SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 2001
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 000-24659
CYBERIAN OUTPOST, INC.
a/k/a OUTPOST.COM
(Exact name of registrant as specified in its charter)
Delaware 06-1419111
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
23 North Main Street-PO Box 636, Kent, Connecticut 06757
(Address of principal executive offices) (Zip Code)
(860) 927-2300
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 26, 2001, the registrant had 31,693,545 shares of common stock,
par value $.01 per share, outstanding.
OUTPOST.COM
FORM 10-Q
For the Quarter Ended May 31, 2001
INDEX
Page No.
--------
PART I--FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets, May 31, 2001 (Unaudited) and February 28, 2001........... 3
Consolidated Statements of Operations, for the Three Months Ended May 31, 2001
and 2000 (Unaudited).............................................................. 4
Consolidated Statements of Cash Flows, for the Three Months Ended May 31, 2001
and 2000 (Unaudited).............................................................. 5
Notes to Consolidated Financial Statements (Unaudited)................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................ 11
PART II--OTHER INFORMATION:
Item 1. Legal Proceedings..................................................................... 18
Item 2. Changes in Securities and Use of Proceeds............................................. 18
Item 6. Exhibits and Reports on Form 8-K...................................................... 19
SIGNATURE............................................................................................ 20
EXHIBIT INDEX........................................................................................ 21
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
OUTPOST.COM
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
May 31, February 28,
2001 2001
----------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents.................................................... $ 4,556 $ 21,970
Accounts receivable, net..................................................... 7,014 15,762
Inventories.................................................................. 4,517 15,234
Prepaid expenses and other current assets.................................... 498 692
--------- --------
Total current assets.................................................... 16,585 53,658
Property and equipment, net...................................................... 21,086 20,580
Goodwill, net.................................................................... -- 15,224
Other assets..................................................................... 278 243
--------- --------
Total assets............................................................ $ 37,949 $ 89,705
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease obligations................................. $ 604 $ 696
Accounts payable............................................................. 15,075 37,372
Accrued expenses and other current liabilities............................... 4,059 6,080
--------- --------
Total current liabilities............................................... 19,738 44,148
Capital lease obligations, excluding current portions and other long-term debt... 297 389
--------- --------
Total liabilities....................................................... 20,035 44,537
Minority interest................................................................ 3,775 3,603
Stockholders' Equity:
Common stock................................................................. 317 317
Additional paid-in capital................................................... 141,188 141,172
Accumulated deficit.......................................................... (127,366) (99,924)
--------- --------
Total stockholders' equity.............................................. 14,139 41,565
--------- --------
Total liabilities and stockholders' equity.............................. $ 37,949 $ 89,705
========= ========
See accompanying notes to consolidated financial statements.
3
OUTPOST.COM
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
May 31,
----------------------
2001 2000
-------- --------
Net sales............................................................................ $ 63,714 $ 64,994
Cost of sales........................................................................ 54,787 56,295
-------- -------
Gross profit..................................................................... 8,927 8,699
Operating expenses:
Sales and marketing.............................................................. 11,284 10,917
General and administrative....................................................... 3,887 2,768
Technology and development....................................................... 3,631 2,916
Amortization of goodwill......................................................... 285 --
Impairment of goodwill........................................................... 14,939 --
Restructuring charges............................................................ 2,290 --
-------- -------
Total operating expenses.................................................... 36,316 16,601
-------- -------
Operating loss................................................................... (27,389) (7,902)
Other income, net.................................................................... 119 637
-------- -------
Net loss before minority interest................................................ (27,270) (7,265)
Minority interest.................................................................... (172) (100)
-------- -------
Net loss......................................................................... $(27,442) $(7,365)
======== =======
Basic and diluted net loss per share................................................. $(0.87) $(0.26)
======== =======
Weighted average shares outstanding.................................................. 31,667 28,014
======== =======
See accompanying notes to consolidated financial statements.
4
OUTPOST.COM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
May 31,
---------------------
2001 2000
-------- --------
Cash flows from operating activities:
Net loss......................................................................... $(27,442) $ (7,365)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................... 1,864 1,434
Amortization of deferred compensation....................................... -- 28
Minority interest income.................................................... 172 100
Amortization of goodwill.................................................... 285 --
Loss on disposal of property and equipment.................................. (267) --
Impairment of goodwill...................................................... 14,939 --
Loss on sales and maturities of short term investments...................... -- (8)
(Increase) decrease in operating assets:
Accounts receivable.................................................... 8,748 (1,962)
Inventories............................................................ 10,717 572
Prepaid expenses and other assets...................................... 159 139
Decrease in operating liabilities:
Accounts payable....................................................... (22,297) (3,843)
Accrued expenses....................................................... (2,021) (91)
-------- --------
Net cash used in operating activities............................. (15,143) (10,996)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment.............................................. (2,103) (2,751)
Purchases of short term investments.............................................. -- (12,397)
Proceeds from sales and maturities of short term investments..................... -- 5,050
Cash acquired from consolidating joint venture................................... -- 5,706
-------- --------
Net cash used in investing activities....................................... (2,103) (4,392)
-------- --------
Cash flows from financing activities:
Repayment of capital lease obligations and other long-term debt.................. (184) (179)
Proceeds from issuance of common stock........................................... 16 35,277
-------- --------
Net cash provided by (used in) financing activities......................... (168) 35,098
-------- --------
Net increase (decrease) in cash and cash equivalents........................ (17,414) 19,710
-------- --------
Cash and cash equivalents at the beginning of period........................ 21,970 13,293
Cash and cash equivalents at the end of period.............................. $ 4,556 $ 33,003
======== ========
Supplemental disclosure of cash paid for interest................................ $ 30 $ 43
======== ========
See accompanying notes to consolidated financial statements.
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
During the three-month periods ended May 31, 2001 and 2000, the Company
acquired office equipment by incurring capital lease obligations of
approximately $0 and $44,000, respectively.
