(TM) golf clubs incorporate the Company's patent-pending Invisible Inset
Hosel(TM).
The Company initially entered the U.S. golf market under a
license agreement with Hippo Holdings, Ltd. ("Hippo Holdings"), a British golf
equipment manufacturer and distributor. Under the terms of the licensing
agreement, the Company acquired the rights, in perpetuity, to market and sell
HiPPO(TM) brand products in the U.S. and Canada for 50,000 shares of the
Company's common stock, and prepaid royalties of $150,000. In May 1998, the
Company sold this license back to Hippo Holdings (see Note 9).
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. Since its inception
in 1996 through January 31, 1999, the Company has incurred recurring losses of
approximately $13,471,000 and has not generated cash from its operating
activities. Additionally, at January 31, 1999, the Company had a shareholders'
deficit of approximately $4,560,000 and its current liabilities exceeded its
current assets by approximately $5,067,000. These factors, among others, raise
substantial doubt about the Company's ability to continue as a going concern.
Continuation of the Company is dependent on (i) achieving sufficiently
profitable operations and (ii) obtaining adequate financings. These financial
statements do not reflect any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
In connection with the above, during March and April 1999 the
Company completed an initial public offering under which the Company sold
438,500 shares of its Class A common stock for net proceeds of approximately
$1,794,000 inclusive of certain unpaid offering expenses (see Note 10). In
addition, the Company intends to raise additional funds through a combination of
equity and/or debt financings. The Company also intends to test market an
infomercial for TEGRA(TM) drivers on network affiliates, sports cable channels
and regional cable channels in the Northeastern United States beginning in June
1999. The success of these planned measures however, cannot be determined at
this time and there can be no assurance that these planned measures will be
realized.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
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 and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
CASH
The Company considers those short-term, highly liquid
investments with original maturities of three months or less as cash.
F-8
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories, which is primarily comprised of clubs and
component parts, is stated at the lower of cost or market with cost determined
using the first-in, first-out method. Component parts consist primarily of golf
club heads, shafts and grips.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated
depreciation. Depreciation is computed using the straight line method over the
estimated useful lives of the related assets, which approximate three and five
years. Significant additions and improvements are capitalized and costs for
maintenance and repairs are expensed as incurred.
DEFERRED OFFERING COSTS
Deferred offering costs represent charges incurred in
connection with a proposed initial public offering of the Company's common
stock. Upon successful completion of such offering, the aggregate offering costs
will be charged to additional paid-in capital. In the event that the proposed
offering is unsuccessful, the aggregate offering costs will be charged to
operations in the appropriate period.
DEBT ISSUANCE EXPENSE
Costs associated with certain of the Company's debt financing
transactions have been capitalized. These costs include the value of common
stock issued, as consideration for obtaining various loans. Such costs are being
amortized over the terms of the related loans.
LONG LIVED ASSETS
The Company reviews long lived assets and identifiable
intangibles for recoverability and reserves for impairment whenever events or
changes in circumstances indicate. Based on estimated future cash flows, the
carrying amount of the assets will not be fully recoverable.
REVENUE RECOGNITION
Revenue from the sale of non consignment products is
recognized at the time title to such products passes to the customer. Revenue
from the sale of products delivered on consignment is recognized at the time
such products are sold by the customer.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs, which relate primarily to the
design of the TEGRA(TM) brand name products, are expensed as incurred.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense consists of
media advertising as well as brochure, production and direct mail costs.
Advertising expense approximated $1,033,000 and $1,288,000 for the years ended
January 31, 1998 and 1999 respectively.
F-9
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company records deferred income taxes using the liability
method. Under the liability method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences
between the financial statement and income tax bases of the Company's assets and
liabilities. An allowance is recorded, based upon currently available
information, when it is more likely than not that any or all of the deferred tax
asset will not be realized. The provision for income taxes includes taxes
currently payable, if any, plus the net change during the year in deferred tax
assets and liabilities recorded by the Company.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation to its
employees using the intrinsic value method, which requires the recognition of
compensation expense over the vesting period of the options when the exercise
price of the stock option granted is less than the fair value of the underlying
common stock. Additionally, the Company provides pro forma disclosure of net
loss and loss per share as if the fair value method had been applied in
measuring compensation expense for stock options granted. Stock-based
compensation related to options granted to non-employees is recognized using the
fair value method.
LOSS PER SHARE
The computation of loss per share of common stock is computed
by dividing net loss for the period by the weighted average number of common
shares outstanding during that period. The weighted average number of common
shares outstanding for the years ended January 31, 1998 and 1999 excludes
approximately 1,179,000 and 3,218,000 respectively, of antidilutive stock
options and warrants.
Because the Company is incurring losses, the effect of stock
options and warrants is antidilutive. Accordingly, the Company's presentation of
diluted earnings per share is the same as that of basic earnings per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments,
including cash , accounts receivable, accounts payable, accrued expenses and
notes payable approximated fair value because of the short maturity of these
instruments. The Company routinely assesses the financial strength of its
customers and records an allowance for doubtful accounts when it determines that
collection of a particular amount is unlikely.
RECLASSIFICATIONS
Certain items in these financial statements have been
reclassified to conform to the current period presentation.
F-10
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim financial data of the Company is unaudited.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial statements for the interim periods presented have
been made. The results of operations for the six month period ended July 31,
1999 are not necessarily indicative of the results for the full year.
NOTE 3 - INVENTORIES
JULY 31, JANUARY 31,
1999 1999
(UNAUDITED)
Inventories consist of the following:
Components parts .................. $ 79,800 $ 64,800
Clubs ............................. 139,216 124,216
APPAREL, GOLF ACCESSORIES AND OTHER 39,703 36,788
-------- --------
$258,719 $225,804
======== ========
NOTE 4 - PROPERTY AND EQUIPMENT
JULY 31, JANUARY 31,
1999 1999
(UNAUDITED)
Property and equipment
consists of the following:
Furniture and fixtures . $468,974 $468,974
EQUIPMENT .............. 50,132 46,199
-------- --------
519,106 515,173
ACCUMULATED DEPRECIATION 235,740 160,855
-------- --------
$283,366 $354,318
======== ========
The Company recorded depreciation expense of $8,100 and $149,400 for the
years ended January 31, 1998 and 1999, respectively.
F-11
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 5 - NOTES PAYABLE - RELATED PARTIES
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 1999
---------
(UNAUDITED)
Notes payable to related parties
consist of the following:
Long-term unsecured note payable to the
Company's Chief Executive Officer, due
<S> <C> <C> <C>
April 2004, interest at prime rate ..................... $150,000 $ --
Long-term unsecured note 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 40,000
-------- -------
290,000 40,000
CURRENT PORTION .......................................... 100,000 --
LONG-TERM PORTION ........................................ $190,000 $ 40,000
======== ========
NOTE 6 - NOTES PAYABLE
JULY 31, JANUARY 31,
1999 1999
(UNAUDITED)
Notes payable consist of the following:
Unsecured notes payable to private investors,
due September 1998 (see below) ................ $360,000 $375,000
Unsecured notes payable to private investors,
due February 1999, interest at 12% (see below) -- 75,000
Unsecured note payable to private investor,
due September 1999, interest at 10% (see below) -- 25,000
Unsecured notes payable to private investors,
due April 1999, interest at 7.5% .............. -- 250,000
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 ........................ 35,641 35,100
Unsecured note payable to private investor,
Interest at 5%, due June 2000 ................. 300,000 --
Unsecured note payable, interest at 10.5%,
Due December 1999 ............................. 40,000 --
Advances from factor, interest at 24%, due on
DEMAND ........................................ -- 2,744
$735,641 $762,844
======== ========
</TABLE>
F-12
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 6 - NOTES PAYABLE (CONTINUED)
In January 1998, as part of a proposed $3,500,000 debt
offering, the Company issued a $50,000 note payable maturing at the earlier of
September 1998 or within 5 days after an initial public offering of the
Company's common stock generating in excess of $7 million of gross proceeds.
From February 1998 through June 1998 the Company raised an additional $3,455,000
through the issuance of notes payable, the terms of which were the same as the
January 1998 note. Under the terms of the debt financing, for each $50,000
principal the holder of the note payable had the option to receive interest in
the amount of $3,125 or warrants to purchase 25,000 shares of the Company's
common stock at a price per share equal that to be offered in connection with
the offering of warrants under the Company's then planned initial public
offering, which management expected to be 115% of the per share initial public
offering price.
In July 1998 the Company issued a $400,000 note payable, the
terms of which gave the noteholder the option to receive either $25,000 in
interest or warrants to purchase 533,333 shares of the Company's common stock at
125% of the per share initial public offering price.
In November 1998, noteholders of $3,530,000 principal of the
$3,905,000 principal described above elected to exchange such indebtedness for
an aggregate of 706,000 shares of the Company's Class A common stock and 706,000
warrants to purchase Class A common stock (see Note 7). At January 31, 1999 the
Company was in default on the remaining $375,000 notes payable.
In connection with the issuance of the 12% and 10% notes, the
Company issued 8,000 shares of Class A common stock valued at $40,000. Such
shares have been recorded as debt issuance expense and are being amortized over
the terms of the loans.
Pursuant to the terms of a factoring agreement, the Company
assigns substantially all of its accounts receivable to a factor with recourse.
The Company is able to borrow up to 50% of eligible accounts receivable, as
defined, up to a maximum amount of $1 million. The agreement calls for the
Company to assign a minimum of $1.5 million per year of eligible accounts
receivable, as defined. Advances from the factor bear interest at 24% per annum.
Receivables assigned to the factor are subject to a charge of 3% of the face
amount of the receivable. The advances from the factor are secured by all of the
Company's assets. During the year ended January 31, 1998, the Company incurred
interest of $10,059 and factoring charges of $7,739. During the year ended
January 31, 1999, the Company incurred combined interest and factoring charges
of $34,877. The factoring agreement, as amended on August 31, 1998, is for an
initial term of twelve months and renews for successive twelve month periods
thereafter, unless cancelled by the Company or the factor.
In connection with the $300,000 note payable to a private
investor, due June 2000, the lender will receive a royalty equal to 2% of gross
sales of Tegra titanium drivers, as defined. All royalties are payable quarterly
and, in addition, the lender was granted 50,000 warrants to purchase common
stock expiring in three years.
F-13
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 7 - SHAREHOLDERS' DEFICIT
STOCK SPLITS AND NUMBER OF AUTHORIZED SHARES
In February 1997, the Company increased the number of
authorized shares of common stock from 6,500,000 to 10,881,000 and
simultaneously effected a 3-for-2 reverse stock split. In July 1997, the Company
increased the number of authorized shares of common stock from 10,881,000 to
24,300,000. On January 31, 1998, the Company decreased the authorized shares of
common stock to 8,100,000 and simultaneously effected a 3-for-1 reverse stock
split.
In October 1998, the Company increased the authorized shares
of common stock from 8,100,000 to 20,000,000. Within the authorized shares of
common stock, the Company created a Class A and a Class B stock, consisting of
15,000,000 and 5,000,000 shares of stock, respectively. Additionally, the
Company authorized 5,000,000 shares of preferred stock, par value $0.01 per
share.
