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, 2000
( ) 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.
------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4363944
- ---------------------------------- -------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3811 Turtle Creek Blvd., Suite 350
Dallas, Texas 75219 Telephone (214)528-8200
------------------------------------------------------------------------------
(Address of Principal Executive Offices, including Registrant's zip code
and telephone number)
1
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
--- ---
The number of shares of the registrant's common stock as of December 31,
2000: 20,788,122 shares.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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 - January 19, 2001
2
SIGNATURES
FINANCIAL DATA SCHEDULE
[CAPTION]
Out-Takes, Inc.
Consolidated Balance Sheets
December 31, March 31,
2000 2000
(UNAUDITED)
--------- ---------
Assets
Current Assets
Cash and cash equivalents $ 757 $77,265
Accounts receivable 134,222 42,722
Note receivable 517
------- -------
Total Current Assets 135,496 119,987
------- -------
Property, Plant and Equipment-net 223,675 236,798
Other Non-Current Assets
Goodwill-net 4,062,327 4,170,891
Deposits and advances 23,148 23,148
--------- ---------
Total Assets $ 4,444,646 $ 4,550,824
========= =========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 125,218 $ 95,067
Accrued expenses 22,173 25,159
Compensation payable-related parties 271,390 211,390
Accrued interest 201,232 422,931
Accrued interest-related parties - 173,001
Deferred income 8,715 6,971
Notes payable 1,429,150 1,606,811
--------- -------
Total Current Liabilities 2,057,878 2,541,330
--------- -------
Long-Term Debt
Notes payable 4,368,541 4,011,459
--------- -------
Stockholders' Equity
Common stock, par value $0.01 per share,
35,000,000 shares authorized; 20,788,122
shares issued of which 292,396 shares
are in Treasury 207,882 207,882
3
Preferred stock, par value $0.01 per
share, 5,000,00 shares authorized;
none issued -0- -0-
Capital in excess of par 9,918,230 9,913,230
Accumulated deficit (11,999,479) (12,014,671)
------------ -----------
(1,873,367) (1,893,559)
----------- -----------
Treasury stock, at cost (108,406) (108,406)
----------- -----------
Total Liabilities and
Stockholders' Equity $ 4,444,646 $ 4,550,824
========== ==========
[CAPTION]
OUT TAKES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2000
AND DECEMBER 31, 1999
2000 1999
(UNAUDITED) (UNAUDITED)
-------------------------
Revenues $167,292 $ 54,270
Cost of Revenues 25,755 44,427
------- -------
Gross Margin 131,581 9,843
General and Administrative Expenses 63,442 51,053
------- -------
Income (loss) from operations 68,139 (41,210)
------- -------
Other Income (Expense)
Interest expense-related parties - ( 6,293)
Interest expense - (19,345)
------- -------
- (25,638)
------- -------
Net Income (Loss) $68,139 ($66,848)
======== =======
Net Income (Loss) per share ($0.00) ($0.00)
======== ========
Weighted average common
Shares outstanding 20,495,726 20,495,726
========== ==========
4
[CAPTION]
OUT TAKES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000
AND DECEMBER 30, 1999
2000 1999
(UNAUDITED) (UNAUDITED)
-------------------------
Revenues $311,566 $ 113,383
Cost of Revenues 122,948 96,524
------- --------
Gross Margin 188,618 16,859
General and Administrative Expenses 173,490 219,526
------- --------
Income (loss) from operations 15,128 (202,667)
------- -------
Other Income (Expense)
Interest expense-related parties - ( 6,293)
Interest expense ( 64) (73,545)
------- -------
( 64) (79,838)
------- -------
Net Income (Loss) 15,192 ($282,505)
======== =======
Net Income (Loss) per share ($0.00) ($0.00)
======== ========
Weighted average common
Shares outstanding 20,495,726 20,495,726
========== ==========
5
[CAPTION]
OUT-TAKES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
(UNAUDITED) (UNAUDITED)
----------------------
Cash Flows From
Operating Activities
Net Income (Loss) $ 15,192 ($282,505)
Noncash items included
In net income (loss)
Depreciation and amortization 121,687 218,420
Changes in:
Accounts receivable (92,017) ( 19,076)
Accounts payable 30,151 5,928
Accrued expenses (2,986) ( 51,269)
Accrued interest (216,698) 19,190
Accrued interest-related party (173,001) 58,147
Deferred income 1,743 -
Compensation payable-related party 60,000 36,369
------- -------
Net cash provided (used)
by operating activities (255,929) (14,796)
Cash Flows From
Investing Activities
Purchase of property, plant
and equipment - (12,271)
------- -------
Net cash provided (used)
by investing activities - (12,271)
Cash Flows From
Financing Activities
Advances from related parties 11,746
Payments to related parties (191,140)
Proceeds from short-term debt (177,661) 205,001
Proceeds from long-term debt 357,082 ( 23,345)
------- --------
Net cash provided (used)
By financing activities 179,421 ( 2,262)
Net decrease in cash and
cash equivalents ( 76,508) (24,805)
Cash and cash equivalents-
beginning of period 77,265 506
-------- --------
Cash and cash equivalents-
end of period $ 757 ($24,299)
======== ========
6
[CAPTION]
Out-Takes, Inc.
