SECURITIES AND EXCHANGE
COMMISSION WASHINGTON, D.C. 20549
--------------------
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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 August 10, 2000:
Title of Class Number of Shares
-------------- ----------------
Common Stock, par value $.001 16,932,234
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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BarPoint.com, Inc.
Index to Form 10-Q
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Page
Item Number
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheet - June 30, 2000 3
Consolidated Statements of Operations - For the three months ended June
30, 2000 and June 30, 1999 and from inception October 1, 1998 through
June 30, 2000 4
Consolidated Statements of Cash Flows - For the nine months ended June
30, 2000 and June 30, 1999 and from inception October 1, 1998 through
June 30, 2000 5
Consolidated Statements of Stockholders Equity for the period ended
June 30, 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 - April 5, 2000 - August 9, 2000
Signatures
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(A Development Stage Company)
Consolidated Balance Sheet
ASSETS
June 30, 2000
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 41,466,203
Marketable securities 3,316,186
Account receivable 94,744
Inventory-net of allowance for obsolescence 2,497,372
Loans receivable 85,000
Other current assets 136,860
--------------
Total Current Assets 47,596,365
--------------
Property-land -
Equipment - net of accumulated
depreciation of $43,173 547,771
--------------
547,771
--------------
OTHER ASSETS
Deposit in escrow 190,000
Goodwill-net 462,513
Software development and licensing - net
of accumulated amortization of $668,272 1,114,777
--------------
1,767,290
--------------
TOTAL ASSETS 49,911,426
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 3,010,935
Income tax payable 5,072,026
--------------
Total Current Liabilities 8,082,961
--------------
OTHER LIABILITIES
Deferred taxes payable 700,899
--------------
700,899
--------------
TOTAL LIABILITIES 8,783,860
--------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value- 5,000,000
shares authorized: 3 shares issued and outstanding -
Common stock; $.001 par value- 100,000,000
shares authorized; 16,914,077 issued and outstanding 16,914
Paid in capital 31,426,303
Accumulated Earnings -Development Stage Company 10,295,086
Comprehensive Income (Loss) (610,737)
--------------
Total Stockholders' Equity 41,127,566
--------------
Total Liabilities and Stockholders' Equity $ 49,911,426
==============
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BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
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<CAPTION>
Three Months Three Months Nine Months Nine Months From Inception
Ended Ended Ended Ended October 1998 through
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Total revenues $ 192,346 $ - $ 412,636 $ - $ 412,636
Cost of Sales 22,691 - 38,616 - 38,616
----------------------------------------------------------------------------------
Gross Profit 169,655 - 374,020 - 374,020
Operating Expenses:
Selling, General and Administration 2,433,034 102,484 7,739,659 171,810 8,571,949
Research and Development 379,996 - 989,143 - 1,067,055
----------------------------------------------------------------------------------
Total Operating Expenses 2,813,030 102,484 8,728,802 171,810 9,639,004
----------------------------------------------------------------------------------
Loss from Operations (2,643,375) (102,484) (8,354,782) (171,810) (9,264,984)
----------------------------------------------------------------------------------
Other Income:
Interest Income 646,126 9,605 932,826 9,605 996,433
Gain on Sale of Marketable Securities
and Other Assets - - 23,422,663 - 23,422,663
----------------------------------------------------------------------------------
Total Other Income 646,126 9,605 24,355,489 9,605 24,419,096
Income before Income Tax (1,997,249) (92,879) 16,000,707 (162,205) 15,154,112
Income Tax Expense 727,700 - (5,267,026) 591 (4,859,026)
----------------------------------------------------------------------------------
Net (Loss) Income $ (1,269,549) $ (92,879) 10,733,681 (162,796) 10,295,086
==================================================================================
Net (Loss) Income per Common Share--
Basic $ (0.08) $ (0.01) $ 0.68 $ (0.02) $ 0.83
==================================================================================
Diluted $ (0.08) $ (0.01) $ 0.61 $ (0.02) $ 0.75
==================================================================================
Weighted Average Common Shares
Shares Outstanding--Basic 16,847,826 7,715,314 15,710,244 6,990,569 12,425,425
==================================================================================
Weighted Average Common Shares
Shares Outstanding--Diluted 16,847,826 7,715,314 17,484,127 6,990,569 13,758,440
==================================================================================
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BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine months From Inception
Ended Ended October 1998 through
June 30, 2000 June 30, 1999 June 30, 2000
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<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 10,733,681 $ (162,796) $ 10,295,086
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Deferred income tax (benefit) provision 221,000 - (187,000)
Gain on sale of marketable securities (23,422,663) - (23,422,663)
Depreciation and Amortization 731,508 - 747,186
Non-Cash administration & development expenses 623,056 20,500 643,556
Non-Cash acquisition costs 9,997 - 9,997
--------------------------------------------------
(11,103,421) (142,296) (11,913,838)
Increase (decrease) in cash flows due to changes in operating assets and
liabilities:
Change in liabilities 6,104,026 15,116 6,271,608
Change in assets (1,087,023) (2,724) (1,123,482)
--------------------------------------------------
Total Adjustments 5,017,003 12,392 5,148,126
--------------------------------------------------
Net Cash used in Operating Activities (6,086,418) (129,904) (6,765,712)
--------------------------------------------------
INVESTING ACTIVITIES:
Cash received on acquisition - 628,227 628,227
Acquisition costs - 189,000 (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)
Purchases of equipment (552,617) (17,007) (577,276)
--------------------------------------------------
Net Cash Provided Investing Activities 23,508,661 800,220 23,870,210
--------------------------------------------------