All references to the number of common shares and per share
amounts elsewhere in the financial statements and related footnotes have been
restated to reflect the effect of all stock splits for all periods presented.
COMMON STOCK
During February 1997, the Company's Chief Executive Officer
was issued approximately 1,025,000 shares of the Company's common stock in
return for the forgiveness of $588,660 in advances to the Company at various
dates during 1996 and 1997. The Company recorded approximately $57,000 of
compensation expense in connection with the issuance of such shares based on the
fair market value of the shares as determined by an independent valuation. Also,
during the year ended January 31, 1998, the Company sold approximately 181,000
shares of its common stock for $299,000, of which 4,833 shares were sold to a
related party.
In March 1998, the Company issued 104,784 shares to a
professional golfer as consideration for $220,047 owed to such golfer under the
Company's endorsement arrangement with Hippo Holdings. The Company was then
negotiating an endorsement contract with this professional golfer for the
Company's TEGRA(TM) brand products. These negotiations ceased prior to any
agreement being reached between the Company and the golfer.
On April 29, 1998, the Company entered into a consulting
agreement with a financial advisor to obtain financial investment services
through January 22, 2000. The consideration provided for in the agreement was
the issuance of 125,000 shares of the Company's common stock. This agreement was
terminated by the Company in November 1998. Accordingly, the Company recorded
$125,000 as a charge to operations in the current period.
In March 1998 the Company issued 12,916 shares of Class A
common stock valued at $69,166 to three consultants in connection with services
performed.
In connection with issuance of $100,000 principal notes
payable (see Note 6) the Company issued 8,000 shares of Class A common stock
valued at $40,000. Such shares have been recorded as debt issuance expense and
are being amortized over the term of the loans.
F-14
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 7 - SHAREHOLDERS' DEFICIT (Continued)
COMMON STOCK (Continued)
On October 7, 1998, the Company's President and Chief
Executive Officer converted an aggregate of 1,464,953 shares of their Class A
common stock to the equivalent number of Class B common stock. The Company has
agreed not to register the Class B common stock under the Securities Exchange
Act of 1933 for a period of two years. The Class B common stock converts to an
equal amount of Class A common stock upon the earlier of (i) October 31, 2000 or
(ii) such time as the closing price for the Class A common stock shall equal or
exceed $8 for a period of 10 consecutive trading days. Otherwise, the rights of
the holders of Class A and Class B common stock are substantially the same.
In November 1998, the Company executed exchange agreements
with certain noteholders including a related party, whereby such parties
exchanged an aggregate of $5,808,327 of principal and interest on notes for
1,161,666 Class A shares of common stock and 1,161,666 warrants to acquire Class
A shares of common stock. Subsequent to such exchange, the Company was in
default on $375,000 principal notes payable.
Additionally, in November 1998 the Company executed exchange
agreements with the Company's President and Chief Executive Officer who had
advanced funds to the Company, whereby such officers exchanged an aggregate of
$312,957 of principal and interest on advances for 62,591 Class A shares of
common stock and 62,591 warrants to acquire Class A shares of common stock.
COMMON STOCK WARRANTS
In connection with the issuance of its unsecured notes payable
to private investors, the Company issued warrants to purchase shares of its
common stock as follows:
<TABLE>
<CAPTION>
WARRANTS
Weighted Average
SHARES EXERCISE PRICE
<S> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1997 7,150 $ 1.13
Warrants issued in connection with $975,000 of
notes payable at 12.5% 107,250 0.75
Warrants issued in connection with $525,000 of
notes payable at 15% 232,750 0.75
Warrants issued in connection with $420,000 of
notes payable at 12.5% 84,000 2.10
WARRANTS ISSUED IN CONNECTION WITH OTHER NOTES PAYABLE 33,000 2.33
------------ -------
BALANCE, JANUARY 31, 1998 464,150 1.12
</TABLE>
F-15
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 7 - SHAREHOLDERS' DEFICIT (Continued)
COMMON STOCK WARRANTS (Continued)
<TABLE>
<CAPTION>
WARRANTS
Weighted Average
SHARES EXERCISE PRICE
Warrants issued in connection with extension of
<S> <C> <C> <C> <C>
$975,000 of notes payable at 12.5% 26,813 $ 0.75
Warrants issued in connection with extension of
$525,000 of notes payable at 15% 58,188 0.75
Warrants issued in connection with extension of
$420,000 of notes payable at 12.5% 130,000 2.78
Warrants issued in connection with $400,000 of
note payable 533,333 7.25
Warrants issued in connection with exchange of
$6,121,284 PRINCIPAL AND INTEREST (SEE ABOVE) 1,224,257 6.67
---------- -----------
BALANCE, JANUARY 31, 1999 2,436,741 5.32
Warrants issued in connection with interest on
$3,505,000 PRINCIPAL DEBT FINANCING (SEE NOTE 6) 1,752,500 6.67
---------- -----------
BALANCE, JULY 31, 1999 (UNAUDITED) 4,189,241 $ 5.89
========== ==========
</TABLE>
The Company believes that the above warrants had an
insignificant fair market value at the time of their issuance.
COMMON STOCK OPTIONS
On September 4, 1996, the Company adopted the 1996 Incentive
and Non-Qualified Stock Option Plan (the "1996 Plan") allowing the Company to
issue 500,000 incentive stock options to employees and non-qualified stock
options to either employees or consultants. The total number of shares with
respect to which options may be granted was increased to 1.15 million on January
24, 1997.
In June 1998 the Company adopted the 1998 Incentive and
Non-Qualified Stock Option Plan (the "1998 Plan") allowing the Company to issue
800,000 incentive stock options to employees and non-qualified stock options to
either employees or consultants.
The Company has issued various stock options to employees and
consultants. The options' vesting period varies from full vesting upon issuance
of options to vesting over a three year period. A summary of the Company's stock
options activity is as follows:
F-16
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 7 - SHAREHOLDERS' DEFICIT (Continued)
COMMON STOCK OPTIONS (Continued)
<TABLE>
<CAPTION>
OPTIONS
Weighted Average
SHARES EXERCISE PRICE
<S> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1997 267,531 $0.82
GRANTED 448,880 3.04
BALANCE, JANUARY 31, 1998 716,411 2.21
Terminated (101,765) (3.05)
GRANTED 166,666 8.24
BALANCE, JANUARY 31, 1999 781,312 $3.383
========= =======
</TABLE>
<TABLE>
<CAPTION>
Outstanding Exercisable Weighted Average
EXERCISE PRICE RANGE SHARES SHARES EXERCISE PRICE
<S> <C> <C> <C> <C>
$0.225 85,476 85,476 $ 0.225
0.72 - 0.75 159,441 151,942 0.689
2.10 - 3.00 319,896 318,785 2.632
6.00 - 9.20 216,499 112,791 7.724
--------- ---------- ------
781,312 668,994 $ 3.383
========= ========== ======
</TABLE>
The Company generally grants options at exercise prices equal
to the estimated market value of the Company's common stock at the date of the
grant. The Company recognized approximately $153,000 of stock-based compensation
expense during the year ended January 31, 1998, relating to options granted to
exercise prices below the estimated fair market value of the Company's common
stock at the date of grant. Had compensation costs for the Company's stock
option grants to employees been determined using the fair value method, the
Company's loss and loss per share for the year ended January 31, 1998 would not
have been significantly different from the amounts recorded.
Fair market value information for the Company's stock warrants
and options for the years ended January 31, 1998 and 1999 was estimated using
the Black-Scholes option pricing model assuming risk free rates of 5.6% to 6.5%,
no dividend yield, expected terms of 3 years, and no significant volatility.
NOTE 8 - INCOME TAXES
The Company is subject to federal and state income taxes but
has not incurred a liability for such taxes due to losses incurred. As of
January 31, 1999 the Company had a net operating loss carryforward ("NOLC") for
federal income tax purposes of approximately $9,800,000. This NOLC is available
to offset future federal taxable income, if any, through 2014. Limitations on
the utilization of the Company's net operating tax loss carryforwards could
result in the event of certain changes in the Company's ownership.
The Company had deferred tax assets of approximately
$4,116,000 at January 31, 1999, resulting primarily from net operating loss
carryforwards. The deferred tax assets have been fully offset by a valuation
allowance resulting from the uncertainty surrounding the future realization
of the net operating loss carryforwards.
F-17
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company currently rents office space on a month to month
basis and leases equipment under non cancelable operating lease arrangements.
Rent expense for the years ended January 31, 1998 and 1999 was approximately
$101,000 and $133,000, respectively.
The Company has a commitment under an employment contract
expiring in November 1999. The remaining commitment on this contract is
approximately $47,000.
As of January 31, 1998, the Company had entered into purchase
agreements with various suppliers for components and finished goods for both
TEGRA(TM) and HiPPO(TM) brand products, approximating $1.3 million (see Note
10). At January 31, 1999 the Company had no significant purchase agreements.
The Company is a defendant in a lawsuit alleging patent
infringement and, additionally, has received a request that the Company reviews
its TEGRA(TM) line of clubs in view of a patent issued to a third party relating
to golf club design. The Company believes that its TEGRA(TM) brand golf clubs do
not infringe the patents which are the subject of the lawsuit of the review
request. However, no assurance can be given that the Company's product does not
infringe such patents, or any golf club related patent. Further, the Company
cannot currently estimate the effect of an adverse decision in connection with
these matters on the Company's financial condition or results of operations.
The Company is a defendant in a lawsuit alleging the breach of
a letter of intent with an underwriter. The lawsuit seeks approximately $1.5
million in damages. The Company believes this claim is without merit and intends
to vigorously defend itself; however, there can be no assurance that the Company
will prevail.
The Company is involved in legal proceedings and claims which
arise in the ordinary course of its business. Management believes that the
outcome of such litigation and claims will not result in any material adverse
effect on the Company's financial position or results of operations.
NOTE 10 - SALE OF LICENSE
In May 1998, the Company sold its license to sell HiPPO(TM)
products in the U.S. back to Hippo Holdings along with all existing HiPPO(TM)
brand inventory and certain marketing materials of approximately $91,000,
prepaid royalties of approximately $133,000, and the assumption of liabilities
in the amount of approximately $225,000. The Company received cash payments of
approximately $413,000. A gain of approximately $414,000 was recorded in
connection with this transaction. In addition, Hippo Holdings returned to the
Company the 50,000 shares of common stock it had received upon entering the
license agreement; no gain or loss was recorded in connection with the return of
the stock. Furthermore, Hippo Holdings assumed the Company's then outstanding
purchase commitments in the amount of approximately $1,172,000 related to the
HiPPO(TM) brand of products. Sales of HiPPO(TM) brand products for the years
ended January 31, 1998 and 1999, were approximately $589,000 and $24,000,
respectively.
F-18
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 11 - SUBSEQUENT EVENTS
Subsequent to January 31, 1999, the Company received $125,000
in exchange for notes payable bearing interest at a rate of 10% with an
equivalent face amount and 10,000 shares of the Company's Class A common stock.
