SECURITIES AND EXCHANGE
COMMISSION WASHINGTON, D.C. 20549
--------------------
FORM 10-QSB/A
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSACTION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER:
000-21235
BarPoint.com, Inc.
DELAWARE 11-2780723
(STATE OR JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
One East Broward Boulevard
Suite 410
Fort Lauderdale, FL 33301
(Address of Principal Executive Offices)
(954) 745-7500
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of issuer's classes of common
equity, as of July 31, 2000:
Title of Class Number of Shares
-------------- ----------------
Common Stock, par value $.001 16,921,367
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
BarPoint.com, Inc.
Index to Form 10-Q
<TABLE>
<CAPTION>
Page
Item Number
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheet - March 31, 2000 3
Consolidated Statements of Operations - For the three months ended
March 31, 2000 and from inception October 1, 1998 through March
31, 2000 4
Consolidated Statements of Cash Flows - For the six months ended
March 31, 2000 and from inception October 1, 1998 through March
31, 2000 5
Consolidated Statements of Stockholders Equity for the period ended
March 31, 2000 7 - 9
Notes to Consolidated Financial Statements 10
ITEM II. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits - Financial Data Schedule
b. Reports on Form 8-K - None
Signatures
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
BARPOINT.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
ASSETS
AS RESTATED
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 27,122,552
Marketable securities 7,181,221
Account receivable 57,908
Inventory 46,076
Mortgage receivable 60,000
Other current assets 158,045
------------
Total Current Assets 34,625,802
------------
Equipment - net of accumlated
depreciation of $21,611 205,686
------------
205,686
------------
OTHER ASSETS
Deposit in escrow 190,000
Goodwill 490,285
Software development and licensing - net of
accumulated amortization of $450,045 1,322,974
------------
2,003,259
------------
TOTAL ASSETS $ 36,834,747
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,059,049
Income tax payable 5,786,726
------------
Total Current Liabilities 6,845,775
------------
OTHER LIABILITIES
Deferred taxes 2,246,894
------------
2,246,894
------------
TOTAL LIABILITIES 9,092,669
------------
STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value - authorized 5,000,000
share: 3 shares issued and outstanding -
Common stock; $.001 par value - authorized 20,000,000
shares; 15,430,077 issued and outstanding 15,430
Paid in capital 14,453,728
Accumulated Earnings in Development Stage 11,564,636
Accumulated Comprehensive Income 1,708,284
------------
Total Stockholders' Equity 27,742,078
------------
Total Liabilities and Stockholders' Equity $ 36,834,747
============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
BARPOINT.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
From Inception
Three Months Six Months October 1, 1998
Ended Ended through
March 31, 2000 March 31, 2000 March 31, 2000
------------------------------------------------------
AS RESTATED AS RESTATED AS RESTATED
<S> <C> <C> <C>
Revenues:
Total revenues $ 169,965 $ 220,290 $ 220,290
Cost of Sales 14,158 15,925 15,925
------------------------------------------------------
Gross Profit 155,807 204,365 204,365
Operating Expenses:
Selling, General and Administration 3,425,491 5,306,625 6,138,915
Research and Development 354,943 609,147 687,059
------------------------------------------------------
Total Operating Expenses 3,780,434 5,915,772 6,825,974
------------------------------------------------------
Loss from Operations (3,624,627) (5,711,407) (6,621,609)
------------------------------------------------------
Other Income:
Interest Income 220,794 286,700 350,507
Gain on Sale of Marketable Securities
and Other Assets 23,052,216 23,422,663 23,422,663
------------------------------------------------------
Total Other Income 23,273,010 23,709,363 23,772,970
------------------------------------------------------
Income before Income Tax 19,648,383 17,997,956 17,151,361
Income Tax Expense (6,676,363) (5,994,726) (5,586,726)
------------------------------------------------------
Net Income $ 12,972,020 $ 12,003,230 $ 11,564,635
======================================================
Net Income per Common Share--
Basic: $ 0.84 $ 0.79 $ .98
======================================================
Diluted: $ 0.74 $ 0.70 $ .86
======================================================
Weighted Average Common Shares
Shares Outstanding--Basic 15,409,478 15,144,561 11,854,828
======================================================
Weighted Average Common Shares
Shares Outstanding--Diluted 17,488,947 17,119,446 13,371,160
======================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BARPOINT.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
From Inception
Six Months October 1, 1998
Ended through
March 31, 2000 March 31, 2000
---------------------------------
AS RESTATED AS RESTATED
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 12,003,230 $ 11,564,635
Adjustments to reconcile net income to net cash used
for operating activities:
Deferred income tax asset 221,000 (187,000)
Gain on sale of marketable securities (23,422,663) (23,422,663)
Depreciation and Amortization 463,978 479,656
