SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Fiscal Year Ended September 30, 1999
or
[] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number 000-21235
BarPoint.com, Inc.
(Name of Small Business Issuer in Its Charter)
Delaware
(State or Other Jurisdiction of 11-2780723
Incorporation or Organization) (I.R.S. Employer Identification No.)
One East Broward Blvd., Suite 410, Ft. Lauderdale, FL 33301
(Address of Principal Executive Offices) (Zip Code)
Issuers Telephone Number: (954)-745-7500
Securities registered pursuant to Section 12(b) of the Act:
None
(Title or Class)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title or Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
twelve (12) months (or such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past ninety (90) days. [x] Yes [] No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer has 15,408,238 shares of Common Stock outstanding as of
December 23, 1999.
The issuer's revenues for the fiscal year ended September 30, 1999 were
$0.
The aggregate market value of the outstanding common stock held by
non-affiliates of the issuer on December 17, 1999 (computed by reference to the
last reported sales price of the issuer's common stock on the OTC Bulletin
Board) was $26,550,375.
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PART I
BarPoint.com cautions readers that certain important factors may affect
its actual results and could cause those results to differ significantly from
any forward-looking statements made in this Form 10-KSB or otherwise made by or
on behalf of BarPoint.com. For this purpose, any statements contained in this
Form 10-KSB that are not statements of historical fact should be considered to
be forward-looking statements. Words such as may, expect, believe, anticipate,
intend, could, estimate, or continue or the negatives of those words, or other
comparable terminology, are intended to identify forward-looking statements.
These statements appear in a number of places in this Form 10-KSB, including in
Item 1 and Item 6, and include statements as to the intent, belief or
expectations of BarPoint.com and its management as of the date of this report.
Actual results and the occurrence or timing of certain events could differ
materially from those projected in any of such forward-looking statements due to
a number of factors, including those set forth under "Factors Affecting Our
Operating Results, Business Prospects and Stock Price" and elsewhere in this
Form 10-KSB.
Item 1. Business
Overview
BarPoint has developed and recently launched a comparative shopping and
consumer information Internet site utilizing proprietary reverse search
technology that enables consumers to search the Internet for product-specific
information using universal product codes, known as UPCs or barcode numbers.
Barcode numbers are an international standard identifier for retail products.
BarPoint has compiled an extensive database, which includes information on
approximately 20 million of what we believe to be more than 100 million US
retail products with UPC barcode numbers. The BarPoint service can be accessed
from a desktop computer or a wide variety of Internet-enabled handheld mobile
devices, such as personal digital assistants (PDAs), interactive pagers and cell
phones. By typing or scanning the barcode number that manufacturers attach to
their products, consumers gain access to a variety of information gathered by
BarPoint on the specific product, including:
manufacturer contact information;
product reviews, specifications and other related information;
comparative pricing from a variety of on-line
(and, in some cases, retail) sources; and
links to purchase the item from a variety of e-commerce vendors.
On December 6, 1999, we "soft-launched" our preview website,
www.barpoint.com, where consumers can access our database to search for
information in the following select categories: audio books, books, videos, DVDs
and music. In addition, visitors to our preview website can download free
software for the Palm VII PDA manufactured by 3 Com/Palm Computing, which
enables them to access our database from the Palm VII on a wireless basis. We
intend to launch a more complete version of our website with additional
categories and features in early 2000. We also plan to release versions of our
technology for additional wireless mobile devices, including other Palm OS and
Windows CE hand-held computers, interactive pagers from Research in Motion and
Motorola, and Internet enabled cellular phones. Since our technology allows the
consumer to comparison shop in a retail store with a hand-held wireless device
and to place orders to purchase through e-commerce the item they are viewing in
the retail store, we believe that BarPoint, by placing product information in
the hands of the consumer, has the potential to revolutionize the way people
shop and how traditional retailers compete for customers. As of December 22,
1999 we had e-commerce agreements with 310 e-commerce vendors including
Amazon.com, ValueAmerica, Cyberian Outpost, eToys and Tower Records.
Company History
Our company was incorporated in Delaware on December 19, 1995 under the
name The Harmat Organization, Inc. and began operations as a construction,
architectural landscape design and real estate development firm. Beginning in
1997, we believed that it was in the best interest of the shareholders of our
company to change our direction away from the real estate business. The real
estate market in which we concentrated changed, and management felt that there
were fewer prospects for significant profit in the future. We began making
strategic investments in technology oriented companies.
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On June 3, 1999, we acquired all of the shares of BarPoint.com, Inc., a
Florida corporation, and began to develop our current line of business. The
transaction was accounted for as a reverse acquisition, as if the Florida
corporation had acquired us, because the former shareholders of BarPoint.com,
Inc. owned a majority of our outstanding common stock after the transaction.
Following the acquisition, we changed our name to BarPoint.com, Inc. The Florida
corporation that we acquired is now our wholly-owned subsidiary.
Industry Overview
We believe that the development of alternative Internet access devices
is a principal factor in the growth of Internet traffic. International Data
Corporations estimates that in 1998 approximately 92% of all Internet access was
achieved from personal computers. However, International Data Corporation
projects that in 2002 only 67% of Internet access will be through personal
computers. Alternative Internet access devices include NetTVs, Internet
screenphones, and handheld devices. We believe that handheld devices, including
PDAs, will become more prevalent. The mobile nature of the Internet access that
will be developing over the next few years will allow users to undertake
"point-of-sale" comparative shopping, using enhanced product-specific search
technology like the BarPoint Shopper.
The Internet provides consumers with numerous sources of information
and numerous sites to purchase items electronically. An increasing number of
Internet users are spending an increasing amount of money on online retail
spending. International Data Corporation estimates that the number of U.S
Internet users was approximately 62.8 million in 1998 and will grow to
approximately 148.6 million by the end of 2002. Jupiter Communications, Inc.
projected that online shopping in the U.S. was approximately $7.8 billion in
1998 and will reach approximately $41 billion by 2002. We believe that, as the
number of electronic commerce transactions increases, more efficient
product-specific search capabilities will be increasingly attractive.
Most current search technology is text-based, relying on the searcher
to identify "key words" to search for the item. This search methodology can be
useful for searching text archives, but can be inexact and inefficient for
searching for particular products. To find a product using current search
methodologies, users often undertake multiple levels of searches in a
time-consuming process. In contrast, UPC barcode numbers provide an efficient
search criteria to locate detailed information regarding a particular product.
Each UPC barcode number is unique to a specific manufacturer's product. By using
these barcodes and adding a wide range of supplemental product information, we
believe we have created a powerful and efficient way to track and search for
product-specific information regarding the manufacturer, product and pricing.
Strategy
BarPoint intends to establish itself as the leading product-specific
comparative information and shopping service for mobile and online e-commerce.
BarPoint seeks to achieve this goal by:
Integrating BarPoint's Technology into New and Existing Avenues of Internet
Access. To attract consumers who access the Internet through personal computers,
we intend to license our patent pending technology to other portal and search
engine sites. In addition, we provide consumers the opportunity to enter a UPC
barcode number into a handheld device and access information about the product,
including competing prices and reviews, while at the store. Currently this is
possible by downloading our BarPoint ShopperTM application for the Palm VII
device. We are also developing applications for use with other PDAs and portable
wireless devices, and are working with manufacturers to bundle our technology
into their existing and future products.
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Pursuing Strategic Relationships. We have established a strategic
relationship with Symbol Technologies, Inc. (See "Strategic Relationships
and Acquisition"), and we intend to establish and expand strategic
relationships with content providers, technology manufacturers,
distributors and others. We intend to capitalize on existing relationships
by offering opportunities to sponsor categories of products on the BarPoint
web site and mobile devices and by entering into co-branding relationships.
We are currently planning and intend to cross-promote and/or bundle
products with a wide range of wireless Internet devices including those
manufactured by Symbol and 3COM among others.
Establishing a Brand Identity. BarPoint will seek to build its brand
identity through traditional advertising and promotional vehicles in order
to generate high traffic levels to the BarPoint web site and consumer
awareness of the BarPoint name. We have entered into an agreement with
Wunderman Cato Johnson, a division of Young & Rubicam, Inc. to develop our
advertising and marketing strategy and promote our brand recognition.
Capitalizing on multiple avenues of generating revenues. While many
Internet sites hope to generate revenues simply from advertising on
e-commerce, BarPoint intends to generate revenues from these sources and
through licensing, manufacturer listings, sponsorship and data-mining. As
with other heavily trafficked web sites, www.barpoint.com will sell banner
advertisements and sponsorship buttons throughout its pages. Manufacturers
and retailers will have the opportunity to add supplemental product
information to the BarPoint search results and ensure that their products
appear in the comparative and related products sections when searches are
conducted for similar and/or competitive products. In return for monthly
and/or annual fees, retailers and e-commerce sites will have the
opportunity to sponsor a product category resulting in their link being
given premium placement when a user submits a UPC barcode number to the
sponsored product category. As of December 22, 1999, we had agreements with
310 e-commerce sites to pay BarPoint, on a percentage basis, for each
referral that generates revenue. In addition, we plan to charge retailers,
manufacturers and others for access to our My BarPoint database which
allows a company to reach customers by certain demographic characteristics.
Database and Products
The BarPoint technology can be accessed via the Internet at
www.barpoint.com from desktops or handheld wireless devices. It is presently
available on a variety of hand-held and wireless devices including the Palm VII
from 3COM/Palm Computing, interactive pagers such as those from Research In
Motion, and the SPT 1500, a Palm VII with a built-in scanning device,
manufactured by Symbol Technologies. Our web site currently allows UPC searches
in the following categories:
o audio books;
o books;
o DVDs;
o music; and
o videos.
We expect to add search capabilities for additional categories of
products, including computer hardware and software, groceries, automotive,
office supplies, pet supplies, toys, hardware, vitamins and pharmaceuticals,
electronics and more.
Additional features we are developing include the My BarPoint service,
BarPoints(TM), and the sale of barcode input devices. The My BarPoint service
will allow members to store product UPC barcode numbers and receive free e-mail
messages about the products, such as coupon information, warranty registration,
new product releases, rebates, special offers, recalls and auctions.
BarPoints(TM) is a loyalty rewards program for frequent users of our BarPoint
technology. We plan to offer for sale new products containing barcode scanning
features including the SPT 1500, a Palm Computing PDA manufactured by Symbol
Technologies.
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Strategic Relationships and Acquisition
As part of our strategy, we have entered into strategic relationships and
pursued acquisitions with content providers, technology manufacturers and
distributors, including the following:
In August 1999, we announced a strategic partnership with Symbol
Technologies, Inc. As part of the strategic partnership Symbol Technologies
purchased 1,315,789 shares of our common stock representing approximately
9% of our outstanding common stock and granted us a royalty free license to
use Symbol's scanner patents. We agreed to sell Symbol SPT 1500 machines
and grant Symbol the right to designate one designee to our board of
directors. Symbol manufactures a wide range of barcode scanning hardware
that is compatible with BarPoint's service, including the SPT 1500, a
handheld organizer using the popular Palm platform with a built in laser
barcode scanner.
In August 1999, we announced a partnership with JP Systems, Inc. to
integrate our BarPoint Shopper technology into JP Systems' Info Beam
content package for wireless devices. InfoBeam software provides on-demand
access to data and is available for a number of popular handheld devices
and PDAs working with two-way pagers, wireless modems or cell phones. In
November 1999, Motorola announced that it would be offering JP Systems Info
Beam, including BarPoints UPC search service, on its new Pagewriter 2000x
Interactive Pager.
On November 5, 1999, BarPoint acquired Synergy Solutions, Inc., which
creates commercial applications for Palm Computing devices. Synergy
Solutions products are currently sold at major on-line, retail, and catalog
software vendors. We hope that Synergy Solutions, as a wholly-owned
subsidiary of BarPoint, will drive the core development of handheld
applications and mobile e-commerce solutions to further enable and enhance
consumer buying decisions and shopping experiences through UPC barcode
numbers, while continuing to provide the high level of quality of the Palm
OS applications they have developed in the past.
We have made an association with Konover Property Trust, Inc. (NYSE:KPT),
a fully integrated shopping center real estate investment trust, to
collaborate to combine the experience of traditional retail shopping with
the breadth of information, selection and convenience of e-commerce on
truefinds.com, an online shopping site created by Konover. This
collaboration will allow consumers to use and benefit from the unique UPC
barcode that identifies brand name products. An online shopper will enter a
particular item's UPC number at truefinds.com, and the BarPoint service
will provide a virtual connection to a store's inventory to determine if
that product is available in a different color or size or to gather
additional information about the product.
The Company has an alliance with Go America, a leading wireless Internet
Service Provider (ISP) to offer BarPoint's service to its wireless
customers on devices such as the Research In Motion (RIM) interactive
pager, as well as handheld devices using wireless modems and Go America's s
internet service.