These notes mature on the earlier of October 1, 1999 or 5 days subsequent to the
completion of an initial public offering by the Company. The Company valued the
shares issued in connection with this transaction at $50,000. These loans were
repaid in March 1999.
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.
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 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.
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.
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.
F-19
<PAGE>
OUTLOOK SPORTS TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(INFORMATION AS OF JULY 31, 1999 AND FOR THE SIX
MONTHS ENDED JULY 31, 1999 AND 1998 IS
UNAUDITED)
NOTE 11 - SUBSEQUENT EVENTS (Continued)
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 12 - SUBSEQUENT EVENTS (UNAUDITED)
In October 1999 the Company issued to an individual 65,000
shares of Class A common stock in connection with an exchange agreement, in
exchange for $300,000 principal amount promissory note, future 2% royalty
payments on gross sales of Tegra drivers, and warrants to purchase 50,000 shares
of the Company's Class A common stock.
In October 1999 the Company borrowed approximately $134,000
and $37,000 from its Chief Executive Officer and President respectively.
NOTE 13 - YEAR 2000 CONSIDERATIONS
------------------------
The "Year 2000" problem relates to computer systems that have
time and date-sensitive programs that were designed to read years beginning with
"19", but may not properly recognize the year 2000. If a computer system or
software application used by the Company or a third party dealing with the
Company fails because of the inability of the system or application to properly
read the year 2000 the results could have a material adverse effect on the
Company.
The Company's review of its own operating systems does not
indicate any Year 2000 problems. However, the Company is dependent on third
party vendors. Failures and interruptions, if any, resulting from the inability
of certain computing systems of third party vendors to recognize the Year 2000
could have a material adverse effect on the Company's results of operations.
There can be no assurance that the Year 2000 issue can be resolved by any of
such third parties prior to the upcoming change in the century. Although the
Company may incur substantial costs, as a result of such third party service
providers correcting Year 2000 issues, such costs are not sufficiently certain
to estimate at this time.
F-20
<PAGE>
II-9
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Registrant's Certificate of Incorporation includes certain
provisions permitted pursuant to the Delaware General Corporation Law ("Delaware
Law") whereby officers and directors of the Registrant are to be indemnified
against certain liabilities. The Certificate of Incorporation also limits to the
fullest extent permitted by Delaware Law a director's liability to the
Registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director, including gross negligence, except liability for (i) breach of
the director's duty of loyalty, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
the unlawful payment of a dividend or unlawful stock purchase or redemption, and
(iv) any transaction from which the director derives an improper personal
benefit. Delaware Law does not permit a corporation to eliminate a director's
duty of care and this provision of the Registrant's Certificate of Incorporation
has no effect on the availability of equitable remedies, such as injunction or
rescission, based upon a director's beach of the duty of care.
Article SEVENTH of the Registrant's Certificate of Incorporation, as
amended (the "Certificate of Incorporation"), provides that no director of the
Registrant shall be personally liable for any monetary damages for any breach of
fiduciary duty as a director, except to the extent that the Delaware General
Corporation Law prohibits the elimination or limitation of liability of
directors for breach of fiduciary duty.
Article EIGHTH of the Certificate of Incorporation provides that a
director or officer of the Registrant shall be indemnified by the Registrant
against (a) all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement incurred in connection with any litigation or other
legal proceeding (other than an action by or in the right of the Registrant)
brought against him or her by virtue of his or her position as a director or
officer of the Registrant if he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful and (b) all expenses
(including attorneys' fees) and amounts paid in settlement incurred in
connection with any action by or in the right of the Registrant brought against
him or her by virtue of his or her position as a director or officer of the
Registrant if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the Registrant,
except that no indemnification shall be made with respect to any matter as to
which such person shall have been adjudged to be liable to the Registrant,
unless a court determines that, despite such adjudication but in view of all of
the circumstances, he or she is entitled to indemnification of such expenses.
Notwithstanding the foregoing, to the extent that a director or officer has been
successful, on the merits or otherwise, including the dismissal of an action
without prejudice, he or she is required to be indemnified by the Registrant
against all expenses (including attorneys' fees) incurred in connection
therewith. Expenses shall be advanced to a director or officer at his or her
request, provided that he or she undertakes to repay the amount advanced if it
is ultimately determined that he or she is not entitled to indemnification for
such expenses.
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within sixty days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article EIGHTH of the Certificate of Incorporation further provides
that the indemnification provided therein is not exclusive, and provides that in
the event that the Delaware General Corporation Law is amended to expand the
indemnification permitted to directors or officers the Registrant must indemnify
those persons to the fullest extent permitted by such law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he or she is or is threatened
to be made a party by reason of such position, if such person shall have acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, in any criminal
proceeding, if such person had no reasonable cause to believe his or her conduct
was unlawful; provided that, in the case of actions brought by or in the right
of the corporation, no indemnification shall be made with respect to any matter
as to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances.
The Registrant maintains a directors' and officers' insurance policy
that covers certain liabilities of directors and officers of the Registrant. The
Registrant maintains a general liability insurance policy that covers certain
liabilities of directors and officers of the Registrant arising out of claims
based on acts or omissions in their capacities as directors or officers.
<PAGE>
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities offered hereby.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee .................................... $ 12,529
Printing and engraving .................................. $ 5,000.00
Accountants' fees and expenses .......................... $ 40,000.00
Legal fees .............................................. $ 65,000.00
Miscellaneous ........................................... $ 27,471.00
Total ................................................... $ 150,000.00
</TABLE>
Item 26. Recent Sales of Unregistered Securities
On October 7, 1998, the Registrant amended its certificate of
incorporation to create two classes of Common Stock. References to Common Stock
below are to the Common Stock of the Registrant prior to this Amendment.
The following information is furnished with regard to all securities
sold by the Registrant within the past three years which were not registered
under the Securities Act. The share numbers set forth below have been adjusted
to reflect a number of stock splits. In August 1996, the Registrant increased
the number of authorized shares of Common Stock from 250,000 to 6,500,000 and
simultaneously effected a 15-for-1 stock split. In February 1997, the Registrant
increased the number of authorized shares of Common Stock from 6,500,000 to
10,881,000 and simultaneously effected a 3-for-2 reverse stock split. In July
1997, the Registrant increased the number of authorized shares of Common Stock
from 10,881,000 to 24,300,000. On January 31, 1998, the Registrant decreased the
number of authorized shares to 8,100,000 and simultaneously effected a 3-for-1
reverse stock split.
The issuances described in this Item 26 were made in reliance upon the
exemption from registration set forth in Section 4(2) of the Securities Act
relating to sales by an issuer not involving any public offering.
None of the foregoing transactions involved a distribution or public
offering. The recipients of all of these securities represented that such
securities were being acquired for investment and not with a view to the
distribution thereof. In addition, the certificates evidencing these securities
bear restrictive legends. All investors represented that they were either
sophisticated or accredited investors. All investors were given full disclosure
concerning the Registrant and its business as well as a full opportunity to ask
questions of and receive answers from the Registrant and its officers and
authorized representatives regarding the terms and conditions of the offering as
well as the affairs of the Registrant and related matters.
Issuances of Common Stock
<TABLE>
<CAPTION>
Number
Name Of Shares Purchase Price Date Sold
--------- -------------- ---------
<S> <C> <C> <C> <C>
Paul Berger........................ 333,333 $ 132,000 May 13, 1996
117,630 95,000 June 21, 1996
207,690 170,000 August 19, 1996
1,024,800 588,660 February 27, 1997
Jim Dodrill........................ 333,333 132,000 May 31, 1996
4,833 10,150 April 22, 1997
Greg Cohen......................... 76,502 210,000 September 4, 1996
David Staudinger................... 6,666 14,000 July 25, 1997
Walter Maupay...................... 16,666 35,000 July 31, 1997
Walter & Gina McDonough............ 3,333 7,000 August 1, 1997
DDJ Hackworthy Ltd Pp.............. 47,619 100,000 August 11, 1997
David Stern........................ 8,333 17,500 August 18, 1997
Ian Woosnam(1)..................... 104,784 220,047 October 1, 1997
Synergy Group International(2)..... 200,000 100,000 October 17, 1997
Carol Dodrill/Bill Powell(3)....... 100,000 50,000 October 28, 1997
Paul Fairchild..................... 33,333 70,000 October 30, 1997
Rodger Berman(2)................... 6,666 5,000 November 10, 1997
Frank Maddocks..................... 60,000 45,000 November 11, 1997
Glen Day........................... 10,000 (4) January 1, 1998
Dan Snider......................... 1,250 (4) January 1, 1998
Arthur Chou........................ 1,666 (4) January 1, 1998
Andrew Holder/Marc Roberts(2)...... 100,000 100,000 January 23, 1998
Argent Securities, Inc............. 125,000 (4) January 23, 1998
Sichenzia, Ross & Friedman LLP..... 20,000 (5) October 1, 1999
Dan Hicks.......................... 18,250 (6) March 5, 1999
Afzal Ahmad........................ 65,000 (7) October 26, 1999
GAR Group, Inc.................... 162,500 (8) July 1, 1999
Capital York, Inc.................. 10,000 (9) October 26, 1999
Lynn Chidester..................... 25,000 $100,000 October 26, 1999
- -------------------
</TABLE>
<PAGE>
(1) Purchase price was paid by the individual forgoing payments due under a
contract with the Registrant in amounts equal to the purchase price.
(2) These individuals purchased stock from Paul Berger and Jim Dodrill.
(3) These individuals purchased stock from Paul Berger.
(4) Issued in connection with a services contract.
(5) Issued in consideration for past legal services rendered.
(6) Issued in connection with Spokesperson Agreement, dated March 5, 1999,
in consideration for making appearances on our behalf.
(7) Issued in connection with Exchange Agreement, in exchange for $300,000
principal amount promissory note, future 2% royalty payments on gross sales of
Tegra drivers, and warrants to purchase 50,000 shares of the Registrant's Class
A common stock.
(8) Issued in connection with Consulting Agreement, dated July 1, 1999,
with Gary A. Rogers in consideration for consulting services.
(9) Issued in connection with Consulting Agreement, dated October 26, 1999,
with Capital York, Inc. in consideration for consulting services.
Additionally, during the quarter ended July 31, 1999, the Registrant
also raised $215,000 from the private sale of 53,750 shares of unregistered,
restricted Class A Common Stock to unaffiliated parties.
Debt Securities And Warrants
From February 1997 through October 1999, the Registrant issued
unregistered debt securities and warrants to a number of individuals pursuant to
five private placements and to Stanley Berger and Paul Berger in connection with
certain advances to the Registrant. The issuances made in connection with these
transactions were made in reliance on Section 4(2) of the Securities Act. In
each case, each purchaser was an accredited investor. The following summary of
these transactions reflects the effect of all stock splits of the Registrant's
Common Stock. The summary also reflects a 25% increase in the number of shares
of Common Stock that may be purchased by each investor in the offerings
described under (a) and (b) below, which increase was granted by the Registrant
in return for an extension of the payment date for each Note.