Consolidated Notes to Financial Statements
(UNAUDITED)
1. Summary of Significant Accounting Policies
Nature of Business - 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 preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
reported amounts of assets, liabilities, revenues, expenses and the disclosure
of contingent assets and liabilities. Actual results could differ from these
estimates.
Basis of Presentation - The accompanying financial statements include the
accounts of Out-Takes, Inc. and its wholly owned subsidiaries. All significant
inter-company accounts and transactions have been eliminated.
Property, Plant and Equipment - Plant and equipment are recorded at cost.
Depreciation is provided over the estimated useful asset lives using the
straight-line method over 5-7 years.
Cash and cash equivalents - The Company classifies all highly liquid debt
instruments, readily convertible to cash and purchased with a maturity of three
months or less at date of purchase, as cash equivalents. The Company had no
cash equivalents at December 31, 2000 and March 31, 2000
Goodwill and acquisition related intangibles - Goodwill is recorded when the
consideration paid for acquisitions exceeds the fair value of net tangible and
intangible assets acquired. Goodwill is amortized on a straight-line basis
over 40 years. Net goodwill at the reporting dates is as follows:
December 31, 2000 March 31, 2000
-------------- --------------
Goodwill $ 4,342,874 $4,342,874
Accumulated amortization (280,547) (171,983)
--------- --------
Net Goodwill $4,062,327 $4,170,891
========= ===========
Amortization expense $ 81,423 $ 108,564
========= ==========
Earnings per share - Earnings per share data in the financial statements have
been calculated in accordance with SFAS No. 128. Earnings per share reflects
the amount of earnings for the period available to each share of common stock
7
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. As of December 31 and March 31,2000, no
contingently issuable shares qualified as dilutive to be included in the
earnings per share calculation.
2. Mergers and Acquisitions
On August 31, 1998, Out-Takes, Inc. acquired all of the issued and outstanding
equity interests of Los Alamos Energy, LLC, a California limited liability
company (LAE). This acquisition has been accounted for as an exchange between
companies under common control. The investment has been recorded at historical
cost in a manner similar to a pooling of interest, and the face value of the
note given has been adjusted down to the net equity value of LAE at the date of
the exchange.
In March 2000, the Company executed a letter of intent with Merger Solutions,
LTD.(MSL), which among other things, provides for a merger to be effected
pursuant to the provisions of a Merger Agreement. As of December 31, 2000, the
merger is in process but had not yet been completed.
In June 1999, the Company 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. As of December 31,
2000 the merger has been terminated.
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. As of December 31, 2000, the merger
is in process but had not yet been completed.
3. Property, Plant and Equipment
The components of property, plant and equipment are as follows:
December 31, 2000 March 31, 2000
Computers and software 4,793 4,793
Equipment and furniture 350,633 350,633
Leased asset 19,000 19,000
------------- -------------
Total - At Cost 374,426 374,426
Less: Accumulated depreciation (150,751) (137,628)
------------- -------------
Net $ 223,675 $ 236,798
============= =============
8
4. Notes Payable
Note Payable - Consultant
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, 2000 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 indefinitely without interest. The payable amount as of
December 31, 2000 is $29,444.
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 had been extended to December 31, 1999 with interest and is being
negotiated for another extension. The payable amount as of December 31, 2000
is $10,000.
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 payable amount as of December 31, 2000 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 was extended to December 31, 1999 with interest and the parties
are in negotiation for an additional extension. The payable amount as of
December 31, 2000 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
9
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,
2000 is $62,984.
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 Septebmer 2000.
