-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TixPiQPU+UL+8v8/gKHb2tKwEOLw+fM7qJUFgmiqT0u5BTHoK232o1EWTUeuS59e y80N1fBActZE6tYIswiiYA== 0001072588-99-000117.txt : 19991115 0001072588-99-000117.hdr.sgml : 19991115 ACCESSION NUMBER: 0001072588-99-000117 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATCHOUT INC CENTRAL INDEX KEY: 0000736314 STANDARD INDUSTRIAL CLASSIFICATION: OIL ROYALTY TRADERS [6792] IRS NUMBER: 840959153 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-11424 FILM NUMBER: 99747886 BUSINESS ADDRESS: STREET 1: 1900 N W CORP BLVD STREET 2: SUITE 400 E CITY: BOCA RATON STATE: FL ZIP: 33431 BUSINESS PHONE: 9548037480 MAIL ADDRESS: STREET 1: 1900 N W CORP BLVD STREET 2: SUITE 400 E CITY: BOCA RATON STATE: FL ZIP: 33431 FORMER COMPANY: FORMER CONFORMED NAME: WHITE CLOUD EXPLORATION INC DATE OF NAME CHANGE: 19920703 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the quarterly period ended: March 31, 1999 Commission File number: 0-114244 WATCHOUT! INC. (Exact name of registrant as specified in its charter) Utah 84-0959153 State or Other Jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 116 Stanyan, San Francisco, California 94118 (Address of principal Executive Offices Zip Code) Registrant's telephone number, including area code: 415-387-3135 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 the filing requirements for at least the past 90 days. Yes X No ____ As of March 31, 1999, there were 15,030,245 outstanding shares of common stock, par value $.0001.
PART 1. FINANCIAL INFORMATION ITEM 1. Financial Statements WATCHOUT! INC. Balance Sheet (Unaudited) ASSETS March 31, 1999 December 31, 1998 --------------------------- ---------------------------- Current Assets Cash 0 580 Accounts Receivable 0 - Less Allowance for Doubtful Accounts 0 - --------------------------- ---------------------------- 580 Inventory 0 - Total Current Assets 0 580 Property, Plant and Equipment 0 - Less Accumulated Depreciation 0 - --------------------------- ---------------------------- Total Property and Equipment 0 - Other Assets Due from member 0 - Organization Costs 15,250 15,250 Less Accumulated Amortization (3,812) (3,050) --------------------------- ---------------------------- Total Other Assets 11,437 12,200 --------------------------- ---------------------------- TOTAL ASSETS 11,437 12,780 =========================== ============================ LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities Accrued Expenses 537,213 537,213 Accounts Payable 475,989 475,989 Due to Stockholders 457,945 457,945 Due to Factor 0 - Line of Credit 0 - Notes Payable 450,000 450,000 --------------------------- ---------------------------- Total Current Liabilities 1,921,147 1921,147 Stockholders' Equity (Deficit) Preferred Stock, no par value 10,000,000 shares authorized, no shares issued or outstanding 0 - Common Stock, $.001 par value, 50,000,000 shares authorized, 15,030,245 shares issued and outstanding 15,030 15,030 Additional Paid in Capital 989,502 989,502 Accumulated Deficit (2,914,241) (2,914,241) --------------------------- ---------------------------- Total Stockholders' Deficit (1,909,709) (1,908,367) --------------------------- ---------------------------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 11,437 12,780 =========================== ============================
WATCHOUT! INC. Consolidated Statement of Income and Expense (Unaudited) For the three months ended March 31, 1999 1998 ---------------------------- ------------------------------ OPERATING REVENUES Revenues 0 $198,397 Cost of goods sold 0 22,972 ---------------------------- ------------------------------ Gross profit 0 175,426 OPERATING EXPENSES Royalties 0 - Research & development 0 23,955 Selling expenses 0 27,479 Professional fees 0 20,561 General & Administrative 580 6,937 Marketing 0 1,250 Commitment/Loan Fees 0 - ---------------------------- ------------------------------ Total operating expense 580 80,182 ---------------------------- ------------------------------ OPERATING PROFIT (LOSS) (580) 95,244 OTHER (REVENUES) & EXPENSES Interest expense 13,500 4,268 Miscellaneous income 0 (1,691) Loss on sale of receivables 0 138,528 ---------------------------- ------------------------------ Total other revenues & expenses 13,500 141,105 NET INCOME (LOSS) (14,080) (45,861) ============================ ============================== LOSS PER SHARE Primary (0.00) (0.00) Weighted number of shares outstanding 15,030,245 15,030,245
The accompanying notes are an integral part of this financial statement
WATCHOUT! INC. Consolidated Statement of Cash Flows (Unaudited) Quarter Ended March 31 1999 1998 ---------------------------- ---------------------------- Cash flows from Operating Activities Net income (loss) (580) (45,861) Depreciation & amortization (Increase) decrease in Accounts Receivable 0 (40,503) (Increase) decrease in Inventory 0 0 (Decrease) increase in Accrued Expenses 0 (157) (Decrease) increase in Accounts Payable 0 11,588 (Decrease) increase in Interest Payable 13,500 (2,663) Net cash flows used for Operating Activities (14,080) (77,596) Cash flows from investing activities (Purchase) sale of Fixed Assets 0 (12,954) (Purchase) sale of Other Assets 0 50,889 ---------------------------- ---------------------------- Total cash used for investing 0 37,935 Cash flows from financing activities (Decrease) increase in Due to Stockholders 0 9,000 (Decrease) increase in Due to Member 0 (11,188) (Decrease) increase in Line of Credit 0 (11,591) (Decrease) increase in Notes Payable 0 0 Additional capital invested 0 0 ---------------------------- ---------------------------- Total cash from financing activities 0 (13,779) Increase (Decrease) in cash (580) (53,440) ---------------------------- ---------------------------- Cash and cash equivalents - beginning of period 580 59,147 ---------------------------- ---------------------------- Cash and cash equivalents - end of period 0 5,707 ============================ ============================
