UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended DECEMBER 31, 1999
( ) Transition report pursuant of Section 13 or 15(d) of the Securities
Exchange Act of 1939 for the transition period ____ to______
COMMISSION FILE NUMBER 0-21322
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OUT TAKES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-4363944
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(State or other jurisdiction of (IRS Employer Identification
No.)
incorporation or organization)
3811 Turtle Creek Blvd., Suite 350 Telephone 214-528-8200
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(Address of Principal Executive Offices, including Registrant's zip code
and telephone number)
NONE
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Former name, former address and former fiscal year, if changed
Indicate by check mark whether the registrant (1) has filed all reports
required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports,), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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The number of shares of the registrant's common stock as of December 31,
1999: 20,788,122 shares.
Transitional Small Business Disclosure Format (check one): Yes No X
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TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Balance Sheet
(b) Statement of Operations
(c) Statement of Changes in Financial Position
(d) Statement of Shareholders' Equity
(e) Notes to Financial Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Item 3. Risks
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults On Senior Securities
Item 4. Submission of Items to a Vote
Item 5. Other Information
Item 6
(a) Exhibits
(b) Reports on Form 8K May 4, 1998 September 14, 1998
SIGNATURES
FINANCIAL DATA SCHEDULE
[CAPTION]
OUT TAKES, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1999 AND MARCH 31, 1999
(unaudited)
December 31, March 31,
1999 1999
Assets
Current Assets
Cash and cash equivalents $ 59 $ 1,356
Accounts receivable 19,076
Other current assets -0- 217,414
Total Current Assets 19,135 218,770
------- -------
Property, Plant and Equipment-net 219,987 248,965
Other Non-Current Assets
Goodwill 4,198,032 4,279,455
Deposits and advances 24,691 24,692
Total Assets $4,461,845 $4,771,882
Liabilities and Stockholders' Equity
Current Liabilities
Bank overdraft $ 24,358 $ -0-
Accounts payable 14,312 4,600
Accrued expenses 6,300 -0-
Compensation payable-related parties 238,710 202,341
Accrued interest19,19093,008
Accrued interest-related parties 153,655 -0-
Deferred income -0- 30,604
Short-term notes 632,835 250,278
Due to related parties 773,845 357,506
Total Current Liabilities 1,863,205 938,337
Long-Term Debt
Notes payable 4,000,000 951,400
Stockholders' Equity
Common stock, par value $0.01 per share,
35,000,000 shares authorized; 20,788,122 20,788,122
shares issued of which 292,396 are in
Treasury 207,882 207,882
Preferred stock, par value $0.01 per
share, 5,000,00 shares authorized;
none issued -0- -0-
Capital in excess of par 9,913,230 14,256,014
Accumulated deficit (11,414,066) (11,473,345)
(1,292,954) 2,990,551
Treasury stock, at cost (108,406) (108,406)
Total Liabilities and
Stockholders' Equity $4,461,845 $4,771,882
[CAPTION]
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
Revenues $54,270 $101,517
Cost of Revenues
Compensation and related benefits 7,500 18,600
Depreciation and amortization 13,750 33,802
Rent-0--0-
Lease operating expense 23,177 11,498
Total Cost of Goods Sold 44,427 63,900
Gross Margin 9,843 37,617
General and Administrative Expenses
Compensation and related benefits 7,500 22,482
Professional fees 3,422 24,729
Management fee-related party -0- -0-
Rent of offices 3,494 8,500
Profit on disposal of plant and equipment -0- -0-
Depreciation and amortization 27,141 11,777
Other general and administrative 9,496 22,033
51,053 89,521
Income (loss) from operations (41,210) (51,904)
Other Income (Expense)
Interest income -0- -0-
Interest expense (6,293) (235)
Interest expense-related parties (19,345) -0-
Gain on sale of assets -0- -0-
(25,638) (235)
Provision for income taxes -0- -0-
Net Income (Loss) ($66,848) (52,139)
Net Income (Loss) per share ($0.01) ($0.01)
Weighted average common
Shares outstanding 20,495,726 20,788,122
[CAPTION]
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
Revenues $ 113,383 $ 632,436
Cost of Revenues