Non-Cash administration, marketing & development expenses 580,000 600,500
Non-Cash acquisition costs 9,997 9,997
---------------------------------
(10,144,458) (10,954,875)
Increase (decrease) in cash flows due to changes
in operating assets and liabilities:
Change in liabilities 6,412,835 6,580,417
Change in assets (131,090) (167,549)
---------------------------------
Total Adjustments 6,281,745 6,412,868
---------------------------------
Net Cash Used by Operating Activities (3,862,713) (4,542,007)
---------------------------------
INVESTING ACTIVITIES:
Cash received on acquisition 628,227
Acquisition costs (189,000)
Acquisition of Synergy Solutions, Inc.* (100,000) (100,000)
Sale of land held for sale 149,750 149,750
Sales of marketable securities 24,683,232 24,683,232
Software development costs (53,019)
Purchase of marketable securities (671,704) (671,704)
Equipment (188,970) (213,629)
---------------------------------
Net Cash Provided by Investing Activities 23,872,308 24,233,857
---------------------------------
FINANCING ACTIVITIES:
Payment on subscription receivable 750,000 750,000
Private placements - net of commissions 6,273,170
Exercise of stock options and warrants 389,002 407,532
---------------------------------
Net Cash Provided by Financing Activities 1,139,002 7,430,702
---------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 21,148,597 27,122,552
CASH AND CASH EQUIVALENTS - beginning of period 5,973,955 --
---------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
From Inception
Six Months October 1, 1998
Ended through
March 31, 2000 March 31, 2000
---------------------------------
AS RESTATED AS RESTATED
<S> <C> <C>
CASH AND CASH EQUIVALENTS - end of period $27,122,552 $27,122,552
=================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Taxes $ 0 $ 591
=================================
Interest $ 0 $ -
=================================
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS:
Software Development Costs for Services Rendered
by Certain Stockholders $ 0 $ 220,000
=================================
Product supply and technology license agreement
acquired through issuance of Common Stock -
Note G $ 0 $ 1,500,000
=================================
Non-Cash Administrative, Marketing
& Development Expenses $ 580,000 $ 600,500
=================================
Finders fee applied to stockholders loan
receivable $ 0 $ 218,655
=================================
Common stock dividend of 878,770 shares $ 879 $ 879
=================================
*75,000 common shares issued as part of
Acquisition of Synergy Solutions, Inc. $ 408,207 $ 408,207
=================================
Acquisition of BarPoint- Note A
Cashless exercise of warrants $ 195,372 $ 195,372
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
BARPOINT.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED MARCH 31, 2000
AS RESTATED
<TABLE>
<CAPTION>
# of Common Stock
Shares
of Additional
Preferred Paid-In
Stock Shares Par Value Capital
<S> <C> <C> <C> <C>
Balance-September 30, 1998 0 2,612,500 $ 2,612 $4,253,604
Contribution of 250,000 shares of Financial
Web stock and 60,000 warrants of Socket
Communications, Inc. 108,956
Stock Options, Net Loss and Unrealized Gain
on Marketable Securities (Net of Income
Taxes) October 1,1998 - June 3, 1999 775,000
Executive Compensation to Board of Directors 50,000 50 24,950
---------------------------------------------------------
Balance June 3, 1999 0 2,662,500 2,662 5,162,510
Acquisition of The Harmat Organization (447,842)
BarPoint.com, Inc. Equity at June 3, 1999 100 100 241,400
Recapitalization of BarPoint.com, Inc. 6,633,942 6,534 (6,534)
Acquisition Costs (189,000)
Licensing Agreement - Note G 1,500,000
<CAPTION>
Note
Receivable
from Accumulated Comprehensive
Stockholder (Deficit) Income Total
<S> <C> <C> <C>
Balance-September 30, 1998 (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
Stock Options, Net Loss and Unrealized Gain
on Marketable Securities (Net of Income Taxes)
October 1,1998 - June 3, 1999 (1,161,558) 2,380,585 1,994,027
Executive Compensation to Board of Directors 25,000
-------------------------------------------------------------
Balance June 3, 1999 (2,828,427) 2,380,585 4,717,330
Acquisition of The Harmat Organization 2,828,427 (2,380,585)
BarPoint.com, Inc. Equity at June 3, 1999 (89,602) 151,898
Recapitalization of BarPoint.com, Inc. 0
Acquisition Costs (189,000)
Licensing Agreement - Note G 1,500,000
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
# of Common Stock
Shares
of Additional
Preferred Paid-In
Stock Shares Par Value Capital
<S> <C> <C> <C> <C>
Private Placements 4,499,868 4500 6,800,015
Exercise of Stock Options 50,000 50 17,450
Issuance of Preferred Stock 3 -- 30
Net Loss
Unrealized Gain on Marketable
Securities (Net of Income Taxes)
------------------------------------------------------------------------
Balance - September 30, 1999 3 13,846,410 $ 13,846 $ 13,078,029
------------------------------------------------------------------------
Common Stock Dividend to Shareholders
of record June 2, 1999 878,770 879 (879)
Acquisition of Synergy Solutions, Inc. 75,000 75 408,207
Exercise of Stock Options 11,600 12 3,468
Cancellation of all Class A Warrants
and Class B Warrants, plus $50,000 325,000 325 (50,325)
Cashless exercise of Warrants 195,372 195 (195)
Exercise of Warrants 17,391 18 78,362