Technology
BarPoint utilizes proprietary 'reverse search' technology that enables
consumers to search the Internet for product-specific information using UPC
barcode numbers. When a UPC barcode number is entered, BarPoint's technology and
database is used to first identify the item, as well as its manufacturer and
product category. Then, using that information, BarPoint's search technology
collects a wide range of product details, links and related information. All of
this information is returned to the consumer in the BarPoint search results
page.
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Currently, our web site is hosted on Unix based equipment from Sun
Microsystems and our primary database is stored using Oracle 8i software. The
server equipment is located at Global Crossings, Inc., which we believe to be a
tier 1 Internet provider.
The BarPoint service is available through accessing www.barpoint.com
through which UPC barcode number searches can be executed by simply typing or
scanning in a UPC barcode number. If a consumer visiting the BarPoint site does
not have the UPC barcode number handy for the product they are interested in,
they can also conduct a search by entering a text description of the desired
item. Our company has also introduced the BarPoint Shopper(TM) web clipping
application for the Palm VII wireless organizer from 3Com/Palm Computing, and
will be releasing versions of the BarPoint Shopper(TM) for many wireless mobile
devices including other Palm OS and Windows CE handheld computers, interactive
pagers from RIM and Motorola and cellular phones. Customers are able to see an
item they wish to purchase in a retail store and enter the item's barcode into a
handheld device and obtain detailed product information, including comparative
prices from a variety of vendors.
Sales and Marketing
We plan to generate revenue from the BarPoint portal and BarPoint
Shopper in the following ways:
establishing sponsorship arrangements for product search categories with
leading online brands, both on our website and on mobile devices;
selling advertising space on the BarPoint free software and web site;
offering manufacturers and retailers the opportunity to list supplemental
product information with the BarPoint search results for their products;
offering manufacturers and retailers the opportunity to list their
product in BarPoint's comparative and related product sections when
searches are done for similar or competitive products;
entering into revenue sharing arrangements with e-commerce partner sites
for any BarPoint referred online customer;
sales of hardware through our website; and
licensing fees from other Internet sites that license our technology.
As of December 22, 1999, we have entered into e-commerce agreements
with 310 e-commerce vendors including companies such as Amazon.com,
ValueAmerica, Cyberian Outpost, eToys and Tower Records. These e- commerce
agreements are industry standard agreements that Internet companies enter into
in order to provide links from the company's website to an e-commerce vendor's
website. When a customer visits BarPoint and links to one of the e-commerce
vendor companies websites to purchase an item, BarPoint receives a commission.
Typically, these commissions range from 5% to 30% of the sale.
When the My BarPoint service becomes available, we intend to provide
manufacturers, retailers and others the ability to send e-mail or other
notifications to persons who store a particular UPC barcode number on the
service. My BarPoint users will indicate when they register if they would like
to receive such messages.
Our in-house sales force currently includes 2 employees whose sales
focus is on banner advertisements and category sponsorship. We have entered into
a strategic marketing and advertising relationship with Wunderman Cato Johnson,
a division of Young & Rubicam, Inc., who will assist in developing our
advertising and marketing strategy and promoting our brand recognition.
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Research and Development
We believe that strong product development capabilities are essential
to our strategy of continuing to enhance and improve our product offerings both
on our web site and on mobile devices. This process involves continued
investment in equipment, services and qualified personnel to optimize our
ability to adapt to rapidly changing technologies and evolving customer
expectations. Our patent-pending "reverse search" technology has been developed
to be scalable and to provide access to our database of UPC linked product
information from a variety of Internet capable devices, using industry standard
software platforms. Our in-house web development team includes programmers,
engineers, graphic designers, and database administrators.
Research and development expenses were $77,912 for the year ended
September 30, 1999. Research and development expenses to date have been to
development of our large database of products and information linked to the
manufacturer's UPC barcode number, as well as the hiring of personnel. These
numbers do not reflect research and development expenses that were capitalized.
In addition these figures do not reflect the research and development expenses
related to the preview and launch of our web site which occurred subsequent to
September 30, 1999. We expect that research and development expenses in fiscal
year 2000 will significantly exceed our research and development expenses for
fiscal year 1999. See "Factors Affecting Our Operating Results, Business
Prospects and Stock Price" for a discussion of certain risks related to our
research and development.
Intellectual Property
BarPoint's success and ability to compete depend significantly on our
proprietary technology. We have applied for patent protection of our BarPoint
technology. We cannot assure our stockholders that a patent will be issued, or
if issued that it will be upheld against any challenges. In addition, we rely on
copyright, trademark and trade secret laws and confidentiality agreements with
our employees and third parties to protect our intellectual property. We have
applied for registration of two trademarks for the BarPoint name and our logo in
the United States and will seek to register additional service marks and
trademarks as appropriate.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy or otherwise obtain and use our proprietary
information or technology. The laws of some foreign countries do not protect
proprietary rights to the same extent as the laws of the United States and we
currently do not have any patents or patent applications in any foreign country.
In addition, others could possibly independently develop substantially
equivalent intellectual property. If we do not effectively protect our
intellectual property, our business could suffer.
Companies in the computer software industry frequently resort to
litigation regarding intellectual property rights. We may have to litigate to
enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of other parties' proprietary rights. This type
of litigation, even if we are successful, could be time-consuming and expensive,
divert management's attention, cause product or service delays or require us to
enter into royalty or licensing agreements on terms that may not be acceptable
to us. A successful claim of infringement against us could materially adversely
affect our business, financial condition and results of operations.
Competition
The Internet consumer market is a new and rapidly emerging area. We
face competition from a number of established competitors who offer consumer
goods and items on the Internet, as well as product information and price
comparisons, including Yahoo!, Lycos, Excite, My Simon, Comparenet, Amazon.com
and others. Many of our competitors have greater financial, technical, marketing
and other resources. Because barriers to entry are low, new competitors will
continue to emerge.
Our ability to compete successfully depends in part upon our ability
to attract and retain personnel with a wide range of technical capabilities.
Competition for experienced and technically capable personnel is intense, and is
expected to increase in the future. We cannot assure our shareholders that we
will be able to attract and retain the necessary personnel to develop and expand
our business.
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We believe that BarPoint is the first system to search for detailed
product information on the Internet using UPC barcode numbers as the primary
search parameter. If another company develops similar or superior capabilities
or if our concept and technology do not achieve market acceptance, our business,
financial condition and results of operations will be materially adversely
affected.
Employees
As of December 17, 1999, we had 30 employees. None of our employees is
represented by a labor union and we consider our relationship with our employees
to be good. We believe that our future success will depend upon our ability to
attract and retain qualified personnel, in spite of the intense competition for
technically capable personnel.
Item 2. Properties
BarPoint currently rents 10,284 square feet of office space at One East
Broward Boulevard, Suite 410, Ft. Lauderdale, FL 33301 under a temporary lease
that expires December 31, 1999. We are currently in the process of negotiating a
new lease that we expect will have a term of five years commencing January 1,
2000. If we fail to execute the new lease, we are obligated to pay the landlord
$200,000 in agreed upon liquidated damages.
On September 21, 1999 we entered into a contract of sale to sell
land held for sale for $175,000. The sale closed on December 18, 1999. We will
recognize income of approximately $25,000, before commissions and other selling
expenses.
Item 3. Legal Proceedings
BarPoint is not currently involved in any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
In June 1999, by written consent of our shareholders, holding a
majority of the shares of our company entitled to vote, voted to amend our
certificate of incorporation in accordance with Delaware Law to change our name
to BarPoint.com, Inc.
PART II
Item 5. Market for Common Equity and Related Shareholder Matters
Our common stock is traded on the OTC Bulletin Board under the symbol
BPNT. Before we changed our name to BarPoint, our common stock traded on the OTC
Bulletin Board under the symbol HMAT. Prior to our initial public offering under
the name The Harmat Organization on September 9, 1996, there was no public
trading market for such shares. The following table sets forth the high and low
closing bid quotations for the company's common stock:
Fiscal Year High Low
2000
First Quarter (through 12/21/99) $15 1/2 $4 3/4
1999
First Quarter $ 5/8 $ 1/4
Second Quarter $31/2 $ 9/16
Third Quarter $6 3/16 $3 1/8
Fourth Quarter $5 19/32 $4 1/16
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1998
First Quarter $ 3/8 $ 1/8
Second Quarter $ 1/4 $ 1/8
Third Quarter $13/32 $ 1/4
Fourth Quarter $ 3/8 $ 1/8
The above quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission. These quotes are not necessarily
representative of actual transactions or of the value of our common stocks, and
are in all likelihood not based upon any recognized criteria of securities
valuation as used in the investment banking community.
As of November 19, 1999 there were 1,035 record holders of our
company's common stock.
Dividend Policy
Generally we do not pay dividends and we have no present intention of
paying cash dividends in the foreseeable future. However, we declared a stock
dividend of an aggregate of 878,770 shares of the Company's common stock to
shareholders of record on June 2, 1999 and distributed on October 19, 1999, pro
rata to their shareholding.
Recent Sales of Unregistered Securities
In June, 1999, we issued 6,634,042 shares of common stock in connection
with our acquisition of BarPoint.com, Inc. The transaction was valued at $1.90
per share, but is subject to adjustment based on the value of certain assets
subsequent to the date of closing. We believe this transaction is exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
On June 14, 1999, we completed a private placement of an aggregate of
541,318 shares of common stock to six accredited investors for gross proceeds of
approximately $1,028,500. We believe this transaction is exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended, and
Rule 506 promulgated thereunder.
On August 4, 1999 and August 5, 1999, the company concluded private
placements of an aggregate of 3,958,550 shares of common stock to Symbol
Technologies, Inc. and 59 accredited investors and received gross proceeds of
approximately $6,166,500 in cash and a subscription note. We believe this
transaction is exempt from registration under Section 4(2) of the Securities Act
of 1933, as amended, and Rule 506 promulgated thereunder. (See "Strategic
Relationships and Acquisition" and "Other Related Transactions".)
Item 6. Management's Discussion and Analysis or Plan of Operations
Overview
On June 3, 1999, we acquired all issued and outstanding shares of
BarPoint.com, Inc. in exchange for 6,634,042 shares of our common stock. The
transaction was accounted for as a reverse acquisition, as if BarPoint acquired
us, because the former shareholders of BarPoint owned a majority of our common
stock after the transaction. As a result of a post-closing adjustment provision
we issued a stock dividend to owners of shares of Harmat common stock as of June
2, 1999 of a total of 878,770 shares of our common stock. The consolidated
financial statements presented herein for the periods prior to the effective
date of the acquisition only include the accounts of BarPoint, because we have
discontinued our prior real estate development business. The consolidated
statement of shareholders' equity has been converted from BarPoint's capital
structure to Harmat's capital structure to reflect the exchange of shares
pursuant to the merger agreement. Comparative financial statements are not
included as a result of this reverse acquisition.
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The financial statements reflect the financial position and results of
operations of BarPoint and our subsidiaries on a consolidated basis, which
reflects our current organizational structure. Our policy is to consolidate all
majority -owned subsidiaries. All inter-company amounts have been eliminated in
consolidation.
On December 6, 1999, we launched a preview version of our website,
www.barpoint.com, which features a patent-pending search engine and software
technology that allows consumers to use the standard UPC barcode number that
appears on what we believe to be more than 100 million retail items to search
for product-specific information from and shop for products on the Internet. We
intend to launch a more complete version of our website with additional
categories and features in early 2000.
Results of Operations
Loss from operations were $.05 per common share for the year ended
September 30, 1999. As of September 30, 1999, we had no current revenue stream;
however with our December 6, 1999 launch of our preview website, and our more
complete launch in early 2000, we expect to begin to book revenues. We also
expect that near term operational losses will continue for the foreseeable
future because of advertising, research and development and administrative
expenses. We intend to generate future revenues from commissions, advertising
and other sources.
Selling, general and administration expenses were $832,290 for the year
ended September 30, 1999. Selling, general and administration expenses consist
primarily of professional fees, hiring of personnel, travel and entertainment.
Research and development expenses were $77,912 for the year ended
September 30, 1999. Research and development expenses were primarily due to
development of our large database of products and information linked to the
manufacturer's UPC barcode and hiring of personnel. We anticipate research and
development expenses will increase significantly in the upcoming year.
Advertising expenses were $90,800 for the year ended September 30,
1999. Advertising expenses were primarily related to developing brand
recognition and the launch of our website.
Interest income was $63,607 for the year ended September 30, 1999.
Interest income was primarily due to interest earned form our money market
account.
Liquidity and Capital Resources
As of September 30, 1999, we had approximately $6.0 million in cash
and cash equivalents and $3,223,123 in marketable securities. These marketable
securities consisted of 750,000 shares of Preferred Series D stock of Socket
Communications, Inc. and 425,000 shares of common stock of FinancialWeb.Com,
Inc. The shares of FinancialWeb are not saleable for a one year period.