(a) In February through April, 1997, the Registrant sold through a
private placement a total of 9.75 Units (or portions of a Unit) to fourteen
individuals, each Unit consisting of a non-transferable promissory note in the
amount of $100,000, earning 12.5% interest annually, and a warrant to purchase
13,570 shares of the Common Stock of the Registrant. The warrants are
convertible into shares of Common Stock at $0.75 per share and terminate after
five years.
(b) In May through June, 1997, the Registrant sold through a private
placement a total of 10.5 Units (or portions of a Unit) to ten individuals (all
of whom had participated in the first private placement), each Unit consisting
of a non-transferable promissory note in the amount of $50,000, earning 15%
interest annually, and a warrant to purchase 27,708 shares of the Common Stock
of the Registrant. The warrants are convertible into shares of Common Stock at
$0.75 per share and terminate after five years.
(c) In July, 1997, the Registrant sold through a private placement a
total of six Units (or portions of a Unit) to three individuals, each Unit
consisting of a non-transferable promissory note in the amount of $75,000,
earning 12.5% interest annually, and a warrant to purchase 15,000 shares of the
Common Stock of the Registrant. The warrants are convertible into shares of
Common Stock at $2.10 per share and terminate after five years. One investor in
this offering received warrants to purchase an additional 98,333 shares of Class
A common stock at $3.00 per share, and one investor received warrants to
purchase an additional 31,666 shares of Class A common stock at $2.10 per share.
(d) In January through June, 1998, the Registrant sold through a
private placement a total of 70.1 Units (or portions of a Unit) to 43
individuals (four of whom had participated in the first private placement), each
Unit consisting of a non-transferable promissory note in the amount of $50,000
and an option to receive an additional $3,125 in cash or a warrant to purchase
25,000 shares of the Common Stock of the Registrant. The warrants are
convertible into shares of Common Stock at $6.67 per share and terminate after
three years. The Registrant will register the warrants contemporaneously with
registration of this Offering. Argent Securities, Inc. acted as placement agent
in the private placement and received compensation of $499,150 consisting of a
10% commission and certain other fees.
(e) On July 1, 1998, the Registrant sold through a private placement a
total of one Unit to a single individual, which Unit consisted of a
non-transferable promissory note in the amount of $400,000 and a warrant to
purchase 533,333 shares of the Common Stock of the Registrant. The warrant is
convertible into shares of Common Stock at $7.25 per share and terminates after
three years. H.J. Meyers acted as placement agent in the private placement and
received compensation of $40,000 consisting of a 10% commission.
(f) In September, 1996 through January, 1998, the Registrant issued a
total of ten non-transferable promissory notes, totaling $340,000 and warrants
to purchase a total of 67,857 shares of the Common Stock of the Registrant. The
warrants are convertible into shares of Common Stock at exercise prices ranging
from $0.75 per share to $4.00 per share and terminate after five years.
<PAGE>
(g) During the quarter ended July 31, 1999, the Registrant borrowed
$250,000 from Paul Berger, its Chief Executive Officer, 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 the Registrant's equity securities
resulting in gross proceeds 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 the Registrant's equity securities resulting
in gross proceeds of $5,000,000.
(h) Subsequent to the end of July 31, 1999, the Registrant borrowed
approximately $133,795 from Paul Berger, its Chief Executive Officer, and
$36,500 for Jim Dodrill, its President, in exchange for notes payable bearing
interest at the prime rate of interest. These amounts are due on December 1,
1999.
Additionally, on May 30, 1997, the Registrant issued to Greg Cohen
options to purchase 116,666 shares of Class A common stock at an exercise price
of $2.10 per share and on May 30, 1998 the Registrant issued to Mr. Cohen an
additional 116,666 shares of Class A common stock at an exercise price of $9.20
per share, however, on October 26, 1999, the Registrant agreed to reduce the
exercise price of these options to $6.67.
Conversion of Debt
In November 1998, the Registrant executed exchange agreements (the
"Exchange Agreements") with certain unaffiliated noteholders whereby such note
holders exchanged an aggregate of $5,210,236.29 principal amount of indebtedness
plus accrued interest for 1,052,047 shares of Common Stock and 1,052,047
Warrants. At January 31, 1999, $375,000 of such debt had not been converted and
remains due and owing. In addition $911,047.75 which the Registrant had borrowed
from certain officers or persons affiliated to officers of the Registrant was
also converted in November 1998 into 182,210 shares of Common Stock and 182,210
Warrants.
In October 1999, we issued to Afzahl Ahmad 65,000 shares of Class A
common stock in connection with Exchange Agreement, in exchange for $300,000
principal amount promissory note, future 2% royalty payments on gross sales of
Tegra drivers, and warrants to purchase 50,000 shares of the Registrant's Class
A common stock.
Item 27: Exhibits
<TABLE>
<CAPTION>
Exhibit Description
<S> <C>
3.1* Amended and Restated Certificate of Incorporation
3.2* By-Laws
4.1* Specimen certificate for the Common Stock
5.1 Opinion of Sichenzia, Ross & Friedman LLP
10.1* Form of Underwriter's Warrant issued to Kashner Davidson Securities Corp. in connection with the
Registrant's initial public offering.
10.2* Business Note and Security Agreement, dated June 19, 1997, with Barnett Bank, N.A.
10.3* Revolving Accounts Receivable Funding Agreement between Outlook Sports Technology, Inc. and Gibraltar
Financial Corporation, dated November 25, 1997
10.4* Amendment to Revolving Accounts Receivable Funding Agreement, dated November 25, 1997
10.5* Gibraltar Financial Corporation Demand Note, dated November 25, 1997
10.6* Form of Promissory Note signed by the Registrant in favor of Paul Berger, Jim Dodrill and Stanley Berger
for all advances made by them to the Registrant
10.7* Option, dated January 24, 1997, received by Paul Berger as consideration for an advance made by him to
the Registrant
10.8* Option, dated September 5, 1996, received by Jim Dodrill as consideration for an advance made by him to
the Registrant
10.9* Form of Warrant for the purchase of the Common Stock of the
Registrant received by Stanley Berger as consideration for advances
made by him to the Registrant
10.10* Form of Warrant for the purchase of the Common Stock of the
Registrant received by all participants in a private financing
between February 4, 1997 and April 30, 1997
10.11* Form of Warrant for the purchase of the Common Stock of the
Registrant received by all participants in a private financing
between May 12, 1997 and June 30, 1997
10.12* Form of Warrant for the purchase of the Common Stock of the Registrant received by all participants in a
private financing in July, 1997
10.13* Form of Subscription Agreement signed by all investors in the Registrant
10.14* Sublease Agreement and Rider, dated December 1, 1996, between the
Registrant and Tom Rochon Associates (for office space in New York
City) and Over-Lease Agreement incorporated therein
10.15* Sublease Agreement and Rider, dated July 12, 1996, between the
Registrant and Tom Rochon Associates (for office space in New York
City) and Over-Lease Agreement incorporated therein
10.16* Research, Development and Consulting Contract, dated October 8, 1996, with Chou Golf Design Labs, Inc.
10.17* Contract Amendment, dated May 4, 1997, to Research, Development and Consulting Contract with Chou Golf
Design Labs, Inc.
10.18* 1996 Incentive and Non-qualified Stock Option Plan
10.19* Form of Incentive Stock Option Agreement under 1996 Incentive and Non-qualified Stock Option Plan
10.20* Form of Non-qualified Stock Option Agreement under 1996 Incentive and Non-Qualified Stock Option Plan
10.21* 1998 Incentive and Non-qualified Stock Option Plan 10.22* Form of Incentive Stock
Option Agreement under 1998 Incentive and Non-Qualified Stock Option Plan
10.23* Form of Non-Qualified Stock Option Agreement under 1998 Incentive and
Non-Qualified Stock Option Plan
10.24* Settlement Agreement and Release, dated May 4, 1998, between the Registrant and Hippo Holdings Ltd
<PAGE>
10.25* Form of Non-Qualified Stock Option Agreement for Outside Directors under 1998 Incentive
and Non-Qualified Stock Option Plan
10.26* Form of Exchange Agreement
10.27 $250,000 Principal Amount Promissory Note with Paul Berger, dated May 1, 1999
10.28 Host Agreement with Dan Hicks, dated March 5, 1999
10.29 Spokesperson Agreement with Dan Hicks, dated March 5, 1999
10.30 Consulting Agreement with Gary A. Rogers, dated July 1, 1999
10.31 Form of Exchange Agreement with Afzal Ahmad
10.32 Consulting Agreement with Capital York, Inc., dated October 26, 1999
10.33 $112,000 Principal Amount Promissory Note with Paul Berger, dated October 26, 1999
23.1 Consent of Wolinetz, Gottlieb & Lafazan, P.C.
23.2 Consent of Sichenzia, Ross & Friedman LLP (incorporated by reference to Exhibit 5.1)
24.1 Power of Attorney (contained on the signature page of this Registration Statement)
27.1** Financial Data Schedule
- -------------------------
</TABLE>
* Incorporated by reference to the Registrant's registration statement on Form
SB-2, as filed on July 7, 1998, and all amendments thereto.
** Incorporated by reference to the Regisrant's Quarterly Report on Form 10-QSB,
and the Amendment thereto, as filed on September 14, 1999 and the Registrant's
Annual Report on Form 10-KSB as filed on May 17, 1999.
Item 28. Undertakings
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the Securities
Act;
b. To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
c. To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
2. For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
3. To remove from the registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
4. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
5. For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the issuer under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
6. For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in New
York, New York, October 29, 1999.
OUTLOOK SPORTS TECHNOLOGY, INC.
By: /s/ Paul Berger
------------------------------------
Paul Berger, Chief Executive Officer
and Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul Berger his true and lawful attorney-in-fact
and agent, with full power of substitution and re-substitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits and schedules thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully ratifying and confirming all that said attorney-in-fact and agent or their
substitutes or substitute may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 29, 1999.
<TABLE>
<CAPTION>
<S> <C>
Signature Title
/s/ Paul Berger Chief Executive Officer, Principal Financial and
---------------
Paul Berger Accounting Officer
and Chairman of the Board
/s/ Jim Dodrill II President, General Counsel and Director
------------------
Jim Dodrill II
/s/ William Barthold Vice President
--------------------
William Barthold
</TABLE>
EXHIBITS 5.1 AND 23.2
SICHENZIA, ROSS & FRIEDMAN LLP
ATTORNEYS AT LAW
135 West 50th Street, 20th Floor
New York, New York 10020
---------------------
Telephone: (212) 664-1200
Facsimile: (212) 664-7329
E-Mail: [email protected]
October 29, 1999
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
RE: OUTLOOK SPORTS TECHNOLOGIES, INC.
Ladies and Gentlemen:
We refer to the above captioned registration statement on Form SB-2 (
the "Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), filed by Outlook Sports Technologies, Inc., a Delaware corporation (the
"Company"), with the Securities and Exchange Commission.
We have examined the originals, photocopies, certified copies or other
evidence of such records of the Company, certificates of the officers of the
Company and public officials, and other documents as we have deemed relevant and
necessary as a basis for the opinion hereinafter expressed. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as certified copies or photocopies and the
authenticity of the originals of such latter documents.