Net Loss
<CAPTION>
Note
Receivable
from Accumulated Comprehensive
Stockholder (Deficit) Income Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Private Placements (750,000) 6,054,515
Exercise of Stock Options 17,500
Issuance of Preferred Stock 30
Net Loss (348,993) (348,893)
Unrealized Gain on Marketable
Securities (Net of Income Taxes) (1,015,665) (1,015,665)
---------------------------------------------------------------------------
Balance - September 30, 1999 $ (750,000) $ (438,595) $ (1,015,665) $ 10,887,615
---------------------------------------------------------------------------
Common Stock Dividend to Shareholders
of record June 2, 1999 --
Acquisition of Synergy Solutions, Inc. 408,283
Exercise of Stock Options 3,480
Cancellation of all Class A Warrants
and Class B Warrants, plus $50,000 (50,000)
Cashless exercise of Warrants --
Exercise of Warrants 78,380
Net Loss (968,790) (968,790)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
# of Common Stock
Shares
of Additional
Preferred Paid-In
Stock Shares Par Value Capital
<S> <C> <C> <C> <C>
Change in Unrealized Gain on Marketable
Securities (Net of Income Taxes)
---------------------------------------------------------------------
Balance - December 31, 1999 3 15,349,543 15,350 13,516,668
---------------------------------------------------------------------
Payment of subscription note receivable
Exercise of Stock Options 586 1 1,113
Exercise of Warrants 79,948 79 355,947
Issue of stock options below market 220,000
Issue of warrants to a vendor 360,000
Net Income
Change in Unrealized Gain on Marketable
Securities (Net of Income Taxes)
---------------------------------------------------------------------
Balance - March 31, 2000 3 15,430,077 15,430 14,453,728
---------------------------------------------------------------------
<CAPTION>
Note
Receivable
from Accumulated Comprehensive
Stockholder (Deficit) Income Total
<S> <C> <C> <C> <C>
Change in Unrealized Gain on Marketable
Securities (Net of Income Taxes) 4,166,829 4,166,829
---------------------------------------------------------------------
Balance - December 31, 1999 (750,000) (1,407,385) 3,151,164 14,525,797
---------------------------------------------------------------------
Payment of subscription note receivable 750,000 750,000
Exercise of Stock Options 1,114
Exercise of Warrants 356,026
Issue of stock options below market 220,000
Issue of warrants to a vendor 360,000
Net Income 12,972,020 12,972,020
Change in Unrealized Gain on Marketable
Securities (Net of Income Taxes) (1,442,880) (1,442,880)
---------------------------------------------------------------------
Balance - March 31, 2000 -- 11,564,635 1,708,284 27,742,077
---------------------------------------------------------------------
</TABLE>
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
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 interests 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., a Florida corporation ("Florida BarPoint"), more fully
described in Note F below. The transaction was accounted for as a reverse
acquisition, as if BarPoint acquired Harmat, because the former shareholders of
Florida 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 Florida
BarPoint since its inception. The consolidated statement of stockholders' equity
has been converted from Florida BarPoint's capital structure to Harmat's capital
structure to reflect the exchange of shares pursuant to the acquisition. The
consolidated group of companies is 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., a Delaware corporation, 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 and necessary adjustments have been made to financial statements.
The Company "soft launched" its preview website in December 1999 and frequently
updates it. We intend to launch a more complete version of the web site and
service by October 2000. The website, www.barpoint.com, features a
patent-pending reverse search engine and software technology that allows
businesses and 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 web site provides businesses and consumers
easy efficient access to meaningful product specific information.
Restatement
Subsequent to the issuance of the Company's three months ended March 31, 2000
financial statements, the Company's management determined that the fair value of
the Product Supply and Technology Licensing Agreement with Symbol Technologies,
Inc. executed on July 30, 1999, was not properly recorded. In August 1999 the
Company issued 1,315,789 shares of common stock at $1.90 per share totaling
$2,500,000 to Symbol Technologies, Inc. for (a) delivery of $1,000,000 in cash,
and (b) a Product Supply and Technology Licensing Agreement commencing on
October 1, 1999 thereby creating a partnership with an established enterprise
affording the Company easier access to potential users and market acceptance. No
value was recorded for the Product Supply and Licensing Agreement. As a result,
the March 31, 2000 financial statements have been restated from amounts
previously reported to record the $1,500,000 fair value of the Product Supply
and Licensing Agreement, which is included in Software development and
licensing, and a corresponding increase in Paid-in-Capital, as well as
amortization of the asset on a straight line basis over a twenty-two month
period commencing October 1, 1999.