5
OUTPOST.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MAY 31, 2001
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Cyberian
Outpost, Inc. ("Outpost.com", or the "Company") have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. In the opinion of management, all adjustments (consisting primarily
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended May 31, 2001
are not necessarily indicative of the results that may be expected for the year
ending February 28, 2002.
The consolidated financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The financial statements do not
include any adjustments relating to the recoverability of assets that might be
necessary should the Company be unable to continue as a going concern. For the
year ended February 28, 2001, the audit opinion from the Company's independent
accountants, KPMG LLP, included an explanatory paragraph with respect to the
Company's ability to continue as a going concern.
NOTE 2 - DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
The Company was incorporated in the state of Connecticut on March 6, 1995
and reincorporated in the state of Delaware on July 8, 1998. Outpost.com is a
leading global Internet retailer featuring over 175,000 consumer technology and
related products for the home and office. As of May 31, 2001, the Company had
the following subsidiaries: Tweeter@Outpost.com, LLC, OutpostPRO.com, Inc.,
Outpost Vendor Supply A, Inc. and Outpost Holdings LLC. Additionally,
OutpostPRO.com, Inc. has as wholly-owned subsidiaries CMP Internet Development
Private LTD and India Parent Co. The results of these companies are consolidated
in the accompanying financial statements for the three-month period ended May
31, 2001.
(b) Revenue Recognition
Net sales are primarily comprised of product sales, net of a provision for
estimated returns and allowances. Net sales also include shipping revenue,
advertising revenue derived from vendors that pay for promotional placements on
the Company's Web site and site management fees derived from hosting and
managing its partners' Web sites. Product sales are comprised of computers and
accessories, software, consumer electronics, cameras and high end consumer
products. Product sales are recognized as revenue when the products are shipped
to customers, which coincides with transfer of title. The Company records a
reserve for estimated sales returns at the time of shipment based on historical
return rates. The majority of net sales are merchandise to customers using
credit cards. The remainder is amounts received from vendors for advertising,
and partners for site management fees and shipping revenue.
(c) Reclassifications
Certain prior year balances have been reclassified to conform with the
current year's presentation.
6
OUTPOST.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MAY 31, 2001
(d) Amortization and Impairment of Goodwill
Amortization of goodwill consists of amortization of goodwill incurred in
connection with the Company's September 8, 2000 acquisition of CMPExpress.com,
Inc. (renamed OutpostPRO). Goodwill arising from business purchase combinations
is reviewed for impairment whenever events or circumstances indicate its
carrying value may not be recoverable. The Company acquired CMPExpress.com, Inc.
for the purpose of enhancing its business-to-business customer base by adding
medium to large businesses. Sales to business customers were made with standard
collection terms of 30 days, resulting in an increasingly negative impact on the
Company's working capital as revenue in this business sector grew. In April
2001, in light of the need for additional liquidity, the Company announced a
restructuring of the business. As a result of the restructuring, the OutpostPRO
business was eliminated. The Company has concluded that the goodwill recorded in
connection with the acquisition of CMPExpress.com on September 8, 2000 no
longer had future value. Accordingly, an impairment charge of $14.9 million was
recorded for the unamortized goodwill balance as of the date of the
restructuring announcement. The Company also recorded $285,000 for the
amortization of goodwill for the period from March 1, 2001 through the date of
the restructuring announcement.
(e) New Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities" establishes accounting and
reporting standards for derivatives and hedging activities. In June 2000, the
Financial Accounting Standards Board issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," an amendment to
SFAS No. 133. These statements require that an entity recognize all derivatives
as either assets or liabilities on the balance sheet and measure those
instruments at fair value. The Company adopted these standards on March 1, 2001.
These new statements did not have a material effect on the consolidated
financial position, results of operations or cash flow of the Company.
NOTE 3 - LIQUIDITY
The Company has experienced significant operating losses since inception.
From July 1998 to April 2001, the Company utilized a flooring agreement with
Deutsche Financial Services Corporation ("DFS") in order to finance inventory
purchases. In April 2001, the Company attempted to renegotiate the terms of this
agreement but was unable to negotiate terms with DFS that the Company found to
be satisfactory. As a result, the Company terminated its agreement with DFS on
April 20, 2001 in order to release the assets pledged under the DFS agreement.
In connection with the termination, the Company repaid the $8.1 million
outstanding balance. As a result of terminating the flooring agreement,
purchases made from major inventory suppliers are now paid based on cash in
advance or vendor required terms, except for purchases made using the credit and
supply agreement described below.
In February 2001, the Company engaged Dain Rauscher Wessels to assist the
Company with respect to exploring strategic alternatives. On April 13, 2001, the
Company initiated a restructuring plan to improve operating results and conserve
cash. This included refocusing the Company's core business to only the business-
to-consumer sector. The refocus included the significant curtailment of the
operations of its OutpostPRO (business-to-business) operation, termination of
the majority of OutpostPRO employees and the discontinuance of offering product
sales to business customers under the Company's former 30-day credit policy. The
Company has also reduced its marketing, web site development, technology and
operating infrastructure development budgets, reduced staffing levels, and is in
the process of terminating facility leases.
On May 29, 2001, the Company signed a definitive merger agreement with PC
Connection, Inc. a direct marketer of information technology products and
solutions, including brand-name personal computers and related peripherals,
software, and networking products to business, education, government, and
consumer end users located
7
OUTPOST.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MAY 31, 2001
primarily in the United States. The merger agreement provides for the merger of
the Company with a subsidiary of PC Connection, Inc., after which the Company
will continue its operations as a wholly-owned subsidiary of PC Connection. The
transaction will be structured as a stock-for-stock, tax-free merger and will be
accounted for under the purchase method of accounting. The Boards of both
companies have unanimously approved the transaction. The merger, however, is
subject to approval of the Company's stockholders and to other closing
conditions.
Provided that the merger is approved by the Company's stockholders and all
other conditions to closing are satisfied or waived, the merger is expected to
be completed by the end of October, 2001. However, because many of the closing
conditions are beyond the control of the Company, there can be no assurance that
the merger will be completed by the end of October 2001, or at all. If the
Company is unable to close the merger it will need to obtain additional
financing or complete another sale or merger transaction. If it cannot do so,
it is unlikely that the Company would be able to continue as a going concern.
