<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 10 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: February 28, 1997
Commission file number: 33-68570
LEGGOONS, INC.
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(Exact name of registrant as specified in its charter)
MISSOURI 43-1239043
---------------------- ----------------------------------
(State of incorporation) (IRS Employer Identification number)
400 South Lindell, Vandalia, Missouri, 63382
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(Address of principal executive offices and Zip Code)
(573) 594-6418
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(Registrant's telephone number, including area code)
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 ____
Number of shares of common stock outstanding as of March 31, 1997: 2,787,000
Transitional Small Business Disclosure Format (Check one): Yes ___ No X
<PAGE>
PART I-FINANCIAL INFORMATION
Item 1.Financial Statements
LEGGOONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, August 31,
1997 1996
ASSETS (Unaudited) (Audited)
------ ----------- ---------
<S> <C> <C>
Total Assets $ 0 $ 0
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Due to stockholder $35,135 $8,188
Accounts payable 21,304 12,339
------ ------
Total current liabilities 56,439 20,527
------ ------
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.01 par value, authorized
10,000,000 shares; issued and outstanding,
2,787,000 27,870 27,870
Preferred stock, $.01 par value, authorized
5,000,000 shares; issued and outstanding
- none - -
Additional paid-in capital 3,522,792 3,522,792
Accumulated deficit (3,607,101) (3,571,189)
---------- ----------
Total stockholders' equity (56,439) (20,527)
---------- ----------
$ 0 $ 0
---------- ---------
</TABLE>
See accompanying notes to interim financial statements
<PAGE>
LEGGOONS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
General and
Administrative
expenses $ 15,886 $ 6,596 $ 35,912 $ 21,866
---------- ---------- ---------- ---------
Loss from continuing
operations (15,886) (6,596) (35,912) (21,866)
---------- ---------- ---------- ---------
Discontinued operations:
Income (loss) from
discontinued apparel
operations 0 (79,507) 0 (281,802)
Loss on disposal of
apparel operations,
including a provision
of $150,000 for
operating losses
during phase-out
period 0 (565,720) 0 (565,720)
Loss from discontinued
operations before
extraordinary items (15,886) (645,227) (35,912) (847,522)
---------- ---------- ---------- ---------
Extraordinary item -
gain on restructuring
of liabilities 0 90,973 0 90,973
---------- ---------- ---------- ----------
Net loss $(15,886) $(560,850) $(35,912) $(778,415)
---------- ---------- ---------- ----------
Loss from continuing
operations per share $ (.00) $ (.00) $ (.01) $ (.01)
---------- ---------- ---------- ----------
Net loss per common
share $ (.00) $ (.20) $ (.01) $ (.28)
---------- ---------- ---------- ----------
Weighted average shares
outstanding 2,787,000 2,787,000 2,787,000 2,787,000
</TABLE>
See accompanying notes to interim financial statements
<PAGE>
LEGGOONS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
February 28, February 29,
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities
Continuing operations:
Net loss $(35,912) $(21,866)
Changes in assets and liabilities:
Accounts payable 8,965 0
-------- ---------
Cash used in continuing operations (26,947) (21,866)
-------- ---------
Discontinued operations:
Net loss 0 (756,549)
Adjustments to reconcile net loss to net cash
provided (used) by discontinued operations:
Depreciation and amortization 0 70,820
Gain on investment in partnership 0 (3,500)
Gain on restructuring of liabilities 0 (90,973)
Estimated loss on discontinued operations 0 422,508
Changes in assets and liabilities:
Accounts receivable 0 (46,071)
Inventories 0 173,909
Deferred charges 0 145,218
Prepaid expenses 0 89,233
Accounts payable 0 (134,077)
Accrued expenses 0 4,102
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Net cash used by discontinued operations 0 (125,380)
-------- ---------
Cash Used in Operating Activities (26,947) (147,246)
-------- ---------
Cash Flows From Investing Activities:
Discontinued operations:
Decrease in other assets 0 0
Distributions from partnership 0 326
------- ------
Net Cash provided by investing activities 0 326
------- ------
</TABLE>
See accompanying notes to interim financial statements.