A summary of the significant effects of the restatement is as follows:
<TABLE>
<CAPTION>
From Inception From Inception
October 1, 1998 October 1, 1998
Three Months Ended Three Months Ended through through
March 31, 2000 March 31, 2000 March 31, 2000 March 31, 2000
------------------- ------------------- --------------- ---------------
As Previously As Restated As Previously As Restated
Reported Reported
<S> <C> <C> <C> <C>
Balance Sheet Data:
Software development and
licensing - net of amortization $ 232,066 $ 1,322,974 $ 232,066 $ 1,322,974
Total Assets 35,743,839 36,834,747 35,743,839 36,834,747
Paid in capital 12,953,728 14,453,728 12,953,728 14,453,728
Accumulated Deficit - Development
Company 11,826,474 11,564,636 11,826,474 11,564,636
Total Stockholder's Equity 26,503,916 27,742,078 26,503,916 27,742,078
Statement of Operations Data:
Selling, general and administration
expenses 3,220,944 3,425,491 5,729,802 6,138,915
Net income 13,102,930 12,972,020 11,826,474 11,564,635
Net income per common share:
Basic $ 0.85 $ 0.84 $ 0.99 $ 0.98
Diluted $ 0.75 $ 0.74 $ 0.88 $ 0.86
</TABLE>
NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents.
The Company considers all highly liquid instruments purchased with a maturity of
six months or less to be cash equivalents.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk are cash and cash equivalents. The Company places its cash and cash
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 $25,450,000 at March 31, 2000.
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 March 31, 2000 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 uses the average cost method for gains and losses on
the sales of marketable securities. (See Note C)
10
<PAGE>
Property and Equipment
Property and equipment is 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, which 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 and diluted EPS includes the effect of
outstanding options and warrants.
The reconciliation of the basic and diluted earning per common share is as
follows:
<TABLE>
<CAPTION>
Three months ended Six months ended From Inception Oct. 98
March 31, 2000 March 31, 2000 to March 31, 2000
<S> <C> <C> <C>
Weighted average common shares outstanding 15,409,478 15,144,561 11,854,828
Diluted effect of:
Employee stock options 1,997,006 1,892,422 1,488,265
Warrants 82,463 82,463 28,047
---------- ---------- ----------
Weighted average common shares
Outstanding, assuming dilution 17,488,947 17,119,446 13,371,160
</TABLE>
For the period ended March 31, 2000, options to purchase 24,300 shares of common
stock were outstanding but were not included in the computation of diluted EPS
because the option's exercise price was greater than the average market price of
the current shares.
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.
Goodwill
The goodwill related to the acquisition of Synergy Solutions, Inc. is being
amortized over 15 years on a straight line basis.
Software Development and Licensing 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 planning stage web
development costs have been expensed. Web site application and infrastructure
and graphic and content development stage expenditures will be capitalized in
accordance with the recent EITF consensus.
The Company issued 1,315,789 shares of common stock at $1.90 per share totaling
$2,500,000 to Symbol Technologies, Inc., for (a) delivery of $1,000,000 in cash,
(b) a Product Supply and Technology License Agreement commencing on October 1,
1999, and (c) the agreement by Symbol to make available to the Company up to
110,000 Symbol SPT 1500 machines at a discount. The $1,500,000 value of the
Product Supply and Licensing Agreement will be amortized on a straight line
basis over 22 months commencing October 1, 1999.
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.
Revenue Recognition
Revenue is recognized from services upon completion of the services and from
software sales when payment has been received.
Software Revenue Recognition:
In March 1998, the AICPA issued Statement of Position 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2" ("SOP 98-4). SOP 98-4 defers for one
year the application of certain provisions of statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2). Different informal and
unauthoritative interpretations of certain provisions of SOP 97-2 have arisen
and, as result, the AICPA is deliberating amendments to SOP 97-2, so they can
issue interpretations regarding the applicability and the method of application
of those provisions. The adoption of SOP 97-2 has not had a material impact on
the Company's consolidated statements of operations, balance sheets or cash
flows.
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 three months ended
March 31, 2000advertising expense was $715,452 and for the six months ended
March 31, 2000 the Company incurred advertising expense of $923,252. These
amounts are included in selling, general and administration expenses.
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 gain (loss) on
marketable securities.
11
<PAGE>
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. As of March 31, 2000 the unrealized gain, net of deferred federal
income tax, was $4,088,869.
NOTE D SUBSCRIPTION AND LOANS RECEIVABLE
A subscription note receivable in the amount of $750,000 bears interest at 8%
per annum and maturing on February 12, 2000. The note was secured by 394,737
shares of common stock of the Company. The subscription note receivable for
$750,000 plus accrued interest of $35,178 was paid in full on February 11, 2000.
