SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Amendment No. 1)
[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 16,921,367 shares of Common Stock outstanding as of July
31, 2000.
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 July 31, 2000 (computed by reference to the last
reported sales price of the issuer's common stock on the Nasdaq Small Cap Market
was $61,339,955.
<PAGE>
Explanatory Note
This Amendment No. 1 to the Form 10-KSB for the fiscal year ended
September 30, 1999 of BarPoint.com, Inc. (the "Company") is being filed to
amend the Financial Statements that are part of Item 7 of the form 10-KSB.
<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.
As discussed in Note A, these financial statements have been restated to reflect
a change in the method of accounting for certain contracts obtained in
conjunction with the issuance of Company shares. Previously issued financial
statements as of September 30, 1999 and for the year then ended should be
discarded and no longer relied upon.
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
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BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Balance Sheet
September 30, 1999
(As Restated)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,973,956
Marketable securities 3,223,123
Loans receivable 210,436
Other current 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 and licensing - net 1,759,398
------------------
1,759,398
------------------
TOTAL ASSETS $ 11,441,151
==================
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; $.001 par value-authorized 5,000,000
shares; 3 issued and outstanding -
Common stock; $.001 par value-authorized 20,000,000
shares; 13,846,410 issued and outstanding 13,846
Paid in capital 13,078,029
Subscription receivable (750,000)
Accumulated Deficit-Development Stage Company (438,595)
Comprehensive Income (Loss) (1,015,665)
------------------
Total Stockholders' Equity 10,887,615
------------------
Total Liabilities and Stockholders' Equity $ 11,441,151
==================
See Independent Auditors' Report and Notes to Consolidated Financial Statements.
F-2
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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>
<TABLE>
<CAPTION>
BarPoint.com Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
For the Year Ended September 30, 1999
(As Restated)
Note
# of Shares Common Stock Additional Receivable
of Preferred Paid-In from Accumulated Comprehensive
Stock Shares Par Value Capital Stockholder (Deficit) Income Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Licensing Agreement - Note G 1,500,000 1,500,000
Exercise of Stock Options 50,000 50 17,450 17,500
Issuance of Preferred Stock 3 - 30 30
Net Loss (348,993) (348,993)
Change in Unrealized Gain on
Marketable Securities (Net of
Income Taxes) (1,015,665) (1,015,665)
------------------------------------------------------------------------------------------------------
Balance - September 30, 1999 3 13,846,410 $13,846 $13,078,029 ($750,000) ($438,595) ($1,015,665) $10,887,615
------------------------------------------------------------------------------------------------------
</TABLE>
See Independent Auditors' Report and Notes to Consolidated Financial Statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Year Ended September 30, 1999
<S> <C>
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
============
Product Supply and Technology License Agreement
acquired Through Issuance of Common Stock - as restated $ 1,500,000
============
Non-Cash Administrative Expenses $ 20,500
============
Finders fee applied to stockholders loan
receivable $ 218,655
============
Acquisition of BarPoint- Note A
</TABLE>
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.
Restatement
Subsequent to the issuance of the Company's year ended September 30, 1999
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 Technology Licensing Agreement. As
a result, the September 30, 1999 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.
A summary of the significant effects of the restatement is as follows:
Year Ended Year Ended
September 30, 1999, September 30, 1999,
------------------- -------------------
As Previously As Restated
Reported
Balance Sheet Data:
Software development and
licensing - net of amortization $ 259,398 $ 1,759,398
Total Assets 9,941,151 11,441,151
Paid in capital 11,578,029 13,078,029
Total Stockholder's Equity 9,387,615 10,887,615
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 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 will be expensed.
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.
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
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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. 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.
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
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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
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<PAGE>
THE FOLLOWING TABLE SUMMARIZES INFORMATION ABOUT FIXED STOCK OPTIONS
OUTSTANDING AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
Weighted- Weighted-
Outstanding Number average average Number Weighted-
Excercise Price Outstanding Remaining Exercise Exercised average
Contractual Price At 9/30/98 Exercise Price
<S> <C> <C> <C> <C> <C> <C>
$.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
</TABLE>
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
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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,
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.
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<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: August 3, 2000
BarPoint.com, Inc.
By: John C. Macatee
Chief Executive Officer