<PAGE>
LEGGOONS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
February 28, February 29,
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows From Financing Activities:
Continuing operations:
Proceeds from additional borrowings from
stockholder 26,947 0
--------- --------
Cash provided by continuing operations 26,947 0
--------- --------
Discontinued operations:
Proceeds from additional borrowings from
stockholder 0 214,960
Net proceeds (payments) on note payable to
bank 0 (28,872)
Principal payments on long-term debt 0 (29,250)
--------- ---------
Cash provided by discontinued operations 0 156,838
--------- --------
Cash provided by financing activities 26,947 156,838
--------- --------
Net decrease in cash 0 9,918
Cash at beginning of period 0 9,881
--------- --------
Cash at end of period $ 0 $ 19,799
========= ========
See accompanying notes to interim financial statements.
LEGGOONS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
1. Unaudited Interim Periods:
The information furnished herein relating to interim periods has not been
audited by independent Certified Public Accountants. In the opinion of the
Company's management, the financial information in this report reflects any
adjustments that are necessary for a fair statement of results for the
interim periods presented in accordance with generally accepted accounting
principles. All such adjustments are of a normal and recurring nature. The
accounting policies followed by the Company, and additional footnotes, are
set forth in the audited financial statements included in the company's
Annual Report Form 10-KSB/A filed with the SEC in January 1997.
2. Initial Public Stock Offering:
On November 18, 1993, the Company completed an initial public offering in
which it sold 900,000 Units at $3.125 per Unit. Each Unit consisted of one
share of Common Stock and one Class A Warrant. Three Warrants entitle the
holder thereof to purchase one share of Common Stock at $3.75 per share and
expire on November 18, 1997. The warrants are callable in total by the
Company after November 18, 1994, at a redemption price of $.05 per warrant
upon 60 days prior notice if the common stock has traded above $3.75 for at
least 20 out of the 30 trading days preceding the date of the notice of
redemption.
3. Earnings (loss) Per Share:
Net earnings (loss) per share are computed using the weighted average
number of common and common equivalent shares outstanding during the period.
The Class A Warrants issued during the public offering are anti-dilutive and
have not been included in the computation of common equivalent shares
outstanding. Fully diluted net earnings (loss) per share for all periods
presented is not materially different from primary net earnings (loss) per
share.
4. Income Taxes:
Effective September 1, 1987, the Company elected to be taxed under
Subchapter S of the Internal Revenue Code. As such, the Company's taxable
income or loss was included in the individual tax returns of its shareholders
for Federal and State income tax purposes. Upon the closing of the public
stock offering on November 18, 1993, the Company terminated its Subchapter S
election. The company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" effective September 1, 1993, the
impact of which was immaterial.
At February 28, 1997, the Company had unused net operating losses to carry
forward against future years' taxable income of approximately $2,790,000
expiring in various amounts from 2009 to 2011.
<PAGE>
5. Discontinued Operations
On January 19, 1996, the Company adopted a formal plan to discontinue the
designing, selling, manufacturing and distribution of its apparel products.
As part of such plan, the Company discontinued production on April 30, 1996
and culminated with the Assignment for Benefit of Creditors on June 12, 1996.
6. Disposition of Assets and Liabilities:
On June 12, 1996, the Company transferred all of its assets and liabilities
to a third party assignee, under an "Assignment for the Benefit of
Creditors." An Assignment is a business liquidation device available as an
alternative to bankruptcy. The third party assignee, a Nebraska corporation,
also named Leggoons, Inc. (the "Assignee"), will be required to properly,
timely, and orderly dispose of all remaining assets for the benefit of
creditors. The net liabilities as of June 12, 1996, were removed from the
Company's financial statements by a corresponding credit to additional
paid-in capital of $1,132,722. The Company will continue to maintain its'
status as a shell corporation.
7. Accumulated Deficit:
As a result of the termination of the Company's S Corporation status on
November 18, 1993, the accumulated deficit of $1,168,375 incurred through
that date was closed out against additional paid-in capital. The $3,607,101
of deficit on the balance sheet at November 30, 1996, is the result of
operations from November 18, 1993, to February 28, 1997.
<PAGE>
Item 2. PLAN OF OPERATIONS
General:
The Company is currently satisfying its cash requirements by obtaining
advances from its principal stockholder, James S. Clinton. Mr. Clinton is
also the President and a member of the Board of Directors of the Company.
Mr. Clinton has advised the Company that he will continue to provide cash
advances for operations for at least the next twelve months. It is
anticipated that the Company will employ one or two employees in the next
twelve months to provide for the procedures required to market the public
shell for merger or acquisition.