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 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
principal balance plus accrued interest). The new note bears interest at 9.75%
per annum and matured December 15, 1999. The Company granted an extension on
this loan to February 15, 2000. The promissory note for $150,436 plus accrued
interest of $16,012 was paid in full on January 21, 2000.
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. As
of July 31, 2000 this mortgage receivable note had not been paid.
In March 2000 an escrow deposit of $190,000 was made in connection with the
PriceBee merger and acquisition. See "Legal Proceeding"
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
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
Florida BarPoint (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 the Florida BarPoint acquired Harmat, due to
the fact that the former shareholders of Florida 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 (the "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 on October 20, 1999. The dividend
declared consisted of an aggregate of 878,770 shares of common stock.
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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 revenues of
at least $24,500,000 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
revenues of at least $89,500,000 in such third year.
As part of the transaction, the Company sold to Leigh Rothschild, the Chairman
of the Company, three (3) shares of the Company's Series A Preferred Stock, one
Class I share, one Class II share and one Class III share, for an aggregate
purchase price of $10. All of the shares of Series A Preferred Stock vote on a
pari passu basis with the Company's Common Stock. 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 the Company's Class A and Class B warrants.
In connection with the cancellation of these warrants the Company issued an
aggregate of 325,000 shares of common stock. The Class I share of Series A
Preferred Stock has 216,667 votes, the Class II share of Series A Preferred
Stock has 108,333 votes and the Class III share of Series A Preferred Stock has
346,766 votes. None of the shares of Series A Preferred Stock are entitled to
any dividends. All voting rights for these preferred shares end on June 7, 2004
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 director 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. 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 has agreed not
to sell more than 28,500 shares per month commencing January 1, 2000. On
December 23,1999 Spencer Trask purchased 195,372 common shares on a cashless
exercise of the 200,000 warrants.
Properties
The Company currently rents over 10,000 square feet of office space Ft.
Lauderdale, Florida under a new five-year lease commencing in January 2000.
Annual future lease payments:
Year Amount
---- ------
2001 $207,544
2002 $299,525
2003 $311,506
2004 $323,487
2005 $335,468
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Employment Agreements
On March 24, 2000, the Company entered into a two-year employment agreement with
John C. Macatee, a director and chief executive officer, with a base salary of
$400,000 in the first year and increasing to $450,000 for the second year.
On March 27, 2000 the Company entered into a new two-year employment agreement,
which supersedes his prior employment agreement, with Leigh M. Rothschild, a
stockholder, director and chairman of the board. The new employment agreement
provides that Mr. Rothschild shall serve as the Chairman of the Board and not as
the Chief Executive Officer, with a base salary of $300,000 in the first year
increasing to $350,000 for the second year.
On March 27, 2000 the Company entered into a new two-year employment agreement,
which supersedes his prior employment agreement, with Jeffery W. Sass, a
stockholder, director and chief operating officer. The new employment agreement
provides for a base salary of $250,000 in the first year increasing to $300,000
for the second year.
On June 3, 1999, the Company entered into a three year consulting agreement with
Matthew Schilowitz, who is a stockholder, for an annual base of $150,000 with
increases of $25,000 each year thereafter.
NOTE H RELATED PARTY TRANSACTIONS
The Company paid a finders fee in June 1999 to Mr. Schilowitz, a stockholder and
former director 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
July 1999. In August 1999 the Company repaid an advance to Leigh Rothschild in
the amount of $110,000.
The law firm of McLaughlin & Stern, LLP of which Mr. David Sass, a stockholder
and director, is a principal, received legal fees of approximately $51,000 for
the three months ending March 31, 2000 and $120,000 for the six months ending
March 31, 2000.
NOTE I YEAR 2000 ISSUES
We did not experience any significant effects of the Year 2000 issue on January
1, 2000. We will continue to address this issue and the impact it might have on
operations and financial reporting. We believe that by modifying or replacing
systems, and by monitoring the Year 2000 readiness of key external parties, we
are mitigating the Year 2000 risks. However, we cannot assure our stockholders
that the uncertainties surrounding the Year 2000 issue will not materially and
adversely affect us.
NOTE J STOCK OPTION PLANS AND WARRANTS
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.
a) The Plan for Incentive Compensation of Matthew Schilowitz (the "Schilowitz
Incentive Plan"), who was 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 Harmat's common stock. In January 1997, 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. As of March 31, 2000, 50,000 options have
been 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 revenues of at
lease $24,500,000 in the second year and one third
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after June 3, 2002 in the event the Company revenues of $89,500,000 in the third
year. As of March 31, 2000, an aggregate of 800,000 options have been granted.
d) The 1999 Equity Incentive Plan was adopted by the Board of Directors on
September 17, 1999 and was approved at the annual meeting of shareholders on
April 4, 2000, authorizing 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 March 31, 2000, an aggregate of
1,405,200 options have been granted. The Company issued 180,000 stock options
to Mr. Schilowitz at a 15% discount to market resulting in a $220,000
compensation expense.