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 (LAE) 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, 2000, this conversion and reverse stock split has not been
completed. The payable amount as of December 31 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 March 31, 2000,
this conversion or repayment has not been completed. The payable amount as of
December 31, 2000 is $220,834.
Note Payable - Hall
This is an unsecured promissory note dated January 4, 2000. The note's maturity
date is January 4, 2001 without interest. The payable amount as of September
30, 2000 is $8,000.
Lease Payable - Fairfield Energy Corp.
The company is the lessee of a transformer under a capital lease expiring July
2003. The asset and liability under the capital lease is recorded at the
10
present value of the minimum lease payments. The asset is depreciated over the
lease term of 50 months. Depreciation of the asset under the capital lease is
included in depreciation expense for the six months ended December 31, 2000.
The equipment held under capital lease at December 31, 2000 is valued at
$19,000 less accumulated depreciation of $6,220.
Future minimum lease obligations are as follows:
Year ended March 31
-------------------
2001 $ 6,137
2002 6,137
2003 6,137
2004 2,046
--------
Total $ 20,457
Less interest 5,162
Present value of net minimum lease payment $ 15,295
5. Due to Related Party
The amount due to related party of $773,845 is unsecured and payable upon
demand. Interest is charged at a rate of 10% per annum and for the nine months
ended December 31, 2000 and 1999 was $19,998 and $30,959 respectively. As of
June
30, 2000 and March 31, 2000 interest of $192,999 and $173,001 respectively was
accrued.
6. Commitments and Contingencies
The Company has an extended 12 month non-cancelable operating lease agreement
for an office facility.
Future minimum lease obligations are as follows:
Year ended March 31
-------------------
2001 $ 10,200
--------
Total $ 10,200
=========
In the nine months ended December 31, 2000 and 1999 total rent expense under
this lease was $5,100 and $5,100 respectively
The Company's facilities are subject to federal, state and local provisions
relating to the discharge of materials into the environment. Compliance with
these provisions has not had, nor does the Company expect such compliance to
11
have, any material effect on the capital expenditures, revenues or expenses, or
financial condition of the Company. Management believes that its current
practices and procedures for the control and disposition of materials comply
with all applicable federal, state and local requirements.
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.
7. Income Taxes
As of March 31, 2000, the Company has a net operating loss (NOL) carry forward
of approximately $11,250,000. The net operating loss carry forwards expire
between 2007 and 2015. No deferred tax asset has been recorded for these losses
since a valuation allowance has been recorded for the portion of the NOL that
is not expected to be realized.
8. New Authoritative Pronouncements
The Company intends to adopt Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities," as of
the beginning of its fiscal year 2001. The standard will require the Company to
recognize all derivatives on the balance sheet at fair value. The effect of
adopting the standard is not expected to have a material effect on the
Company's financial position or overall results in operations.
9. 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, 2000 was $164,635. The Company incurred a net loss of $884,110 for the year
ended March 31, 2000 and has a working capital deficit as of March 31, 2000 of
$2,421,343. This trend continued for the nine ended December 31, 2000.
12
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: February 27, 2001 By: /s/ Jody P. Lenihan
---------------------------
Jody P. Lenihan, Vice President
[CAPTION]
FINANCIAL DATA SCHEDULE
[TYPE]EX-27
<SEQUENCE>2
[DESCRIPTION]FINANCIAL DATA SCHEDULE
[ARTICLE] 5
[MULTIPLIER] 1
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] MAR-31-2000
[PERIOD-START] MAR-31-2000
[PERIOD-END] DEC-30-2000
[CASH] 757
[SECURITIES] 0
[RECEIVABLES] 137,222
[ALLOWANCES] 0
[INVENTORY] 0
13
[CURRENT-ASSETS] 135,496
[PP&E] 219,987
[DEPRECIATION] 0
[TOTAL-ASSETS] 4,444,646
[CURRENT-LIABILITIES] 2,057,878
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 207,882
[OTHER-SE] 9,918,230
[TOTAL-LIABILITY-AND-EQUITY] 4,444,646
[SALES] 167,292
[TOTAL-REVENUES] 167,292
[CGS] 63,442
[TOTAL-COSTS] 63,442
[OTHER-EXPENSES] 0
[LOSS-PROVISION] (681,139)
[INTEREST-EXPENSE] ( 0)
[INCOME-PRETAX] (66848)
[INCOME-TAX] 0
[INCOME-CONTINUING] (681,139)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (681,139)
[EPS-BASIC] (.01)
[EPS-DILUTED] (.01)
14