For the year ended September 30, 1999 , we had cash flow used in
operations of [$679,294]. The negative cash flow was primarily due to the net
loss from operations.
For the year ended September 30, 1999, net cash provided by investing
activities of $361,549 was primarily the result of the reverse acquisition by
the Harmat Organization, Inc.
For the year ended September 30, 1999, net cash provided by financing
activities of $6,291,700 was primarily the result of proceeds form the sales of
common stock in private placements. From June through August 1999, we issued a
total of 4,499,868 shares of our common stock in private placements to
accredited investors for gross proceeds of approximately $7,195,000, which
includes a subscription note receivable of $750,000.
We have federal net operating loss carryforwards (NOL) of approximately
$1,680,000 and expects these NOL to be available in the future to reduce the
federal income tax liability of the Company. However, due to the ownership
change, resulting from the stockholders of BarPoint gaining more than half of
our common stock in the
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merger, our ability to utilize the NOL is restricted under Section 382 of the
Internal Revenue Code. Therefore, a tax benefit has been reflected only to the
extent allowable in the current year.
We believe that cash, cash equivalents and marketable securities,
together with projected cash flow from operations, will be sufficient to meet
our liquidity and capital requirements for the next year, although no assurance
exists that we will not require additional capital prior to the end of such
period.
Subsequent Events
On November 5, 1999, BarPoint acquired Synergy Solutions, Inc., which
creates commercial applications for Palm Computing devices, for 75,000 shares of
BarPoint common stock, $100,000 and additional earn out payments. Synergy
Solutions products are currently sold at major on-line, retail, and catalog
software vendors.
On November 4, 1999, we converted 750,000 shares of our Socket
Communications, Inc. Preferred Series D holdings into 1,307,190 of Socket
Communications common shares which are registered by a prospectus filed August
3, 1999 and amended November 8, 1999.
On September 21, 1999 we entered into a contract of sale to sell land
held for sale for $175,000. The sale closed on December 18, 1999. We will
recognize income of approximately $25,000, before commissions and other selling
expenses.
On June 3, 1999, we issued three shares of preferred stock, one Class I
share, one Class II share and one Class III share. On December 16, 1999,
pursuant to a stock exchange agreement, voting rights were allocated to the
Class I and II shares due to the cancellation of our company's Class A and B
warrants. In connection with the cancellation of all Class A Warrants and Class
B Warrants the Company issued 325,000 shares of common stock. The Class I share
shall vote with the common stock and shall have 216,667 votes. The Class II
share shall vote with the common stock and shall have 108,333 votes. The Class
III share shall vote with the common stock and shall have 346,766 votes. None of
these shares of preferred stock are entitled to any dividends. All voting rights
for these preferred shares end on June 3, 2004. All three shares of preferred
stock were issued to Leigh Rothschild, our Chairman and Chief Executive Officer.
Year 2000 Issues
We may experience the effects of the Year 2000 issue before, on, or
after January 1, 2000, and, if we do not address this issue, the impact on
operations and financial reporting may range from minor errors to significant
systems' failures which could affect our ability to conduct normal business
operations. We believe that by modifying or replacing systems, and by monitoring
the Year 2000 readiness of key external parties, we are mitigating its Year 2000
risks. However, we cannot assure our stockholders that the uncertainties
surrounding the Year 2000 issue will not materially and adversely affect us.
FACTORS AFFECTING OUR OPERATING RESULTS, BUSINESS PROSPECTS
AND STOCK PRICE
This report on Form 10-KSB contains forward-looking statements which
involve risks and uncertainties. The factors described below, among others,
could cause our actual results to differ materially from those anticipated.
Our operating history is limited.
While our company was founded in 1995, we only began our current
operations with the acquisition of BarPoint in June 1999. When we acquired
BarPoint it had been in existence since October 1998. Therefore our results of
operations from prior periods are not indicative of our future results. We face
substantial difficulties as an early stage company in a new and rapidly evolving
industry, and do not have financial results which are relevant to evaluate our
business and our prospects.
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We have a history of operating losses and expect to continue to post
losses.
We incurred a net loss of $438,595 from our inception through September
30, 1999. Prior to the launch of our preview website on December 6, 1999, we had
no revenues. We expect to continue to incur losses in the foreseeable future due
to the advertising, research and development, selling, general and
administrative expenses involved in launching and marketing our website. We have
not yet begun to generate revenues and we are unable to assure our shareholders
that we will achieve profitability, or sustain profitability if attained in the
future.
We expect to experience rapid technological changes and an increase in cost
and competition.
The Internet industry is relatively new and has undergone, and is
expected to continue to undergo, significant and rapid technological changes.
Market penetration and customer acceptance of our business will depend upon our
ability to develop successful marketing strategies as well as our ability to
adapt to rapid technological changes in the industry and integrate our
technology into emerging wireless access devices and other Internet appliances.
We also expect that new competitors may introduce systems or services that are
directly or indirectly competitive with those of our company. These competitors
may succeed in developing systems and services that have greater functionality
or are less costly than our systems and services, and may be more successful in
marketing such systems and services.
We recently launched our website and may not achieve market acceptance.
Our success depends on a sufficient number of Internet users utilizing
our specific technology to enable us to achieve profitable operations. We cannot
predict whether the technology, licenses, and business plan we have developed
will appeal as a package to Internet users. Wide market acceptance will be
necessary to generate profits and enable us to continue in the marketplace.
We are dependent on the Internet and third party Internet providers to
conduct business.
We are dependent on the Internet and third party Internet providers to
conduct our business. If the Internet were to experience technical difficulties
that limit our ability to provide information through our website, limit our
customers' access to our website, or impair our ability to effectively process
information through the Internet, our business would be adversely affected. We
have an agreement with a third party to host our website from their facility in
California. At this time we do not have a redundant host center. If our host
center in California experiences technical difficulties, our website may be
unavailable and our business, reputation, financial condition and results of
operation may suffer.
We may experience the adverse effect of economic downturn.
Our system is dependent upon our customers' shopping habits, consumer
spending capability and their ability to access the Internet. In the event of an
economic downturn or change in consumer patterns, our business could be
adversely affected. For example, if the economy declines, the public's ability
and desire to shop or spend money may significantly decrease. A shift in the
economic environment may cause the public to limit their consumer spending. In
addition, a customers' ability to purchase a computer and access the Internet
may equally be affected in an economic downturn.
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Our current officers and directors can act together to control the actions
of our company.
As of December 23, 1999, our executive officers and directors own a
total of 3,590,969 shares, representing approximately 23.3% of our outstanding
common stock. In addition, Leigh Rothschild holds three shares of Series A
Preferred Stock that vote with the common stock. Class I of the Series A
Preferred Stock has 216,667 votes, Class II of the Series A Preferred Stock has
108,333 votes, and Class III of the Series A Preferred Stock has 346,766 votes.
Jay Linn, one of our directors, is the trustee of Irrevocable Trust No. III, one
of our shareholders who owns 4,973,328 shares of our common stock. Mr. Linn
disclaims all beneficial ownership of these shares. As a result, our officers
and directors are able to control the election of directors and the outcome of
other matters that come before the shareholders. They may defeat a proposed
merger or acquisition which some of our stockholders may consider to be in their
best interest. Management's stock ownership and voting control may also
discourage potential acquirers from making a tender offer or other proposal to
obtain control of our company, even at a premium to the then prevailing stock
price.
We may need to incur litigation expenses in order to defend our
intellectual property rights and might nevertheless be unable to adequately
protect these rights.
We may need to engage in costly litigation to enforce our intellectual
property rights, to protect our trade secrets or to determine the validity and
scope of the intellectual property rights of others. We have applied for one
patent and expect to apply for additional patents, as we deem appropriate. We
cannot assure you that our efforts to prevent misappropriation or infringement
of our intellectual property will be successful. An adverse determination in any
litigation of this type could require us to make significant changes to the
structure and operation of our online services and features or to license
alternative technology from another party. Implementation of any of these
alternatives could be costly and time-consuming and may not be successful. Any
intellectual property litigation would likely result in substantial costs and
diversion of resources and management attention.
Our success largely depends on our trademarks and internally developed
technologies, including our Internet systems and lead-delivery systems, which we
seek to protect through a combination of patent, trademark, copyright and trade
secret laws. Protection of our trademarks is crucial as we attempt to build our
brand name and reputation. Despite actions we take to protect our intellectual
property rights, it may be possible for third parties to copy or otherwise
obtain and use our intellectual property without authorization or to develop
similar technology independently. In addition, legal standards relating to the
validity, enforceability and scope of protection of intellectual property rights
in Internet-related businesses are uncertain and still evolving. Although we are
not currently engaged in any lawsuits for the purpose of defending our
intellectual property rights, we may need to engage in such litigation in the
future. Moreover, we may be unable to maintain the value of our intellectual
property rights in the future.
Because of the growth of the Internet and Internet related businesses,
patent applications are continuously and simultaneously being filed in
connection with Internet related technology. There are a significant number of
U.S. and foreign patents and patent applications in our areas of interest, and
we believe that there has been, and is likely to continue to be, significant
litigation in the industry regarding patent and other intellectual property
rights.
In addition, while there can be no assurance that our patent
applications will result in the issuance of patents, however, in the event that
they do, we may still not be aware of current patents or other intellectual
property that already exist similar to our own. While we believe that our
technology does not infringe on the proprietary rights of others, we may
inadvertently infringe upon third parties' patents and intellectual property in
the future. We may be challenged as to the validity of our current and future
patents and patent applications, and asked or mandated to modify our systems
accordingly or even discontinue our operations. There can be no assurance that
such third parties will not assert such claims of infringement against us and
that such claims will not lead to litigation.
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If third parties acquire domain names that are similar to our domain names,
they could decrease the value of our trademarks and take customers away
from our website.
We currently hold the Internet domain name BarPoint.com as well as
various other related names. We may be unable to prevent third parties from
acquiring similar domain names, which could reduce the value of our trademarks,
potentially weaken our brand name and take customers away from our website.
Domain names generally are regulated by Internet regulatory bodies. The
regulation of domain names in the United States and in foreign countries is
subject to change in the near future. Regulatory bodies could establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. The relationship between
regulations governing domain names and laws protecting trademarks and similar
intellectual property rights is unclear. Therefore, we may be unable to prevent
third parties from acquiring domain names that infringe on, or otherwise
decrease the value of, our trademarks and other intellectual property rights. We
believe other online companies in other countries may be using domain names that
potentially infringe on our trademarks. We may be unable to prevent them from
using these domain names, and this use may decrease the value of our trademarks
and our brand name.
We may be unable to successfully compete in the highly competitive Internet
consumer business.
The Internet consumer market is a new and rapidly emerging area. We
face competition from a number of established competitors who offer consumer
goods and items on the Internet, including Yahoo, Lycos and Excite, which
provide search engines to potential consumers. In addition to the search engines
are comparative price shopping websites such as mysimon.com, dealtime.com and
checkout.com. These websites offer similar comparative price shopping as
BarPoint and are expected to be our main competitors. Many of our competitors
have greater financial, technical, marketing and other resources. We expect
competition to intensify in the future. As the Internet continues to displace
the traditional ways of shopping and consumer spending, we believe that the
number of companies involved in providing online consumer information and
comparative price shopping, will increase their efforts to develop services and
marketing programs that compete with our approach. We are unable to anticipate
which other companies are likely to offer competitive services and marketing
approaches in the future.
We are dependent on the proliferation of third party products.
Our company has no direct control over the proliferation of third party
products which either presently, or in the future intends to, utilize our
technology. Failure of consumers to be able to adopt or attain our technology
through the widespread distribution of such products could impact our company's
ability to achieve our business model and generate revenues.
One aspect of our strategy depends on integrating our technology and
software into mobile Internet access devices such as PDAs, interactive pagers
and cellular phones such as the Palm VII, Bidiretional Pager, and Internet
photos. If the devices that contain our software or for which our software is
available, do not achieve market acceptance, we will not generate sufficient
traffic and revenues to offset the costs associated with this strategy. Even if
these devices achieve market acceptance, technical difficulties that limit
access to our database could adversely affect our business. There can be no
assurance that such proliferation will occur in time to provide us with adequate
revenue during the development phase of the business.
In addition, we intend to continue to enter into agreements with third
parties to make our technology available through new computer devices, such as
our agreement with Symbol Technologies. Our success depends upon our ability to
enter into these agreements and renew them on favorable terms after their
expiration. Moreover, if these agreements terminate, or if the third party
experience technical difficulties causing us to lose access to these devices,
our business would be materially and adversely affected.
We have a need for highly qualified personnel.
The success of our business will depend upon our ability to attract and
retain personnel with a wide range of technical capabilities. Competition for
such personnel is intense, and is expected to increase in the future. If we are
unable to attract and retain qualified personnel, our business and results of
operations will be adversely affected.