In connection with the execution of the merger agreement, the Company
entered into a credit and supply agreement with Merrimack Services Corporation,
a subsidiary of PC Connection, Inc. Under the terms of the credit and supply
agreement, Merrimack Services has agreed, in its discretion, to provide the
Company with working capital loans not to exceed in the aggregate a principal
amount of $3.0 million. In addition, Merrimack Services has agreed to make
inventory items available to the Company at PC Connection's cost plus 5% on
seven day credit for sale to the Company's customers. The inventory line of
credit's outstanding balance shall not exceed $5.0 million in the aggregate at
any time. Merrimack Services has also entered into a security agreement with the
Company, pursuant to which the Company granted Merrimack Services a security
interest in substantially all of its present and future assets to secure payment
and performance of all of the Company's obligations to Merrimack Services under
the credit and supply agreement.
NOTE 4 - RESTRUCTURING CHARGES
On April 13, 2001, as a result of recurring losses from operations and the
Company's inability to secure satisfactory terms for working capital financing
or raise additional equity, the Company implemented a restructuring plan (the
"Plan"). The significant components of the Plan included the closure and lease
terminations of facilities in Tom's River, New Jersey and Bethel, Connecticut
and the termination of 110 employees. These actions were substantially completed
at May 31, 2001. The Company also reduced its marketing, Web site development,
technology and operating infrastructure development budgets. The Company has
refocused its core business to only the business-to-consumer sector. The refocus
included the significant curtailment of the operations of its OutpostPRO
(business-to-business) operation, termination of the majority of OutpostPRO
employees and the discontinuance of offering product sales to business customers
under the Company's former 30-day credit policy. The restructuring charges were
comprised of $1.0 million in lease terminations, $240,000 in severance costs,
$633,000 in professional fees and $273,000 for the write-off of excess equipment
and $117,000 for moving costs and write-off of prepaid expenses. As of May 31,
2001, the remaining accrued lease obligations were $1.0 million. All severance
costs were paid prior to May 31, 2001. In addition to the restructuring charges
detailed above, the Company also incurred costs of approximately $800,000
related to liquidation of inventory in certain product lines, $200,000 related
to a retention program established to retain key personnel during the Company's
transition and $1.1 million for the write-off of accounts receivable.
NOTE 5 - STOCKHOLDERS' EQUITY
In March 2000, the Company completed a private equity placement and issued
4,702,900 shares of its common stock to institutional investors at a price of
$7.87 per share, reflecting a 5% discount of the market price at the date of
issue. The Company received approximately $35.3 million of proceeds, net of the
placement agent and offering expenses.
In September 2000, the Company issued 3,139,666 shares of its common stock
in connection with the acquisition of CMPExpress.
8
OUTPOST.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MAY 31, 2001
In May 2001, as a condition of the merger agreement, the Company entered
into a Stock Warrant Agreement with PC Connection, Inc. for no cash
consideration at the date of issuance. This warrant, exercisable only under
certain circumstances, gives PC Connection, Inc. the option to purchase up to
19.9% of the Company's common stock at an exercise price of $0.51 per share.
NOTE 6 - COMPREHENSIVE LOSS
Three Months Ended
May 31,
--------------------
2001 2000
-------- -------
(In thousands)
The components of comprehensive loss, net of tax, are as follows:
Net loss.................................................................... $(27,442) $(7,365)
Other comprehensive loss, net of tax:
Change in unrealized holding loss in available for sale securities.......... -- (1)
-------- -------
Comprehensive loss............................................................... $(27,442) $(7,366)
======== =======
NOTE 7 - RELATED PARTY TRANSACTIONS
On October 1, 1999, the Company formed a joint venture, Tweeter@Outpost.com,
LLC with Tweeter Home Entertainment Group, Inc. Tweeter@Outpost.com, LLC
operates a fully authorized Internet consumer electronics retail destination.
The Company contributed $2.5 million in cash. Both partners hold 50% of the
voting stock of the joint venture and the Company has an ownership interest in
the joint venture of approximately 50%. The corporate governance provisions of
the joint venture agreement provides for the Company to consolidate the
financial statements of Tweeter@Outpost.com, LLC with those of Outpost.com as a
controlled subsidiary. All intercompany transactions have been eliminated. There
could be future dilution of the Company's interests if further investments are
made in the joint venture.
NOTE 8 - BUSINESS COMBINATIONS
On September 8, 2000, the Company completed the acquisition of
CMPExpress.com, Inc., a private Internet retailer of technology products to
medium and large businesses. From September 2000 through April 2001 the Company
operated the business of CMPExpress.com, Inc. as a subsidiary of Outpost.com,
which was renamed OutpostPRO.com, Inc. As a result of the acquisition,
Outpost.com issued 3,139,666 shares of its common stock, valued at approximately
$11.9 million, which was net of transaction fees. The results of operations of
the acquired company have been included in the Company's consolidated financial
results starting on the date of acquisition. The acquisition was accounted for
under the purchase method of accounting for business combinations.
The purchase price for the acquisition of CMPExpress was allocated as shown
in the following table:
(IN THOUSANDS)
Goodwill................................................. $ 16,344
Property and equipment................................... 464
Line of credit........................................... (1,607)
Working capital deficit.................................. (3,201)
--------
Purchase price....................................... $(12,000)
========
9
OUTPOST.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MAY 31, 2001
In April 2001, the Company concluded that the goodwill recorded at September
8, 2000 no longer had future value as a result of the restructuring of the
Company's business (Note 2). Accordingly, an impairment charge of $14.9 million
was recorded for the unamortized goodwill balance during the three months ended
May 31, 2001.