In August 1999 the Company issued 60,000 warrants to a vendor at an exercise
price of $4.04, the warrants expire in three years. This resulted in a marketing
expense of $360,000 which has been reflected in financials for the six months
ended March 31, 2000.
A summary of the status of the Company's stock options as of March 31, 2000, and
the changes during the six months ended March 31, 2000 is presented below:
Weighted-Averaged
FIXED OPTIONS Shares Exercise Price
----------------------------------------------------------------------------
September 30, 1999 1,505,078 $ 1.27
Granted 284,700 6.44
Exercised 0 -
Forfeited (8,700) 7.42
December 31, 1999 1,781,078 2.07
Granted 995,500 7.89
Exercised 586 1.90
Forfeited 0 -
March 31, 2000 2,776,579 4.16
Exercisable at March 31, 2000 2,776,579
Weighted-average fair value of
options granted during the year $ 7.57
On April 4, 2000 the Board of Directors amended the 1999 Equity Incentive Plan,
subject to stockholder approval, authorizing the Company to grant an additional
1,500,000 five-year options to purchase shares of the Company's common stock at
fair market value at date of grant or 85% of fair market value.
NOTE K INCOME TAXES
The income tax expense for the six months ended March 31, 2000 consists of the
following:
Three Months Ended Six Months Ended
March 31, 2000 March 31, 2000
------------------ -----------------
Income $19,648,383 $17,997,956
Federal income tax at 34% 6,676,363 6,097,726
Prior NOL allowable under
IRC Section 382 0 (103,000)
----------- -----------
Income tax provision $ 6,676,363 $ 5,994,726
Current provision $ 6,455,363 $ 5,773,726
Deferred provision $ 221,000 $ 221,000
----------- -----------
$ 6,676,363 $ 5,994,726
=========== ===========
The Company for the fiscal year ended September 30, 1999 had 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
tax liability is as follows:
Deferred tax assets:
NOL prior to acquisition based $ 398,800
Stock based compensation (prior to acquisition) 279,000
Stock based compensation and marketing expense 200,000
Valuation allowance (398,800)
----------
Balance March 31, 2000 $ 479,000
Unrealized gain on marketable securities $2,725,894
----------
Deferred tax liability $2,246,894
==========
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NOTE L ACQUISITION
On November 5,1999 pursuant to an Agreement for Merger and Reorganization,
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 the Company
(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 former Stockholders of Synergy Solution, Inc. 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 the Company's Equity
Incentive Plan.
The business combination was accounted for as follows:
Current Assets 78,651
Furniture and equipment-net 13,668
--------
Total Assets $ 92,319
Less: Total Current Liabilities $ 82,322
--------
Net book value 9,997
Goodwill 498,285
--------
Total consideration on acquisition $508,282
========
Goodwill from the acquisition is being amortized over 15 years.
NOTE M SUBSEQUENT EVENTS
On April 4, 2000 the Board of Directors approved an employee benefits program
including a 401(k) Retirement Plan and an employee Stock Purchase Plan. The
401(k) Plan provides for the Company to match 25% of the first six percent of
employee contributions and an additional 25% of the first six percent of
employee contributions if certain annual Company goals are achieved. The
employee Stock Purchase Plan provides for the Company to contribute up to 15% of
the common stock purchased by the employee.
On April 4, 2000, PriceBee.com, Inc. submitted a claim for arbitration to the
American Arbitration Association with respect to our termination of an agreement
and plan of merger, whereby we had agreed to acquire PriceBee. PriceBee alleges
that our termination of the agreement and plan of merger was wrongful and seeks
specific performance and/or $5.0 million in damages. We have submitted a
counterclaim against PriceBee alleging breach of the agreement and plan of
merger on the part of PriceBee and are seeking $7.0 million in damages. We are
not a party to any other material legal proceedings.
On April 4, 2000 the annual meeting of shareholders was held and the
shareholders approved the election of directors, adopting the 1999 Equity
Incentive Plan, ratified the granting of certain options to officers and
directors and adopting an amendment to the Company's Certificate Incorporation
increasing the authorized shares of common stock to 100,000,000 shares.
On April 5, 2000 the Company completed a private equity offering selling
1,848,333 common shares at a price of $12 per share by the Company and selling
stockholders. Included in the total number of shares was $370,833 shares sold by
two shareholders. Matthew Schilowitz, a former director and founder of the
Company sold 100,000 shares and the Irrevocable Trust III, of which Jay Linn, a
director, serves as trustee and the beneficiaries of which are family members of
Leigh Rothschild, the Company's chairman, sold 270,833 shares. The Company
received gross proceeds of approximately $17.7 million for the sale of 1,477,600
shares of BarPoint Common Stock.