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Reduced barriers to entry may increase competition.
Technological changes have lowered the cost of operating communications
and computer systems and purchasing software. These changes reduce our cost of
providing services but also facilitate increased competition by reducing
competitors' costs in providing similar services. This competition could
increase price competition and reduce anticipated profit margins.
We may be vulnerable to attempts by unauthorized computer users to
penetrate our network security.
Someone may be able to misappropriate proprietary information and cause
interruptions in our services. We may need to expend significant capital and
resources to protect against the threat of such security breaches or to
alleviate problems caused by such breaches. In addition to security breaches,
inadvertent transmission of computer viruses could expose us to risk of loss or
litigation and possible liability.
The nature of our business is highly seasonal.
The revenues and operations of companies in the e-commerce business
are subject to seasonal variations and have typically increased during the
months of November and December, and declined after the holiday months. We have
only "soft-launched" our website as of December 6, 1999 and do not intend to
launch a more complete version of our website until after the busier holiday
months, in early 2000. This could have a material adverse impact on the
operating results and our ability to achieve profitable operations.
We may need additional financing.
We intend to fund our operations and other capital needs for the next
12 months from the date of this report substantially from revenues generated by
our planned operations, investments, the proceeds of our recent acquisition and
private placements. Because we only recently launched our website, we may not
adequately predict our costs and expenses and available funds may be
insufficient. Additional financing may not be available on acceptable terms if
at all.
We have a limited history of trading.
We have been trading on the OTC Bulletin Board since our initial public
offering (IPO) in September 1996. Since our IPO, we conducted a low volume of
trading until our June 3, 1999 acquisition and subsequent change from our real
estate investment business into our current Internet business. Since June 3,
1999, we have been trading at a significantly increased volume and at higher
prices. There can be no assurance that an active market for our securities will
be sustained in the future.
The market price for our company's common stock may be significantly
affected by such factors as our company's financial results, changes in
technology, changes in the Internet, new competition, consumer demands, a shift
in products that carry our technology, any change to the UPC barcode number
system, or any change in consumer spending habits.
Additionally, in recent years, the stock market has experienced a high
level of price and volume volatility, and market prices for many companies,
particularly small and emerging growth companies as well as Internet/high tech
companies, the stocks of which trade in the over-the-counter market, have
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. The market price for our company's common stock
may be affected by general stock market volatility.
We may be subject to increased government regulations in the future.
We are subject to the risks associated with changes in United States
regulatory requirements. There can be no assurances that more stringent
regulatory requirements and/or safety and quality standards will not be issued
in the future with an adverse effect on the business of our company. In
addition, use of our website could be adversely affected if third parties, such
as our Internet system provider as well as the Internet system providers of our
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customers, adopted stricter safety standards or become more heavily regulated by
the Federal Communications Commission.
We rely on third party distributors.
The products that are sold through our website rely on third party distributors,
retailers and suppliers. Such reliance upon third party distribution and supply
sources subjects our company to risks of business failure by such individual
distributors and credit, inventory and business concentration risks.
The sale of our investment securities may affect our liquidity and capital
resources.
We have $3,223,123 in marketable securities. These securities consist
of 1,307,190 common shares of Socket Communications, Inc. and 425,000 shares of
common stock of Financial Web.com, Inc. The Socket shares are unrestricted
securities and may be traded at any time. In the event we decided to sell our
shares in Socket our liquidity and capital resources could be materially and
adversely affected.
The price of our stock may decrease as a result of sales under Rule 144.
As of December 23, 1999, 13,304,983 shares of common stock held by
present shareholders had not been registered under the Securities Act of 1933.
These shares can only be sold pursuant to an exemption from the registration
requirements of the Securities Act and may be sold in compliance with Rule 144
under the Securities Act. Sales of substantial amounts of stock under Rule 144
could adversely affect the market price of the shares and make it more difficult
for us to sell our stock in the future.
The failure of third party vendors to be year 2000 compliant could
adversely affect us.
Certain entities with which we transact business, including customers
and vendors may suffer from the year 2000 problem. We cannot be certain their
products or systems are year 2000 compliant. We cannot predict the effects of
the year 2000 problem on such entities or on the economy in general, or the
resulting effects on us. We may suffer interruptions or additional expense or
lose revenue to the extent customers or vendors are not compliant.
Our authorized preferred stock may have anti-takeover effects.
Our certificate of incorporation authorizes the issuance of up to
5,000,000 shares of preferred stock, $.001 par value per share. Only three
shares of preferred stock have been designated and issued. Our board of
directors is authorized to issue shares of preferred stock from time to time
with the relative conversion rights, voting rights, terms of redemption and
liquidation preferences the directors designate. If shares of preferred stock
with voting rights are issued, such issuance could affect the voting rights of
the holders of our common stock by increasing the number of outstanding shares
having voting rights, and by the creation of class or series voting rights. If
our board of directors authorizes the issuance of shares of preferred stock with
conversion rights, the number of shares of our common stock outstanding could
potentially be increased by up to the authorized amount. Issuance of shares of
preferred stock could, under certain circumstances, have the effect of delaying
or preventing a change in control of our company and may adversely affect the
rights of holders of our common stock. Also, the preferred stock could have
preferences over the common stock (and other series of preferred stock) with
respect to dividends and liquidation rights. In addition, the terms of any
series of preferred stock, could adversely affect the rights of holders of the
common stock. The issuance of preferred stock could make the possible takeover
of our company or the removal of our management more difficult, discourage
hostile bids for control of our company in which stockholders may receive
premiums for their shares of common stock or otherwise dilute the rights of
holders of common stock and the market price of the common stock.
On June 3, 1999, we issued three shares of preferred stock, one Class I
share, one Class II share and one Class III share. The Class I share shall vote
with the common stock and shall have 216,667 votes. The Class II share shall
vote with the common stock and shall have 108,333 votes. The Class III share
shall vote with the common stock and shall have 346,766 votes. None of these
shares of preferred stock are entitled to any dividends.
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All voting rights for these preferred shares end on June 3, 2004. All three
shares of preferred stock were issued to Leigh Rothschild, our Chairman and
Chief Executive Officer.
Item 7. Financial Statements
The financial statements required by this Item 7 are set forth at the
pages indicated in Item 13 below.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financing Disclosure
None.
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Registrant
The following is a list of our executive officers and directors and a
brief summary of their business experience and certain other information are set
forth below:
Name Age Title
Leigh M. Rothschild 47 CEO and Chairman
Jeffrey W. Sass 40 Chief Operating Officer, Executive
Vice President, Secretary and Director
Seymour G. Siegel 57 Treasurer and Director
David W. Sass 64 Director
Matthew C. Schilowitz 36 Director
Jay Howard Linn 65 Director
Kenneth Jaeggi 53 Director
The biographies of our directors are as follows:
Leigh M. Rothschild. Prior to founding BarPoint.com in October 1998,
Mr. Rothschild was President and Chief Executive Officer of Intracorp
Entertainment, Inc., a consumer software company with worldwide
product distribution that he founded in 1984. Mr. Rothschild is a
former presidential appointee to the High-Resolution Board for the
United States under former President George W. Bush. He has served two
Florida governors on technology boards and served as a special advisor
to the their Florida Secretary of Commerce, now Governor, Jeb Bush.
Prior to founding Intracorp, Mr. Rothschild was a real estate investor
and founded several high technology companies. Mr. Rothschild has an
undergraduate degree from and has also done post graduate work at the
University of Miami.
Jeffrey W. Sass. Prior to joining BarPoint in June 1999, Mr. Sass
formed, in July 1997, the Marketing Machine, a full-service marketing
agency and consulting firm, servicing clients in computer hardware,
software and other industries. From April 1995 through July 1997 he
served as Vice President of marketing at Intracorp Entertainment. From
July 1994 through April 1995 Mr. Sass was the director of marketing of
Gametek, Inc. Mr. Sass is a graduate of Cornell University.
Seymour G. Siegel. Mr. Siegel became a director of our company in July
1995. Mr. Siegel is a CPA and from 1969-1990 was senior partner and
founder of Siegel Rich & Co. P.C. (Siegel Rich), an accounting firm
specializing in privately owned businesses and high net worth
individuals. In 1990, Siegel Rich merged with M.R. Weiser & Co. Mr.
Siegel stayed on as a senior partner until 1994, when he co-founded
Siegel Rich Incorporated, a firm providing advisory services to
businesses regarding mergers and acquisitions, long-range planning and
problem resolution. Mr. Siegel is also a former director of the Oak
Hall Capital Fund and Prime Motor Inns, L.P.
David W. Sass. Mr. Sass has been a director of our company since July
1995. For the past 39 years, Mr. Sass has been a practicing attorney
in New York City and is currently a senior partner in the law firm of
McLaughlin & Stern, LLP, counsel to our company. Mr. Sass is a
director of Genisys Reservation Systems, Inc., a company engaged in
the Internet travel business; an officer of Westbury Metals Group,
Inc. a company engaged in the refining of precious metals; a director
of Pallet Management Systems, Inc. a company engaged in the
manufacture and repair of wooden pallets and other packaging services
and a member and Vice Chairman of the Board of Trustees of Ithaca
College.
Matthew C. Schilowitz. Mr. Schilowitz has been a director of our
company since its inception in 1995 and from inception until June 3,
1999, was our president and chairman. Prior to The Harmat
Organization, Inc., Mr. Schilowitz was President of Harmat Homes, Inc.
Mr. Schilowitz has a B.A. in finance from the AB Freeman School
of Business at Tulane University.
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Jay Howard Linn. Mr. Linn has been a director of our company since
July 1999. Since 1995, he has practiced in his own firm as a certified
public accountant. Prior to going out on his own, he was a partner at
the CPA firm of Moss & Linn for 14 years in North Miami, Florida.
Kenneth Jaeggi. Mr. Jaeggi became a director of our company in
September 1999. He is the Senior Vice President of Finance and the
Chief Financial Officer of Symbol Technologies, Inc. From May 1996 to
May 1997, he was a member of the Office of the Chairman and the
Operating Committee of Electromagnetic Sciences in Atlanta, GA. From
December 1992 until May 1996, Mr. Jaeggi served as Senior Vice
President, Chief Financial Officer and consultant of
Scientific-Atlanta, Inc., a leading producer of cable network and
satellite communications systems.
David W. Sass, one of our directors, is the father of Jeffrey W. Sass,
our Chief Operating Officer and Executive Vice President.
Messrs. Leigh Rothschild and Jeffrey Sass were previously employed by
a company, Intracorp Entertainment, Inc. which on October 4, 1996
filed a voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code. Messrs. Jeffrey Sass and Leigh Rothschild were
officers of Intracorp, and are now current officers of the company.
The filing of this bankruptcy petition was caused, in part, by the
failure and subsequent bankruptcy of two of Intracorps largest
accounts receivable debtors. Intracorp operated as a
debtor-in-possession under case number 96-16276-BKC-RAM, United States
Bankruptcy Court for the Southern District of Florida. On March 20,
1998, the Bankruptcy Court entered its order converting Intracorps
bankruptcy case to a case under Chapter 7 of the U.S. Bankruptcy Code.
Marcia Dunn was appointed as Chapter 7 Trustee and undertook
liquidating the remaining assets of Intracorp.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires certain officers, directors, and beneficial owners of more than ten
percent of our common stock to file reports of ownership and changes in their
ownership of our equity securities with the Securities and Exchange Commission.
Based solely on a review of the reports and representations furnished to us
during the last fiscal year, we believe that each of these persons is in
compliance with all applicable filing requirements.
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Item 10. Executive Compensation
Summary Compensation Table. The following table sets forth the
aggregate cash compensation paid for services rendered to our company during
each of our company's last three fiscal years by all individuals who served as
our company's Chief Executive Officer during the last fiscal year and our
company's most highly compensated executed officers who served as such during
the last fiscal year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Annual Compensation Long-Term Compensation
Other
Annual
Name and Principal Compensa Securities Underlying
Position Year Salary($) Bonus tion ($) Options SARs
Leigh M. Rothschild(1) 1999 $66,667
Chief Executive
Officer
Jeffrey W. Sass (1) 1999 $50,000
Executive Vice President
Matthew C. Schilowitz(2) 1999 $150,000 190,615 shares of common
stock
Director/Consultant 1998 $155,000 576,748 shares of common
stock
1997 $105,000 346,049 shares of common
stock
</TABLE>
(1) Messrs. Rothschild and Sass were employed by our company for only
four months of our fiscal 1999 year and salary payments amounts
reflect for a partial year.
(2) The Plan for Incentive Compensation of Matthew C. Schilowitz (the
Schilowitz Incentive Plan) was adopted by the Board of Directors and
approved by our companys stockholders on March 1, 1996, amended August
3, 1996, March 24, 1997 and June 19, 1998. Pursuant to the Schilowitz
Incentive Plan, Mr. Schilowitz has been granted an option to purchase
up to an aggregate of 500,000 shares of common stock at $.35 per
share, which has been adopted to 576,748 shares exercisable at $.30
per share.