On May 29, 2001, the Company entered into a merger agreement with PC
Connection, Inc., pursuant to which the Company will be merged with a subsidiary
of PC Connection and become a wholly-owned subsidiary of PC Connection. The
merger is subject to approval of the Company's stockholders and to other closing
conditions. Provided that the merger is approved by the Company's stockholders
and all other conditions to closing are satisfied or waived, the merger is
expected to be completed by the end of October 2001. However, because many of
the closing conditions are beyond the control of the Company there can be no
assurance that the merger will be completed by the end of October 2001, or at
all. If the Company is unable to close the merger it will need to obtain
additional financing or complete another sale or merger transaction. If it
cannot do so, it is unlikely that the Company would be able to continue as a
going concern. If the merger is completed, each outstanding share of the
Company's common stock will be canceled and converted into the right to receive
shares of PC Connection's common stock based on an exchange ratio that will be
determined based upon the Company's revenue for the three-month period ending
August 31, 2001 and the average closing price of the PC Connection's common
stock over the ten trading days ending four days prior to the closing.
In connection with the execution of the merger agreement, the Company
entered into a credit and supply agreement with Merrimack Services Corporation,
a subsidiary of PC Connection. Under the terms of the credit and supply
agreement, Merrimack Services has agreed, in its discretion, to provide the
company with working capital loans not to exceed in the aggregate a principal
amount of $3.0 million. In addition, Merrimack Services has agreed to make
inventory items available to the Company at PC Connection's cost plus 5% on
seven day credit for sale to the Company's customers. The inventory line of
credit's outstanding balance shall not exceed $5.0 million in the aggregate at
any time. Merrimack Services has also entered into a security agreement with the
Company, pursuant to which the Company granted Merrimack Services a security
interest in substantially all of its present and future assets to secure payment
and performance of all of the Company's obligations to Merrimack Services under
the credit and supply agreement.
The Company also issued PC Connection a warrant, for no cash consideration
on the date of issuance, that gives PC Connection the right to purchase up to
19.9% of the Company's outstanding common stock on May 29, 2001. The warrant is
exercisable upon the occurrence of certain triggering events at an exercise
price of $0.51 per share. In addition, if a merger, consolidation, acquisition
of 50% or more of the Company's common stock or a similar transaction involving
the Company occurs, PC Connection may require the Company to repurchase the
warrant for a price between $1.0 million and $1.5 million.
NOTE 9 - SUBSEQUENT EVENT
On July 9, 2001, Fry's Electronics, Inc. filed a Form 13D with the
Securities and Exchange Commission indicating it currently owns 3,465,000 shares
or 10.933% of the Company and that it was prepared to offer $.70 per share for
the Company's outstanding common stock. The Company is currently considering
such proposal.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the business, results of operations, and liquidity
and capital resources should be read in conjunction with the Company's unaudited
Consolidated Financial Statements, including the Notes thereto, included
elsewhere in this Form 10-Q.
OVERVIEW
Outpost.com, established in 1995, has two primary areas of focus for its
business: (i) an industry-leading retail superstore located at www.Outpost.com;
and (ii) eBusiness Services, which provides end-to-end online commerce solutions
for other retailers, manufacturers and Web sites.
The Company is a leading global Internet retailer featuring over 175,000
consumer technology and related products for the home and office. As of May 31,
2001, there were approximately 1.4 million customers worldwide. The Company's
online superstore features computers and accessories, software, consumer
electronics, cameras, and other high end consumer products for domestic and
international customers. The online store features: (i) an easy to navigate,
intuitive interface, (ii) extensive product information, (iii) powerful search
capabilities, (iv) competitive pricing and (v) a flexible return policy,
including pick-up from any location in the U.S.
Although the Company has grown rapidly since inception in 1995, it continues
to incur significant net losses. As of May 31, 2001, the Company had cash and
cash equivalents of approximately $4.6 million, which the Company believes will
last until the merger with PC Connection, Inc. is completed. However, because
many of the conditions to closing for the merger are beyond the control of the
Company, there can be no assurance that the merger will be completed. If the
merger agreement is terminated prior to competion of the merger, the Company
will need to obtain additional financing or complete another sale or merger
transaction in order to continue as a going concern. In April 2001, the Company
initiated a restructuring plan to reduce costs and conserve cash. The
restructuring included refocusing the Company's core retailing business to only
the business-to-consumer sector. The refocus included the significant
curtailment of the operations of its OutpostPRO (business-to-business) retailing
operation, termination of the majority of OutpostPRO employees and the
discontinuance of offering product sales to business customers under the
Company's former 30-day credit policy. The Company has also reduced its
marketing, Web site development, technology and operating infrastructure
development budgets, reduced staffing levels, and is in the process of
terminating facility leases. The Company believes, however, that it will
continue to incur operating losses in the near term.
On May 29, 2001, the Company entered into a merger agreement with PC
Connection, Inc., a direct marketer of information technology products and
solutions, including brand-name personal computers and related peripherals,
software, and networking products to business, education, government, and
consumer end users located primarily in the United States. The merger agreement
provides for the merger of the Company with a subsidiary of PC Connection, after
which the Company will continue its operations as a wholly-owned subsidiary of
PC Connection. The merger is subject to approval of the Company's stockholders
and to other closing conditions. Provided that the merger is approved by the
Company's stockholders and all other conditions to closing are satisfied or
waived, the merger is expected to be completed by the end of October 2001.
However, because many of the closing conditions are beyond the control of the
Company, there can be no assurance that the merger will be completed by the end
of October 2001, or at all. If the Company is unable to close the merger or
obtain additional financing or complete another sale or merger transaction, it
is unlikely that the Company would be able to continue as a going concern.