Based on our examination mentioned above, we are of the opinion that
the securities being sold pursuant to the Registration Statement are duly
authorized and will be, when sold in the manner described in the Registration
Statement, legally and validly issued, and, in the case of the Class A common
stock, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under "Legal Matters" in
the related Prospectus. In giving the foregoing consent, we do not hereby admit
that we are in the category of persons whose consent is required under Section 7
of the Act of the rules and regulations of the Securities and Exchange
Commission.
Very truly yours,
/s/ SICHENZIA, ROSS & FRIEDMAN LLP
Sichenzia, Ross & Friedman LLP
EXHIBIT 10.27
PROMISSORY NOTE
$250,000.00 May 1, 1999
- -----------
FOR VALUE RECEIVED, the undersigned, Outlook Sports Technology, Inc., a
Corporation located at 100 Grand Street, New York, NY 10013 ("Borrower"),
promises to pay to the order of Paul H. Berger an individual with an address at
450 North End Ave., Apt. 22F, New York, NY 10282 ("Lender"), the principal sum
of Two Hundred Fifty Thousand Dollars ($250,000) or such lesser amount as set
forth below, of which One Hundred Thousand Dollars ($100,000) shall be due and
payable, together with interest thereon calculated at the prime lending rate per
annum, on March 1, 2000 (the "First Maturity Date") and One Hundred Fifty
Thousand Dollars ($250,000) shall be due and payable, together with interest
thereon calculated at the prime lending rate per annum, on April 20, 2004 (the
"Second Maturity Date").
Notwithstanding the foregoing, the entire amount of Two Hundred Fifty
Thousand Dollars ($250,000) due pursuant to this promissory note shall be due
and payable within five days following the closing of a public offering of the
Borrower's equity securities resulting in gross proceeds equal to or greater
than $5,000,000.
Borrower may repay all or any portion of the amount hereof without
penalty at any time and from time to time prior to each respective Maturity
Date.
All payments shall be payable in lawful money of the United States of
America in immediately available funds at the office of the Lender or his
assignee.
Borrower hereby waives presentment, demand for payment, notice of
dishonor or acceleration, protest and notice of protest, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this promissory note.
This promissory note shall be binding upon Borrower and its successors
and assigns and shall inure to the benefit of the Lender and his successors and
assigns. This promissory note shall be governed as to validity, interpretation
and effect by the laws of the State of New York, without giving effect to the
conflicts of laws principles thereof, irrespective of any form in which any
action may be brought to enforce or secure an interpretation of this promissory
note and irrespective of the place of business, address or domicile of Borrower
or the Company.
IN WITNESS WHEREOF, the undersigned has executed this promissory note
on the day and year first above written.
OUTLOOK SPORTS TECHNOLOGY, INC.
BY: /S/ JAMES DODRILL
James Dodrill, President
Dan Hicks Agreement - Final -10/28/99
EXHIBIT 10.28
OUTLOOK SPORTS TECHNOLOGY
TEGRA DRIVER INFOMERCIAL
HOST AGREEMENT
This Agreement ("Agreement") is made by and between Outlook Sports Technology,
Inc., a Delaware corporation with its principal place of BUSINESS LOCATED AT 100
GRAND STREET, 5TH Floor, New York, NY 10013 (hereinafter referred to as
"Company"), and Dan Hicks, a person, with primary residence located at 12
Sherwood Avenue, Greenwich, CT 06831, (hereinafter referred to as "Talent") and
is entered into on THIS DATE OF EXECUTION MARCH 5, 1999, in the following
circumstances:
Background
The Company is engaged in the business of golf club design and
marketing. Talent is a professional sports broadcaster. Company and Talent
desire to work together in a national advertisement campaign for the promotion
and sale of the Company's golf equipment during the Term of this Agreement, all
in accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in the consideration of the mutual covenants contained herein,
the parties do hereby agree as follows:
1. SERVICE: Talent shall appear as the Host in (1) or more versions of
a golf oriented thirty (30) minute infomercial ("Infomercial") and direct mail,
point-of-sale, outbound telemarketing, catalogs, packaging, web sites,
billboards and broadcast advertisements promoting the Company's Tegra driver, to
be sold to consumers through direct response and retail sales. Company retains
the rights to the said materials produced hereunder, and the right to edit the
Infomercial into various shorter lengths. For the purpose of this agreement,
"Products" shall mean Tegra titanium drivers as defined in schedule A attached
hereto and incorporated herein by reference.
2. ENDORSEMENT: Company shall have the exclusive right and license to
use, reproduce and distribute Talent's name, approved photograph, message,
voice, initials, approved likeness or signature of talent, or any words and/or
sounds, and/or symbols, and/or graphic representations which identify Talent
and/or his named identity or likeness during the Term (as defined in Paragraph
3) for purpose of advertising, promoting, marketing, sales and distribution of
Products including, without limitation, use on label and packaging for the
products and in print, broadcast, electronics, and any other media now known or
hereafter created, subject to quality control provisions set forth in this
Agreement.
3. TERM: Twelve months beginning with the first use of the materials,
or beginning on June 1, 1999, whichever occurs first. Notwithstanding the option
provisions in Paragraph 8 herein, all of the results and proceeds of Talent's
services hereunder, including but not limited to uses of Talent's name, approved
image or approved likeness and all other materials using Talent's name, image or
likeness shall terminate upon the expiration of any Term or Option Term.
4. DAYS OF SERVICE: All production is to take place during two (2)
twelve (12) hour sessions during the month of March, 1999 on a day and at a
location to be determined by mutual agreement, plus an extra voice over session
later for "looping", if needed, with the available dates not to conflict
provisions set forth in this Agreement. This extra session shall be held at a
mutually convenient studio. In the event of an overrun, Talent will make himself
available for an additional 12 hour session at the rate of $7,500 and for a
second additional 12 hour session at the rate of $15,000. This compensation is
additional to any other compensation earned under Paragraph 7 below.
<PAGE>
In addition, Talent agrees to make himself available, during the Term
of this Agreement, at the Company's request, on three days (for a maximum of
eight hours per day) for the purposes of making appearances including public or
promotional appearances on behalf of the Company's Products (hereinafter defined
as "Appearance Dates") as compensated in Paragraph 7(B) below.
The Company recognizes that Spokesperson is presently an employee of
the National Broadcasting Corporation ("NBC") and his primary obligations are to
NBC. The Company will make a best effort to schedule all appearances around
Spokespersons existing schedule.
5. EXCLUSIVITY: During the Term of the Agreement, Talent agrees not to
endorse or appear in advertising for any other golf clubs. Nothing herein shall
preclude Talent from appearing in the entertainment information or news program
including lead-ins and lead-outs regardless of sponsorship.
6. AREA OF USE: Worldwide.
7. COMPENSATION: Talent shall receive compensation according to the
following Schedule:
A. Infomercial
1. $25,000 to be paid within two weeks of the signing of this contract, but
prior to Talent performing any days of service.
2. $25,000 to be paid upon completion of filming.
3. Talent shall receive a royalty equal to One and One Half (1.5%) percent
of gross sales of Product based on the retail price on the gross orders of the
Product in response to the infomercial (less customary discounts, returns, bad
checks, cancellations, declines, shipping and handling, sales and/or use taxes,
and credit card charge backs) (hereinafter "Royalty"). All Royalties shall be
applied against $175,000 in guaranteed royalty payments (hereinafter "Guaranteed
Royalty"). The first $50,000 of the Guaranteed Royalty is deemed paid in full
upon payments made by the Company to Talent under provisions A(1) and A(2) of
this paragraph. One Hundred Twenty Five Thousand Dollars ($125,00) of this
Guaranteed Payment is to be paid quarterly in four equal payments of $31,250 to
be paid 90 days after the first use of the materials, or beginning or September
1, 1999, whichever occurs first.
4. Within forty five (45) days after the expiration of the Term, the
Company shall pay to Talent, the balance of the Royalty less the Guaranteed
Royalty payments previously made, should any be owed.
B. Appearance Dates
Ten Thousand Dollars ($10,000) per appearance date, payable within fifteen
(15) days after the completion of the appearance. *In CONJUNCTION WITH THE
SPOKESPERSON AGREEMENT, THE FEE SHALL BE PAID ON THE 1ST, 4TH & 7TH appearances.
*/s/J. Dodrill 3-17-99
C. Payment Terms
All Compensation will be made payable to "The Marquee Group for the
services of Dan Hick". Federal I.D. # 13-3878295.
8. OPTION TERM: The Company shall have the option to extend this
Agreement upon thirty (30) days written notice prior to the expiration of the
Term, for one additional year (hereinafter "Option Term") with a continuation of
the Royalty as defined in Paragraph 7 and a Guaranteed Royalty payment of Two
Hundred Thousand Dollars ($200,000) paid quarterly during the Option Term.
During the Option Term, the Company shall have the option (but not the
obligation) to require Talents services to appear in a sequel to the
infomercial. Talent shall be required to perform similar days of service as
provided in Paragraph 4 for an additional Fifty Thousand Dollars ($50,000) for
the work required in filming the sequel and $15,000 for each Appearance Date
during the Option Term.
<PAGE>
9. TRAVEL ARRANGEMENTS: For the service described herein Company agrees
to supply Talent with the price of one (1) round trip first-class airfare, one
(1) first class hotel room, transportation portal to portal, and per diem of
Three Hundred ($300) Dollars per day (work and travel). In addition, the Company
shall reimburse Talent for all first class travel expenses incurred in
connection with any Appearance Dates.
10. APPROVAL: Talent shall have script, copy, likeness, print, and
photo approval, not to be unreasonably withheld including but not limited to
approval over any statements made by or attributed to Talent. Artist to have
approval over hair, makeup and wardrobe. If the Company supplies wardrobe,
Artist shall be entitled to keep same at no cost. Approval rights must be
exercised within five (5) business days of Talent's receipt of script or photos,
otherwise it shall be deemed that approval has been given.
11. ON-LINE PRODUCTION: Company shall be responsible for on-line
production. Concerning this Campaign, Company represents THAT ITS SIGNATORY
AFFILIATE, , is and will continue to be throughout the term of this Agreement
and any extension thereof, a signatory to the AFTRA Infomercial Single Project
Agreement, and Company shall pay to all unions which may have jurisdiction.
Pension and Health contributions as required in connection with Talent's
services hereunder, and shall provide Talent with evidence of such payments.
<PAGE>
12. INDEMNIFICATION:
A. Company shall indemnify, defend, and hold harmless Talent from and
against any and all damages, claims, actions, damages, cost, recoveries,
judgements, penalties and expenses of any kind whatsoever (including reasonable
attorney/legal fees and disbursements) which may be obtained against, imposed
upon or suffered by Talent in defending a claim, lawsuit or other proceedings
arising from or relating to the services of Talent herein, and the results and
proceeds thereof, or relating to Company, or the products or any advertising or
other exploitation thereof (including the Infomercial), including without
limitation any use of the materials, the programs or shows which Talent appears
and the Products, including without limitation any defects, infringement of any
intellectual property or other property rights of any third party; from
Company's breach of any of its obligations to Talent, or any of its
representation or warranties hereunder; produced under and the advertising and
promotion thereof.
