UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
------------------
OR
[] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File No. 0-26569
SALEOUTLET.COM, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-03992
------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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 September 30, 2000
---------------- ------------------------------------
Common Stock 9,334,271 shares
Par Value $0.001
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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Page
Unaudited Balance Sheet as of June 30, 2000 F-1
Unaudited Statements of Operations for the three and six months
ended June 30, 2000 and 1999 F-2
Unaudited Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 F-3
Notes to Unaudited Financial Statements F-4
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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Reason for Amendment
The Company inadvertently eliminated two deposits totaling $50,000 of cash and
the corresponding debt because at the time of the original filing, the paperwork
appeared to indicate that the monies were a duplication. The Company also failed
to properly record warrant activity related to convertible debt and used the
wrong value for some stock that was issued as consideration for certain
services.
Results of Operations
Three Months Ended June 30, 2000
The Company commenced its business of selling clients' merchandise on
its website during the second quarter of 1999. During the three month period
ended June 30, 2000, the Registrant had website revenues of $132,876 compared to
$15,000 of revenues in the same period in 1999 when the Registrant was just
beginning operations. The Registrant's general and administrative expenses were
$285,823 for the three months ended June 30, 2000 compared to $204,785 for the
same period in 1999. These expenses are attributable primarily to officer and
employee salaries, rent and overhead related expenses. Sales, marketing and
public relations expenses were $389,145 for the three months ended June 30, 2000
compared to $282,121 for the same period in 1999. These expenses are mainly
attributable to advertising, printing, consulting and public relations.
Management anticipates that it will experience increased revenues in the
remainder of 2000 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. As of the date
of this Report, the Registrant has approximately 130 clients which list
merchandise for sale on the Registrant's website. It is anticipated that this
number will increase to approximately 250 by the end of the year.
2
<PAGE>
During the six month period ended June 30, 2000, the Registrant had
website revenues of $266,868 compared to $15,000 of revenues in the same period
in 1999 when the Registrant was just beginning operations. The Registrant's
general and administrative expenses were $490,200 for the six months ended June
30, 2000 compared to $215,548 for the same period in 1999. These expenses are
attributable primarily to officer and employee salaries, rent, and overhead
related expenses. Sales, marketing and public relations expenses were $796,371
for the six months ended June 30, 2000 compared to $282,121 for the same period
in 1999. The Company was able to pay about $462,000 of these expenses with its
common stock.
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 ten (10) full time employees.
Liquidity and Capital Resources
During the six month period ended June 30, 2000, the Registrant raised
approximately $60,000 through the sale of its common stock and $350,000 through
the sale of 8% convertible promissory notes.
Management anticipates that the Company will require additional capital
to fund its working capital requirements for the remainder of 2000. Management
is currently in negotiations with a private company to provide website design,
consulting and development to such company which is expected to generate,
together with cash flow from revenues, sufficient capital to finance the
Registrant's working capital requirements through the end of 2000. No assurances
can be given that an agreement to provide such services will be reached. In such
event, it is anticipated that required 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.
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
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"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.
PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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(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 20, 2000 By: /s/ Michael Aronowitz
-------------------------
Michael Aronowitz, President
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SALEOUTLET.COM
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31
(Unaudited) 1999
----------------- ------------------
(As restated)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 92,097 $ 338,143
Accounts receivable 93,521 48,727
Due from affiliate 0 12,495
Prepaid expenses 467,083 222,917
----------------- ------------------
TOTAL CURRENT ASSETS 652,071 622,282
PROPERTY, PLANT, AND EQUIPMENT 56,293 67,462
----------------- ------------------
$ 708,994 $ 689,744
================= ==================
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 171,208 $ 181,313
Convertible promissory notes, net of discount (face amount $350,000) 145,833 0
Capital leases - current 5,766 8,322
----------------- ------------------
TOTAL CURRENT LIABILITIES 322,807 189,635
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LONG-TERM LIABILITIES
Capital leases 6,973 7,442
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STOCKHOLDERS' EQUITY
Common stock, $.001 par value
Authorized 50,000,000 shares
9,334,271 shares issued and 108,016 issuable
(8,934,271 and 108,016 in 1999) 9,442 9,042
Additional paid-in capital 3,150,613 2,047,259
Deficit accumulated during development stage (2,780,841) (1,563,634)
----------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 379,214 492,667
----------------- ------------------
$ 708,994 $ 689,774
================= ==================
</TABLE>
F - 1
<PAGE>
SALEOUTLET.COM
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
9/1/95
Three months ended Six months ended (Date of
June 30, June 30, inception) to