On March 24, 1997, as part of our company's 1996 Incentive Stock
Option Plan, Mr. Schilowitz was granted options to purchase 300,000 shares
of our company's common stock at an exercise price of $2.337 per share,
being 110% of the fair market value of such shares on the date of grant. On
June 19, 1998 our company reduced the exercise price of such options to
$.35, and then later reduced to its current price at $.30 per share and
adjusted the number of shares to 346,049, as a result of anti-dilution
provisions provided in the plan. The options have a duration of five years.
In connection with services rendered, the new consulting agreement
issued by Matthew Schilowitz relating to the collectability of certain
assets of The Harmat Organization, Mr. Schilowitz was awarded options to
purchase an aggregate of 190,615 shares at $1.90 per share, exercisable
over a five year period.
Employment Agreements
In addition, we entered into three year employment agreements with
Leigh M. Rothschild and Jeffrey W. Sass and a three year consulting
agreement with Matthew C. Schilowitz. Mr. Rothschild's employment agreement
provides for a base salary of $200,000 in the first year with a raise of
$50,000 in each of the second and third years. Mr. Sass's employment
agreement provides for a base salary of $150,000 in the first year with a
raise of $25,000 in each of the second and third years. In addition, each
of Messrs. Rothschild and Sass is eligible to participate in our Bonus
Incentive Plan and our employee benefit plans, and each receives a car
allowance of $750 per month. Upon termination other than for death or
disability, each will continue to receive his base salary for the remainder
of the term and retain any stock options whether or not vested or
exercisable. Under his consulting agreement, Mr. Schilowitz receives a fee
of $150,000 for the first year, $175,000 for the
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second year and $200,000 for the third year. He may participate in our
employee benefit plans to the extent eligible and receives a car allowance
of $750 per month. In addition, he will receive a bonus in the amount of
60% of the bonus granted to Mr. Rothschild, if and when Mr. Rothschild
receives a bonus pursuant to his employment agreement. Upon termination
other than for death or disability, Mr. Schilowitz will continue to receive
his base fee for the remainder of the term and retain any stock options
whether or not vested or exercisable.
Stock Option Plans
In March 1996, we adopted a plan for incentive compensation of Matthew
C. Schilowitz, who is currently a director and consultant and was our chairman
and president. This plan was amended in August 1996, March 1997 and June 1998.
Under this plan, Mr. Schilowitz has been granted an option to purchase up to an
aggregate of 500,000 shares of common stock at $.35 per share, which has been
adjusted to 576,748 shares of common stock at an exercise price of $.30 per
share as a result of dilution protection. In conjunction with the acquisition of
BarPoint all such options have become fully vested.
In February 1996, the Board of Directors adopted the 1996 Incentive
Stock Option Plan providing for awards of up to a total of 400,000 shares of our
common stock. In January 1997, we granted five year options under the Plan
providing for 10,000 shares at a price of $2.125 per share ($.35 as amended) to
four directors and three key employees of The Harmat Organization. During 1998,
10,000 of these options were forfeited with the termination of employment of a
key employee. During the year ended September 30, 1999, 60,000 options were
exercised.
On March 24, 1997, as part of our company's 1996 Incentive Stock
Option Plan, Mr. Schilowitz was granted options to purchase 300,000 shares of
our company's common stock at an exercise price of $2.337 per share, being 110%
of the fair market value of such shares on the date of grant. On June 19, 1998
our company reduced the exercise price of such options to $.35, and then later
reduced to its current price at $.30 per share and adjusted the number of shares
to 346,049, as a result of anti-dilution provisions provided in the plan. The
options have a duration of five years.
As part of the acquisition we authorized five year options to
purchase 800,000 shares of our common stock at an exercise price of $1.90
per share. Such options vest as follows: one-third after June 3, 2000;
one-third after June 3, 2001 in the event we achieve revenues of $24,500,000
in the second year and one third after June 3, 2002 in the event we achieve
revenues of $89,500,000 in the third year. To date all of the options have
been granted to certain of our employees, management and the original
BarPoint shareholders.
The 1999 Plan for Incentive Stock Options was adopted by the Board of
Directors on September 17, 1999, subject to stockholder approval, authorizing us
to grant five year options to purchase 1,500,000 shares of our common stock at
fair market value at date of grant, with the exception of grants to certain
officer's at 85% of the fair market value at the date of grant. To date, 919,000
options have been granted.
21
<PAGE>
Option/SAR Grant Table
The table below sets forth the following information with respect
to options granted to the named executive officers during fiscal year 1999
and the potential realizable value of such option grants (1) the number of
shares of common stock underlying options granted during the year, (2) the
percentage that such options represent of all options granted to employees
during the year, (3) the exercise price, and (4) the expiration date.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Individual Grants
Number of Percent
Securities of Total
Underlying Options/SARs
Options/SARs Granted to
Employees
in
Name Granted Fiscal Exercise Expiration
Year Price Date
($/Sh)
Leigh M. Rothschild............... -0- 0% - -
CEO and Chairman
Jeffrey Sass...................... -0- 0% - -
Chief Operating Officer, Executive
Vice President and Secretary
Matthew Schilowitz................ 190,615 32.7% $1.90 6/3/ 2004
former CEO Consultant
</TABLE>
Option Exercises and Values for 1999
The table below sets forth the following information with respect
to option exercises during fiscal 1999 by each of the named executive
officers and the status of their options at September 30, 1999 (1) the
number of shares of common stock acquired upon exercise of options during
fiscal 1999, (2) the aggregate dollar value realized upon the exercise of
such options, (3) the total number of exercisable and non exercisable stock
options held at September 30, 1999, and (4) the aggregate dollar value of
in-the-money exercisable options at September 30, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
AGGREGATED
OPTION VALUES ON SEPTEMBER 30, 1999
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at 9/30/99 at 9/30/99(1)
Name Exercisable Unexercisable Exercisable Unexercisable
Leigh M. Rothschild -0- -0- -0- -0-
Jeffery Sass -0- -0- -0- -0-
Matthew C.Schilowitz 1,113,412 -0- $4,580,111.11 -0-
-------------------------
1. Values are calculated by subtracting the exercise price from the
fair market value of the underlying common stock. For purposes of
this table, fair market value is deemed to be $4.6875, the average
of the high and low bids for our common stock price on the OTC
Bulletin Board on September 30, 1999.
</TABLE>
22
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The following tabulation shows the security
ownership as of December 23, 1999 of (i) each person known
to us to be the beneficial owner of more than 5% of our
outstanding common stock; (ii) each of our directors and
executive officers and (iii) all of our directors and
executive officers as a group. As of December 23, 1999, we
had 15,407,983 shares of common stock issued and
outstanding.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name & Address Number of Shares Owned Percent of Class
Leigh M. Rothschild (1)(4)
c/o BarPoint.com
One East Broward Blvd.
Suite 410 926,818 6.0%
Ft. Lauderdale, FL 33301
Irrevocable Trust No. III (2)
c/o Jay Howard Linn, Trustee
1160 Kane Concourse, Suite 205 4,973,328 32.3%
Miami, Fl. 33154
David W. Sass (3)(7)
c/o McLaughlin Stern, LLP
260 Madison Avenue 69,817 *
New York, NY 10016
Matthew C. Schilowitz (5)
PO BOX 108 12.8%
Remsenburg, NY 11960 1,976,012
Jeffrey W. Sass (6)
c/o BarPoint.com
One East Broward Blvd. 3.1%
Suite 410 487,192
Ft. Lauderdale, FL 33301
Seymour Siegel(8) 59,817 *
c/o Siegel Rich, Inc.
295 Madison Avenue
Suite 926
New York, NY 10017
Jay Howard Linn(9) 71,313 *
1160 Kane Concourse, Suite 205
Miami, Fl. 33154
Kenneth Jaeggi(10)
Symbol Technologies
One Symbol Plaza 0 *
Holtsville, NY 11742-1300
Symbol Technologies(11)
One Symbol Plaza
Holtsville, NY 11742-1300 1,355,789 8.8%
23
<PAGE>
Name & Address Number of Shares Owned Percent of Class
All Officers and Directors 3,590,969 23.3%
as a Group (7 persons)
(1)(3)(4)(5)(6)(7)(8)(9)(10)
</TABLE>
* Represents an amount less than one (1%) percent.
(1) Does not include 156,736 shares and options to purchase 16,730
shares at an exercise price of $1.90 per share, owned by Mr. Leigh
Rothschild's brother or 156,736 shares and options to purchase 16,730
shares at an exercise price of $1.90 per share owned by the Rothschild
Children Present Interest Trust, nor 4,973,328 shares and options to
purchase 548,660 shares at an exercise price of $1.90 per share, owned
by the Irrevocable Trust No. III, in all of such shares Mr. Leigh
Rothschild disclaims any beneficial interest.
(2) Does not include 156,736 shares and options to purchase 16,730
shares at an exercise price of $1.90 per share, owned by The
Rothschild Children's Present Interest Trust nor 31,213 shares and
options to purchase 3,343 shares at an exercise price of $1.90 per
share, owned by Jay Howard Linn, the trustee of both trusts, nor
options to purchase 548,660 shares at an exercise price of $1.90 per
share.
(3) Does not include 79,609 shares and options to purchase 8,498
shares at an exercise price of $1.90 per share, owned by McLaughlin &
Stern, LLP, counsel to our company, of which firm David W. Sass is a
member. David W. Sass is the father of Jeffrey W. Sass.
(4) Does not include options to purchase 66,908 shares at an exercise
price of $1.90 per share. Includes options to purchase 300,000
shares at $6.97 pursuant to our company's 1999 Stock Option Plan.
(5) Includes options to purchase 190,615 shares at $1.90 per share,
options to purchase 180,000 shares at $6.97 per share, options to
purchase 346,049 shares pursuant to the 1996 Stock Option Plan
exercisable at $.30 per share and options to purchase 576,748 shares
at $.30 per share under his former employment agreement.
(6) Does not include options to purchase 66,650 shares at an exercise
price of $1.90 per share. Includes options to purchase 255,000 shares
at $6.97 pursuant to our company's 1999 Stock Option Plan.
(7) Includes options to purchase 40,000 shares pursuant to our
company's 1999 Stock Option Plan.
(8) Includes options to purchase 20,000 shares pursuant to our
company's 1999 Stock Option Plan.
(9) Includes options to purchase 40,000 shares pursuant to our
company's 1999 Stock Option Plan. Does not include shares or options
(as set forth in this table) owned by the Rothschild Children's
Present Interest Trust or the Irrevocable Trust Agreement III. Mr.
Linn is a trustee of both trusts. Does not include options to purchase
3,344 shares at an exercise price of $1.90 per share.
(10) Does not include 1,315,789 shares owned by Symbol Technologies,
which company Mr. Jaeggi is Senior Vice President and Chief Financial
Officer and disclaims any beneficial ownership thereof.
(11) Includes options to purchase 40,000 shares pursuant to our
company's 1999 Stock Option Plan.
Item 12. Certain Relationships and Related Transactions
The June 3, 1999 Acquisition
Our company's present business and technology was acquired from a
Florida corporation by the name of BarPoint.com, Inc. We acquired the Florida
corporation of BarPoint.com, Inc. when our company, then The Harmat
Organization, Inc., purchased all of the outstanding shares of the Florida
corporation of BarPoint.com, Inc. The transaction was accounted for as a reverse
acquisition, as if the Florida BarPoint acquired our company, due to the fact
that the former shareholders of the Florida BarPoint owned a majority of our
common stock after the transaction. Upon the closing of the acquisition, we
changed our name from The Harmat Organization, Inc. to BarPoint.com, Inc.
The consideration for the acquisition was 6,634,042 shares of our
common stock based upon a negotiated value of $1.90 per share. The purchase
price was subject to adjustment depending upon the value of certain assets of
our company at the date of closing (June 3, 1999) and over a 45 day period
following the closing.
24
<PAGE>
A group of investors headed by Matthew Schilowitz, a shareholder and
former President and Director of our company, made a capital contribution to the
company of 250,000 shares of FinancialWeb.com, Inc. and certain other assets.
The then Board of Directors of our company declared a stock dividend of our
common stock to our shareholders of record on June 2, 1999, excluding the
shareholders of the acquired company (the Florida BarPoint) who received our
companys common stock in the transaction. The number of shares to be distributed
in the dividend was determined based upon the value of the FinancialWeb Stock
over a 45 day period, plus the agreed upon value of the other assets
contributed. The payment of the dividend of a total of 878,770 shares of our
common stock was made on October 19, 1999.