Compensation and related benefits 22,500 197,577
Depreciation and amortization 41,250 101,406
Rent-0-62,033
Lease operating expense -0- 46,330
Other cost of revenues 32,774 124,773
Total Cost of Revenues 96,524 532,119
Gross Margin 16,859 100,317
General and Administrative Expenses
Compensation and related benefits 22,500 55,935
Professional fees 61,279 126,377
Management fee-related party -0- 7,800
Rent of offices 13,370 36,375
Depreciation and amortization 81,423 35,332
Other general and administrative 40,954 66,259
219,526 328,078
Income (loss) from operations (202,667) (227,761)
Other Income (Expense)
Interest income -0- 45
Interest expense (6,293) (3,118)
Interest expense related parties (73,545) (34,059)
Gain (loss) on sale of assets -0- 18,939
Taxes -0- (800)
(79,838) (18,993)
Provision for income taxes -0- -0-
Net Income (Loss) ($282,505) ($246,754)
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Net Income (Loss) per share ($0.01) ($0.01)
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Weighted average common
Shares outstanding 20,495,726 20,495,726
[CAPTION]
OUT-TAKES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Additional
Number of Paid-In
Shares Amount Capital
Balance, March 31, 1999 20,788,122 $ 207,882 $9,913,230
Net loss for the three
Months ended December 31,
1999 _________ _______ _________
Balance December 31, 1999 20,788,122 $ 207,882 $9,913,230
========== ========= ==========
Accumulated Treasury
Deficit Stock Total
Balance, March 31, 1999 $(11,131,561) $(108,406) $(1,118,855)
Net loss for the three
Months ended December 31,
1999 ( 282,505) ______ (282,505)
Balance December 31, 1999 $(11,414,066) $(108,406) $(1,401,360)
========== ======= =========
[CAPTION]
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
Cash Flows From
Operating Activities
Net Income (Loss) ($282,505) ($246,754)
Noncash items included
In net income (loss)
Depreciation and amortization 218,420 136,738
Profit on disposal of
Plant and equipment -0- (18,939)
Management fee-related party -0- 7,800
Changes in:
Accounts receivable (19,076) 4,931
Inventory -0- 10,082
Prepaid expenses -0- 10,315
Deposits and advances -0- (375)
Other current assets -0- 2,844
Accounts payable 5,928 31,375
Accrued payroll -0- (22,047)
Accrued expenses (51,269) (43,052)
Accrued interest 19,190 2,500
Accrued interest-related party 58,147 34,056
Provision for studio closure -0- (31,878)
Royalties payable -0- 4,913
Joint venture payable -0- (11,744)
Compensation payable -0- (1,347)
Compensation payable-related party 36,369 52,618
Net cash provided (used)
by operating activities (14,796) (77,964)
Cash Flows From
Investing Activities
Purchase of property, plant
and equipment (12,271) (10,019)
Disposal of property, plant
and equipment -0- 19,078
Net cash provided (used)
by investing activities (12,271) 9,059
Cash Flows From
Financing Activities
Advances from related parties 11,746 -0-
Capital contributions -0- 7,563
Payments to related parties (191,140) -0-
Proceeds from short-term debt 205,001 25,000
Proceeds from long-term debt (23,345) -0-
Net cash provided (used)
By financing activities 2,262 32,563
Net increase in cash and
cash equivalents (24,805) (36,342)
Cash and cash equivalents-
beginning of period 506 23,044
Cash and cash equivalents-
end of year ($24,299) ($13,298)
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[CAPTION]
OUT-TAKES INC.
Consolidated Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation The accompanying financial statements include the
accounts of Out-Takes, Inc. and its subsidiary, Los Alamos Energy, LLC. All
significant inter-company accounts and transactions have been eliminated.
These financial statements are unaudited and have been prepared in
accordance with the requirements of Regulation S-X and Form 10-Q and
therefore, do no include all information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of the management of the Company, all adjustments consisting
only of normal recurring adjustments necessary for a fair presentation of
financial position, results of operations and cash flows for the three-month
periods ended December 31, 1999 and 1998 have been made. The results of
operations for any interim period are not necessarily indicative of the
results for the full year. These notes to financial statements should be
read in conjunction with the financial statements and notes thereto
contained in the annual report on Form 10-K for the year ended March 31, 1999.