In June 2000 the Company was approved for trading on the Nasdaq small cap
market.
16
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2000
OVERVIEW
On June 3, 1999, we acquired all issued and outstanding shares of BarPoint.com,
Inc., a Florida Corporation ("Florida BarPoint") in exchange for 6,634,042
shares of our common stock. The transaction was accounted for as a reverse
acquisition, as if Florida BarPoint acquired us, because the former shareholders
of Florida 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 Florida BarPoint, because of the reverse acquisition
accounting. The consolidated statement of shareholders' equity has been
converted from Florida 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.
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 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 that are registered by a prospectus filed August 3, 1999 and amended
November 8, 1999. On February 7, 2000 we exercised warrants to purchase 578,836
Socket Communications common shares for a total exercise price of $671,703.
During the six months ended March 31, 2000 we sold 1,675,254 Socket
Communications common shares for approximately $24.6 million in cash.
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 75,000 shares of BarPoint common shares held
in escrow pursuant to additional earn out payments. Synergy Solutions products
are currently sold at major on-line, retail, and catalog software vendors.
Employment Agreements were entered into with various executives of Synergy
Solutions, Inc. as well as the granting of options under the Company Incentive
Option Plan
The Company "soft launched" its preview website in December 1999 and frequently
updates it. We intend to launch a more complete version of the web site and
service by October 2000. The website, www.barpoint.com, features a
patent-pending reverse search engine and software technology that allows
businesses and 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 web site provides businesses and consumers
easy efficient access to meaningful product specific information.
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 7, 2004. All three shares of preferred stock
were issued to Leigh Rothschild, our Chairman.
On December 18, 1999 we closed on the sale of land held for sale for $175,000.
We recognized income of approximately $25,000, before commissions and other
selling expenses.
In February 2000, BarPoint entered into an agreement to acquire PriceBee.com, a
price comparison "shopbot", through a merger of PriceBee.com with and into
Synergy Solutions, Inc., a wholly-owned subsidiary of BarPoint. On March 31,
2000, BarPoint gave ten days notice of termination of the agreement and plan of
merger with PriceBee.com. PriceBee.com is disputing BarPoint's termination of
the agreement and the dispute is in arbitration. See "Legal Proceedings."
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In March 2000, Matthew Schilowitz, a director and consultant of BarPoint,
entered into an agreement with the Company whereby Mr. Schilowitz: (i) resigned
from his position as a director upon the appointment of a new Chief Executive
Officer, (ii) sold 100,000 shares of common stock in the private placement
completed by the Company in April 2000, (iii) agreed to lock-up the shares he
owns and the shares underlying his options until the later of (x) 180 days from
the date of the first closing of the private placement and (y) the effective
date of the registration statement relating to the April 2000 offering and (iv)
entered into an agreement with the placement agent for the private placement
which provides that Mr. Schilowitz's lock-up shall expire with regard to 100,000
of his shares upon his resignation as a director of BarPoint. The 87,600 shares
held by the ARS Revocable Family Trust, a family trust established by Mr.
Schilowitz's wife and of which Mr. Schilowitz disclaims beneficial ownership,
are not be subject to lock-up restrictions. Mr. Schilowitz's consulting
agreement with BarPoint will remain in effect. The remainder of his shares and
options will be locked up for the longer of 180 days and registration statement
effectiveness. (See Subsequent Event)
Results of Operations
Net income was $12,972,020 or $.74 per common share diluted for the three months
ended March 31, 2000 and $12,003,230 or $.70 per common share diluted for the
six months ended March 31 2000. Net income was primarily due to gain on the sale
of marketable securities. As of March 31, 2000, we had no significant revenue
stream; and do not expect material revenues until we launch a more complete
version of our website in October 2000. 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 $3,425,491 for the three
months ended March 31, 2000 and $5,306,625 for the six months ended March 31,
2000. Selling, general and administration expenses consist primarily of
salaries, marketing, professional fees, hiring of personnel, travel and
entertainment.
Research and development expenses were $354,943 for the three months ended March
31, 2000 and $609,147 for the six months ended March 31, 2000. Research and
development spending was primarily due to the development of our product
database, content and technology infrastructure. We anticipate research and
development expenses will increase significantly in the upcoming year as we
continue to build and develop our database and technology infrastructure.
Advertising expenses were $715,452 for the three months ended March 31, 2000 and
$923,252 for the six months ended March 31, 2000. Advertising expenses were
primarily related to developing brand recognition and the launch of our preview
website. These amounts are included in selling, general and administration
expenses.
Interest income was $220,794 for the three months ended March 31, 2000 and
$286,700 for the six months ended March 31, 2000. Interest income was primarily
due to interest earned form our money market account.
Gain on sale of marketable securities was $23,052,216 for the three months ended
March 31, 2000 and $23,422,663 for the six months ended March 31, 2000. The gain
was primarily the result of selling approximately 1,675,000 common shares of
Socket Communication at a gain on sale of marketable securities of approximately
$23.4 million.