FINANCING ACTIVITIES:
Payment on subscription receivable 750,000 874,134 750,000
Loan payable-stockholder, private placements - net of commissions 16,931,003 110,000 23,204,173
Exercise of stock options and warrants 389,002 - 407,532
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Net Cash Provided by Financing Activities 18,070,005 984,134 24,361,705
--------------------------------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 35,492,248 1,654,450 41,466,203
CASH AND CASH EQUIVALENTS - beginning of period 5,973,955 - -
--------------------------------------------------
CASH AND CASH EQUIVALENTS - end of period 41,466,203 $ 1,654,450 $ 41,466,203
==================================================
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<TABLE>
<CAPTION>
Nine Months Nine months From Inception
Ended Ended October 1998 through
June 30, 2000 June 30, 1999 June 30, 2000
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<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Taxes $ - $ 591 $ 591
==================================================
Interest $ - $ - $ -
==================================================
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS:
Software Development Costs for Services Rendered
by Certain Stockholders $ - $ - $ 220,000
================================================
Product Supply and Technology License Agreement $ - $ _ $ 1,500,000
================================================
Non-Cash Administrative, Marketing & Development Expenses $ 623,056 $ - $ 643,556
================================================
Finders fee applied to stockholders loan
receivable $ 218,655 $ -
================================================
Common stock dividend of 878,770 shares $ 879 $ - $ 879
================================================
*Acquisition of Synergy Solutions, Inc.
75,000 common shares $ 408,207 $ - $ 408,207
================================================
Cashless exercise of warrants $ 195,372 $ - $ 195,372
================================================
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BarPoint.com Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
(Unaudited)
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<CAPTION>
Note
# of Shares Common Stock Additional Receivable Accumulated
of Preferred Paid-In from (Deficit) Comprehensive
Stock Shares Par Value Capital Stockholder Earnings 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 0 (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) -
Acquisition Costs (189,000) (189,000)
Licensing Agreement 1,500,000 1,500,000
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 (348,993) (348,993)
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
--------------------------------------------------------------------------------------------------
Common Stock Dividend to
Shareholders of record
June 2, 1999 878,770 879 (879) -
Acquisition of Synergy
Solutions, Inc. 75,000 75 408,207 408,282
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 (968,790) (968,790)
Change in Unrealized Gain on
Marketable Securities
(Net of Income Taxes) 4,166,829 4,166,829
Balance - December 31, 1999 3 15,349,543 15,350 13,516,668 (750,000) (1,407,385) 3,151,164 14,525,797
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Payment of subscription note
receivable 750,000 750,000
Exercise of Stock Options 586 1 1,113 1,114
Exercise of Warrants 79,948 79 355,947 356,026
Issuse of stock options below
market 220,000 220,000
Issuse of warrants to a vendor 360,000 360,000
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)
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Balance - March 31, 2000 3 15,430,077 15,430 14,453,728 - 11,564,635 1,708,284 27,742,077
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Private Placements 1,477,500 1478 16,929,519 16,930,997
Issuance of stock for services
preformed 6,500 6 43,056 43,062
Net Loss (1,269,549) (1,269,549)
Change in Unrealized Gain on
Marketable Securities
(Net of Income Taxes) (2,319,021) (2,319,021)
--------------------------------------------------------------------------------------------------
Balance - June 30, 2000 3 16,914,077 16,914 31,426,303 - 10,295,086 (610,737) 41,127,566
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Notes to Consolidated Financial Statements
June 30, 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 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., 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".
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 the 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, anytime,
anywhere.
On April 5, 2000 the Company completed a private offering of common stock at a
price of $12 per share by the Company and selling stockholders. 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
(BPNT).
NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents.
The Company considers all highly liquid instruments purchased with maturity of
three 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 $41,250,000 at June 30, 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 June 30, 2000 investments were classified as
available-for-sale securities. Unrealized gains and losses for
available-for-sale securities are excluded from earnings and
1
<PAGE>
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)
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 earnings per common share is as
follows:
<TABLE>
<CAPTION>
Three months ended Three months ended Nine months ended Nine months ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 16,847,826 7,715,314 15,678,717 6,990,569
Diluted effect of:
Employee stock options - - 1,617,727 -
Warrants - - 156,156 -
---------- ---------- ---------- ----------
Weighted average common shares
Outstanding, assuming dilution 16,847,826 7,715,314 17,484,127 6,990,569
---------- ---------- ---------- ----------
<CAPTION>
From Inception to
June 30, 2000
<S> <C>
Weighted average common shares outstanding 12,426,456
Diluted effect of:
Employee stock options 1,289,592
Warrants 43,423
----------
Weighted average common shares
Outstanding, assuming dilution 13,759,471
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</TABLE>
For the three months ended June 30, 2000, diluted EPS is not presented since no
effect was given to outstanding options, as it would be anti-dilutive. For the
nine months ended June 30, 2000, options and warrants to purchase 393,900 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 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 is being amortized on a straight-line
basis over 22 months starting 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.