As part of the transaction our company sold to Leigh Rothschild,
President of the Florida corporation of BarPoint.com, Inc., and our company's
current Chief Executive Officer, three (3) shares of our company's Series A
Stock for a purchase price of $10.00 per share. The Preferred Stock shall vote
on a pari-passu basis with our common stock. The first share of Preferred Stock
shall have 216,667 votes, the second share shall have 108,333 votes and the
third share of Preferred Stock shall have 346,766 votes. In no event will any of
the Preferred Stock have any votes after five years from the date of issue.
As part of the acquisition our company authorized five year options to
purchase 800,000 shares of our common stock at an exercise price of $1.90 per
share. To date, all of the options have been granted to certain of our
employees, management and the original BarPoint shareholders. Such options vest
as follows: one-third (1/3) immediately after one year from the date of the
closing of the acquisition (June 3, 1999), one-third (1/3) after the second year
from the date of the closing of the acquisition, in the event our company
achieves 50% of its revenue projection of $49,000,000 in such second year, and
the balance of one-third (1/3) after the third year from the date of closing of
the acquisition, in the event our company achieves 50% of its revenue projection
of $179,000,000 in such third year. Projections referred to herein are the
Florida corporation of BarPoint.coms April 1, 1999 business projections as
presented to our company prior to the closing of the acquisition.
Other Related Transactions
In August 1999, we announced a strategic partnership with Symbol
Technologies, Inc. As part of the strategic partnership Symbol Technologies
purchased 1,315,789 shares of our common stock representing approximately 9% of
our outstanding common stock and granted us a royalty free license to use
Symbol's scanner patents. We agreed to sell Symbol SPT 1500 machines and grant
Symbol the right to designate one designee to our board of directors. Ken
Jaeggi, CFO and Senior Vice President of finance of Symbol Technology, was
designated as Symbol's designee to our board of directors. Symbol manufactures a
wide range of barcode scanning hardware that is compatible with BarPoint's
service, including the SPT 1500, a handheld organizer using the popular Palm
platform with a built in laser barcode scanner.
David W. Sass, a director of our company, is the father of Jeffrey W.
Sass, our Chief Operating Officer and Executive Vice President. Mr. David Sass
is a partner with McLaughlin & Stern, LLP, counsel to our company. McLaughlin &
Stern received 79,609 shares and options to purchase at $1.90 per share, 8,498
shares in our company, representing less than 1% of our outstanding shares as of
December 23, 1999, as part of the acquisition transaction. In addition,
McLaughlin & Stern received aggregate legal fees of $69,000 and $19,000 during
1999 and 1998 respectively, for services rendered to our company.
We have a loan receivable from Mr. Schilowitz, which bears interest at
the Prime Rate charged by Chase Manhattan Bank, NA, and is collateralized by
500,000 shares of our common stock. The balance of this loan as of June 30, 1999
was $218,655. During August 1999 Mr. Schilowitz was paid a finders fee for funds
raised; this finders fee was applied to the loan receivable as payment in full
plus expenses of approximately $27,800.
In August 1999, we repaid a loan to Leigh Rothschild, president of the
company, in the amount of $110,000. The loan amount was unsecured and
non-interest bearing.
The 1999 Plan for Incentive Stock Options was adopted by our board of
directors on September 17, 1999. Options were granted to Leigh Rothschild and
Jeffrey W. Sass to purchase 300,000 and 255,000 shares of common
25
<PAGE>
stock respectively, exercisable at $6.97. In addition Matthew Schilowitz was
granted an option to purchase 180,000 shares, exercisable at $6.97 per share.
In addition options to purchase 40,000 were granted to each of David W.
Sass, Jay Howard Linn, Seymour Siegel and Ken Jaeggi. Mr. Jaeggi's options
are currently owned by Symbol Technologies.
A Plan for Incentive Compensation of Matthew Schilowitz was adopted by
our board of directors and approved by our company's stockholders on March 1,
1996, amended August 3, 1996, March 24, 1997 and June 19, 1998. The plan is
currently fully vested and can be exercised for a period of 10 years expiring
April 1, 2006. Pursuant to this plan, Mr. Schilowitz has been granted an option
to purchase up to an aggregate of 500,000 shares of common stock at $.35 per
share, which has been adjusted to 576,748 shares exercisable at $.30 per share.
On January 23, 1997, our board of directors voted to grant options to
four directors , (David W. Sass, Scott Prizer, David Eiten, and Seymour Siegel)
under the terms of our company's 1996 Stock Option Plan. Each board member
abstained from voting for himself. Each individual was granted a five year
option to purchase 10,000 shares at a price of $2.125. On June 19, 1998 the
exercise price was reduced to $.35. All of such shares have been exercised.
On March 24, 1997, as part of our companys 1996 Qualified Stock Option
Plan, Mr. Schilowitz was granted an option of 300,000 shares (which was later
adjusted after a stock dividend to 346,049 shares) of our companys common stock
at an exercise price of $2.337 per share, being 110% of the fair market value of
such shares on the date of grant. On June 19, 1998, our board of directors voted
to reduce the exercise price of such options for Mr. Schilowitz to $.35 ($.30,
as amended). This option has a duration of five-years.
In July 1997, Matthew Schilowitz became personally indebted to us
pursuant to a certain promissory note in the original principal amount of
$225,000.00. Pursuant to an agreement between Mr. Schilowitz and us, such note
and all accrued interest thereon deemed satisfied and paid in full in exchange
for Mr. Schilowitzs waiver of commissions in the amount of $246,548.95.
During 1997 and 1998 we made loans to related parties in the amount of
$67,600 and $186,696, respectively. These loans had no stated interest rate and
are due on demand.
In April 1997 we purchased a building lot from Emerald Woods
Development Corp. (of which Matthew Schilowitz is a 50% owner) for $195,000 and
constructed and sold a house on such lot. We purchased two additional building
lots from Emerald Woods in December 1997 for $190,000 and simultaneously sold
them to an unaffiliated third party.
In October 1997 we purchased a 2.5% Class A Limited Partnership
interest in Woodland Development Associates (of which Matt Schilowitz owns
11.1%) for a purchase price of $50,000.
During 1998 we purchased a building lot from Crossings Associates, L.P.
(of which Matthew Schilowitz is a 11.1% owner) and constructed and sold a house
on such lot.
26
<PAGE>
PART IV
Item 13. Exhibits, Lists and Reports on Form 8-K
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Page
(a)(1) Financial Statements Number
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheet as of September 30, 1999 F-2
Consolidated Statement of Operations for the year ended September 30, 1999 F-3
Consolidated Statement of Stockholders' Equity for the year ended
September 30, 1999 F-4
Consolidated Statement of Cash Flows for the year ended September 30,1999 F-5
Notes to Financial Statements F-6
Schedules other than those listed above are omitted for the reason that they are
not required, are not applicable, or the required information is shown on the
financial statements or notes thereto.
(a)(2) Exhibits
2.1 Stock Purchase Agreement dated May 20, 1999, incorporated herein by Reference to Exhibit
1 to the Registrants Report on Form 8-K on June 3, 1999.
2.2 Addendum to Stock Purchase Agreement dated June 1, 1999, incorporated by Reference to
Exhibit 2 to the Registrants Report on Form 8-K on June 3, 1999.
3.1 Registrant's Articles of Incorporation as amended to date,
incorporated herein by Reference to Exhibit 3.1 to Registrant's
Registration Statement on Form SB-2, File No. 333-3501.
3.2 Registrants Certificate of Amendment to the Certificate of
Incorporation of the Registrant authorizing the Series A
Preferred Stock, incorporated herein by Reference to Exhibit 6
to the Registrants Report on Form 8-K on June 3, 1999.
3.3 Registrants Certificate of Amendment to the Certificate of
Incorporation of the Registrant changing the name of the
corporation, incorporated herein by Reference to Exhibit 1 to
the Registrants Report on Form 8-K on June 15, 1999.
3.4 Registrant's By-Laws, as amended to date, incorporated herein by Reference to Exhibit 3.2 to
Registrant's Registration Statement on Form SB-2, File No.333-3501.
4.1 Form of Common Stock Certificate, incorporated herein by Reference to Exhibit 4.1 to
Registrant's Registration Statement on Form SB-2, File No. 333-3501.
4.2 Form of Series A Warrant and Warrant Agreement, incorporated herein by Reference to
Exhibit 4.2 to Registrant's Registration Statement on Form SB-2, File No. 333-3501.
4.3 Form of Series B Warrant, incorporated herein by Reference to Exhibit 4.3 to Registrant's
Registration Statement on Form SB-2, File No. 333-3501.
4.4 Form of Representative's Purchase Option, incorporated herein by Reference to Exhibit 4.4 to
Registrant's Registration Statement on Form SB-2, File No. 333-3501.
4.5 Registrant's 1996 Stock Option Plan incorporated herein by Reference and as amended June
19, 1997 (Exhibit 4.5 to Registrants Registration Statement on Form SB-2, File
No.333-3501).
10.1 Employment Agreement between the Registrant and Leigh M.
Rothschild , incorporated herein by Reference to Exhibit 3 to
the Registrants Report on Form 8-K on June 3, 1999.
10.2 Employment Agreement between the Registrant and Jeffrey W. Sass,
incorporated herein by Reference to Exhibit 3 to the Registrants
Report on Form 8-K on June 3, 1999.
10.3 Consulting Agreement between the Registrant and Matthew C.
Schilowitz, incorporated herein by Reference to Exhibit 3 to the
Registrants Report on Form 8-K on June 3, 1999.
10.4 Agreement for Merger and Reorganization among Registrant, Newco, Synergy Solutions,
Inc. and the Shareholders of Synergy Solutions, Inc. incorporated herein by Reference to
Exhibit 1 to the Registrants Report on Form 8-K on November 15, 1999
</TABLE>
27
<PAGE>
(b) Reports on Form 8-K
Three report on Form 8-K were filed during the third and fourth
quarters of the fiscal year ended September 30, 1999:
(i) Form 8-K filed for June 3, 1999 (as amended October 6, 1999);
(ii) Form 8-K filed for June 15, 1999;
(iii) Form 8-K filed for August 5, 1999; and
(iv) Form 8-K filed for November 15, 1999.
28
<PAGE>
Marks Shron & CompanyLLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of BarPoint.com, Inc.
We have audited the accompanying consolidated balance sheet of BarPoint.com,
Inc. and subsidiaries (a development stage company) as of September 30, 1999,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of BarPoint.com, Inc. and subsidiaries as of September 30, 1999, and
the results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Great Neck, New York
December 15,1999
111 Great Neck Road
Great Neck, New York 11021
516/466-6550 Fax: 516/466-5649
275 Madison Avenue
New York, New York 10016
212/252-1600 Fax: 212/252-1515
F-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Balance Sheet
September 30, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,973,956
Marketable securities 3,223,123
Loans receivable 210,436
Other assets 101,886
------------------
Total Current Assets 9,509,401
------------------
Property-land 149,750
Equipment - net of accumlated
depreciation of $2,207 22,602
------------------
172,352
OTHER ASSETS
Software development - net 259,398
------------------
259,398
------------------
TOTAL ASSETS $ 9,941,151
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 337,637
------------------
Total Current Liabilities 337,637
------------------
OTHER LIABILITIES
Deferred taxes payable 215,899
------------------
215,899
------------------
TOTAL LIABILITIES 553,536
------------------
STOCKHOLDERS' EQUITY
Preferred stock -
Common stock 13,846
Paid in capital 11,578,029
Subscription receivable (750,000)
Accumulated Deficit-Development Company (438,595)
Comprehensive Income (Loss) (1,015,665)
------------------
Total Stockholders' Equity 9,387,615
------------------
Total Liabilities and Stockholders' Equity $ 9,941,151
==================
See Independent Auditors' Report and Notes to Consolidated Financial Statements.
F-2
<PAGE>
BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Operations
For the Year Ended September 30, 1999
Revenues:
Total revenues $ - -
Cost of Sales -
-------------------
Gross Profit -
Operating Expenses:
Selling, General and Administration 832,290
Research and Development 77,912
-------------------
Total Operating Expenses 910,202
-------------------
Loss from Operations (910,202)
-------------------
Other Income:
Interest Income 63,607
-------------------
Loss before income tax benefit (846,595)
Income tax benefit 408,000
-------------------
Net Loss $ (438,595)
===================
Loss per Common Share--
Basic and Diluted: $ (0.05)
===================
Weighted Average Common Shares
Shares Outstanding 8,211,278
===================
See Independent Auditors' Report and Notes to Consolidated Financial Statements.
