SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
(Mark One)
(X) Quarterly report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934, for the quarterly period ended
December 31, 1999.
( ) Transition report pursuant to section 13 or 15 (d) of the
Securities Exchange Act of 1934, for the transition period from
to .
Commission file number 000-21235
BarPoint.com, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-2780723
(State of Incorporation) (I.R.S. Employer ID No.)
1 East Broward Boulevard, Suite 410, Fort Lauderdale, Florida 33301
(Address of Principal Executive Offices and Principal Place of Business
and Telephone Number)
The Harmat Organization, Inc.
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 31, 1999
Common Stock, $.001 par value 15,349,543 shares
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BarPoint.com, Inc.
Index to Form 10-Q
Page
Item Number
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheet - December 31, 1999 3
Consolidated Statements of Operations -
For the three months ended December 31, 1999
and from inception June 3, 1999 through December 31, 1999 4
Consolidated Statements of Cash Flows -
For the three months ended December 31, 1999
and from inception June 3, 1999 through December 31, 1999 5
Consolidated Statements of Stockholders Equity
for the period ended December 31, 1999 6 - 7
Notes to Consolidated Financial Statements 8
ITEM II. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
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
2
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<S> <C> <C> <C> <C> <C> <C>
BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Balance Sheet
December 31, 1999
ASSETS
December 31, 1999
CURRENT ASSETS
Cash and cash equivalents $ 4,918,452
Marketable securities 10,095,559
Account receivable 15,734
Inventory 43,895
Loans receivable 210,436
Other assets 161,824
------------------------
Total Current Assets 15,445,900
------------------------
Property-land -
Equipment - net of accumlated
depreciation of $7,999 125,476
------------------------
OTHER ASSETS
Goodwill 498,285
Software development - net 247,621
------------------------
745,906
TOTAL ASSETS 16,317,282
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 767,744
------------------------
Total Current Liabilities 767,744
------------------------
OTHER LIABILITIES
Deferred taxes payable 2,429,832
------------------------
2,429,832
TOTAL LIABILITIES 3,197,576
STOCKHOLDERS' EQUITY
Preferred stock -
Common stock 15,350
Paid in capital 12,016,668
Subscription receivable (750,000)
Accumulated Deficit-Development Company (1,313,476)
Comprehensive Income 3,151,164
------------------------
Total Stockholders' Equity 13,119,706
------------------------
Total Liabilities and Stockholders' Equity $ 16,317,282
========================
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BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Operations
For the Period Ended December 31, 1999
Three Months From Inception
Ended June 3, 1999 through
December 31, 1999 December 31, 1999
---------------------- ------------------------
Revenues:
Total revenues $ 50,325 $ 50,325
Cost of Sales 1,767 1,767
---------------------- ------------------------
Gross Profit 48,558 48,558
Operating Expenses:
Selling, General and Administration 1,676,588 2,508,878
Research and Development 254,204 332,116
---------------------- ------------------------
Total Operating Expenses 1,930,792 2,840,994
---------------------- ------------------------
Loss from Operations (1,882,234) (2,792,436)
---------------------- ------------------------
Other Income:
Interest Income 65,906 129,513
Gain on Sale of Marketable Securities and Other Assets 370,447 370,447
---------------------- ------------------------
Total Other Income 436,353 499,960
Loss before income tax benefit (1,445,881) (2,292,476)
Income tax benefit 571,000 979,000
---------------------- ------------------------
-
Net Loss $ (874,881) (1,313,476)
====================== ========================
Loss per Common Share--
Basic and Diluted: $ (0.06) $ (0.12)
====================== ========================
Weighted Average Common Shares
Shares Outstanding 14,083,732 11,378,490
====================== ========================
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BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Period Ended December 31, 1999
Three Months From Inception
Ended June 3, 1999 through
December 31, 1999 December 31, 1999
----------------- ------------------
OPERATING ACTIVITIES:
Net (loss) income $ (874,881) $ (1,313,476)
Adjustments to reconcile net (loss) to net cash
(used for) operating activities:
Tax asset (571,000) (979,000)
Depreciation and Amortization 17,719 33,397