B. Talent agrees to indemnify Company should Talent fail to pay any
assessments or taxes due on Talent compensation hereunder. Talent will be
responsible for any payments to be made to his agent with respect to Talent's
services hereunder. Talent acknowledges that for the purposes of retaining his
services hereunder, Talent is an independent contractor and will not be
considered an employee of Company. Talent agrees to indemnify and hold harmless
the Company from and against any and all damages arising out of or in any way
related to third party claims or government fines or penalties based on the (1)
negligent or willful acts or omissions of the Talent in relation to the
activities described in this Agreement not at the direction of the Company, (2)
any loss of or damage to property, personal injury or death resulting from the
negligent or willful services of the Talent hereunder, or (3) any breach by
Talent of any obligation to be performed or any other agreement of
representation made by Talent herein except to the extent such damages arise
from the gross negligence or willful neglect of Company.
13. FORCE MAJUERE: IF FOR ANY UNFORESEEABLE REASON OUTSIDE OF COMPANY'S
CONTROL, such as strikes, boycotts, war, act of God, labor troubles, riots,
delays of commercial carriers, or restraints of public authority, Company shall
be unable to use and/or reuse any of the materials produced hereunder during any
period of the term hereof, then Company shall have the right to extend the term
hereof for an equivalent period, without any additional compensation to Talent,
but this period shall not exceed two (2) weeks. Company may only suspend/extend
once; must provide prior written notice; and continue to pay earned royalties.
14. DEATH: In the event of the Talent's death during the term hereof,
the payment obligations under this Agreement shall continue in full force and
effect and Company shall pay any monies due to Talent's estate and the estate
shall, under no circumstances, be required to return any monies previously paid
to Talent under this Agreement.
15. ILLNESS: If Talent shall fail to fulfill its obligations described
in Paragraphs 1 and 4 or during the Option Term as provided in Paragraph 8, due
to Talent's illness, injury, accident, or significant change in physical
appearance, then Company shall have the right to terminate this Agreement if
Talent is prevented from rendering services for more than thirty (30) days. In
such event, Company shall have no obligation to make any payments to Talent for
the services Talent has not performed, and any and all monies that had been paid
to Talent for those specific services will be refunded to Company immediately.
16. ACCOUNTING AND AUDIT RIGHTS: During any Term hereunder, Company
shall furnish to Talent, on a quarterly basis, within thirty (30) days after the
last day of each quarter, a complete detailed statement setting forth all gross
sales revenues including number, description and sales price of product shipped
and sold. Include itemized list of all deductions permitted hereunder to arrive
AT ROYALTIES SET FORTH HEREIN. Compensation due Talent shall be paid to Talent
simultaneously with the submission of these statements, unless payment is due
earlier per the terms of this Agreement. Talent, or a representative designated
by Talent in writing, shall be entitled to audit and examine and make copies of
all records reasonably related to sales and/or calculation of royalties
hereunder, upon reasonable prior written notice to Company. All such records
must be maintained by Company for a period of two (2) years from the date of
termination of this contract. Talent shall have the right to audit these records
for a period of one (1) year following each Term set forth in Paragraphs 3 and
8. All such inspections shall be at the expense of Talent, unless such
inspections disclose a variation of Client's accounting records of three percent
(3%) or greater, in which case the reasonable out-of-pocket and audit expenses
shall be paid for by Client.
<PAGE>
17. PROFESSIONAL BEHAVIOR: Talent agrees that at no time during the
Term will Talent disparage the Product, Campaign or Company. If Talent does
disparage the Product, Campaign or Company, Company shall have the right after
written notice to Talent and a failure by Talent to cure within five (5)
business days, to terminated this Agreement without waiver of any and all other
legal remedies. Company's decision to terminate hereunder must be exercised, if
at all, not later than fifteen (15) days after the facts giving rise to such
right under this paragraph are brought to Company's attention.
18. PAY OR PLAY: The payment of the required compensation provided in
Paragraph 7(A)(1) and 7(A)(2) hereof, will fully discharge all of Company's
obligations hereunder and Company shall not be obligated to produce, broadcast,
telecast, or publish any of the materials or to utilize Talent's services
hereunder. If Company fails to compensate Talent by the Terms hereof, or
otherwise breaches the terms of this Agreement, upon receiving written notice
from Talent of the breach, Company shall have thirty (30) days to cure, except
that such fifteen (15) day cure period shall be reduced to fifteen (15) days if
Company fails to compensate Talent. Failing same, and in addition to any other
remedies to which Talent may be entitled, Talent shall have the right to
terminate this contract and all uses of Talent permitted hereunder.
19. TERMINATION: The Company, at its option may terminate this
Agreement at any time prior to the expiration of forty (40) days commencing with
the first use of the materials, or on August 1, 1999, whichever occurs first.
The payment of the required compensation provided in Paragraph 7(A)(1) and
7(A)(2) hereof, will fully discharge all of Company's obligations hereunder and
Talent will not be entitled to any further compensation.
20. RIGHT OF FIRST REFUSAL: If, during the Term of this Agreement,
Talent is given a firm offer to endorse any competing product manufactured by
the Company, the Company will have the right to match said offer to Talent under
the exact terms and conditions within fifteen (15) days of notice that an offer
has been made.
21. ATTORNEY'S FEES AND COSTS: In the event of any litigation,
arbitration, or other dispute relating to this Agreement, the prevailing party
shall be entitled to payment of its reasonable attorney's fees and out-of-pocket
costs by the non-prevailing party.
22. INTELLECTUAL PROPERTY RIGHTS: Subject to the terms hereof and the
uses allowed hereunder, commercials, name and likeness trademarks of Company,
name and likeness of Talent as it relates to the promotion/marketing of this
Program, all scripts, raw commercial footage, and completed masters created
pursuant to this Agreement and performances recorded thereon shall be and remain
the sole property of Company. In addition all still photography, negatives,
slides and any form of electronic media shall remain the sole PROPERTY OF
COMPANY SUBJECT TO USE RESTRICTIONS CONTAINED HEREIN.
23. RELATIONSHIP OF THE PARTIES: This Agreement shall not constitute or
be considered as a partnership, employer-employee relationship, joint venture,
or agency between the parties hereto nor by or between any of their employees or
agents.
24. SEVERANCE: If any term, covenant, condition or provision of this
Agreement or the application thereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement shall be
valid and shall be enforceable to the fullest extent provided by law.
25. AUTHORITY: Each of the parties hereby represents and warrants to
the other that it has the right, power, and legal authority to enter into and
fully perform this Agreement in accordance with its terms and that this
Agreement when executed and delivered by the parties will be a legal, valid and
binding obligation enforceable against the parties in accordance with its terms.
<PAGE>
26. NOTICE: Notice by any party is deemed given when mailed, postage
paid, certified or registered return receipt requested, Federal Express or any
other overnight mail service, addressed to the parties appearing below:
To Spokesperson: Dan Hicks
c/o The Marquee Group
888 7TH Avenue
37TH Floor
New York, NY 10019
Attn: Michael Levine
To Company: Outlook Sports Technology
100 Grand Street
5TH Floor
New York, NY 10013
Either party may, by written notice to the other, change the address to which
any such communications shall be sent. After notice of such change has been
received, any communications shall be sent directly to such party at such
changed address.
27. ENTIRE AGREEMENT: This agreement, consisting of the foregoing,
correctly sets forth the entire agreement between Company and Talent. No
agreements or understandings shall be binding on any of the parties hereto
unless specifically set forth in this agreement or modified in a separate
written agreement.
28. APPLICABLE LAW: This Agreement shall be construed and enforced in
accordance with the laws of the State of New York without regard to its
principals of conflicts of laws. Any action on this Agreement or arising out of
its terms and conditions shall be instituted and litigated in the courts of the
State of New York, City of New York. In accordance the parties submit to the
jurisdiction and venue of the State of New York and agree and acknowledge that
such a forum shall be a convenient forum for the resolutions of their questions,
disputes and other differences.
AGREED AND ACCEPTED:
for Outlook Sports Technology, Inc.
/S/ PAUL BERGER DATE 3-5-99
by: Paul Berger, CEO
and for: Dan Hicks
/S/ DAN HICKS DATE 3-5-99
by: Dan Hicks
Dan Hicks Spokesperson Agreement - Final - 10/28/99
EXHIBIT 10.29
OUTLOOK SPORTS TECHNOLOGY
SPOKESPERSON AGREEMENT
THIS AGREEMENT ("AGREEMENT") IS MADE BY AND BETWEEN OUTLOOK SPORTS TECHNOLOGY,
INC., A DELAware corporation with its principal place of BUSINESS LOCATED AT 100
GRAND STREET, 5TH Floor, New York, NY 10013 (hereinafter referred to as
"Company"), and Dan Hicks, a person, with primary residence located at 12
Sherwood Avenue, Greenwich, CT 06831, (hereinafter referred to as
"Spokesperson") and is entered into on this date of execution March 5, 1999, in
the following circumstances:
Background
The Company is engaged in the business of golf club design and
marketing. Talent is a professional sports broadcaster. Company and Talent
desire to work together in the promotion and sale of the Company's golf
equipment during the Term of this Agreement, all in accordance with the terms
and conditions set forth herein.
NOW, THEREFORE, in the consideration of the mutual covenants contained herein,
the parties do hereby agree as follows:
1. SERVICE: Spokesperson shall appear from time to time as an
ambassador of the Company and or the Company's products at various events or
outings. In addition, Spokesperson shall serve as a member of the Company's
advisory board.
2. TERM: The Term shall run from the date of execution of this contract
though April 31, 2000.
3. DAYS OF SERVICE: Spokesperson agrees to make himself available,
during the Term of this Agreement, at the Company's request, on four days (for a
maximum of eight hours per day) for the purposes of making appearances including
public or promotional appearances on behalf of the Company. These appearances
may include, but will not be limited to, events such as the following: Company
sponsored golf outings, advisory board meetings, retail promotion of
product/autograph signings and PGA Golf Show appearances. Spokesperson will be
required to travel outside of the New York Metropolitan area for not more than
two (2) of these appearances. In addition to the aforementioned days
Spokesperson agrees to make himself available, during the Term of this
Agreement, at the Company's request, for four social events (for a maximum of
four hours per event) for the purposes of entertaining persons on behalf of the
Company. Spokesperson will not be required to travel more than one hour for the
for the social event appearances. The Company recognizes that Spokesperson is
presently an employee of the National Broadcasting Corporation ("NBC") and his
primary obligations are to NBC. The Company will make a best effort to schedule
all appearances around Spokespersons existing schedule.
<PAGE>
4. COMPENSATION: Spokesperson shall receive Eighteen Thousand Two
Hundred Fifty Shares (18,250) of Class A Common Stock valued at par value $0.01
per share. It is anticipated that the initial public offering price of the stock
will be $5.50 per share. Thus the initial market value of the stock will be One
Hundred Thousand Three Hundred Seventy Five Dollars ($100,375). At Spokespersons
direction, the Company will issue any commission earned to any agency in the
form of stock subtracted from Spokespersons Compensation.