LIQUIDITY AND CAPITAL RESOURCES
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 that are registered by a prospectus filed August 3, 1999 and amended
November 8, 1999. On February 7, 2000 we exercised warrants of 578,836 Socket
Communications common shares at a total exercised price of $671,703. During the
six months ended March 31, 2000 we sold 1,675,254 Socket Communications common
shares for approximately $24.6 million in cash.
As of March 31, 2000, we had approximately $27.1 million in cash and cash
equivalents and $7.1 million in marketable securities. These marketable
securities consisted of 278,836 shares of common stock of Socket Communications,
Inc. and 425,000 shares of common stock of FinancialWeb.Com, Inc. The shares of
FinancialWeb are under a lock-up agreement and are not saleable until January
31, 2001.
For the six months ended March 31, 2000, we had cash flow used by operations of
($3,862,713). The negative cash flow was primarily due to the net loss from
operations.
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For the six months ended March 31, 2000, net cash provided by investing
activities of $23,872,308 was primarily the result of the sale of land held for
sale and sale of marketable securities.
For the six months ended March 31, 2000, net cash provided by financing
activities of $1,139,002 was primarily the result of proceeds from the
exercising of stock options and warrants. 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. The subscription note
receivable was paid in full February 11, 2000.
The Company for the fiscal year ended September 30, 1999 had 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.
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 April 4, 2000 the annual meeting of shareholders was held and the
shareholders approved the election of directors, adopting the 1999 Equity
Incentive Plan, ratified the granting of certain options to officers and
directors and adopting an amendment to the Company's Certificate Incorporation
increasing the authorized shares of common stock to 100,000,000 shares.
On April 4, 2000, PriceBee.com, Inc. submitted a claim for arbitration to the
American Arbitration Association with respect to our termination of an agreement
and plan of merger, whereby we had agreed to acquire PriceBee. PriceBee alleges
that our termination of the agreement and plan of merger was wrongful and seeks
specific performance and/or $5.0 million in damages. We have submitted a
counterclaim against PriceBee alleging breach of the agreement and plan of
merger on the part of PriceBee and are seeking $7.0 million in damages. We are
not a party to any other material legal proceedings.
On April 4, 2000 the Board of Directors approved an employee benefits program
including a 401(k) Retirement Plan and an employee Stock Purchase Plan. The
401(k) Plan provides for the Company to match 25% of the first six percent of
employee contributions and an additional 25% of the first six percent of
employee contributions if certain annual Company goals are achieved. The
employee Stock Purchase Plan provides for the Company to contribute up to 15% of
the common stock purchased by the employee.
On April 5, 2000 the Company completed a private equity offering selling
1,848,333 common shares at a price of $12 per share by the Company and selling
stockholders. Included in the total number of shares was 370,833 shares sold by
two shareholders. Matthew Schilowitz, a former director and founder of the
Company sold 100,000 shares and the Irrevocable Trust III, of which Jay Linn, a
director, serves as trustee and the beneficiaries of which are family members of
Leigh Rothschild, the Company's chairman, sold 270,833 shares. The Company
received gross proceeds of approximately $17.7 million for the sale of 1,477,600
shares of BarPoint Common Stock.
In June 2000 the Company was approved for trading on the Nasdaq small cap
market.
YEAR 2000 ISSUES
We did not experience any significant effects of the Year 2000 issue on January
1, 2000. We will continue to address this issue and the impact it might have on
operations and financial reporting. We believe that by modifying or replacing
systems, and by monitoring the Year 2000 readiness of key external parties, we
are mitigating the Year 2000 risks. However, we cannot assure our stockholders
that the uncertainties surrounding the Year 2000 issue will not materially and
adversely affect us.
CAUTIONARY STATEMENT RELATING TO FORWARD LOOKING STATEMENTS
This Form 10-QSB contains certain "forward looking statements" which
represent the Company's expectations or beliefs, including, but not limited to,
statements concerning industry performance and the Company's operations,
performance, financial condition, growth and strategies. For this purpose, any
statements contained in this Form 10-QSB that are not statements of historical
fact may be deemed to be forward looking statements. Without limiting the
generality of the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "estimate" or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
certain forward-looking statements. These statements by their nature involve
substantial risks and
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uncertainties, certain of which are beyond the Company's control, and actual
results may differ materially depending on a variety of important factors which
are noted herein, including but not limited to the potential impact of
competition, changes in local or regional economic conditions, the ability of
the Company to continue its growth strategy, dependence on management and key
personnel, supervision and regulation issues and an inability to find financing
on terms suitable to the company.
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Pursuant to the requirements of the Securities and exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
duly authorized
Dated: August 3, 2000
BarPoint.com, Inc.
By: /s/ John Macatee
----------------------------------------
John Macatee
Chief Executive Officer
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