Nature of Business Los Alamos Energy, LLC is a limited liability company
whose Articles of Organization and agreement were filed with the State of
California on July 25, 1996. The Company's principal business activity is
the collection and distribution of waste natural gas in the State of
California, and the conversion of such natural gas into electricity, which
is then sold to retail providers of consumer electricity. The liability of
the members is limited to the member's enforceable obligations to make
capital contributions and the member's obligation to return any prohibited
or illegal distributions.
Plant and Equipment and Depreciation - Plant and equipment as of December
31, 1999 consists primarily of generators, computers, furniture and
fixtures, and they are stated at cost. Depreciation is provided over the
estimated useful asset lives using the straight-line method over 5-7 years
for all equipment and furniture.
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 disclosures 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
those estimates.
Cash and cash equivalents - The Company classifies all highly liquid debt
instruments, readily convertible to cash and purchased with maturity of
three months or less at date of purchase, as cash equivalents. The Company
had no cash equivalents at March 31, 1999.
Risk concentrations - All of the revenue of Out-Takes, Inc. is generated
from the leasing of photographic equipment to one customer and the sale of
electricity to Pacific Gas and Electric Company and Texaco.
Amortization of Goodwill - Cost of investments in purchased companies in
excess of the underlying fair value of net assets at dates of acquisition
are recorded as goodwill and amortized over 40 years on a straight-line basis.
Loss per share - The Financial Accounting Standards Board ("FASB") has
issued Statement of Financial Accounting Standard ("SFAS") No. 128,
"Earnings Per Share" which is effective for financial statements issued for
periods ending after December 15, 1997. Accordingly, earnings per share
data in the financial statements for the year ended March 31, 1998 has been
calculated in accordance with SFAS No. 128. Prior periods earnings per share
data have been recalculated as necessary to conform prior years data to SFAS
No. 128. SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15,
"Earnings per Share" and replaces its primary earnings per share with a new
basic earnings per share representing the amount of earnings for the period
available to each share of common stock outstanding during the reporting
period. SFAS No. 128 also requires a dual presentation of basic and diluted
earnings per share in the face of the statement of operations for all
companies with complex capital structures. Diluted earnings per share
reflects the amount of earnings for the period available to each share of
common stock outstanding during the reporting period, while giving effect
to all dilutive potential common shares that were outstanding during the
period, such as common shares that could result from the potential exercise
or conversion of securities into common stock.
The computation of diluted earnings per share does not assume conversion,
exercise or contingent issuance of securities that would have an
anti-dilutive effect on earnings per share (i.e. increasing earnings per
share or reducing loss per share). The dilutive effect of outstanding
options and warrants and their equivalents are reflected in dilutive
earnings per share by the application of the treasury stock method which
recognizes the use of proceeds that could be obtained upon exercise of
options and warrants in computing diluted earnings per share. It assumes
that any proceeds would be used to purchase common stock at the average
market price during the period. Options and warrants will have a dilutive
effect only when the average market price of the common stock during the
period exceeds the exercise price of the options or warrants.
Deferred Taxes - There are no material differences between the
accounting
methods used for financial and tax purposes. The Company has sustained
losses in
recent years and has a large net operating loss carryforward. No deferred
taxes
are reflected in these financial statements.
Note 2 - Plant and Equipment
The components of plant and equipment are:
December 31, March 31,
1999 1999
Computers and Software 1,300 1,300
Equipment and Furniture 337,912 337,912
Leasehold Improvements -
-
Motor Vehicle 5,500 5,500
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Total - At Cost 344,712 344,712
Less: Accumulated Depreciation 124,725 95,747
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Net $ 219,987 $ 248,965
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Depreciation is provided over the estimated useful asset lives using the
straight-line method over five to seven years for all equipment and
furniture. Leasehold improvements are amortized on a straight-line basis
over the shorter of the useful life of the improvement or the term of the
lease. Expenditures for major improvements that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
Note 3 Notes Payable
This is an unsecured note payable to a former financial consultant to the
Company pursuant to a settlement agreement dated August 17, 1994. The note
is non-interest bearing and payment is subject to availability of future
cash flows from the Company's operations. The note holder has threatened to
commence legal action, however management has advised the note holder that
no amount is due at the present time as the Company has not generated
positive cash flow. Counsel has advised the Company that no litigation has
commenced and counsel is unable to assess a possible outcome, should
litigation be commenced. The payable amount as of December 31, 1999 is
$48,000.
