UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1999
-----------------------
OR
[] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File No. 0-26569
SALEOUTLET.COM, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0399260
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
132 West 21st Street, New York, NY 10011
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (212) 691-0288
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of November 1, 1999
- ----------------------------------- ------------------------------------
Common Stock 8,927,271 shares
Par Value $0.001
1
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PART I - FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Item 1. Financial Statements
- --------------------------------------------------------------------------------
Page
Unaudited Balance Sheet as of September 30, 1999 F-1
Unaudited Statements of Operations for the three and nine months
ended September 30, 1999 and 1998 F-2
Unaudited Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 F-3
Notes to Unaudited Financial Statements F-4
- --------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
- --------------------------------------------------------------------------------
Results of Operations
Three Months Ended September 30, 1999
During the three month period ended September 30, 1999, the Registrant
had revenues from sales generated by its website of $81,199 compared to $0
revenues in the same period in 1998. This was the first full quarter since the
Registrant commenced its Internet business of selling its clients' merchandise
on its website. The Registrant's general and administrative expenses were
$464,518 for the three months ended September 30, 1999 compared to $0 for the
same period in 1998. These expenses are attributable primarily to officer and
employee salaries, rent and overhead related expenses which did not exist in the
comparable 1998 period. Management anticipates that it will experience increased
revenues in the fourth quarter of 1999 from holiday sales through its website.
It is also expected that revenues from initial site fees, maintenance fees and
website design and creation will increase as the Registrant adds new clients to
its vendor base. Currently, the Registrant has approximately 75 clients which
list merchandise for sale on the Registrant's website. It is anticipated that
this number will increase to approximately 100 by the end of the fourth quarter.
Nine Months Ended September 30, 1999
The Registrant commenced its business of selling clients' merchandise
on its website during the second quarter of the 1999 fiscal year which generated
revenues for that quarter of $15,000. During the nine month period ended
September 30, 1999, the Registrant had revenues from sales on its website of
$96,199 compared to $0 revenues during the same period in 1998 when the
Registrant had no business or operations. General and administrative expenses
also increased in the same
2
<PAGE>
period of 1999 to $972,415 from $100 in the comparable period in 1998. This
increase is directly related to the commencement of the Registrant's business
operations in the second quarter of the current fiscal year and is attributable
to officer and employee salaries, rent and additional overhead and operating
expenses of the business.
From time to time the Registrant may evaluate potential acquisitions
involving complementary businesses, content, products or technologies. The
Registrant has no present agreements or understanding with respect to any such
acquisition. The Registrant's future capital requirements will depend on many
factors, including the entrance into strategic alliances, increases in
advertising, marketing and promotions, growth of the Registrant's customer base,
economic conditions and other factors including the results of future
operations.
The Registrant currently has five (5) full time employees and one (1)
part time employee. Management expects to hire approximately four additional
people in the next 12 months. It is anticipated that two will be directly
related to sales and customer service, one will be directly related to the
design, development and technical support of the Registrant's website, and one
will be directly related to general and administrative. The anticipated future
cost associated with this planned increase in employees is $150,000. The number
of employees actually hired will be based upon the Registrant's ability to
support the increased cost through cash flow generated by its business.
Liquidity and Capital Resources
During the nine month period ended September 30, 1999, the Registrant
raised approximately $1,100,000 through the sale of its securities. These funds
have been used for website development ($125,000), equipment ($30,000),
marketing and advertising ($600,000) and the balance of approximately $345,000
for working capital requirements.
Management anticipates that the funds the Registrant received from the
private sale of its securities together with cash flow from revenues will be
sufficient to finance the Registrant's working capital requirements for the next
12 months. If, however, there is a need for additional capital, such funding
will likely come from the sale of the Registrant's debt and/or equity
securities, the successful sale of which, if any, cannot be assured.
Impact of Inflation
Although the Registrant has not attempted to calculate the effect of
inflation, management does not believe inflation has had or will have a material
effect on its results of operations.