11
RESULTS OF OPERATIONS: THREE MONTHS ENDED MAY 31, 2001 AND 2000
The following table sets forth certain items from the statement of operations
data as a percentage of net sales for the periods indicated:
Three Months Ended
May 31
--------------------
2001 2000
------ ------
Net sales......................................... 100.0% 100.0%
Cost of sales..................................... 86.0 86.6
------ ------
Gross profit.................................. 14.0 13.4
Operating expenses:
Sales and marketing........................... 17.7 16.8
General and administrative.................... 6.1 4.3
Technology and development.................... 5.7 4.5
Amortization of goodwill...................... 0.5 --
Impairment of goodwill........................ 23.4 --
Restructuring charges......................... 3.6 --
------ ------
Total operating expenses................. 57.0 25.6
------ ------
Operating loss................................ (43.0) (12.2)
Other income, net................................. 0.2 1.0
------ ------
Net loss before minority interest............. (42.8) (11.2)
Minority interest................................. (0.3) (0.1)
------ ------
Net loss...................................... (43.1)% (11.3)%
====== ======
NET SALES
Net sales are comprised of product sales net of provisions for estimated
returns and allowances. Net sales also include shipping revenue, advertising
revenue derived from vendors that pay for promotional placements on the
Company's Web site, and site management fees for hosting and managing partners'
Web sites. Product sales are comprised of computers and accessories, software,
consumer electronics, cameras, and other high end consumer and business
products. Product sales are recognized as revenue when the products are shipped
to customers. The Company records a reserve for estimated sales returns at the
time of shipment based on historical return rates. The majority of net sales
are merchandise to customers using credit cards. The remainder of net sales
consists of vendor advertising, shipping revenue and partner site management
fees. In April 2001, the Company ceased granting credit to business customers in
conjunction with its restructuring plan.
Net sales decreased by $1.3 million to $63.7 million in the quarter ended
May 31, 2001 from $65.0 million in the quarter ended May 31, 2000. The overall
decrease was the net result of a decrease resulting from buying inventory on a
cash basis, which limited the Company's ability to stock product, and the
discontinuance of offering product sales to small business customers under the
Company's former 30-day credit policy. As of May 31, 2001, the Company had
approximately 1.4 million customer accounts.
As discussed in Note 3 of the Company's Consolidated Financial Statements,
included elsewhere in this Form 10-Q, the Company is currently buying inventory
either on a cash basis from vendors or from PC Connection, Inc. under the credit
and supply agreement. This could have a significant negative impact on sales in
future quarters as the Company may not be able to stock adequate amounts of
inventory. This will also likely have a significant negative impact on the
Company's gross margin as it may not be able to take advantage of certain volume
discounts.
12
COST OF SALES AND GROSS PROFIT
Cost of sales consists of the product cost of the merchandise sold. Cost of
sales decreased by $1.5 million to $54.8 million in the quarter ended May 31,
2001 from $56.3 million in the quarter ended May 31, 2000. This decrease was
primarily the result of a decrease in product sales volume as described above.
Gross profit increased by $0.2 million to $8.9 million in the quarter ended May
31, 2001 from $8.7 million in the quarter ended May 31, 2000. This increase was
a result of increased shipping revenues and site management fees from eBusiness
services. In April 2001, the Company revised its shipping policy to change from
free shipping to a new low cost shipping policy. As a percentage of net sales,
cost of sales decreased to 86.0% from 86.6% and gross profit increased to 14.0%
from 13.4% in the quarters ended May 31, 2001 and May 31, 2000, respectively.
As discussed in Note 3 of the Company's Consolidated Financial Statements,
included elsewhere in this Form 10-Q, the Company is currently buying inventory
either on a cash basis from vendors or from PC Connection, Inc. under the credit
and supply agreement. This could have a significant negative impact on sales in
future quarters as the Company may not be able to stock adequate amounts of
inventory. This will also likely have a significant negative impact on the
Company's gross margin as it may not be able to take advantage of certain volume
discounts.
OPERATING EXPENSES
Operating expenses consist of sales and marketing expenses, general and
administrative expenses, technology and development expenses, impairment of
goodwill and restructuring charges.
Operating expenses for the quarter ended May 31, 2001 are further described
as follows:
SALES AND MARKETING. Sales and marketing expense consists primarily of
three components:
Direct Selling Expenses. These expenses consist primarily of shipping
expense, contract warehouse fulfillment expense and bank and credit card fees.
The Company classifies the costs related to shipping in and out as well as its
warehouse operations as sales and marketing costs. Shipping and handling costs
were $5.4 million in the quarter ended May 31, 2001 and $5.2 million in the
quarter ended May 31, 2000.
Advertising and Promotional Costs. This consists of the expenses relating
to both online and offline advertising designed to build the Outpost.com brand,
increase customer awareness and drive traffic to the Web site. The types of
expenses incurred include fees paid to search engines to more prominently
feature Outpost.com products, fees paid to affiliates to refer customers to the
Company's Web site, costs to design and send personalized direct marketing email
campaigns, the costs associated with maintenance of email customer lists, as
well as, to a lesser extent, amounts paid for traditional offline advertising.
Sales, Marketing and Customer Service Personnel Costs. This includes the
salaries and benefits paid to sales, marketing and customer service personnel
and the incidental expenses incurred during the course of their business. The
Company does not allocate any material amount of common expenses to sales and
marketing.
Sales and marketing expenses increased by $0.4 million to $11.3 million in
the quarter ended May 31, 2001 from $10.9 million in the quarter ended May 31,
2000. As a percentage of net sales, sales and marketing expenses increased to
17.7% in the quarter ended May 31, 2001 from 16.8% in the quarter ended May 31,
2000. The absolute dollars and percentage increases resulted from sales
decreasing during the period while sales and marketing expenses did not
decrease. Anticipated cost savings from the restructuring was not fully realized
during the three month period ended May 31, 2001.
GENERAL AND ADMINISTRATIVE. General and administrative expense includes
administrative, finance, purchasing, and business development personnel and
related costs, depreciation of furniture, office equipment and leasehold
improvements, general office expenses, as well as professional fees. General and
administrative expense increased by $1.1 million to $3.9 million in the quarter
ended May 31, 2001 from $2.8 million in the quarter ended May 31, 2000. As a
percentage of net sales, general and administrative expense increased to 6.1% in
the quarter ended
13
May 31, 2001 from 4.3% in the quarter ended May 31, 2000. The increase in
general and administrative expense is primarily due to an increase in bad debt
expense of approximately $1.2 million.