Non-Cash administration expenses - 20,500
Non-Cash acquisition costs 9,997 9,997
----------------- ------------------
(1,418,165) (2,228,582)
Increase (decrease) in cash flows due to changes
in operating assets and liabilities:
Current liabilities 347,824 515,406
Current assets (50,950) (87,409)
----------------- ------------------
Total Adjustments 296,874 427,997
----------------- ------------------
Net Cash (Used) by Operating Activities (1,121,291) (1,800,585)
----------------- ------------------
INVESTING ACTIVITIES:
Cash received on acquisition - 628,227
Acquisition costs - (189,000)
Acquisition of Synergy Solutuions, Inc.* (100,000) (100,000)
Sale of land held for sale 149,750 149,750
Sales of marketable securities 79,326 79,326
Software development costs - (53,019)
Property and equipment (95,148) (119,807)
----------------- ------------------
Net Cash Provided by Investing Activities 33,928 395,477
----------------- ------------------
FINANCING ACTIVITIES:
Issuance of common and preferred stock 30 1,060
Private placements - net of commissions - 6,273,170
Exercise of stock options and warrants 31,830 49,330
----------------- ------------------
Net Cash Provided by Financing Activities 31,860 6,323,560
----------------- ------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,055,503) 4,918,452
CASH AND CASH EQUIVALENTS - beginning of period 5,973,955 -
----------------- ------------------
CASH AND CASH EQUIVALENTS - end of period $ 4,918,452 $ 4,918,452
================= ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Taxes - $ 591
==================
Interest $ -
==================
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS:
Software Development Costs for Services Rendered
by Certain Stockholders $ 220,000
==================
Non-Cash Administrative Expenses $ 20,500
==================
Finders fee applied to stockholders loan
receivable $ 218,655
==================
Common stock dividend of 878,770 shares $ 879 $ 879
================= ==================
*Acquisition of Synergy Solutuions, Inc.
75,000 common shares $ 408,207 $ 408,207
================= ==================
Acquisition of BarPoint- Note A
5
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BarPoint.com Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
For the Period Ended December 31, 1999
Note
# of Shares Common Stock Additional Receivable
of Preferred Paid-In from Accumulated Comprehensive
Stock Shares Par Value Capital Stockholder (Deficit) Income Total
Balance-September 30, 1998 0 2,612,500 $2,612 $4,253,604 (1,666,869) $0 $2,589,347
Contribution of 250,000 shares
of Financial Web stock and
60,000 warrants of Socket
Communications, Inc. 108,956 108,956
Stock Options, Net Loss and
Unrealized Gain on Marketable
Securities (Net of Income Taxes)
October 1,1998 - June 3, 1999 775,000 (1,161,558) 2,380,585 1,994,027
Executive Compensation to
Board of Directors 50,000 50 24,950 25,000
----------------------------------------------------------------------------
Balance June 3, 1999 0 2,662,500 2,662 5,162,510 (2,828,427) 2,380,585 4,717,330
Acquisition of The Harmat
Organization (447,842) 2,828,427 (2,380,585)
BarPoint.com, Inc. Equity
at June 3, 1999 100 100 241,400 (89,602) 151,898
Recapitalization of BarPoint.com, Inc. 6,633,942 6,534 (6,534) 0
Acquisition Costs (189,000) (189,000)
Private Placements 4,499,868 4500 6,800,015 (750,000) 6,054,515
Exercise of Stock Options 50,000 50 17,450 17,500
Issuance of Preferred Stock 3 - 30 30
Net Loss and Unrealized Gain on
Marketable Securities
(Net of Income Taxes) (348,993) (1,015,665) (1,364,658)
--------------------------------------------------------------------------------------------------
Balance - September 30, 1999 3 13,846,410 $13,846 $11,578,029 ($750,000) ($438,595) ($1,015,665) $9,387,615
--------------------------------------------------------------------------------------------------
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BarPoint.com Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
For the Period Ended December 31, 1999
Note
# of Shares Common Stock Additional Receivable
of Preferred Paid-In from Accumulated Comprehensive
Stock Shares Par Value Capital Stockholder (Deficit) Income Total
Common Stock Dividend to Shareholders
of record June 2, 1999 878,770 879 (879) -
Acquisition of Synergy Solutions, Inc. 75,000 75 408,207 408,283
Exercise of Stock Options 11,600 12 3,468 3,480
Cancellation of all Class A Warrants
and Class B Warrants, plus $50,000 325,000 325 (50,325) (50,000)
Cashless exercise of Warrants 195,372 195 (195) -
Exercise of Warrants 17,391 18 78,362 78,380
Net Loss and Unrealized Gain on Marketable
Securities (Net of Income Taxes) (874,881) 4,205,918 3,331,037
Reclassification adjustment of Unrealized