Year 2000 Disclosure
The Company does not anticipate any problem in dealing with computer
entries in the year 2000 or thereafter, with any computers currently used at any
of their facilities. All of the Company's computer systems are new and have been
Year 2000 compliant since their acquisition. The
3
<PAGE>
Company keeps current with all updates and revisions with all software the
Company currently uses. It is anticipated that the software updates reflect
required revisions to accommodate transactions in the Year 2000 and thereafter.
Though it is not anticipated that the Company will have a problem at the turn of
the century, the Company intends to coordinate the resolution of any Year 2000
problems with the vendors of the software the Company utilizes. Nonetheless, the
Company recognizes the problems which may arise in connection with the Year 2000
issue.
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. The Company does not believe that it has material exposure
to the Year 2000 issue with respect to its own information systems since its
existing systems correctly define the year 2000. The Company intends to survey
its major clients to determine the extent to which their computer systems
(insofar as they relate to the Company's business) are Year 2000 compliant. The
Company is currently unable to predict the extent to which the Year 2000 issue
will affect its clients, or the extent to which it would be vulnerable to the
client's failure to remediate any Year 2000 issues on a timely basis. The
failure of a major client subject to the Year 2000 to convert its systems on a
timely basis or a conversion that is incompatible with the Company's systems
could have an adverse effect on the Company. In addition, most of the purchases
on the Company's web site are expected to be made with credit cards, and the
Company's operations may be adversely affected to the extent its customers are
unable to use their credit cards due to any Year 2000 issues that are not
rectified by their credit card vendors. In a worst case scenario, if the
Company's clients' computer systems or that of such clients' vendors do not
contain the necessary software updates to be Year 2000 compliant, a multitude of
problems could occur which may include, among others, lost orders, merchandise
not shipped or shipped to incorrect addresses and credit card purchases
incorrectly credited or debited. As a result, the Company could lose customers,
clients, and credibility which could have a material adverse effect on its
business and its financial condition.
Forward-Looking Information
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements made by the Registrant in its
disclosures to the public. There is certain information contained herein, in the
Registrant's press releases and in oral statements made by authorized officers
of the Registrant which are forward-looking statements, as defined by such Act.
When used herein, in the Registrant's press releases and in such oral
statements, the words "estimate", "project", "anticipate", "expect", "intend",
"believe", "plans", and similar expressions are intended to identify
forward-looking statements. Because such forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements.
4
<PAGE>
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
- --------------------------------------------------------------------------------
(a) The following exhibits are included in this filing:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SALEOUTLET.COM, INC.
Dated : November 11 , 1999 By: /s/ Michael Aronowitz
------------------------
Michael Aronowitz, President
5
<PAGE>
SALEOUTLET.COM
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
(Unaudited) (Audited)
----------------- ------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 593,470 $ 0
Accounts receivable 75,456 0
Prepaid expenses 406,667 0
----------------- ------------------
TOTAL CURRENT ASSETS 1,075,593 0
PROPERTY, PLANT, AND EQUIPMENT 4,986 0
OTHER ASSETS
Organization costs, net 66 120
----------------- ------------------
$ 1,080,645 $ 120
================= ==================
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 50,398 $ 0
Officer advances 0 185
Credit cards payable 5,875 0
----------------- ------------------
TOTAL CURRENT LIABILITIES 56,273 185
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value
Authorized 50,000,000 shares
Issued 9,006,287 shares (6,000,000 in 1998) 9,006 6,000
Additional paid-in capital 1,951,422 0
Deficit accumulated during development stage (936,056) (6,065)