TECHNOLOGY AND DEVELOPMENT. Technology and development expense includes
depreciation of hardware and software, systems personnel and related costs,
software support, communications expenditures, maintenance on technology
development and Web site hosting. Technology and development expense increased
by $0.7 million to $3.6 million in the quarter ended May 31, 2001 from $2.9
million in the quarter ended May 31, 2000. As a percentage of net sales,
technology and development expense increased to 5.7% in the quarter ended May
31, 2001 from 4.5% in the quarter ended May 31, 2000. As the Company has
expanded, it has added additional hardware, systems and software. As such, the
dollar increases in technology and development expense is attributable to
increased depreciation, maintainance costs and systems costs on hardware and
software. The percentage increase resulted from higher infrastructure and
depreciation costs than in the prior period. In accordance with SOP 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" and EITF 00-10 "Web site Development Costs", the Company
capitalized development related technology activities of approximately $1.6
million in the quarter ended May 31, 2001. Any anticipated cost savings from the
Company's reduction in headcount was not realized during the three-month priod
ended May 31, 2001.
Amortization and Impairment of Goodwill. Amortization of goodwill consists
of amortization of goodwill incurred in connection with the Company's September
8, 2000 acquisition of CMPExpress.com, Inc. (renamed OutpostPRO). Goodwill
arising from business purchase combinations is reviewed for impairment whenever
events or circumstances indicate its carrying value may not be recoverable. The
Company acquired CMPExpress.com, Inc. for the purpose of enhancing its business-
to-business customer base by adding medium to large businesses. Sales to
business customers were made with standard collection terms of 30 days,
resulting in an increasingly negative impact on the Company's working capital as
revenue in this business sector grew. In April 2001, in light of the need for
additional liquidity, the Company announced a restructuring of the business. As
a result of the restructuring, the OutpostPRO business was significantly
curtailed. The Company has concluded that the goodwill recorded in connection
with the acquisition of CMPExpress.com on September 8, 2000 no longer had future
value. Accordingly, an impairment charge of $14.9 million was recorded for the
unamortized goodwill balance as of the date of the restructuring announcement.
The Company also recorded $285,000 for the amortization of goodwill for the
period from March 1, 2001 through the date of the restructuring announcement.
Restructuring Charges. On April 13, 2001, as a result of recurring losses
from operations and the Company's inability to secure satisfactory terms for
working capital financing or raise additional equity, the Company implemented a
restructuring plan that included the closure of facilities in Tom's River, New
Jersey and Bethel, Connecticut, termination of 110 employees, lease
terminations, severance payments and other related costs. The Company has also
reduced its marketing, Web site development, technology and operating
infrastructure development budgets. The Company has refocused its core business
to only the business-to-consumer sector. The refocus included the significant
curtailment of the operations of its OutpostPRO (business-to-business) business,
termination of the majority of OutpostPRO employees and the discontinuance of
offering product sales to business customers under the Company's former 30-day
credit policy. Accordingly, a restructuring charge of $2.3 million was recorded
in the quarter ended May 31, 2001 (see Note 4 of the Consolidated Financial
Statements, included elsewhere in this Form 10-Q).
OTHER INCOME, NET
Other income, net consists of interest income earned on short term
investments and overnight investments of cash balances in money market accounts,
offset by interest expense primarily attributable to lease financing agreements.
Other income, net decreased by $518,000 to $119,000 in the quarter ended May 31,
2001 from $637,000 in the quarter ended May 31, 2000. These changes were
primarily a result of lower cash balances during the current year compared to
the prior year.
MINORITY INTEREST
Minority interest consists of the joint venture partner's share (Tweeter
Home Entertainment Group, Inc.) of the net income of Tweeter@Outpost.com, LLC.
Minority interest increased by $72,000 to $172,000 in the quarter ended
14
May 31, 2001 from $100,000 in the quarter ended May 31, 2000, reflecting
increased sales and profitability of the joint venture.
NET LOSS
As a result of the foregoing factors, the Company incurred a net loss of
$27.4 million in the quarter ended May 31, 2001 compared to a net loss of $7.4
million in the quarter ended May 31, 2000. As a percentage of net sales, net
loss increased to 43.1% in the quarter ended May 31, 2001 compared to 11.3% in
the quarter ended May 31, 2000. Excluding the restructuring and impairment
charges, the net loss for the quarter ended May 31, 2001 was $10.2 million or
16.0% of sales compared to $7.4 million or 11.3% of sales for the quarter ended
May 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
At May 31, 2001, the total cash and cash equivalents balance was $4.6
million compared to $22.0 million at February 28, 2001. As of June 30, 2001, the
total cash and cash equivalents balance was $4.0 million.
CASH INFLOWS AND OUTFLOWS
During the three months ended May 31, 2001, the net decrease in cash and
cash equivalents was $17.4 million. Details of the cash inflows and outflows are
as follows:
Operating Activities: Cash of $15.1 million was used to fund operations
during the three months ended May 31, 2001. During this period, the principal
operating cash requirements were to fund an operating loss of $27.4 million
(including depreciation, amortization and impairment of goodwill of $17.1
million), make payments of accounts payable and accrued expenses of $24.3
million offset by decreases in inventories of $10.7 million and decreases in
accounts receivable of $8.7 million.
Investing Activities: Cash of $2.1 million was used in investing activities
during the three months ended May 31, 2001. This consists of the net effect
purchases and development of property and equipment of $2.4 million and disposal
of property and equipment of $0.3 million (see Restructuring Note 4).
Financing Activities: Cash of $0.2 million was used in financing activities
during the three months ended May 31, 2001. Financing activities included
repayment of capital lease obligations in the amount of $184,000 offset in part
by proceeds from issuance of common stock related to the redemption of employee
stock options of $16,000.
CASH, CASH EQUIVALENTS AND COMMITMENTS
As of May 31, 2001, there was $4.6 million in cash and cash equivalents
compared to $22.0 million at February 28, 2001. As of June 30, 2001, the total
cash and cash equivalents balance was $4.0 million.
As of May 31, 2001, material capital commitments consisted of $0.9 million
in obligations outstanding under capital leases and other long term debt.