Gain on Marketable Securites Sold (39,089) (39,089)
------------------------------------------------------------------------------------------
Balance - December 31, 1999 3 15,349,543 15,350 12,016,668 (750,000) (1,313,476) 3,151,164 13,119,706
-------------------------------------------------------------------------------------------
7
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BarPoint.com, Inc.
Notes to Consolidated Financial Statements
December 31, 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 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. ("BarPoint"), 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 and necessary
adjustments have been made to financial statements.
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 by June
30, 2000. The web site, www.BarPoint.com, features a patent-pending search
engine and software technology that allows consumers to use the standard UPC
barcode that appears on approximately l00 million retail items to search for
product specific information from the internet. The web site will offer
consumers the opportunity to search for product specific information and shop
for products by entering any UPC barcode number .
NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents.
The Company considers all highly liquid instruments purchased with a maturity of
three months or less to be cash equivalents.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk are cash and cash equivalents. The Company places its cash and cash
equivalents with high credit quality financial institutions.
8
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The amount of deposit in anyone institution that exceeds federally insured
limits is subject to credit risk. Such amount was approximately $4,909,000 at
December 31, 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 December 31, 1999 investments were classified as
available for sale securities. Unrealized gains and losses for
available-for-sale securities are excluded from earnings and reported as a net
amount as a separate component of stockholders" equity as comprehensive
income until realized. The Company primarily uses the specific identification
method for gains and losses on the sales of marketable securities (see Note C).
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets ranging from
five to ten years for furniture, fixtures and office equipment and three to five
years for computer equipment.
Earnings (Loss) Per Share
The Company has adopted Statement of Financial Accounting Standards No.128,
Earnings Per Share, (SFAS 128) requires the presentation of two earnings per
share (EPS) amounts, basic and diluted. Basic EPS is calculated on the weighted
average number of shares outstanding. Diluted EPS is not presented since no
effect was given to outstanding options as it would have been anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Software Development Costs
Costs relative to the initial software development related to the Company's
underlying technology are capitalized and carried at book value and include
$220,000 for services rendered by certain stockholders. Such costs are being
amortized over 5 years, subject to periodic evaluation for impairment. Costs to
maintain such technology going forward, and ongoing web development costs will
be expensed.
Income Taxes
The Company recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when the
differences are expected to be recovered.
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 December 31, 1999 the Company incurred advertising expense of
$207,800.
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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 MARKET ABLE 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 December 31, 1999 the unrealized gain, net of
deferred federal income tax, was $5,477,810.
NOTE D SUBSCRIPTION AND LOANS RECEIV ABLE
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 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 matures December 15, 1999. The Company granted an extension on
this loan to February 15, 2000. The note and accrued interest were paid in full
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.
NOTE E FAIR V ALUE OF FINANCIAL INSTRUMENTS
Effective December 31, 1995, the Company adopted SF AS 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.
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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 consisted of an aggregate of 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 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
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 December 31,1999, 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 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.