5. RELATIONSHIP OF THE PARTIES: This Agreement shall not constitute or
be considered as a partnership, employer-employee relationship, joint venture,
or agency between the parties hereto nor by or between any of their employees or
agents.
6. AUTHORITY: Each of the parties hereby represents and warrants to the
other that it has the right, power, and legal authority to enter into and fully
perform this Agreement in accordance with its terms and that this Agreement when
executed and delivered by the parties will be a legal, valid and binding
obligation enforceable against the parties in accordance with its terms.
7. NOTICE: Notice by any party is deemed given when mailed, postage
paid, certified or registered return receipt requested, Federal Express or any
other overnight mail service, addressed to the parties appearing below:
To Spokesperson: Dan Hicks
c/o The Marquee Group
888 7TH Avenue
37TH Floor
New York, NY 10019
Attn: Michael Levine
To Company: Outlook Sports Technology
100 Grand Street
5TH Floor
New York, NY 10013
Either party may, by written notice to the other, change the address to which
any such communications shall be sent. After notice of such change has been
received, any communications shall be sent directly to such party at such
changed address.
8. ENTIRE AGREEMENT: This agreement, consisting of the foregoing,
correctly sets forth the entire agreement between Company and Talent. No
agreements or understandings shall be binding on any of the parties hereto
unless specifically set forth in this agreement or modified in a separate
written agreement.
<PAGE>
9. APPLICABLE LAW: This Agreement shall be construed and enforced in
accordance with the laws of the State of New York without regard to its
principals of conflicts of laws. Any action on this Agreement or arising out of
its terms and conditions shall be instituted and litigated in the courts of the
State of New York, City of New York. In accordance the parties submit to the
jurisdiction and venue of the State of New York and agree and acknowledge that
such a forum shall be a convenient forum for the resolutions of their questions,
disputes and other differences.
AGREED AND ACCEPTED:
for Outlook Sports Technology, Inc.
/S/ PAUL BERGER DATE MARCH 5, 1999
------------------------------- -------------------
by: Paul Berger, CEO
and for: Dan Hicks
/S/ DAN HICKS DATE MARCH 5, 1999
------------------------------- ----------------
by: Dan Hicks
EXHIBIT 10.30
CONSULTING AGREEMENT
AGREEMENT, effective of the 1st day of July 1999 (the "Agreement"), by
and between Gary A. Rogers (the "Consultant") and Outlook Sports Technology,
Inc. (the "Company"), with its principal offices located at 100 Grand Street,
5th Floor, New York, New York 10013.
WITNESSETH:
WHEREAS, the Consultant is an individual;
WHEREAS, the Consultant has been requested by the Company to provide
consulting services for the Company;
WHEREAS, Consultant and the Company desire to expand their relationship,
and the Company desires to enter into a formal consulting agreement with the
Consultant pursuant to which it will engage the Consultant for general
consulting services, including advice regarding mergers, acquisitions and
related matters.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto hereby agree as follows:
1. TERM. Consultant hereby agrees to act as consultant on behalf of the
Company for a five (5) year term commencing as of the date hereof (the "Term").
2. SERVICES. The consulting services to be provided by Consultant during
the Term shall be to advise and consult the Company regarding general business
matters including, but not limited to the evaluation and analysis of management
needs, prospective mergers, asset, business or other acquisition, and other
business combinations hereinafter ("Business Combinations") that the Company may
ask the Consultant to undertake. Consultant agrees to devote such time toward
the performance of its duties hereunder as it deems reasonably necessary. It is
not intended that such services require full time and effort by Consultant or
any of its employees. The Company acknowledges that Consultant and/or its
affiliates will provide consulting advice (of all types contemplated by this
Agreement and otherwise) to others, as well as Outlook Sports Technology, Inc.
Nothing herein contained shall be construed to limit and restrict Consultant in
conducting such business with respect to others, or in rendering such advise to
others. It is contemplated that the services of Consultant shall be performed in
the City and State of New York and nothing shall require Consultant to attend
meetings more frequently than three days in any calendar month. In addition to
the Compensation hereinafter set forth, Consultant shall receive $500.00 per
diem allowance for any day that his services are so required. In the event
Consultants services are requested outside of the New York City Metropolitan
area Company shall in addition to the per diem allowance provide Consultant with
first class air transportation to and from the location outside the New York
Metropolitan are and first class one bedroom suite hotel accommodations. Company
shall advise Consultant at least 30 days in advance of the date, time and place
of any contemplated meeting and shall be subject to Consultants prior
commitments.
<PAGE>
3. COMPENSATION FOR SERVICES. For and in consideration for the services
rendered and to be rendered by Consultant as provided herein and in addition to
any other compensation previously or subsequently agreed to be paid to
Consultant, Company shall pay to Consultant the following: 162,500 shares of
common stock of Outlook Sports Technology, Inc. The foregoing shall be referred
to as "Compensation". The above compensation shall be registered using a Form
S-8 or any other means required registering the above compensation. The Company
must file with all the appropriate regulatory authorities including but not
limited to the SEC within 30 days of the execution of this agreement.
4. ENTIRE AGREEMENT; WAIVERS; EXHIBITS. This Agreement supersedes any and
all agreements, arrangements and understandings between the parties hereto,
entered into or reached prior to the date hereof. No amendment, waiver or
discharge of any provisions hereof shall be effective unless in writing signed
by the parties hereto. All Exhibits attached hereto or incorporated herein by
reference, together with this Agreement, shall be and are one complete agreement
and constitute the entire agreement between the parties. This Agreement shall
inure to the successors and assigns of the parties hereto.
5. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when delivered personally or
three days after being sent by registered or certified mail, postage prepaid,
return receipt requested, to the address set forth on the first page of this
Agreement or such other address as any party may notify the other pursuant
hereto.
<PAGE>
6. HEADINGS. The headings in the Agreement are for purposes of reference
only and shall not be considered in construing this Agreement.
7. CONSENT TO SERVICE OF PROCESS; JURISDICTION; VENUE. Each of the parties
hereto hereby consents to the personal jurisdiction of the United States
District Court for the Southern District of New York in any action, suit or
proceeding arising under this Agreement and agrees to bring any such action,
suit or proceeding only in such courts.
8. ASSIGNMENT. This Agreement may not be assigned by any party without the
express written consent of the other party.
9. GOVERNING LAW. This Agreement shall be governed and interpreted in
accordance with the laws of the State of New York, without regard to the
conflict of laws principles thereof or the actual domiciles of the parties
hereto.
10. CONFIDENTIAL INFORMATION. During the Term of this Agreement and at all
times thereafter, CONSULTANT agrees that it will keep confidential and will not
use or divulge to any person, firm or corporation, without COMPANY's specific,
prior consent in writing (i) any confidential information concerning the
business affairs of COMPANY, or any of its affiliates; (ii) any trade secrets of
COMPANY, or any of its affiliates; or (iii) any other specialized information or
data relating to COMPANY, the COMPANY's Proprietary Rights, or any participants
therein, heretofore or hereafter learned, acquired or coming to CONSULTANT's
knowledge during the Term. Notwithstanding the above, the CONSULTANT shall have
no liability to COMPANY with regard to information which (i) was generally known
and available in the public domain at the time it was disclosed or becomes
generally known and available in the public domain through no fault of
CONSULTANT; (ii) was known to CONSULTANT at the time of disclosure as shown by
the files of CONSULTANT in existence at the time of disclosure; (iii) is
disclosed with the prior written approval of COMPANY; (iv) was independently
developed by CONSULTANT without any use of confidential information and by
employees or other agents of CONSULTANT who have not been exposed to such
confidential information; (v) becomes known to CONSULTANT from a source other
than COMPANY without breach of this Agreement by CONSULTANT and otherwise not in
violation of COMPANY's rights; and (vi) is disclosed pursuant to the order of a
court, administrative agency or other governmental body; provided, that
CONSULTANT shall provide prompt, advanced notice thereof to enable COMPANY to
seek a protective order or otherwise prevent such disclosure, and provided that
CONSULTANT's disclosure is limited to the expressly required by such court,
administrative agency or other governmental body.
<PAGE>
11. INDEPENDENT CONTRACTOR RELATIONSHIP, The services rendered by
Consultant to the Company pursuant to this Agreement shall be as an independent
contractor, and this Agreement does not make Consultant the employee, agent or
legal representative of the Company for any purpose whatsoever, including,
without limitation, participation in any benefits or privileges given or
attended by the Company to its employees. No right or authority is granted to
Consultant to assume or to create any obligation or responsibility, express or
implied, on behalf of or in the name of the Company. The Company shall not
withhold for Consultant any federal or state taxes from the amounts to be paid
to Consultant hereunder, and Consultant agrees that it will pay all taxes due on
such amounts.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed and delivered in its name and on its behalf, all effective as of
the date first written above.
/S/ GARY A. ROGERS
GARY A. ROGERS
OUTLOOK SPORTS TECHNOLOGY, INC.
/S/ PAUL BERGER
PAUL BERGER, CEO
EXHIBIT 10.31
October 26, 1999
Dr. Afzal Ahmad
1430 North Lakeshore Drive, #18
Chicago, IL 60610
Via Fax (708) 891-0904
RE: Exchange Agreement
WHEREAS, Outlook Sports Technology, Inc. ("Outlook"), a Delaware
corporation and Dr. Afzal Ahmad (the "Offeree") on or about May 25, 1999 entered
into a Royalty Agreement under which Outlook obtained a $300,000 loan from the
Lender. In exchange for the loan, Outlook issued to the Offeree a 12 month
non-transferable 5% note (hereinafter the "Note") which is due and payable on
May 26, 2000, a running royalty on Outlook sales equal to two percent (2%) of
gross sales of Tegra titanium drivers and 50,000 warrants exercisable at 125% of
the market price at the date of the transaction.
NOW, THEREFORE, upon execution of this Agreement by Offeree and Outlook
the Offeree agrees to exchange the Note, the royalty revenue on sales and the
50,000 warrants issued to the Lender under the Royalty Agreement for 65,000
shares of Outlook Sports Technology, Inc. Class A Common Stock. Outlook will
make a best effort to register this stock within thirty days of the date of this
agreement. The Lender acknowledges that receipt of the 65,000 shares of stock
will extinguish all obligations from Outlook to the Offeree.
Upon execution of this Agreement, Offeree will immediately return to
Outlook the Note that Offeree has received from Outlook.
As promptly as practicable upon receipt by Outlook of the Note held by
Offeree, Outlook will deliver to OFFEREE A 65,000 SHARE CLASS A COMMON STOCK
CERTIFICATE; PROVIDED, HOWEVER, that if any law or regulation or order of the
Securities and Exchange Commission or any other body having jurisdiction in the
premises shall require Outlook or Offeree to take any action in connection with
the shares of Class A Common Stock then being exchanged, the date for the
delivery of such certificate shall be extended for the period necessary to take
and complete such action. Outlook shall make a best effort to register these
shares within sixty dates of issue.