The primary general and administrative expenses incurred during the
quarterly period ended February 28, 1997, were legal expenses related to the
HPOS license agreement, accounting fees for the audit of the Company's
financial statements as of and for the year ended August 31, 1996, and stock
expenses required to maintain the Company's public shell status.
Infinitron Investments International, Inc. Stock Acquisition Agreement
- ----------------------------------------------------------------------
The Company has concluded settlement negotiations of a dispute with
Infinitron Investments International, Inc. ("Infinitron"), who, under a Stock
Acquisition Agreement, had previously agreed to acquire the Company.
Generally, under the terms of the settlement, the Company is to receive
$510,000 in cash over a period of six months from Infinitron, along with
186,721 shares of Infinitron common stock, which represents approximately 3%
of Infinitron's outstanding shares of common stock on August 5, 1996. The
186,721 shares of common stock of Infinitron will be held for the benefit of
the Company's stockholders as their "loss of the bargain" under the proposed
merger. The $510,000 of cash proceeds will be distributed in accordance
with the Assignment for Benefit of Creditors.
As of April 16, 1997, no payments on the settlement agreement have been
made by Infinitron. The Company has informed Infinitron that unless the
originals of all documentation, including the stock certificate, and the cash
payments are provided by April 30, 1997, that they will have no alternative
but to take whatever action is recommended by legal counsel to protect
the Company's interests and those of the Company's shareholders.
HPOS License Agreement
- ----------------------
On February 18, 1997, the Company entered into an Agreement to License
Assets from Home Point of Sales, Inc.(HPOS). HPOS is a privately held
corporation focused on the emergence of the Personal Encrypted Remote
Financial Electronic Card Transactions industry. This industry provides
consumers with the option to instantly pay bills or impulse purchase
from home with real time cash transactions. Management believes the
proprietary technology and the large demand for wagering opportunities in
today's marketplace will combine to generate substantial sales for the
Company over the medium term.
Under terms of the Licensing Agreement, Leggoons will issue 2,900,000 shares
of restricted common stock to HPOS in exchange for licensing home ATM card
and SMART card wagering technology developed by HPOS. Of this amount,
2,755,000 shares will be placed in escrow and are subject to cancellation on
<PAGE>
February 10, 1998, in the event the bid price of the common stock of Leggoons
is not at least $3.00 per share for any twenty consecutive day period as
reported on the NASD's Electronic Bulletin Board or NASDAQ's Small Cap Market
from the date of the agreement through February 10, 1998.
The License Agreement also provides that in the event that the bid price for
the common stock of Leggoons is more than $3.00 per share for any twenty
consecutive day period, then HPOS shall have the option to purchase up to
13,822,000 additional shares of the Leggoon's common stock at an exercise
price of $.30 per share.
Thomas S. Hughes, Chairman of HPOS, became Chairman and President of Leggoons
on March 1. He will focus on procedures, policies and state approvals to
begin home lottery, off track betting, casino and sports ATM card and SMART
card wagering. In March 1997 Rick Howe assumed the position of Chief
Executive Officer and Chief Operations Officer. Mr. Howe has over 30 years
of successful experience at all levels of casino management, most recently
as Vice President and Casino Manager at the Four Queens Hotel in Las Vegas,
Nevada. As CEO/COO, Mr. Howe will assemble a team of professionals to
develop the procedures and policies of home ATM card and SMART card wagering.
This development process will include a close focus on the political and the
instant taxation of home winnings issues associated with home ATM card and
SMART card wagering.
Thomas S. Hughes, Chairman of Home Point Sale, Inc., will remain as Chairman
and President of Leggoons, Inc. The Company intends to seek shareholder
approval to change its name from Leggoons, Inc. to Betting, Inc.
<PAGE>
FORM 10-QSB
LEGGOONS, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits - None.
(b) Reports on Form 8-K - A Current Report on Form 8-K dated as
of February 25, 1997,was filed with respect to the Company's
entering the license agreement with HPOS,Inc. on February 18,
1997.
EX-27 Financial Data Schedule
SIGNATURE:
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
(Registrant) LEGGOONS, INC.
BY(Signature) /s/ Thomas S. Hughes
(Date) April 17, 1997
(Name and Title) Thomas S. Hughes
President
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 56,439
<BONDS> 0
0
0
<COMMON> 2,787,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 15,886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (15,886)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,886)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
</TABLE>