Note Payable Radovich
This is an unsecured promissory note dated September 27, 1996. The note's
original maturity dated was thirty (30) days, no interest. The note's
maturity date has been extended to December 31, 1999 without interest. The
payable amount as of December 31, 1999 is $30,556.
Note Payable De Simone
This is an unsecured promissory note dated March 30, 1998. The note's
original maturity date was sixty (60) days, 10% per annum simple interest.
The notes maturity date has been extended to December 31, 1999 with
interest. Payable amount as of December 31, 1999 is $24,000.
Note Payable Reeves
This is an unsecured promissory note dated March 30, 1998. The note's
original maturity date was sixty days with interest at 10% per annum and is
convertible into Out-Takes, Inc. common stock at a rate to be negotiated
between the parties. The note's maturity date has been extended to December
31, 1999 with interest. The payable amount as of December 31, 1999 is $25,000.
Note Payable Boyd
This is an unsecured promissory note dated August 14, 1998. The note's
original maturity date was sixty (60) days, 10% annum simple interest. The
note's maturity date has been extended to December 31, 1999 with interest.
The payable amount as of December 31, 1999 is $45,000.
Note Payable Atlas Engineering
This is an unsecured promissory note dated march 19, 1999. The note is
convertible into Out-Takes, Inc. common stock pursuant to a non-binding
share purchase agreement executed between the parties. The note includes
interest at 10% per annum until paid or converted. The payable amount as of
December 31, 1999 is $15,000.
Note Payable - Coastal Resources Corp.
This note, dated June 15, 1999 is secured by the property, plant and
equipment of Los Alamos Energy, LLC and includes interest at 8% per annum
beginning October 1, 1999. The master loan agreement specifies a $300,000
maximum financing amount and was entered into pursuant to a non-binding
merger agreement between the parties. If the merger is consummated, then the
loan balance at that date shall be credited to Coastal resources Corp. as
part of its proportionate equity interest in Out-Takes, Inc. If the merger
is not consummated, then the principal and interest is due and payable on
the first anniversary date of each advance ranging from June 2000 through
August 2000. The payable amount as of December 31, 1999 is $195,000.
Note Payable Los Alamos Energy, LLC Equity Holders
This note, dated August 31, 1998, is pursuant to a share Purchase Agreement
executed between Los Alamos Energy, LLC and Out-Takes, Inc. The note
specifies interest at 10% per annum and is convertible into a aggregate
ninety percent of the issued and outstanding shares of common stock of
Out-Takes, Inc. as of the date of conversion. The agreement also requires
as a condition of the conversion that out-Takes, Inc. effect a reverse stock
split of one share for every one-hundred issued and outstanding shares at
the conversion date. As of December 31, 1999, this conversion and reverse
stock split has not been completed. The payable amount as of December 31,
1999 is $4,000,000.
Note Payable Joint Venture Working Interest
These notes are pursuant to a Joint Venture Agreement executed between Los
Alamos Energy, LLC and the participants in development and generation of
electricity from waste natural gas activities. The agreement specifies that
participants may be required to convert their working interest into an
equity position when the Company merges with a publicly traded entity.
Those participants electing not to convert would be repaid their original
consideration plus a non-compounded annual yield of 12%. As of December 31,
1999, this conversion or repayment has not been completed. The payable
amount as of December 31, 1999 is $250,279.
Note 4 Due to Related Party
The amount due to related party of $773,845 is unsecured and payable upon
demand. Interest expense is charged at a rate of 10% per annum and for the
nine months ended December 31, 1999, was $73,545. As of December 31, 1999,
interest of $153,655 was accrued.
Note 5 Commitments and Contingencies
The Company has an extended 12 month operating lease agreement for an office
facility.
Future minimum lease obligations as of March 31, 1999 are:
Year ended March 31
-------------------
2000 $ 10,200
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Total $ 10,200
=========
In the nine months to December 31, 1999, total rent expense under this lease
was $7,650.
The Company has established procedures for the on-going evaluation of its
operations to identify potential environmental exposure and assure
compliance with regulatory policies and procedures. Management monitors
these laws and regulations and periodically assesses the propriety of its
operational and accounting policies related to environmental issues. The
nature of the company's business requires routine day-to-day compliance with
environmental laws and costs for the years ended March 31, 1999 and 1998.