11
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David W. Sass, a director of the Company, is the father of Jeffrey W. Sass, a
founder, shareholder, and director of BarPoint. McLaughlin & Stern, LLP,
general counsel to the Company, was a shareholder of BarPoint and received
shares in the Company as part of the transaction. David W. Sass is a member of
said firm and also a shareholder of the Company.
NOTE G COMMITMENTS AND CONTINGENCIES Consulting Agreement
In February 1998, Harmat entered into a one year consulting agreement with
Spencer Trask to advise the Harmat on financial matters in connection with the
operation of the business including acquisitions, mergers and other similar
business combinations. The agreement was extended to February 2000. The Harmat
paid Spencer Trask an initial $10,000 retainer and an additional $3,500 per
month. In addition, Spencer Trask is to receive a transaction fee for any
transactions consummated by Harmat during the term of the agreement or within
two years after the end of the term. In connection with this agreement Spencer
Trask was granted five year warrants to purchase 200,000 shares of Harmat's
common stock at $.35 per share. In connection with the acquisition (see Note F),
Spencer Trask was paid a fee of $189,000. On November 5,1999 the Company and
Spencer Trask terminated the consulting agreement, however, the Company shall
continue to make payments of the retainer fee through January 2000 and the
warrants remain in full force. As part of this agreement the holder of the
warrants has agreed not to sell more than 28,500 shares per month commencing
January 1, 2000.
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
Product Supply and Technology License Agreement
The Company issued 1,315,789 shares of common stock to Symbol Technologies, Inc,
for (a) delivery of $1,000,000 in cash, (b) a Product Supply and Technology
License Agreement, and (c) the agreement by the Company to sell up to 120,000
Symbol SPT 1500 machines at a discount.
Employment Agreement
On June 3, 1999, the Company entered into an Employment Agreement with Leigh
Rothschild, a stockholder, director, and chief executive officer, for three
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 increases of $25,000 each year thereafter.
NOTE H RELATED PARTY TRANSACTIONS
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.
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The law firm of McLaughlin & Stern, LLP of which Mr. David Sass, a director
and stockholder and director, is a principal, received legal fees of
approximately $47,000 for the three months ending December 31, 1999.
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
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 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. During the six month
period ended December 31, 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 December 31, 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
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 December 31, 1999, an aggregate of 302,000 options have been
granted.
A summary of the status of the Company's stock option plan as December 31,
1999, and the changes during the three months ended December 31, 1999 is
presented below:
13
<PAGE>
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
Granted 103,200 9.11
Exercised (11,600) .30
Forfeited ( 8,700) 7.42
December 31, 1999 1,587,978
Exercisable at December 31, 1999 1,587,978
Weighted-average fair value of
Options granted during the year $9.11
NOTE K INCOME TAXES
The income tax benefit for the three months ended December 31, 1999 consists of
the following:
Loss before income tax benefit ($1,445,881)
Federal income tax benefit at 36% 468,000
Prior NOL allowable under IRC
Section 382 103,000
Income tax benefit $571,000
The Company has federal net operating loss carryforwards (NOL) of approximately
$3,350,000 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 773,000
Stock compensation (prior to acquisition) 279,000
Valuation allowance (398,800)
____________
$1,258,000
Deferred income tax liabilities:
Unrealized gain on marketable secunties $3,687,832
$2,429,832
14
<PAGE>
NOTE L ACQUISITION
On November 5,1999 pursuant to an Agreement for Merger and Reorganization of
BarPoint.com, Inc. through a newly organized, wholly owned subsidiary
("Sub") acquired all of the issued and outstanding shares of Synergy
Solutions, Inc. The purchase price for the acquisition consisting of the
following:
(A) 75,000 shares of common stock, par value $.001 per share, of BarPoint{the
"BarPoint Common Stock"); (B) cash totaling $100,000; and (C) in the
event Sub achieves at least Four Hundred Thousand Dollars ($400,000) in
earnings, before interest, taxes, depreciation and amortization
("EBITDA") no later than twelve (12) months from the date of the
closing, 75,000 shares of BarPoint Common Stock, par value $.001 per share,
which shares shall be held in escrow pursuant to an escrow agreement.