The accompanying notes are an integral part of this financial statement WATCHOUT! INC. NOTES TO FINANCIAL STATEMENTS 1. Organization and Summary of Significant Accounting Policies: Organization- White Cloud Exploration, Inc. (the Company) was incorporated in the State of Utah on July 22, 1983, for the purpose of obtaining capital to seek potentially profitable business opportunities. Since inception, the Company has been engaged in organizational activities. The Company acquired two entities, Watchout, a California Corporation, and Goldpoint International, a limited liability company. White Cloud Exploration, Inc. changed its year-end from June 30 to December 31. The Company changed its name to WatchOut! Inc. on November 9, 1998. The Company has ceased all business activities due to lack of operating capital. 2. General and Summary of Significant Accounting Policies Property and Equipment- Property and equipment are stated at cost. Depreciation is computed using the double-declining balance method over estimated useful lives of 5 years. Other Assets- Other assets consists of organizational costs and trademarks which have been capitalized and are being amortized over 5 and 40 years, respectively, using the straight-line method. Research and Development- Research and development costs are expensed when incurred. Uses of Estimates- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported activities during the reporting period. Actual results may differ from those estimates. 3. Related Party Transactions Watchout has recorded unsecured, non-interest-bearing amounts due to stockholders for the reimbursement of expenses. There are no specific repayment terms; however, these amounts are expected to be repaid within 12 months of the balance sheet date. Watchout has also recorded $457,945 in amounts due to stockholders. The amounts are payable on demand at an interest rate of 5.81%. 4. Changes in Control 5. Commitments and Contingencies License Agreement- On September 21, 1995 Watchout entered into a license agreement with an unrelated third party for the use of patents and technical knowledge. The agreement provides for minimum payments for the first four years through September 1999, totaling $915,000, which may be offset by the payment of royalties as a percentage of sales. The agreement may be canceled at any time, without cause, by Watchout, with 60 days notice and with no further liability. In addition to expense reimbursements of $20,000,minimum payments in the amount of $225,000 and $296,250 have been made for 1997 and 1996, respectively, and are reported as royalties in the accompanying Statement of Operations. The Agreement is in default and is in litigation. Investment by Distribution- Watchout entered into an agreement with a distributor on July 21, 1996. The agreement provides that the distributor invest $500,000 - $250,000 as a cash payment to Watchout and $250,000 to be made available to Watchout for use in Hong Kong, oversees production, quality WATCHOUT! INC. NOTES TO FINANCIAL STATEMENTS assurance/quality control and establish a $150,000 standby letter of credit. In exchange, Watchout will issue the distributor 4% of the common stock outstanding as of the date of the agreement, grant distribution rights in Southeast Asia (except Japan), pay 9% commission based on the factory store costs of the product, and grant the right to open Watchout retail stores in all of Southeast Asia. The agreement will remain in effect for a minimum of four years or until the distributor's investment of $500,000 is earned through commissions. Placement Agreement- On February 5, 1997, Watchout entered into an agreement with a placement agent to secure additional capital or financing in the minimum amount of $6,000,000. The agreement requires Watchout to pay commissions to the placement agent equal to 10% of the additional capital or financing received and a non-accountable expense allowance equal to 3% of the additional capital or financing. In addition, Watchout is partially responsible for certain expenses incurred by the placement agent upon closing. In 1996, commitment fees paid to the placement agent amounted to $20,000. No fees were paid in 1997 under this agreement. As a condition of the agreement, the placement agent reserved the right of first refusal to underwrite or place any future public or private sales of debt or equity securities of Watchout, including those involving any principal stockholders of the Watchout through November 19, 1999. Watchout has also agreed to pay the placement agent a 5% finder's fee in the event that they are party to any merger, acquisition or joint venture introduced directly or indirectly by the placement agent. In connection with the placement agreement, the Board of Directors issued 3,639,925 shares of common stock to the placement agent for $500. The shares may be repurchased on a pro rata basis if $6,000,000 is not raised pursuant to the terms of the aforementioned agreement. Stock Warrants- In connection with the loan agreements dated September 19, 1997, Watchout agreed to pay finder's fees to a third party. The agreement requires payment of finder's fees in the form of $32,500 at the closing of the loans and 250,000 stock warrants with an exercise price of $.10 a share expiring on December 19, 2000. Payment of the finder's fees had not been made as of the balance sheet date, however, the $32,500 fee has been accrued at December 31, 1997. The warrants are to be issued when and if the private placement described previously under Placement Agreement is consummated. In connection with the loans arranged for by Sands Brothers & Co., Ltd. ("Sands Brothers"), White Cloud Exploration has agreed to issue stock warrants to Raymond J. Larkin, Watchout-Goldpoint Partners, L.P., Sands Brothers and Mark Hollo totaling 75,000, 225,000, 25,000 and 25,000 shares respectively, with an exercise price of $.01 a share, expiring on September 3, 2000. 