----------------- ------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 1,024,372 (65)
----------------- ------------------
$ 1,080,645 $ 120
================= ==================
</TABLE>
F - 1
<PAGE>
SALEOUTLET.COM
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
9/1/95
Three months ended Nine months ended (Date of
September 30, September 30, inception) to
1999 1998 1999 1998 9/30/99
------------- -------------- ------------- ------------- ------------------
INCOME
<S> <C> <C> <C> <C> <C>
Revenue $ 81,199 $ 0 $ 96,199 $ 0 $ 96,199
------------- -------------- ------------- ------------- ------------------
TOTAL INCOME 81,199 0 96,199 0 96,199
EXPENSES
General and administrative 464,518 0 972,415 100 978,240
Amortization and depreciation 222 18 258 54 498
Research and development 0 0 65,000 0 65,000
------------- -------------- ------------- ------------- ------------------
464,740 18 1,037,673 154 1,043,738
------------- -------------- ------------- ------------- ------------------
TOTAL OPERATING LOSS (383,541) (18) (941,474) (154) (947,539)
OTHER INCOME
Interest 7,382 0 11,483 0 11,483
------------- -------------- ------------- ------------- ------------------
Net loss before income taxes (376,159) (18) (929,991) (154) (936,056)
------------- -------------- ------------- ------------- ------------------
Income tax expense 0 0 0 0 0
------------- -------------- ------------- ------------- ------------------
NET LOSS $ (376,159) $ (18) $ (929,991) $ (154) $ (936,056)
============= ============== ============= ============= ==================
Loss per weighted average share $ (.04) $ (.00) $ (.14) $ (.00)
============= ============== ============= =============
Weighted average number of shares
outstanding 9,006,287 6,000,000 6,701,199 6,000,000
============= ============== ============= =============
</TABLE>
F - 2
<PAGE>
SALEOUTLET.COM
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
9/1/95
Nine months ended (Date of
September 30, inception) to
1999 1998 9/30/99
------------- ------------- ------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $ (929,991) $ (154) $ (936,056)
Adjustments to reconcile net (loss) to cash used
by operating activities:
Amortization and depreciation 258 54 498
Stock issued for expenses 528,333 0 528,333
Changes in assets and liabilities:
Accounts receivable (75,456) 0 (75,456)
Accounts payable and accrued expenses 56,273 0 56,273
Officer advances (185) 100 0
------------- ------------- ------------------
NET CASH USED BY OPERATING ACTIVITIES (420,768) 0 (426,408)
INVESTING ACTIVITIES
Organization costs 0 0 (360)
Purchase of equipment (5,190) 0 (5,190)
------------- ------------- ------------------
NET CASH USED BY INVESTING ACTIVITIES (5,190) 0 (5,550)
FINANCING ACTIVITIES
Issue convertible promissory notes 155,000 0 155,000
Sale of common stock 864,428 0 870,428
------------- ------------- ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,019,428 0 1,025,428
------------- ------------- ------------------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 593,470 0 593,470
Cash and cash equivalents at beginning of period 0 0 0
------------- ------------- ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 593,470 $ 0 $ 593,470
============= ============= ==================
</TABLE>
SUPPLEMENTAL INFORMATION
Effective September 30, 1999 the Company issued 103,333 shares of its
restricted common stock to retire $155,000 of convertible promissory notes
and 155,000 shares for interest associated with the notes.
F - 3
<PAGE>
SALEOUTLET.COM
(A Development Stage Company)
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 1999
NOTE 1: CHANGE IN CONTROL
On March 1, 1999, the then current Board of Directors of Austin
Underground, Inc. appointed Michael Aronowitz and Jefferson Barr
to the Board of Directors and as President and Vice President,
respectively, of the Company. Immediately thereafter, the then
current management and its previous Board of Directors resigned.
Thereafter, in April 1999, Messrs. Aronowitz and Barr received
1,560,000 and 1,470,000 shares of the Company's common stock
respectively and an additional 1,470,000 shares were issued to a
key employee of the Company. Also, in April 1999, prior officers
returned an aggregate of 3,000,000 shares of common stock to the
Company for cancellation. There was no reverse split of the common
stock prior to the sale of 4,500,000 shares in April, 1999.
NOTE 2: REVENUE RECOGNITION POLICY
The Company recognizes commission income when a client sells a
product through the Company's website.