Joint Venture Working Interest Los Alamos, Energy, LLC (LAE) participates
in certain agreements with respect to the generation of electricity from
waste natural gas whereby its managing member also acts as the operator of
the electrical power plant's development and production activities. As its
managing member and operator, LAE is contingently liable for the activities
of this venture
Note 6 - Income Taxes
As of March 31, 1999, the Company has a net operating loss (NOL) carry
forward of approximately $11,411,016. The net operating loss carry forwards
expire between 2007 and 2015. No deferred tax asset has been recorded for
these losses as a valuation allowance has been recorded for the portion of
the NOL that is not expected to be realized.
Note 7 - New Authoritative Pronouncements
The FASB has issued SFAS No. 130, "Reporting Comprehensive Income". SFAS No.
130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. SFAS No. 130 is not
expected to have a material impact on the Company.
The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information". SFAS No. 131 changes how operating segments are
reported in annual financial statements and requires the reporting of
selected
information about operating segments in interim financial reports
issued to
shareholders. SFAS No. 131 is effective for periods beginning after December
15,
1997 and comparative information for earlier years is to be restated. SFAS No.
131 need not be applied to interim financial statements in the initial year of
its application. SFAS No. 131 is not expected to have a material impact on
the
Company.
Note 8 - Going Concern
The Company has been unsuccessful in generating net cash from operations.
The net cash used by the Company in operating activities in the year ended
March
31, 1998 was $346,687. The Company incurred a net loss of $318,555 for the
year ended March 31, 1999 and has a working capital deficit as of March 31,
1999 of $719,567.
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. The
continuation of the Company as a going concern is dependent upon its ability
to generate net cash from operations. The Company's recurring operating
losses and net working capital deficiency raises substantial doubt about the
entity's ability to continue as a going concern. Management's plans include
the continuing reduction of expenses and expanding the activities of Los
Alamos Energy to include direct service of consumer electricity
The Company has, subsequent to March 31, 1999, during June, 1999, executed a
letter of intent with Coastal Resources Corporation, which, among other
things, provides for a merger to be effected pursuant to the provisions of a
Share Exchange Agreement to be entered into, and also providing for $300,000
in loans to be made to Los Alamos Energy, LLC, a subsidiary of the Company.
The Company has also executed a letter of intent with Atlas Engineering, LLC
to the effect that the Company shall acquire Atlas Engineering, LLC pursuant
to the provisions of a Purchase Agreement to be entered into.
Management plans to expand its existing power plant to 4 or 5 Mega Watt, and
to actively pursue other power plant development and acquisitions.
Note 9 - Impairment of Long-Lived Assets
The Company had adopted Statement of Financial Accounting Standard ("SFAS") No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of.
Long term assets of the Company are reviewed at least annually as to whether
their carrying value has become impaired, pursuant to guidance
established in
Statement of Financial Standards ("SFAS") No. 121. Management considers
assets
to be impaired if the carrying value exceeds the future projected cash
flows
from related operations (undiscounted and without interest charges).
If
impairment is deemed to exist, the assets will be written down to fair
value or
projected discounted cash flows from related operations. Management
also
re-evaluates the periods of amortization to determine whether subsequent
events
and circumstances warrant revised estimates of useful lives. As of March
31,
1999, management expects these assets to be fully recoverable.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
THIS ANALYSIS CONTAINS FORWARD-LOOKING COMMENTS WHICH ARE BASED ON CURRENT
INFORMATION. ACTUAL RESULTS IN THE FUTURE MAY DIFFER MATERIALLY.
Results of Operations
Overview
Out-Takes, Inc., ("the company") was incorporated in Delaware on March 18, 1992
Up until October 26, 1998, the company was engaged in the sale of
photographic portraits of children, adults and family groups. Until October
26, 1998, the Company operated a retail photo studio, called Out-Takes(R),
which opened on May 24, 1993 and is located in MCA/ Universal's CityWalkSM
project in Los Angeles, California ("the CityWalk Studio"). The Company had
a second studio, which commenced operations on December 1, 1995, at the
Entertainment Center in the Bazaar at the Irvine Spectrum located in Irvine,
Orange County, California ("the Irvine Studio"). As a result of management's
continuing review of the poor performance of the Irvine Studio, management
decided to close the Irvine Studio. The Irvine Studio ceased operations on
April 22, 1998.