6. Line of Credit A promissory note to Goldpoint International, LLC of $54,968 payable with interest 60 days from the date of each cash advance under a letter of credit issued by Opal Trade Corporation. Interest accrues at a rate of 4% over the prime rate designated by Chemical Bank. This note is collateralized by the assets of the company. 7. Loan Payable ( a ) Two 18% promissory notes of $150,000 and $50,000 due September 3, 1998. These notes are considered Senior and have priority in right of payment over all indebtedness of the company. ( b ) A 12% promissory note of $166,000 payable to John Bader in one payment of principal and interest due on demand or at the time of first funding of a private placement of stock in the amount of $6,000,000 by Watchout. All sums past due shall bear interest at 18% from their maturity date. Collateral security includes the first $1.32 per unit production proceeds upon the sale of certain products. WATCHOUT! INC. NOTES TO FINANCIAL STATEMENTS ( c ) A 12% promissory note of $84,000 payable to Wayne Williams in one payment of principal and interest due on demand or at the time of first funding of a private placement of stock in the amount of $6,000,000 by Watchout. All sums past due shall bear interest at 18% from their maturity date. Collateral security includes priority assignment of contract rights to the next $0.68 per unit in production proceeds, second only to the $1.32 per unit assigned to John Bader from proceeds from certain products. 8. Going Concern The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the company as a going concern. However the company has sustained substantial operating losses in recent years. In addition, the company has used substantial amounts of working capital in its operations. Further, at March 31, 1999 current liabilities exceed current assets by $1,921,147, and total liabilities exceed total assets by $1,909,710. In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon continued operations of the company, which in turn is dependent upon the company's ability to meet its financing requirements, and the success of its future operations. Management believes that actions presently being taken to revise the company's operating and financial requirements provide the opportunity for the company to continue as a going concern. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for the Quarter in 1999 Compared to Same Quarter in 1998 The Company had no revenue and no operations in the first quarter of 1999. On a consolidated basis, after the acquisition of Goldpoint and Watchout! subsidiaries, the Company had revenues in the first quarter of 1998 of $198,397. The cost of goods sold in the three month period was none in 1999 compared to 1998 which cost of goods was $22,572. The gross (loss) profit for the 1998 period was $0 compared to ($175,426) for the 1999 period. The Company incurred operating expenses for the three month period of $580 in 1999 compared to $80,182 in the same period in 19987. The Company recorded a net operating loss of ($580) for the 1999 period as compared to a $95,244 operating profit for the same period in fiscal year 1998. The net income (loss) for the 3 month period in 1999 was ($14,080) compared to ($45,861) in 1998. 1999 quarter losses were attributable to interest accrual. The Company losses will continue until a business is recommended. While the Company is seeking capital sources for investment, there is no assurance that capital sources can be found. The loss per share for the 1999 first quarter was nominal compared to a nominal loss in the first quarter of 1998 Liquidity and Capital Resources The Company had no cash capital at the end of the period. The Company will be forced to make private placements of stock in order to fund operations continuance. No assurance exists as to the ability to make private placements of stock. It had no accounts receivable or assets at quarter end. The Company has significant current liabilities to lenders which exceed current assets by approximately $1,921,147. The Company is in default on notes in the amounts of $450,000, although no demand for payment has been issued. PART II OTHER INFORMATION Item 1. Legal Proceedings - None. Item 2. Changes in securities - None. Item 3. Defaults upon senior securities - None. Item 4. Submission of matters to a vote of security holders - None. Item 5. Other information - None. Item 6. Exhibits and reports on Form 8-K (a) The following are filed as Exhibits to this Quarterly Report. The numbers refer to the Exhibit Table of Item 601 of Regulation S-K: None. (b) Reports on Form 8-K filed during the three months ended March 31, 1999. (incorporated by reference) None. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized. Dated: November 7, 1999 WATCHOUT! INC. /s/ Kevin Waltzer by:-------------------------------- President EX-27 2 FDS --
5 3-MOS DEC-31-1999 MAR-31-1999 0 0 0 0 0 0 0 0 11437 1921147 0 0 0 15030 (1924739) 11437 0 0 0 0 580 0 13500 (14080) 0 0 (14080) 0 0 (14080) (.00) (.00)
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