2000 1999 2000 1999 6/30/00
-------------- ------------- ------------- -------------- -------------
(As restated) (As restated) (As restated)
INCOME
<S> <C> <C> <C> <C> <C>
Revenue $ 132,876 $ 15,000 $ 266,868 $ 15,000 $ 427,187
-------------- ------------- ------------- -------------- -------------
TOTAL INCOME 132,876 15,000 266,868 15,000 427,187
-------------- ------------- ------------- -------------- -------------
EXPENSES
Cost of services 30,565 10,264 49,692 10,264 118,348
Sales, marketing and public relations 389,145 282,121 796,371 282,121 1,359,859
Research and development 0 0 0 65,000 65,000
General and administrative 285,823 204,785 490,200 215,548 1,376,702
Interest expense 152,091 0 152,428 0 309,763
-------------- ------------- ------------- -------------- -------------
857,624 497,170 1,488,691 572,933 3,229,672
-------------- ------------- ------------- -------------- -------------
TOTAL OPERATING LOSS (724,748) (482,170) (1,221,823) (557,933) (2,802,485)
OTHER INCOME
Interest 1,709 4,101 4,616 4,101 21,644
-------------- ------------- ------------- -------------- -------------
Net loss before income taxes (723,039) (478,069) (1,217,207) (553,832) (2,780,841)
-------------- ------------- ------------- -------------- -------------
Income tax expense 0 0 0 0 0
-------------- ------------- ------------- -------------- -------------
NET LOSS $ (723,039) $ (478,069) $ (1,217,207) $ (553,832) $ (2,780,841)
============== ============= ============= ============== =============
Loss per weighted average share $ (.08) $ (.06) (.13) $ (.10)
============== ============= ============= ==============
Weighted average number of shares
outstanding 9,275,969 8,250,180 9,185,337 5,700,090
============== ============= ============= ==============
</TABLE>
F - 2
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SALEOUTLET.COM
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
9/1/95
Six months ended (Date of
June 30, inception) to
2000 1999 6/30/00
------------- ------------- ------------------
(As restated) (As restated)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net (loss) $ (1,217,207) $ (553,832) $ (2,780,841)
Adjustments to reconcile net (loss) to cash used
by operating activities:
Depreciation and amortization 22,745 36 27,761
Amortization of discount on debt 145,833 0 300,833
Option based fees 0 0 19,375
Stock based compensation and fees 693,754 344,583 1,504,629
Changes in assets and liabilities:
Accounts receivable (44,794) (14,615) (93,521)
Due from affiliate 12,495 0 0
Prepaid expenses (244,166) 0 (467,083)
Accounts payable and accrued expenses (10,105) 20,412 171,208
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NET CASH USED BY OPERATING ACTIVITIES (641,445) (203,416) (1,317,639)
INVESTING ACTIVITIES
Purchase of equipment (11,576) 0 (36,833)
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NET CASH USED BY INVESTING ACTIVITIES (11,576) 0 (36,833)
FINANCING ACTIVITIES
Proceeds on issuance of convertible debt (with warrants in 2000) 350,000 155,000 505,000
Payment of capital lease (3,025) 0 (6,357)
Sale of common stock 60,000 864,363 947,926
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NET CASH PROVIDED BY FINANCING ACTIVITIES 406,975 1,019,363 1,446,569
------------- ------------- ------------------
(DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (246,046) 815,947 92,097
Cash and cash equivalents at beginning of year 338,143 0 0
------------- ------------- ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 92,097 $ 815,947 $ 92,097
============= ============= ==================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 508 $ 0 $ 2,843
Cash paid for income taxes 1,870 0 4,713
</TABLE>
F - 3
<PAGE>
SALEOUTLET.COM
(A Development Stage Company)
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2000
NOTE A - THE COMPANY
Saleoutlet.Com, Inc. ("Saleoutlet" or the "Company") was incorporated in
September 1995 in the state of Nevada. The Company changed its name from Austin
Underground, Inc. to Saleoutlet in February 1999. The Company had no operations
from inception through March 1999. The Company has commenced its principal
operations but there has been no significant revenue through June, 2000 and
therefore is still considered a development stage company.
In March 1999, the Company was reorganized. New management was established and
opened its virtual doors on the Web in May 1999. Saleoutlet offers its clients
their own "sale site" for a fee.
The Company is subject to those general risks associated with development stage
companies, as well as special risks unique to emerging E-commerce companies
which, along with a new strategic focus to create new markets for their products
and services. As shown in the accompanying financial statements, the Company has
incurred a substantial net loss and the Company has generated minimal revenues
related to the Company's planned operations. Further, the Company's business
concept and business model are unproven and, accordingly, the Company's
viability is uncertain. In order to finance its continued development the
Company is presently attempting to raise additional financing through additional
private placements. However, there is no assurance that the Company will be
successful in that effort, nor that it will ever attain profitable operations
and operating cash flow. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The Company's continuation as
a going concern is dependent upon its ability to obtain additional financing and
ultimately to attain profitability. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going concern for a
reasonable period of time.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
[1] Cash and equivalents:
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. From time to time, the Company's
cash balances with any single financial institution exceed Federal
Deposit Insurance Corporation ("FDIC") and Securities Investor
Protection Corporation ("SIPC") limits. At June 30, 2000 cash
equivalents amounted to approximately $58,000 and consist of one
investment in a money market fund.
[2] Fixed assets, net:
Fixed assets are stated at cost less accumulated depreciation and
amortization. Fixed assets are depreciated on a straight-line basis
over the estimated useful lives of the assets.