On or about August 31, 1998, the Company acquired all of the issued and
outstanding units of equity of Los Alamos Energy, LLC, which operates a 1
mega watt power plant in Los Alamos, California, which produces electricity
from "waste gas," and shifted its business emphasis to that of electrical
energy provider.
On or about October 26, 1998, the Company leased its photo studio assets to
Colorvision International, Inc., completing the shift of its business focus
to the providing of electrical energy.
Los Alamos Energy was formed in June, 1996, for the purpose of becoming a
principal electricity provider in the State of California. With the
acquisition of Los Alamos Energy, the Company is engaged in a "niche" area
of electricity production from "waste gas," natural gas which is produced in
conjunction with oil production, but for which there is no market.
Normally, waste gas is flared, or burned. The procurement of waste gas
provides an inexpensive source of fuel for the Company's generators. The
Company currently provides all of the electrical energy to the
unincorporated town of Los Alamos, California, through Pacific Gas and
Electric Company (PG&E), which is mandated by current law to purchase all
the electrical energy that the Company can produce.
On August 31, 1998, the Company entered into a Share Purchase Agreement
(the "Acquisition Agreement") whereby the Company acquired (the
"Acquisition") all of the issued and outstanding equity interests in
Los Alamos Energy, LLC, a California limited liability company ("LAE").
The purchase price to be paid for the equity interests of LAE is Four
Million Dollars ($4,000,000), which was paid by Promissory Notes (the
"Notes") to the holders of LAE equity (the "Equity Holders") calling
for interest on all outstanding amounts to accrue at the rate of ten
percent (10%) per annum. Payments of principal and accrued interest under
the Notes shall be made monthly in arrears up to the maturity date, which
is the fifth anniversary of the Notes. The Notes may be prepaid at any
time without premium or penalty.The Acquisition Agreement provides that, in
the event the Equity Holders shall desire to do so, they may convert their
indebtedness to common stock of the Company representing in the aggregate
ninety percent (90%) of the issued and outstanding shares of such common
stock as of the date of such conversion. The Acquisition Agreement provides
that it is a condition of the conversion that the Company effect a reverse
stock split of one (1) share for every one hundred (100) shares issued and
outstanding as of such date. LAE contemplates that a significant number of
persons currently holding promissory notes and/or working interests in its
electricity production (collectively, "Interest Holders") will exercise
their rights to convert such interests into the equity of LAE, and
subsequently to join in the conversion of the Notes into common stock of the
Company. Presently, management of LAE anticipates that, prior to the
conversion of the Notes and after giving effect to the contemplated reverse
stock split, the Company will issue approximately three million (3,000,000)
additional shares of common stock, and that subsequent to completing the
conversion, the Equity Holders and Interest Holders will own, in the
aggregate, approximately two million eight hundred eighty thousand
(2,880,000) shares of the Company's common stock, representing ninety
percent (90%) of the total amount of common stock estimated to be issued and
outstanding as of the date such conversion rights are exercised.
The indebtedness represented by the Notes is secured by (a) a Security
Agreement, granting a first lien and security interest upon all of the
assets of the Company; and (b) a pledge of the common stock of the Company
held by Photo Corporation Group Pty Limited, an Australian corporation,
which is the controlling stockholder of the Company. The stock pledge grants
the Holders specific rights under certain circumstances, including the right
to receive distributions made by the Company in respect of its common stock
and the right to vote the pledged shares, for so long as the Notes are in
force.
The purchase price to be paid by the Company for all of the issued and
outstanding equity of LAE was negotiated based upon several factors,
including, without limitation, the asset value of LAE and its projected
income from operations based, in part, upon management's estimates of its
natural gas reserves and its current contracts.
Prior to the acquisition, Out Takes derived substantially all of its revenue
from a retail photographic studio, called OUT-TAKES , which opened on May
24, 1993 and is located in MCA/Universal's City Walk project in Los Angeles,
California. LAE is engaged in the collection and distribution of natural gas
from properties owned or leased by it in the State of California, and
management of LAE intends to position LAE to become an important independent
power producer, and to benefit as a principal provider of electricity to
consumers in California and elsewhere as deregulation is implemented. LAE
will be operated as a wholly-owned subsidiary of the Company.