<PAGE>
Outlook represents to Offeree as follows:
a. Outlook is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to (i) own, lease and operate its properties and
to carry on its business as now being conducted, and (ii) to execute, deliver
and perform its obligations under this Agreement, and to consummate the
transactions contemplated hereby. The Company is duly qualified to do business
as a foreign corporation and is in good standing in all jurisdictions wherein
such qualification is necessary and where failure to so qualify could have a
material adverse effect on the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company.
b. This Agreement has been duly and validly authorized,
executed and delivered by Outlook and this Agreement is the valid and binding
agreement of Outlook enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
c. Outlook will reserve and keep available, out of shares of
its authorized and unissued Class A Common Stock or shares of Class A Common
Stock held in treasury, a sufficient number of shares of its Common Stock to
satisfy the requirements of this Agreement.
d. All shares of Class A Common Stock agreed to be issued
pursuant to this Agreement will, upon issuance, be duly and validly issued,
fully paid and non-assessable.
Offeree represents to Outlook as follows:
a. Offeree's status as an "accredited investor," as that term
was defined in the Subscription Agreements signed by Offeree in connection with
the Note previously made by Offeree, has not changed.
b. Offeree has had an opportunity to ask questions of and
receive answers from Outlook concerning Outlook and all other matters pertinent
to the Exchange, and all such questions have been answered to the full
satisfaction of Offeree. Offeree has been given access to Outlook's books and
records and all other documents and information that Offeree has requested
relating to the Exchange.
c. Except as set forth herein, no representations or
warranties have been made to Offeree by Outlook or any agent, employee or
affiliate thereof, and no oral or written information furnished to Offeree or
its advisors, if any, was in any way inconsistent with this Agreement.
<PAGE>
This Agreement shall be governed by and interpreted in accordance
with the laws of Delaware. This Agreement may be executed in counterparts and by
the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in any other
jurisdiction.
This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement.
This Agreement sets forth the entire agreement between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, whether written or oral, with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
--------------------------
Offeree
Name: _____________________
Address: __________________
OUTLOOK SPORTS TECHNOLOGY, INC.
By: _______________________
Name: _____________________
Title: ____________________
EXHIBIT 10.32
CONSULTING AGREEMENT
AGREEMENT, effective of the 26th day of October 1999 (the "Agreement"),
by and between Capital York, Inc. (the "Consultant") and Outlook Sports
Technology, Inc. (the "Company"), with its principal offices located at 100
Grand Street, 5th Floor, New York, New York 10013.
WITNESSETH:
WHEREAS, the Consultant has been requested by the Company to provide
consulting services for the Company;
WHEREAS, Consultant and the Company desire to expand their relationship,
and the Company desires to enter into a formal consulting agreement with the
Consultant pursuant to which it will engage the Consultant for general
consulting services, including advice regarding mergers, acquisitions and
related matters.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto hereby agree as follows:
1. TERM. Consultant hereby agrees to act as consultant on behalf of the
Company for a six month term commencing as of the date hereof (the "Term").
2. SERVICES. The consulting services to be provided by Consultant during
the Term shall be to advise and consult the Company regarding general business
matters including, but not limited to the evaluation and analysis of management
needs, prospective mergers, asset, business or other acquisition, and other
business combinations hereinafter ("Business Combinations") that the Company may
ask the Consultant to undertake. Consultant agrees to devote such time toward
the performance of its duties hereunder as it deems reasonably necessary. It is
not intended that such services require full time and effort by Consultant or
any of its employees. The Company acknowledges that Consultant and/or its
affiliates will provide consulting advice (of all types contemplated by this
Agreement and otherwise) to others, as well as Outlook Sports Technology, Inc.
Nothing herein contained shall be construed to limit and restrict Consultant in
conducting such business with respect to others, or in rendering such advise to
others. It is contemplated that the services of Consultant shall be performed in
the City and State of New York and nothing shall require Consultant to attend
meetings more frequently than three days in any calendar month. In addition to
the Compensation hereinafter set forth, Consultant shall receive $500.00 per
diem allowance for any day that his services are so required. In the event
Consultants services are requested outside of the New York City Metropolitan
area Company shall in addition to the per diem allowance provide Consultant with
first class air transportation to and from the location outside the New York
Metropolitan are and first class one bedroom suite hotel accommodations. Company
shall advise Consultant at least 30 days in advance of the date, time and place
of any contemplated meeting and shall be subject to Consultants prior
commitments.
<PAGE>
3. COMPENSATION FOR SERVICES. For and in consideration for the services
rendered and to be rendered by Consultant as provided herein and in addition to
any other compensation previously or subsequently agreed to be paid to
Consultant, Company shall pay to Consultant the following: 10,000 shares of
common stock of Outlook Sports Technology, Inc. The foregoing shall be referred
to as "Compensation". The Company will make a best effort to register within
thirty days of the date of this Agreement and will make a best effort to file
with all the appropriate regulatory authorities including but not limited to the
SEC in said time frame.
4. ENTIRE AGREEMENT; WAIVERS; EXHIBITS. This Agreement supersedes any and
all agreements, arrangements and understandings between the parties hereto,
entered into or reached prior to the date hereof. Specifically, this Agreement
supersedes the Consulting Agreement dated March 22, 1998 which the parties
acknowledge was never performed, no obligation arose on behalf of the parties
and no payment was due to Consultant by the Company. No amendment, waiver or
discharge of any provisions hereof shall be effective unless in writing signed
by the parties hereto. All Exhibits attached hereto or incorporated herein by
reference, together with this Agreement, shall be and are one complete agreement
and constitute the entire agreement between the parties. This Agreement shall
inure to the successors and assigns of the parties hereto.
<PAGE>
5. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when delivered personally or
three days after being sent by registered or certified mail, postage prepaid,
return receipt requested, to the address set forth on the first page of this
Agreement or such other address as any party may notify the other pursuant
hereto.
6. HEADINGS. The headings in the Agreement are for purposes of reference
only and shall not be considered in construing this Agreement.
7. CONSENT TO SERVICE OF PROCESS; JURISDICTION; VENUE. Each of the parties
hereto hereby consents to the personal jurisdiction of the United States
District Court for the Southern District of New York in any action, suit or
proceeding arising under this Agreement and agrees to bring any such action,
suit or proceeding only in such courts.
8. ASSIGNMENT. This Agreement may not be assigned by any party without the
express written consent of the other party.
9. GOVERNING LAW. This Agreement shall be governed and interpreted in
accordance with the laws of the State of New York, without regard to the
conflict of laws principles thereof or the actual domiciles of the parties
hereto.
10. CONFIDENTIAL INFORMATION. During the Term of this Agreement and at all
times thereafter, CONSULTANT agrees that it will keep confidential and will not
use or divulge to any person, firm or corporation, without COMPANY's specific,
prior consent in writing (i) any confidential information concerning the
business affairs of COMPANY, or any of its affiliates; (ii) any trade secrets of
COMPANY, or any of its affiliates; or (iii) any other specialized information or
data relating to COMPANY, the COMPANY's Proprietary Rights, or any participants
therein, heretofore or hereafter learned, acquired or coming to CONSULTANT's
knowledge during the Term. Notwithstanding the above, the CONSULTANT shall have
no liability to COMPANY with regard to information which (i) was generally known
and available in the public domain at the time it was disclosed or becomes
generally known and available in the public domain through no fault of
CONSULTANT; (ii) was known to CONSULTANT at the time of disclosure as shown by
the files of CONSULTANT in existence at the time of disclosure; (iii) is
disclosed with the prior written approval of COMPANY; (iv) was independently
developed by CONSULTANT without any use of confidential information and by
employees or other agents of CONSULTANT who have not been exposed to such
confidential information; (v) becomes known to CONSULTANT from a source other
than COMPANY without breach of this Agreement by CONSULTANT and otherwise not in
violation of COMPANY's rights; and (vi) is disclosed pursuant to the order of a
court, administrative agency or other governmental body; provided, that
CONSULTANT shall provide prompt, advanced notice thereof to enable COMPANY to
seek a protective order or otherwise prevent such disclosure, and provided that
CONSULTANT's disclosure is limited to the expressly required by such court,
administrative agency or other governmental body.
<PAGE>
11. INDEPENDENT CONTRACTOR RELATIONSHIP, The services rendered by
Consultant to the Company pursuant to this Agreement shall be as an independent
contractor, and this Agreement does not make Consultant the employee, agent or
legal representative of the Company for any purpose whatsoever, including,
without limitation, participation in any benefits or privileges given or
attended by the Company to its employees. No right or authority is granted to
Consultant to assume or to create any obligation or responsibility, express or
implied, on behalf of or in the name of the Company. The Company shall not
withhold for Consultant any federal or state taxes from the amounts to be paid
to Consultant hereunder, and Consultant agrees that it will pay all taxes due on
such amounts.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed and delivered in its name and on its behalf, all effective as of
the date first written above.
<TABLE>
<CAPTION>
<S> <C>
Capital York, Inc. Outlook Sports Technology, Inc.
/s/ Michael Konency /s/ Paul Berger
Michael Konency, CEO Paul Berger, CEO
</TABLE>
EXHIBIT 10.33
PROMISSORY NOTE
$112,000.00 October 26, 1999
FOR VALUE RECEIVED, the undersigned, Outlook Sports Technology, Inc., a
Corporation located at 100 Grand Street, New York, NY 10013 ("Borrower"),
promises to pay to the order of Paul H. Berger an individual with an address at
450 North End Ave., Apt. 22F, New York, NY 10282 ("Lender"), the principal sum
of One Hundred Twelve Thousand Dollars ($112,000) or such lesser amount as set
forth below, which shall be due and payable, together with interest thereon
calculated at the prime lending rate per annum, on December 1, 1999 (the
"Maturity Date").
Borrower may repay all or any portion of the amount hereof without
penalty at any time and from time to time prior to the Maturity Date.
All payments shall be payable in lawful money of the United States of
America in immediately available funds at the office of the Lender or his
assignee.
Borrower hereby waives presentment, demand for payment, notice of
dishonor or acceleration, protest and notice of protest, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note.
This Note shall be binding upon Borrower and its successors and assigns
and shall inure to the benefit of the Lender and his successors and assigns.
This Note shall be governed as to validity, interpretation and effect by the
laws of the State of New York, without giving effect to the conflicts of laws
principles thereof, irrespective of any form in which any action may be brought
to enforce or secure an interpretation of this Note and irrespective of the
place of business, address or domicile of Borrower or the Company.
IN WITNESS WHEREOF, the undersigned has executed this Promissory Note
on the day and year first above written.
OUTLOOK SPORTS TECHNOLOGY, INC.
BY: /S/ JAMES DODRILL
James Dodrill, President
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on Outlook Sports Technology, Inc. dated October 12, 1999, in
the Registration Statement (Form SB-2) and related Prospectus of Outlook Sports
Technology, Inc. for the Registration of common stock.
/s/ WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
----------------------------------
WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
Rockville Centre, New York
October 29, 1999