F-3
<PAGE>
BarPoint.com Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
For the Year Ended September 30, 1999
Note
# of Shares Common Stock Additional Receivable
of Preferred Paid-In from Accumulated Comprehensive
Stock Shares Par Value Capital Stockholder (Deficit) Income Total
Balance-September 30, 1998 0 2,612,500 $2,612 $4,253,604 (1,666,869) $0 $2,589,347
Contribution of 250,000 shares
of Financial Web stock and
60,000 warrants of Socket
Communications, Inc. 108,956 108,956
Stock Options, Net Loss and
Unrealized Gain on Marketable
Securities (Net of Income Taxes)
October 1,1998 - June 3, 1999 775,000 (1,161,558) 2,380,585 1,994,027
Executive Compensation to Board
of Directors 50,000 50 24,950 25,000
--------------------------------------------------------------------------------------------------------
Balance June 3, 1999 0 2,662,500 2,662 5,162,510 (2,828,427) 2,380,585 4,717,330
Acquisition of
The Harmat Organization (447,842) 2,828,427 (2,380,585)
BarPoint.com, Inc. Equity
at June 3, 1999 100 100 241,400 (89,602) 151,898
Recapitalization of
BarPoint.com, Inc. 6,633,942 6,534 (6,534) 0
Acquisition Costs (189,000) (189,000)
Private Placements 4,499,868 4500 6,800,015 (750,000) 6,054,515
Exercise of Stock Options 50,000 50 17,450 17,500
Issuance of Preferred Stock 3 - 30 30
Net Loss and Unrealized Gain
on Marketable Securities
(Net of Income Taxes) (348,993) (1,015,665) (1,364,658)
------------------------------------------------------------------------------------------------------
Balance - September 30, 1999 3 13,846,410 $13,846 $11,578,029 ($750,000) ($438,595) ($1,015,665) $9,387,615
------------------------------------------------------------------------------------------------------
See Independent Auditors' Report and Notes to Consolidated Financial Statements.
F-4
<PAGE>
BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Year Ended September 30, 1999
OPERATING ACTIVITIES:
Net (loss) income $(438,595)
Adjustments to reconcile net (loss) to net cash
(used for) operating activities:
Tax asset (408,000)
Depreciation and Amortization 15,678
Non-Cash Administration Expenses 20,500
------------
(810,417)
Increase (decrease) in cash flows due to changes in operating assets and
liabilities:
Accounts payable 167,582
Other assets (36,459)
------------
Total Adjustments 131,123
------------
Net Cash (Used) by Operating Activities (679,294)
------------
INVESTING ACTIVITIES:
Cash received on acquisition 628,227
Acquisition costs (189,000)
Software development costs (53,019)
Property & equipment (24,659)
------------
Net Cash Provided by Investing Activities 361,549
------------
FINANCING ACTIVITIES:
Issuance of common and preferred stock 1,030
Private placements - net of commissions 6,273,170
Exercise of stock options 17,500
------------
Net Cash Provided by Financing Activities 6,291,700
------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 5,973,955
CASH AND CASH EQUIVALENTS - beginning of period -
------------
CASH AND CASH EQUIVALENTS - end of period 5,973,955
============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Taxes $ 591
============
============
Interest $ -
============
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS:
Software Development Costs for Services Rendered
by Certain Stockholders $ 220,000
============
Non-Cash Administrative Expenses $ 20,500
============
Finders fee applied to stockholders loan
receivable $ 218,655
============
Acquisition of BarPoint- Note A
See Independent Auditors' Report and Notes to Consolidated Financial Statements.
F-5
<PAGE>
BarPoint.com, Inc.
Notes to Consolidated Financial Statements
September 30, 1999
NOTE A PRINCIPLES OF CONSOLIDATION AND BUSINESS
The company was incorporated in Delaware on December 19, 1995 under the name The
Harmat Organization, Inc. ("Harmat") and began operations as a construction,
architectural landscape design and real estate development firm. Beginning in
1997, Harmat believed that it was in the best interest of the shareholders of
the Company to change its direction away from the real estate business. The real
estate market in which Harmat concentrated changed, and management felt that
there were fewer prospects for significant profit in the future. The Company
began making strategic investments in technologically oriented companies.
On June 3, 1999, Harmat acquired all issued and outstanding shares of
BarPoint.com, Inc. ("BarPoint"), as more fully described in Note F below. The
transaction was accounted for as a reverse acquisition, as if BarPoint acquired
Harmat, due to the fact that the former shareholders of BarPoint owned a
majority of Harmat common stock after the transaction. The consolidated
financial statements presented herein for the periods prior to the effective
date of the acquisition only include the accounts of BarPoint since its
inception. The consolidated statement of stockholders' equity has been converted
from BarPoint's capital structure to Harmat's capital structure to reflect the
exchange of shares pursuant to the Agreement. The consolidated group of
companies are collectively referred to herein as the "Company". Comparative
financial statements are not included as a result of this reverse acquisition.
The financial statements reflect the financial position and results of
operations of BarPoint.com, Inc. and its subsidiaries on a consolidated basis.
The Company's policy is to consolidate all majority - owned subsidiaries. All
inter-company amounts have been eliminated in consolidation.
The Company has concluded private placements of securities pursuant to which it
issued an aggregate of 4,499,868 shares of common stock and received net
proceeds of approximately $6,054,000 and a subscription note receivable of
$750,000. (See Note D)
The Company "soft launched" its preview website in December 1999 and intends to
launch the more complete version of its web site and service in early 2000. The
web site, www.BarPoint.com, will feature a patent-pending search engine and
software technology that allows consumers to use the standard UPC barcode that
appears on approximately 100 million retail items to search for product specific
information from the internet. The website will offer consumers the opportunity
to search for product specific information and shop for products by entering any
UPC barcode number.
NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of
three months or less to be cash equivalents.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk are cash and cash equivalents. The Company places its cash and cash
F-6
<PAGE>
equivalents with high credit quality financial institutions. The amount of
deposit in any one institution that exceeds federally insured limits is subject
to credit risk. Such amount was approximately $5,814,000 at September 30, 1999.
Marketable Securities
The Company accounts for its investments pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". SFAS No. 115 addresses the accounting and reporting
for investments in equity securities that have readily determinable fair values
and for all investments in debt securities. Those investments are to be
classified into the following three categories: held-to-maturity debt
securities; trade securities; and available-for-sale securities.
Management determines the appropriate classification of its investments in debt
and equity securities at the time of purchase and reevaluates such determination
at each balance sheet date. At September 30, 1999 investments were classified as
available for sale securities. Unrealized gains and losses for
available-for-sale securities are excluded from earnings and reported as a net
amount as a separate component of stockholders' equity as comprehensive income
until realized. The Company primarily uses the specific identification method
for gains and losses on the sales of marketable securities (see Note C).
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets ranging from
five to ten years for furniture, fixtures and office equipment and three to five
years for computer equipment.
Earnings (Loss) Per Share
The Company has adopted Statement of Financial Accounting Standards No.128,
Earnings Per Share, (SFAS 128) requires the presentation of two earnings per
share (EPS) amounts, basic and diluted. Basic EPS is calculated on the weighted
average number of shares outstanding. Diluted EPS is not presented since no
effect was given to outstanding options as it would have been anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Software Development Costs
Costs relative to the initial software development related to the Company's
underlying technology are capitalized and carried at book value and include
$220,000 for services rendered by certain stockholders. Such costs are being
amortized over 5 years, subject to periodic evaluation for impairment. Costs to
maintain such technology going forward, and ongoing web development costs will
be expensed.
Income Taxes
The Company recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when the
differences are expected to be recovered.
F-7
<PAGE>
Advertising
The Company recognizes advertising expense in accordance with Statement of
Position ("SOP") 93-7 "Reporting on Advertising Costs". As such, the Company
expenses the costs of advertising when incurred. For the year ended September
30, 1999 the Company incurred advertising expense of $90, 800.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB No. 25"), and related
interpretations, in accounting for its employee stock options rather than the
alternative fair value accounting allowed by SFAS No. 123, Accounting for
Stock-Based Compensation. APB No. 25 provides that the compensation expense
relative to the Company's employee stock options is measured based on the
intrinsic value of the stock option. SFAS No. 123 requires companies that
continue to follow APB No. 25 to provide a pro forma disclosure of the impact of
applying the fair value method of SFAS No. 123
Comprehensive Income (Loss)
The Company adopted SFAS No. 130, Reporting Comprehensive Income, which
establishes standards for the reporting and display of comprehensive income and
its components in the financial statements. The only item of comprehensive
income (loss) that the Company currently reports is unrealized gains (losses) on
marketable securities.
NOTE C MARKETABLE SECURITIES
Marketable securities consist of investments in equity securities at discounted
market value, since they are unregistered or constrained securities. The
unrealized gain, net of deferred federal income tax, at acquisition date was
$2,380,585. For the period ended September 30, 1999 the unrealized gain, net of
deferred federal income tax, was $1,364,920.
NOTE D SUBSCRIPTION AND LOANS RECEIVABLE
A subscription note receivable in the amount of $750,000 bears interest at 8%
per annum and is payable on February 12, 2000. The note is secured by 394,737
shares of common stock of the Company. In the event the note is not paid at
maturity the shares of common stock held in escrow shall be canceled and the
obligor shall have no further liability or obligation under this note.
Other
Harmat loaned $175,000 to Axxess, Inc. now known as Financial Web.Com, Inc., an
unaffiliated third party. The loan is evidenced by a $175,000 Promissory Note
dated August 15, 1997 which bears interest at 2% above the prime rate and unpaid
interest and principal were due August 15, 1998. Axxess, Inc. pledged 600,000
shares of its common stock as collateral and authorized warrants to purchase its
common stock for a price of $.25 per share (as amended) expiring August 14,
2000. On of December 15, 1998 Harmat notified Axxess, Inc. that it was
exercising its warrants to purchase 175,000 shares of Axxess, Inc. for an
aggregate subscription price of $43,750. The subscription price was applied
against the loan balance. A new promissory note was issued for $150,436 (the
remaining pincipal balance plus accrued interest). The new note bears interest
at 9.75% per annum and matures December 15, 1999. The Company is currently
negotiating an extension on this loan.
In connection with the sale of property in Quogue, New York, the buyer mortgaged
$60,000 of the purchase price to Harmat. The mortgage is payable monthly
(interest only) at an interest rate of 12% per annum and matures May 7, 2000.
NOTE E FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective December 31, 1995, the Company adopted SFAS No. 107, "Disclosure about
Fair Value Financial Instruments", which requires disclosing fair value to the
extent practicable for financial instruments which are recognized or
F-8
<PAGE>
unrecognized in the balance sheet. The fair value of the financial instruments
disclosed herein is not necessarily representative of the amount that could be
realized or settled, nor does the fair value amount consider the tax
consequences of realization or settlement.
The Company's financial instruments include cash and cash equivalents, payables
and short-term loans. It is estimated that the carrying amount approximated fair
value because of the near term maturities of such obligations.
NOTE F ACQUISITION OF ASSETS OF BARPOINT.COM, INC.
On June 3, 1999, Harmat acquired all of the issued and outstanding shares of
BarPoint.com, Inc. (Fla.) (a Company which commenced business in October, 1998)
pursuant to an Acquisition Agreement dated May 20,1999. The transaction was
accounted for as a reverse acquisition, as if BarPoint acquired Harmat, due to
the fact that the former shareholders of BarPoint owned a majority of Harmat
common stock after the transaction.
The consideration for the acquisition was 6,634,042 shares of the Company's
common stock based upon a negotiated value of $1.90 per share. The purchase
price was subject to adjustment depending upon the value of certain of the
Company's assets at the date of closing and over a 45-day period following the
closing.
In connection with the acquisition, a shareholder of Harmat made a capital
contribution to the Company of 250,000 shares of FinancialWeb.com, Inc. (the
"Fweb Stock") and certain other assets.
The Company declared a stock dividend to the shareholders of record as of June
2, 1999 calculated subsequent to the 45-day period following closing and payable
to shareholders on October 20, 1999, excluding the shareholders of BarPoint.com,
Inc. The dividend declared was 878,770 shares of common stock.
As part of the acquisition the Company authorized five (5) year options to
purchase 800,000 shares of the Company's common stock at an exercise price of
$1.90 per share. BarPoint's management is authorized to determine the
distribution of such options. Such options vest as follows: one-third (1/3)
immediately after one year from the date of Closing, one-third (1/3) after the
second year from the date of Closing, in the event BarPoint achieves 50% of its
revenue projection of $49,000,000 in such second year, and the balance of
one-third (1/3) after the third year from the date of Closing, in the event
BarPoint achieves 50% of its revenue projection of $179,000,000 in such third
year.
As part of the transaction, the Company sold to Leigh Rothschild, the Chairman
and CEO of the Company, three (3) shares of the Company's class A Preferred
Stock for a purchase price of $10 per share. The Preferred Stock shall vote on a
pari-pasu basis with the Company's Stock. As of September 30, 1999, the Company
had outstanding 1,500,000 Class A Warrants and 500,000 Class B Warrants
(collectively, the "Warrants"). One share of Preferred Stock shall be voted in
accordance with the issuance of the Class A Warrants and one share of Preferred
Stock shall be voted in accordance with the issuance of the Class B Warrants.