Revenue from site and change fees will be recognized at the point
the service is rendered.
Revenue from the rental of e-mail database info will be recognized
when the information is provided to the client.
Revenue from web site creation will be recognized when the web
site is operational for the client.
Revenue from catalog design and marketing will be recognized upon
completion of the project.
Revenue from web site advertising will be recognized over the
period of the contract.
NOTE 3: ISSUANCE OF COMMON STOCK
During the nine months ended September 30, 1999, the Company
issued common stock for services. An aggregate of 4,500,000 shares
were issued to three individuals as an incentive to join the
Company and develop an operating business. These shares were
valued at $.01 per share which then current management believed to
be the fair value of the services to be provided. 500,000 shares
were issued to a consultant and valued at $1.00 per share, which
was believed by management to be the fair value of the services to
be received. The shares were issued when there was no market for
the Company's stock and before the Company began selling stock for
$1.50 per share. The Company issued 150,000 shares of stock for
advertising services. The shares were valued at $1.50 per share
which the Company believes is fair value for the services to be
received. The Company also issued 10,000 shares to a director and
valued the shares at $1.00 per share which the Company believes is
fair value for the services to be provided by the director. At
September 30, 1999, an amount of $406,667 has been recorded as a
prepaid expense and $328,333 is reflected in general and
administrative expenses. The Company also issued 155,000 shares of
stock valued at $1.00 per share as a premium to encourage three
holders of convertible promissory notes to convert their notes to
shares of common stock at $1.50 per share. The $155,000 has been
treated as interest expense and is reflected in general and
administrative expenses. The Company also issued 103,333 shares of
common stock at $1.50 per share to retire the $155,000 of notes.
F - 4
<PAGE>
SALEOUTLET.COM
(A Development Stage Company)
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS (continued)
September 30, 1999
NOTE 4: COST OF DOING BUSINESS
The financial statements include all costs of doing business.
Officers are being compensated on a monthly basis at a rate which
is reasonable in the industry and have not performed services for
which they have not been compensated. All costs of doing business
are reflected in the financial statements. The financial
statements are prepared on the accrual basis of accounting to
properly record revenue and expense.
NOTE 5: STOCK OPTIONS
On June 3, 1999, the Company granted the Vice President of New
Business and Marketing options to purchase 80,000 shares of the
Company's restricted common stock at a price of $5.50 per share,
for the period commencing 90 days after her employment began and
during the term of her employment, but in no event for more than
10 years. The options granted were at an exercise price above the
market price at the time of grant. On September 15, 1999, the
option price was lowered to $2.25 per share, which was above the
market price at that date.
On August 11, 1999, the Company's President and Vice President
were each granted options to purchase 200,000 shares of the
Company's restricted common stock at an exercise price of $1.25
per share, which was the market price at the time of grant. The
options are exercisable at any time during the term of employment
of the individuals.
On September 15, 1999, an employee received options to purchase
20,000 shares of the Company's restricted common stock at a price
of $2.25 per share for the period commencing 90 days after her
employment began, and during the term of her employment, but in no
event for more than 10 years. The options granted were at an
exercise price above the market price at the time of grant.
F - 5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from SaleOutlet.Com, Inc. September 30, 1999 financial
statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0001085819
<NAME> SaleOutlet.Com, Inc.
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1.00
<CASH> 593,470
<SECURITIES> 0
<RECEIVABLES> 75,456
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,075,593
<PP&E> 5,190
<DEPRECIATION> (204)
<TOTAL-ASSETS> 1,080,645
<CURRENT-LIABILITIES> 56,273
<BONDS> 0
0
0
<COMMON> 9,006
<OTHER-SE> 1,015,366
<TOTAL-LIABILITY-AND-EQUITY> 1,080,645
<SALES> 96,199
<TOTAL-REVENUES> 96,199
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,037,673
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 155,000
<INCOME-PRETAX> (929,991)
<INCOME-TAX> 0
<INCOME-CONTINUING> (929,991)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (929,991)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