From July 1998 to April 2001, the Company utilized a flooring agreement with
Deutsche Financial Services Corporation ("DFS") in order to finance inventory
purchases. In April 2001, the Company attempted to renegotiate the terms of this
agreement but was unable to negotiate terms with DFS that the Company found to
be satisfactory. As a result, the Company terminated its agreement with DFS on
April 20, 2001 in order to release the assets pledged under the DFS agreement.
In connection with the termination, the Company repaid the $8.1 million
outstanding balance. As a result of terminating the flooring agreement,
purchases made from major inventory suppliers are now paid based on cash in
advance or vendor required terms.
On August 9, 2000, a Collateral Subordination Agreement was entered into
between Apple Computer, Inc. ("Apple"), DFS and Outpost.com. This was done for
the purpose of securing a direct credit facility with Apple. Under the terms of
the Collateral Subordination Agreement, Apple has been granted a security
interest in certain assets.
15
On May 29, 2001, the Company entered into a merger agreement with PC
Connection, Inc., a direct marketer of information technology products and
solutions, including brand-name personal computers and related peripherals,
software, and networking products to business, education, government, and
consumer end users located primarily in the United States. Pursuant to the
merger agreement, the Company will be merged with a subsidiary of PC Connection
and become a wholly-owned subsidiary of PC Connection. The merger is subject to
approval of the Company's stockholders and to other closing conditions. Provided
that the merger is approved by the Company's stockholders and all other
conditions to closing are satisfied or waived, the merger is expected to be
completed by the end of October 2001. However, because many of the closing
conditions are beyond the control of the Company, there can be no assurances
that the merger will be completed by the end of October 2001, or at all. If the
Company is unable to close the merger it will need to obtain additional
financing or complete another sale or merger transaction. If it cannot do so, it
is unlikely that the Company would be able to continue as a going concern.
In connection with the execution of the merger agreement, the Company
entered into a Credit and Supply agreement with Merrimack Services Corporation,
a subsidiary of PC Connection. Under the terms of the credit and supply
agreement, Merrimack Services has agreed, in its discretion, to provide the
company with working capital loans not to exceed in the aggregate a principal
amount of $3.0 million. In addition, Merrimack Services has agreed to make
inventory items available to the Company at PC Connection's cost plus 5% on
seven day credit for sale to the Company's customers. The inventory line of
credit's outstanding balance shall not exceed $5.0 million in the aggregate at
any time. Merrimack Services has also entered into a security agreement with the
Company, pursuant to which the Company granted Merrimack Services a security
interest in substantially all of its present and future assets to secure payment
and performance of all of the Company's obligations to Merrimack Services under
the credit and supply agreement.
The Company is currently delinquent in paying incurred trade and other debt
with vendors and business partners. The Company offered interim payments of 24%
of the amounts owed as of April 20, 2001. The Company agreed to make these
interim payments in six weekly payments of 4% each beginning on April 20, 2001
and continuing each successive Friday thereafter until May 25, 2001. The Company
has made five of the 4% payments to date, but has not made the payment that was
due on May 25, 2001. Further, the Company has not reached an agreement with its
creditors regarding the remaining past due balances. The Company is currently
buying inventory from vendors, other than PC Connection, on a cash basis. If the
merger is completed, PC Connection has agreed to pay all past due amounts to the
Company's creditors.
In addition, on April 23, 2001, the Company received a notice from the
Nasdaq National Market that its common stock had failed to maintain the required
minimum closing bid price of $1.00 for a period of 30 consecutive trading days.
As a result, Nasdaq has provided the Company 90 calendar days, or until July 20,
2001, to regain compliance with this requirement or be delisted from trading. In
order to regain compliance, the closing bid price of the common stock must stay
above $1.00 for 10 consecutive days. If the Company is unable to regain
compliance with this requirement during this time period, and any appeal to
Nasdaq for relief from this requirement is unsuccessful, the Company's common
stock will be delisted from trading by the Nasdaq National Market. If this were
to happen, trading in the Company's common stock would decrease substantially,
or cease altogether, the market price of the common stock may decline further,
potentially to zero, and stockholders may lose some or all of their investment.
Furthermore, delisting of the Company's common stock from the Nasdaq National
Market would inhibit, if not preclude, the Company's ability to raise additional
working capital on acceptable terms, if at all.
FORWARD-LOOKING STATEMENTS
This report may contain forward-looking statements. Such statements are
based on management's current expectations and are subject to a number of
factors and uncertainties that could cause actual results or outcomes to differ
materially from those described or implied in such forward-looking statements.
These statements address or may address the following subjects: the
restructuring of the Company's business operations; the pending merger with PC
Connection, Inc.; the Company's ability to continue as a going concern; the
possibility of delisting of the Company's common stock from the Nasdaq National
Market; the Company's need to buy inventory on a cash basis; the impact on
future net sales, gross margin and operating expenses; and the sufficiency of
cash and cash equivalents. We caution investors that there can be no assurance
that actual results, outcomes or business conditions will not
16
differ materially from those projected or suggested in such forward-looking
statements as a result of various factors, including, among others:
. the uncertainty of the Company's ability to close the merger with PC
Connection, Inc.;
. the uncertainty of the Company's ability to continue as a going concern;
. the possibility of the delisting of the Company's common stock from The
Nasdaq National Market;
. the effect that the Company's current financial condition will have on
the willingness of customers to purchase products from Outpost.com; and
. the effect that the Company's current financial condition may have on its
relationships with vendors and suppliers and their willingness and
ability to supply the Company with inventory.
For further information, refer to the more specific factors and uncertainties
discussed throughout this report.