The Company currently leases to a third party, Colorvision, an operating
photographic portrait studio, which was opened on May 24, 1993 at
MCA/Universal's CityWalkSM project in Los Angeles, California ("the CityWalk
Studio"). The Company opened a second studio on December 1, 1995 at the
Entertainment Center in the Bazaar at the Irvine Spectrum located in Irvine,
Orange County, California ("the Irvine Studio"). The Irvine Studio closed on
April 22, 1998.
The Company continues to operate at a net loss. Management believes that the
leasing of its photography studio assets, which enabled it to cut down on
payroll and lease expenses, and the acquisition of Los Alamos Energy, which
generates revenues of approximately $20,000 per month from electrical power
sales will have a positive impact on the Company's operating results as no
further losses will be incurred by the photo studio operations. Studio.
Therefore, management expects to see that net losses will be discontinued in
the first quarter of the current fiscal year. The Company's short term
objectives are to increase the capacity of the Los Alamos power plant to
4mW, which will improve the revenues from the power plant operations.
However, this takes $1.2 to 1.5 million in equity capital to purchase new
equipment. There can be no assurance that the Company will succeed in
raising this equity capital.
Results of Operations
Period ended December 31, 1999 compared with March 31, 1999
The net loss for the period ended December 31, 1999, was $66,848 compared
with $52,139 for the period ended March 31, 1999.
The Company overall generated $54,270 in revenues in the period ended
December 31, 1999, compared to revenues of $101,517 in the fiscal year
ended March 31, 1999. Management attributes this decline to the change in
business focus.
Liquidity and Capital Resources
At December 31, 1999, the Company had a working capital deficit of
$1,844,070 as compared to a working capital deficit on March 31, 1999 of
$719,567. The company attributes this change to the sale of its photo studio
business.
Net cash used in operating activities was $14,796 for the period ended
December 31, 1999, compared to the utilization of $77,964 of cash for the
same period last year.
The Company does not anticipate that it will have any problems in meeting
its obligations for continuing fixed expenses, materials procurement or
operating labor.
Other Matters
The Company is in the process of obtaining a quotation of its securities on
the National Quotation Bureau's "pink sheets." Last month, it's quotation
was dropped on the OTC-Bulletin Board, where it traded under the trading
symbol OUTTE.
PART II. OTHER INFORMATION
Item 1. Legal proceedings NONE
Item 2. Changes in securities and use of proceeds NONE
Item 3. Defaults on senior securities NONE
Item 4. Submission of items to a vote NONE
Item 5. Other information NONE
Item 6.
a) Exhibits NONE
b) Reports on 8K
Current Report on Form 8-K dated April 27, 1998
Current Report on Form 8-K dated May 13, 1998
Current Report on Form 8-K dated October 28, 1998
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned,
thereunto duly authorized.
Out-Takes, Inc.
Dated: April 4, 2000 By: James Harvey
---------------------------
James Harvey, President
Secretary and Chief Financial Officer
[TYPE]EX-27
<SEQUENCE>2
[DESCRIPTION]FINANCIAL DATA SCHEDULE
[ARTICLE] 5
[MULTIPLIER] 1
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] MAR-31-1999
[PERIOD-START] MAR-31-1999
[PERIOD-END] DEC-30-1999
[CASH] 59
[SECURITIES] 0
[RECEIVABLES] 19076
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS]
19135
[PP&E]
219987
[DEPRECIATION] 0
[TOTAL-ASSETS] 4461845
[CURRENT-LIABILITIES] 24358
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 207882
[OTHER-SE] 9913230
[TOTAL-LIABILITY-AND-EQUITY] 4461845
[SALES] 54270
[TOTAL-REVENUES] 54270
[CGS] 44427
[TOTAL-COSTS] 44427
[OTHER-EXPENSES] 51053
[LOSS-PROVISION] (41210)
[INTEREST-EXPENSE] (19345)
[INCOME-PRETAX] (66848)
[INCOME-TAX] 0
[INCOME-CONTINUING] (66848)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (66848)
[EPS-BASIC] (.01)
[EPS-DILUTED] (.01)