F - 4
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SALEOUTLET.COM
(A Development Stage Company)
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS (continued)
June 30, 2000
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (continued)
[3] 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 disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from these estimates.
[4] Stock-based compensation:
The Company has elected to follow the intrinsic value method set forth
in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" in accounting for its stock option incentive plan
applicable to employees. As such, deferred compensation expense is
recorded on the date of grant of employee options if the current market
price of the underlying stock exceeds the exercise price of the option,
and such deferral is amortized and charged to operations over the
vesting period of the options. Options or stock awards issued to
nonemployees are valued using the fair value method and expensed over
the period services are provided, in accordance with the applicable
provisions of Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation."
[5] Impairment of long-lived assets:
The Company evaluates the recoverability of its intangibles and other
long-lived assets in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
of." SFAS No. 121 requires recognition of impairment of long-lived
assets in the event the net book value of these assets exceeds the
estimated future undiscounted cash flows attributable to these assets.
The Company assesses potential impairment to its long-lived assets when
there is evidence that events or changes in circumstances have made
recovery of the asset's carrying value unlikely. Should an impairment
exist, the impairment loss would be measured based on the excess of the
carrying value of the asset over the asset's fair value or discounted
estimates of future cash flows.
[6] Revenue recognition:
The Company recognizes revenue (commission income) when a client sells
a product through the Company's website. Site and change fees are
recognized as the service is rendered. Rental of E-mail database
information will be recognized when such information is provided to the
client. Web site creation income will be recognized when they are fully
operational. Catalog design and marketing will be recognized upon its
completion. Advertising revenue, which consists of advertising space on
the Company web-site, is recorded during the period in which the
advertising services are provided.
F - 5
<PAGE>
SALEOUTLET.COM
(A Development Stage Company)
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS (continued)
June 30, 2000
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (continued)
[7] Advertising:
Advertising expense is comprised of print and internet related
marketing expenses. Advertising expenses are charged to operations
during the period incurred, except for expenses related to the
development of major commercial or media campaigns which are charged to
operations during the period in which the advertising campaign is first
presented by the media. Advertising expense was $214,891 for the six
months ended June 30, 2000. Included in prepaid expenses at June 30,
2000 were $236,250 related to prepaid advertising and marketing
resulting from the issuance of stock in connection with agreements.
[8] Net loss per share:
Basic and diluted net loss per share was computed by dividing the net
loss for the period by the weighted average number of common shares
outstanding during the period plus shares issuable.
[9] Comprehensive income:
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net
assets) during a period from non-owner sources. Comprehensive loss for
the period consists of the net loss.
[10] Segment information:
The Company adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS 131 requires
public companies to report financial and descriptive information about
their reportable operating segments. The Company identifies its
operating segments based on how management internally evaluates
separate financial information, business activities and management
responsibility. The Company believes that its operations, as they are
presently developing, constitute a single, reportable segment.
[11] Financial instruments:
The carrying amounts of the Company's financial instruments approximate
fair value due to their short term nature or their underlying terms.
[12] Website development costs:
The Company capitalized the direct costs for outside consultants to
create the program code for its website.
F - 6
<PAGE>
SALEOUTLET.COM
(A Development Stage Company)
SELECTED NOTES TO UNAUDITED FINANCIAL STATEMENTS (continued)
June 30, 2000
NOTE C - CONVERTIBLE DEBT AND WARRANTS
Effective April 15, 2000, the Company issued $350,000 of 8% convertible
notes. The Company also issued 350,000 warrants to the note holders to
purchase 350,000 shares of the Company's common stock at $1.00 per
share anytime prior to April 15, 2002. The notes and accrued interest
are due October 15, 2000. The notes were convertible into shares of the
Company's common stock at the option of the Company, at the same price
as shares to be sold in a future private placement of Company common
stock. The discount on the debt associated with the warrants is being
amortized over the six month life of the notes.
Under the Black-Scholes valuation method, the value of the warrants
exceeded the face amount of the convertible notes issued, and
therefore, the notes have been discounted to zero at the date of
issuance.
For the period ended June 30, 2000, the amortization of discount was
$145,833.
The fair value of the warrants has been estimated on the date of the
grant using the Black-Scholes option pricing model with the following
assumptions: no dividend yield, volatility of 588%, a risk-free
interest rate of 6.4% and an expected life of two years from date of
grant.
NOTE D - RESTATEMENT
The financial statements for June 30, 2000 have been restated as
follows:
<TABLE>
<CAPTION>
Originally Restated
Reported Adjustments Amount
------------------ ------------------ ------------------
<S> <C> <C> <C>
Cash $ 52,720 $ 39,377 $ 92,097
Prepaid expenses 397,500 69,583 467,083
Accounts payable (181,831) 10,623 (171,208)
Convertible promissory notes (300,000) 154,167 (145,833)
Additional paid-in capital (2,616,863) (533,750) (3,150,613)
Sales, marketing & public relations 682,204 114,167 796,371
Interest expense 6,595 145,833 152,428
Net loss (957,207) (260,000) (1,217,207)
</TABLE>
F - 7