17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to the disclosure contained in the Company's Annual Report
on Form 10-K for the fiscal year ended February 28, 2001 concerning the suit
filed against the Company by Hook Media, Inc. On or about June 11, 2001, the
Company entered into a formal settlement agreement with Hook Media and forwarded
$61,019 to Hook Media's attorney's to be held in escrow pending United States
Bankruptcy court approval. The Company also agreed to pay approximately $193,228
to Hook Media. The payments to Hook Media were for placement fees owed to Hook
Media and amounts paid on the Company's behalf to third party vendors by Hook
Media. Additionally, the Company assumed from Hook Media approximately $930,000
in payables to third party vendors who had previously accepted advertising
placed by Hook Media on behalf of the Company. At the time of the settlement,
these amounts had been accrued as a liability to Hook Media on the Company's
balance sheet.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(A) Recent Sales of Unregistered Securities
In connection with the execution of the merger agreement with PC Connection,
Inc., on May 29, 2001, the Company issued a warrant, for no cash consideration
at the date of issuance, that gives PC Connection the right to buy from the
Company up to 19.9% of the outstanding common stock of the Company. The exercise
price of the warrant is $0.51 per share. PC Connection required the Company to
grant the warrant as consideration for entering into the merger agreement. The
warrant may discourage third parties who are interested in acquiring a
significant stake in the Company and is intended to increase the likelihood that
the merger will be completed.
PC Connection cannot exercise the warrant unless one of the following
triggering events occurs:
. the Company enters into an agreement to be acquired by a third party;
. the Company's board of directors withdraws, modifies, fails to reaffirm
or publicly announces its intent to withdraw or modify its recommendation
to its stockholders to vote for the merger agreement;
. the Company's board of directors recommends that its stockholders vote
for or accept an acquisition transaction with another party or has failed
to publicly oppose an acquisition transaction with another party;
. the Company's stockholders do not adopt the merger agreement following a
proposal by a third party to acquire the Company; or
. a third party acquires beneficial ownership of 20% or more of the
Company's outstanding common stock.
If any of the above triggering events occur, PC Connection may exercise the
warrant. If a merger, consolidation, acquisition of 50% or more of its common
stock or similar transaction involving the Company occurs, then PC Connection
may require the Company to repurchase the warrant for a price between $1.0
million and $1.5 million.
No person acted as an underwriter with respect to this transaction. The
Company relied on Section 4(2) of the Securities Act of 1933, as amended, as no
public offering was involved.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable
ITEM 5. OTHER INFORMATION. Not Applicable
18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits
Exhibit No. 10.1............ Merger Agreement, dated as of May 29, 2001, by and between PC Connection, Inc.
and the Company (filed as Exhibit 10.1 to the Company's Current Report on Form
8-K (File No. 000-24659, filing date June 6, 2001) and incorporated herein by
reference).
Exhibit No. 10.2............ Stock Warrant Agreement, dated as of May 29, 2001, by and between the Company
and PC Connection, Inc. (filed as Exhibit 10.2 to the Company's Current Report
on Form 8-K (File No. 000-24659, filing date June 6, 2001) and incorporated
herein by reference).
Exhibit No. 10.3............ Credit and Supply Agreement, dated as of May 29, 2001, by and between the
Company and Merrimack Services Corporation (filed as Exhibit 10.3 to the
Company's Current Report on Form 8-K (File No. 000-24659, filing date June 6,
2001) and incorporated herein by reference).
Exhibit No. 10.4............ Security Agreement, dated as of May 29, 2001, by and between the Company and
Merrimack Services Corporation (filed as Exhibit 10.4 to the Company's Current
Report on Form 8-K (File No. 000-24659, filing date June 6, 2001) and
incorporated herein by reference).
Exhibit No. 10.5............ Letter Agreement, dated February 14, 2001, by and between the Company and Darryl
Peck.
Exhibit No. 10.6............ Letter Agreement, dated May 22, 2001, by and between the Company and Darryl Peck.
Exhibit No. 11.1............ Computation of loss per share
(B) Reports on Form 8-K.
The Company filed with the Securities and Exchange Commission on April 12,
2001, a Current Report on Form 8-K for the April 12, 2001 event reporting the
public dissemination of a press release announcing its unaudited financial
results for the fourth quarter and fiscal year ended February 28, 2001.
The Company filed with the Securities and Exchange Commission on April 17,
2001, a Current Report on Form 8-K for the April 13, 2001 event reporting the
public dissemination of a press release announcing its restructuring, the
resignation of its President and Chief Executive Officer and the appointment of
its founder Darryl Peck as President and Chief Executive Officer.
The Company filed with the Securities and Exchange Commission on April 19,
2001, a Current Report on Form 8-K for the April 16, 2001 event reporting the
public dissemination of a press release announcing the resignation of its Chief
Financial Officer.
The Company filed with the Securities and Exchange Commission on April 26,
2001, a Current Report on Form 8-K for the April 23, 2001 event reporting the
public dissemination of a press release announcing a new low cost shipping
policy for its customers and the resignation of Michael Murray from its Board of
Directors.
19
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.
Date: July 16, 2001
CYBERIAN OUTPOST, INC.
By: /s/ Darryl Peck
-------------------------------
DARRYL PECK
PRESIDENT AND CEO
/s/ Michael T. Dylag
-------------------------------
MICHAEL T. DYLAG
V.P. FINANCE AND ADMINISTRATION
(PRINCIPAL FINANCIAL OFFICER)
20
EXHIBIT INDEX
Exhibit
- -----------
10.1 Merger Agreement, dated as of May 29, 2001, by and between PC Connection, Inc. and
the Company (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K
(File No. 000-24659, filing date June 6, 2001) and incorporated herein by reference).
10.2 Stock Warrant Agreement, dated as of May 29, 2001, by and between the Company and
PC Connection, Inc. and the Company (filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K (File No. 000-24659, filing date June 6, 2001) and incorporated
herein by reference).
10.3 Credit and Supply Agreement, dated as of May 29, 2001, by and between the Company
and Merrimack Services Corporation (filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K (File No. 000-24659, filing date June 6, 2001) and incorporated
herein by reference).
10.4 Security Agreement, dated as of May 29, 2001, by and between the Company and
Merrimack Services Corporation (filed as Exhibit 10.4 to the Company's Current
Report on Form 8-K (File No. 000-24659, filing date June 6, 2001) and incorporated
herein by reference).
10.5 Letter Agreement, dated February 14, 2001, by and between the Company and Darryl Peck.
10.6 Letter Agreement, dated May 22, 2001, by and between the Company and Darryl Peck.
11.1 Computation of loss per share