BarPoint shall pay the Stockholders additional consideration in proportion to
their respective ownership of Synergy equal to (x) thirty percent (30%) of
Sub's EBITDA attributable to operations ending as of the first anniversary
of the closing; (y) twenty-five percent (25%) of Sub's EBITDA attributable
to operations between the first and second anniversaries of the closing; and (z)
twenty percent (20%) of Sub's EBITDA attributable to operations between the
second and third anniversaries of the closing, (collectively the "Earn
Out"). BarPoint shall deliver the Earn Out for each Earn Out period within
ninety (90) days of the first, second and third anniversary dates of the
Closing.
Any such Earn Out shall be paid in cash until the EBITDA equals eight hundred
thousand dollars ($800,000) and thereafter, in BarPoint common stock, valued at
the closing bid price three (3) business days prior to payment.
Synergy Solutions, Inc. provides computer-consulting services with expertise in
developing computer programs for the Palm OS devices and other pentium based
computer devices and developing web server applications with various software,
including, but not limited to, Oracle Unix/Linux Systems.
Employment agreements were entered into with various executives of Synergy .
Solutions, Inc. as well as the granting of options under the BarPoint.com, Inc.,
Incentive Option Plan, which is subject to shareholder approval.
The business combination was accounted for as follows:
Cash $10,034
Current Assets 78,651
Prepaid assets 36,297
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
NOTE M SUBSEQUENT EVENTS
As of February 10, 2000 we had sold marketable securities consisting of
1,240,483 common shares of Socket Communication, Inc. for approximately $17
million in cash and cash equivalents.
The promissory note dated December 15, 1998 and due on February 14, 2000 from
Financial Web.Com Inc. for $150,436.00 plus accrued interest of $16,012.03 was
paid in full January 21, 2000.
15
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations For the Three Months Ended December 31, 1999
Overview
On June 3, 1999, we acquired all issued and outstanding shares of BarPoint.com,
Inc. in exchange for 6,634,042 shares of our common stock. The transaction was
accounted for as a reverse acquisition, as if BarPoint acquired us, because the
former shareholders of BarPoint owned a majority of our common stock after the
transaction. As a result of a post-closing adjustment provision we issued a
stock dividend to owners of shares of Harmat common stock as of June 2, 1999 of
a total of 878, 770 shares of our common stock. The consolidated financial
statements presented herein for the periods prior to the effective date of the
acquisition only include the accounts of BarPoint, because we have discontinued
our prior real estate development business. The consolidated statement of
shareholders' equity has been converted from BarPoint's capital
structure to Harmat' 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 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 BarPoint.com, Inc.,
Incentive Option Plan, which is subject to shareholder approval.
On December 6, 1999, we launched a preview version of our website,
www.barpoint.com, which features a patent-pending search engine and software
technology that allows consumers to use the standard UPC barcode number that
appears on what we believe to be more than O million retail items to search for
product-specific information from and shop for products on the Internet. We
intend to launch a more complete version of our website with additional
categories and features in early 2000.
On June 3, 1999, we issued three shares of preferred stock, one Class I share,
one Class II share and one Class ill share. On December 16, 1999, pursuant to a
stock exchange
16
<PAGE>
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 ill share shall vote with
the common stock and shall have 346,766 votes. None of these shares of preferred
stock are entitled to any dividends. All voting rights for these preferred
shares end on June 3,2004. All three shares of preferred stock were issued to
Leigh Rothschild, our Chairman and Chief Executive Officer.
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.
Results of Operations
Loss from operations were $.06 per common share for the three months ended
December 31, 1999. As of December 31,1999, we had no current revenue stream;
however with our December 6, 1999 launch of our preview website, and our more
complete launch in early 2000, we expect to begin to book revenues. We also
expect that near term operational losses will continue for the foreseeable
future because of advertising, research and development and administrative
expenses. We intend to generate future revenues from commissions, advertising
and other sources.