The Preferred Stock shall be entitled to one vote for each share of common stock
issued upon exercise of the Warrants. So long as the Warrants are outstanding
and are not exercised, then the Preferred Stock allocated to the Warrants shall
have no vote. In the event the Warrants are not exercised and expire by their
terms, then the Preferred Stock shall be canceled. The third share of Preferred
F-9
<PAGE>
Stock shall have 346,766 votes. In no event will any of the Preferred Stock have
any votes after five (5) years from the date of issue.
In connection with services rendered, the new consulting agreement and
guarantees issued by Matthew Schilowitz relating to collectability of certain
assets of Harmat, Mr. Schilowitz was awarded options to purchase the aggregate
of 190,615 shares at $1.90 per share, exercisable over a five (5) year period.
David W. Sass, a director of the Company, is the father of Jeffrey W. Sass, a
founder, shareholder, and director of BarPoint. McLaughlin & Stern, LLP, general
counsel to the Company, was a shareholder of BarPoint and received shares in the
Company as part of the transaction. David W. Sass is a member of said firm and
also a shareholder of the Company
NOTE G COMMITMENTS AND CONTINGENCIES
Consulting Agreement
In February 1998, Harmat entered into a one year consulting agreement with
Spencer Trask to advise the Harmat on financial matters in connection with the
operation of the business including acquisitions, mergers and other similar
business combinations. The agreement was extended to February 2000. The Harmat
paid Spencer Trask an initial $10,000 retainer and an additional $3,500 per
month. In addition, Spencer Trask is to receive a transaction fee for any
transactions consummated by Harmat during the term of the agreement or within
two years after the end of the term. In connection with this agreement Spencer
Trask was granted five year warrants to purchase 200,000 shares of Harmat's
common stock at $.35 per share. In connection with the acquisition (see Note F),
Spencer Trask was paid a fee of $189,000. On November 5, 1999 the Company and
Spencer Trask terminated the consulting agreement, however, the Company shall
continue to make payments of the retainer fee through January 2000 and the
warrants remain in full force. As part of this agreement the Holder of the
warrants have agreed not to sell more than 28,500 shares per month commencing
January 1, 2000.
Properties
The Company currently rents of office space Ft. Lauderdale, FL under a temporary
lease that expires December 31, 1999. The Company is in the final stages of
negotiating a new five-year lease commencing January 1, 2000. If the Company
fails to execute a new lease it is to pay $200,000 in agreed upon liquidating
damages.
Product Supply and Technology License Agreement
The Company issued 1,315,789 shares of common stock to Symbol Technologies, Inc.
for (a) delivery of $1,000,000 in cash, (b) a Product Supply and Technology
License Agreement, and (c) the agreement by the Company to sell up to 120,000
Symbol SPT 1500 machines at a discount.
Employment Agreement
On June 3, 1999, the Company entered into an Employment Agreement with Leigh
Rothschild, a stockholder, director, and chief executive officer, for 3 years
with a base salary of $200,000 in the first year, increasing in $50,000
increments each subsequent year.
On June 3, 1999, the Company entered into a three year employment agreement with
Jeffrey W. Sass and a three year consulting agreement with Matthew Schilowitz,
who are also company stockholders and directors, for an annual base of $150,000
each, with increments of $25,000 and $50,000 each year thereafter.
NOTE H RELATED PARTY TRANSACTIONS
F-10
<PAGE>
The Company paid a finders fee to Mr. Schilowitz, a stockholder of the Company,
in the amount of $246,455 in connection with the private placements. The fee was
offset against Mr. Schilowitz's loan balance of $218,655 as payment in full plus
Harmat's expenses of approximately $27,800. In addition the Company repaid a
loan to Leigh Rothschild in the amount of $110,000.
The law firm of McLaughlin & Stern, LLP of which Mr. Sass, a stockholder of the
Company is a principal, received legal fees of approximately $69,000 for the
year ended September 30, 1999.
NOTE I YEAR 2000 ISSUES
The effects of the Year 2000 issue may be experienced by the Company before, on,
or after January 1, 2000, and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems' failures
which could affect the Company's ability to conduct normal business operations.
The Company believes that by monitoring the Year 2000 readiness of key external
parties, it is mitigating its Year 2000 risks as all internal systems are Year
2000 compliant. However, there can be no assurance that the uncertainties
surrounding the Year 2000 issue will not materially and adversely affect the
Company.
NOTE J STOCK OPTION PLANS
The Company has four stock-based compensation plans, which are described below.
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized.
a) The Plan for Incentive Compensation of Matthew Schilowitz (the "Schilowitz
Incentive Plan"), who is the principal stockholder, was adopted by the Board of
Directors and approved by Harmat's sole stockholder on March 1, 1996 and amended
August 3, 1996. Pursuant to such plan, Mr. Schilowitz has been granted an option
to purchase up to an aggregate of 500,000 shares of common stock at an exercise
price of $.35, (as amended). The exercise price and number of options have been
amended to $.30 and 576,748 respectively due to the dilutive effect of the
acquisition. In conjunction with the acquisition all such options have become
fully vested resulting in the accrual of compensation expense in the amount of
$775,000, which has been reflected in the operations of Harmat prior to June 3,
1999.
b) In February 1996, the Board of Directors adopted the 1996 Joint Incentive and
Non-Qualified Stock Option Plan (the "Plan") providing for the granting of up to
400,000 shares of the Harmat's common stock. In January 1997, the Harmat granted
five year options under the Plan providing for 10,000 shares at a price of
$2.125 per share ($.35 as amended) to four directors and two key employees of
the Harmat. During 1998, 10,000 of these options were forfeited with the
termination of employment of a key employee. In March 1998, the Harmat's chief
executive officer and principal shareholder was granted 300,000 shares at an
exercise price of $2.337 per share ($.35, as amended). The exercise price and
number of options have been amended to $.30 and 346,049 respectively due to the
dilutive effect of the acquisition. During the year ended September 30, 1999,
50,000 options were exercised.
c) As part of the acquisition the Company authorized five-year options to
purchase 800,000 shares of the Company's common stock at an exercise price of
$1.90 per share. Such options vest as follows: one-third after June 3, 2000;
one-third after June 3, 2001 in the event the Company achieves 50% of its
revenue projection of $49,000,000 in the second year and one third after June 3,
2002 in the event the Company achieves 50% of its revenue projection of
$179,000,000 in the third year. As of September 30, 1999, an aggregate of
560,000 options have been granted.
d) The 1999 Plan for Incentive Stock Options was adopted by the Board of
Directors on September 17, 1999, subject to stockholder approval, authorizing
F-11
<PAGE>
the Company to grant five year options to purchase 1,500,000 shares of the
Company's common stock at fair market value at date of grant or 85% of fair
market value. As of September 30, 1999, an aggregate of 205,000 options have
been granted.
A summary of the status of the Company's stock option plan as of September 30,
1999, and the changes during the year ending September 30, 1999 is presented
below:
Weighted-Averaged
FIXED OPTIONS Shares Exercise Price
October 1, 1998 972,797 $ .30
Granted 582,281 2.82
Exercised (50,000) .35
Forfeited 0 -
--
September 30, 1999 1,505,078 $ .76
Exercisable at September 30, 1999 1,505,078
Weighted-average fair value of
options granted during the year $ 2.82
F-12
<PAGE>
THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT FIXED STOCK OPTIONS
OUTSTANDING AT SEPTEMBER 30, 1999
Outstanding Options Exercisable Options
Weighted- Weighted-
Outstanding Number average average Number Weighted-
Excercise Price Outstanding Remaining Exercise Exercise average
Contractual Price At 9/30/98 Exercise Price
$.30 922,797 2.5 to 7 years $.30 922,797 $.30
$1.90 377,281 5 years $1.90 377,281 $1.90
$4.50 205,000 5 years $4.50 205,000 $4.50
The following information concerning the Company's stock option plans is
provided in accordance with SFAS No. 123 "Accounting for Stock Based
Compensation." The Company accounts for such plans in accordance with APB No.
25, "Accounting for Stock Issue to Employees."
The fair value of each option grant is estimated on the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1999: dividend yield of 0%, risk-free interest
rate of 5.0%, expected volatility of 115.04%, and expected lives of 5 years for
the options.
If the Company had used the fair value based method of accounting for its
employee stock option plan, as prescribed by Statement of Financial Accounting
No. 123, compensation cost included in the net loss for the year ended September
30, 1999 would have increased by approximately $1,267,000, resulting in a net
loss of $(1,249,595), net of tax, and loss per share of $(.15).
NOTE K INCOME TAXES
The income tax benefit for the year ended September 30, 1999 consists of the
following:
Loss before income tax benefit ($846,595)
Federal income tax benefit at 36% 305,000
Prior NOL allowable under IRC
Section 382 103,000
Income tax benefit $408,000
The Company has federal net operating loss carryforwards (NOL) of approximately
$1,680,000 and expects these NOL to be available in the future to reduce the
federal income tax liability of the Company. However, due to the ownership
change, the Company's ability to utilize the NOL's are restricted under Section
382 of the Internal Revenue Code (IRC). Therefore, a tax benefit has been
reflected only to the extent allowable in the current year.
Deferred income taxes reflect the tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The components of the net deferred
income tax assets are as follows:
Deferred income tax assets:
NOL prior to acquisition $604,800
NOL generated in the current year 305,000
Stock compensation (prior to acquisition) 279,000
Valuation allowance ( 501,800)
----------
$687,000
Deferred income tax liabilities:
Unrealized gain on marketable securities $902,899
$215,899
F-13
<PAGE>
NOTE L SUBSEQUENT EVENTS
On November 4, 1999 the Company converted 750,000 of Socket Communications, Inc.
Preferred Series D holdings into 1,307,190 of Socket Communications, Inc Common
Shares.
On November 5, 1999 pursuant to an Agreement for Merger and Reorganization of
BarPoint.com, Inc. through a newly organized, wholly owned subsidiary ("Sub")
acquired all of the issued and outstanding shares of Synergy Solutions, Inc. The
purchase price for the acquisition consisting of the following:
(A) 75,000 shares of common stock, par value $.001 per
share, of BarPoint (the "BarPoint Common Stock"); (B) cash totaling $100,000 ;
and (C) in the event Sub achieves at least Four Hundred Thousand Dollars
($400,000) in earnings, before interest, taxes, depreciation and amortization
("EBITDA") no later than twelve (12) months from the date of the closing, 75,000
shares of BarPoint Common Stock, par value $.001 per share, which shares shall
be held in escrow pursuant to an escrow agreement.
BarPoint shall pay the Stockholders additional consideration in proportion to
their respective ownership of Synergy equal to (x) thirty percent (30%) of Sub's
EBITDA attributable to operations ending as of the first anniversary of the
closing; (y) twenty-five percent (25%) of Sub's EBITDA attributable to
operations between the first and second anniversaries of the closing; and (z)
twenty percent (20%) of Sub's EBITDA attributable to operations between the
second and third anniversaries of the closing, (collectively the "Earn Out").
BarPoint shall deliver the Earn Out for each Earn Out period within ninety (90)
days of the first, second and third anniversary dates of the Closing.
Any such Earn Out shall be paid in cash until the EBITDA equals eight hundred
thousand dollars ($800,000) and thereafter, in BarPoint common stock, valued at
the closing bid price three (3) business days prior to payment.
Synergy Solutions, Inc. provides computer-consulting services with expertise in
developing computer programs for the Palm OS devices and other pentium based
computer devices and developing web server applications with various software,
including, but not limited to, Oracle Unix/Linux Systems.
Employment Agreements were entered into with various executives of Synergy
Solutions, Inc. as well as the granting of options under BarPoint.com, Inc.,
Incentive Option Plan, which is subject to shareholder approval.
In November 1999 the Board of Directors granted 763,000 options at an exercise
price of $6.97. In November 1999 the Class A and Class B warrants were canceled
in exchange for 325,000 shares of the Company's common stock and $50,000.
On September 21, 1999 the Company entered into a contract of sale to sell land
held for sale for $175,000. The sale is expected to close on or before December
31, 1999. The Company will recognize income of approximately $25,000, before
commissions and other selling expenses.
</TABLE>
F-14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
Dated: December 23, 1999
BarPoint.com, Inc.
By: Leigh M. Rothschild
CEO and Chairman of the Board of Directors
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities on
the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name Position Date
By:......................................... Chairman of the Board of Directors and December 23, 1999
Leigh M. Rothschild Chief Executive Officer
By:......................................... Chief Operating Officer, Executive Vice December 23, 1999
Jeffrey W. Sass President and Secretary
By:......................................... Treasurer and a Director December 23, 1999
Seymour G. Siegel
By:......................................... Director December 23, 1999
David W. Sass
By:......................................... Director December 23, 1999
Matthew C. Schilowitz
By:......................................... Director December 23, 1999
Jay Howard Linn
By:......................................... Director December 23, 1999
Kenneth Jaeggi
</TABLE>
29