Selling, general and administration expenses were $1,676,588 for the three
months ended December 31, 1999. Selling, general and administration expenses
consist primarily of salaries, professional fees, hiring of personnel, travel
and entertainment.
Research and development expenses were $254,204 for the three months ended
December 31, 1999. Research and development expenses were primarily due to
salaries, development of our large database of products and information linked
to the manufacturer's UPC barcode and hiring of personnel. We anticipate
research and development expenses will increase significantly in the upcoming
year.
Advertising expenses were $207,800 for the three months ended December 31, 1999.
Advertising expenses were primarily related to developing brand recognition and
the launch of our website.
Interest income was $65,906 for the three months ended December 31, 1999.
Interest income was primarily due to interest earned form our money market
account.
Liquidity and Capital Resources
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. As of December 31,1999, we had approximately $4.9 million in cash and
cash equivalents and $10.0 million in marketable securities. These marketable
securities consisted of 1,240,483 shares of common stock of Socket
Communications, Inc., 495,729 shares of common stock issuable upon exercise of
warrants of Socket Communications, Inc. and 425,000 shares of common stock of
FinancialWeb.Com, Inc. The shares of FinancialWeb are not saleable until January
31, 2001.
17
<PAGE>
For the three months ended December 31, 1999, we had cash flow used in
operations of ($1,121,291). The negative cash flow was primarily due to the net
loss from operations.
For the three months ended December 31, 1999, net cash provided by investing
activities of $(33,928) was primarily the result of the acquisition of Synergy
Solutions, Inc. and the sale of land held for sale.
For the three months ended December 31,1999, net cash provided by financing
activities of $31,860 was primarily the result of proceeds form 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.
We have federal net operating loss carryforwards (NOL) of approximately
$3,125,000 and expects these NOL to be available in the future to reduce the
federal income tax liability of the Company. However, due to the ownership
change, resulting from the stockholders of BarPoint gaining more than half of
our common stock in the merger, our ability to utilize the NOL is restricted
under Section 382 of the Internal Revenue Code. Therefore, a tax benefit has
been reflected only to the extent allowable in the current year.
We believe that cash, cash equivalents and marketable securities, together with
projected cash flow from operations, will be sufficient to meet our liquidity
and capital requirements for the next year, although no assurance exists that we
will not require additional capital prior to the end of such period.
Subsequent Events
As of February 10, 2000 the Company had sold marketable securities consisting of
1,240,483 common shares of Socket Communication, Inc. totaling over $17 million
in cash and cash equivalents.
The promissory note dated December 15, 1998 and due on February 14,2000 from
Financial Web.Com Inc. for $150,436.00 plus accrued interest of $16,012.03 was
paid in full January 21, 2000.
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.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BARPOINT.COM, INC.
(Registrant)
By: /s/ Leigh M. Rothschild
Leigh M. Rothschild, President
DATED: February 14, 2000
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for the three months ended December 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,918,452
<SECURITIES> 10,095,559
<RECEIVABLES> 15,734
<ALLOWANCES> 0
<INVENTORY> 43,895
<CURRENT-ASSETS> 15,445,900
<PP&E> 133,475
<DEPRECIATION> (7,999)
<TOTAL-ASSETS> 16,317,282
<CURRENT-LIABILITIES> 767,744
<BONDS> 0
0
0
<COMMON> 15,350
<OTHER-SE> 13,119,706
<TOTAL-LIABILITY-AND-EQUITY> 16,317,282
<SALES> 50,325
<TOTAL-REVENUES> 50,325
<CGS> 1,767
<TOTAL-COSTS> 1,930,792
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,445,881)
<INCOME-TAX> 571,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (874,884)
<EPS-BASIC> .06
<EPS-DILUTED> .06
</TABLE>