2
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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 June
30, 2000 advertising expense was $96,821 and for the nine months ended June 30,
2000 the Company incurred advertising expense of $1,020,073. 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.
Segment Information.
The Company has adopted Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related Information" which
requires public companies to report selected segment information in the interim
financial reports to shareholders. The Company has determined that it has only
one reportable segment.
Future Accounting Requirements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting and reporting of derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure these instruments at fair value. The statement is effective
for years beginning after June 15, 2000. The adoption of this new accounting
standard is not expected to have a material impact on the Company's consolidated
financial position or results of operations.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, revenue
Recognition in Financial Statements ("SAB 101") to provide guidance on revenue
recognition issues that are covered by specific existing accounting literature.
This statement was initially effective for years beginning after December 15,
1999. However, in June 2000, the SEC delayed the implementation date of SAB 101
until no later than the fourth fiscal quarter of fiscal years beginning after
December 15, 1999. The implementation of SAB No. 101 is not expected to have a
material impact on the Company's consolidated financial position or results of
operations.
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 taxes, at acquisition date was
$2,380,585. For the nine months ended June 30, 2000 the unrealized gain, net of
deferred federal income taxes, was $1,769,848 resulting in a comprehensive loss
of $610,737.
NOTE D SUBSCRIPTION AND LOANS RECEIVABLE
A subscription note receivable in the amount of $750,000 bears interest at 8%
per annum and matured 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 matured May 7, 2000. As
of August 11, 2000 this mortgage receivable note had not been paid, however the
Company is presently negotiating an extension on the note.
In March 2000 an escrow deposit of $190,000 was made in connection with the
PriceBee merger and acquisition. On April 4, 2000, PriceBee.com Inc. submitted a
claim for arbitration to the American Arbitration Association with respect to
the Company's termination of an agreement and plan of merger, whereby the
Company had agreed to acquire PriceBee. PriceBee alleges that the Company's
termination of the agreement and plan of merger was wrongful and seeks specific
performance and/or $5.0 million in damages. The Company has submitted a
counterclaim against PriceBee alleging breach of the agreement and plan of
merger on the part of PriceBee and is seeking $7.0 million in damages. Each of
the Company and PriceBee have selected an arbitrator and a third independent
arbitrator has been selected. An administrative conference is scheduled to occur
on September 12, 2000. The Company believes that it has meritorious claims and
defenses. However, there can be no assurance that the Company will prevail in
the arbitration or in its counterclaim asserted against PriceBee.com, or that
any resolution of the dispute will not have a material adverse effect on the
Company's liquidity, financial condition and results of operations.
3
<PAGE>
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 marketable securities, payables and short-term
loans. It is estimated that the carrying amount approximated fair value because
of the near term maturities of such obligations. Marketable securities are
stated at fair value.
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.
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. 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
continued to make payments of the retainer fee through January 2000 and the
warrants remained in full force. As part of this
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agreement the holder of the warrants agreed not to sell space for 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 in 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
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 $5,000 for
the three months ending June 30, 2000 and $125,000 for the nine months ending
June 30, 2000.
NOTE I 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.
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 $0.35, (as amended). The exercise price and number of options have been
amended to $0.30 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 was 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 ($0.35 (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 $0.35, (as amended). The exercise price and
number of
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options have been amended to $0.30 and 346,049 respectively due to the dilutive
effect of the acquisition. As of June 30, 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 after June 3, 2002 in the
event the Company revenues of $89,500,000 in the third year. As of June 30,
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 June 30, 2000, an aggregate of
1,940,400 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 that was reflected in the financial statements for the six
months ended March 31, 2000.
A summary of the status of the Company's stock options as of June 30, 2000, and
the changes during the nine months ended June 30, 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
Granted 535,200 10.71
Exercised 0 -
Forfeited 41,800 10.46
June 30, 2000 3,269,979 5.38
Outstanding at June 30, 2000 3,269,979
Weighted-average fair value of
options granted during the year $ 8.88
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.
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.
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NOTE K INCOME TAXES
The income tax expense consists of the following:
<TABLE>
<CAPTION>
From Inception,
Three Months Ended Nine Months Ended October 1998 through
June 30, 2000 June 30, 2000 June 30, 2000
------------- ------------- ---------------------
<S> <C> <C> <C>
(Loss) Income $ (1,997,249) $ 16,000,707 $15,154,112
Federal income tax estimate (727,700) 5,370,026 4,962,026
Prior NOL allowable under IRC Section 382 0 (103,000) (103,000)
------------ ------------ -----------
Income tax provision $ (727,700) $ 5,267,026 $ 4,859,026
Current provision $ 5,072,026
Deferred provision $ 221,000
------------
$ 5,267,026
============
</TABLE>
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 $ 398,800
Stock based compensation (prior to acquisition) 279,000
Stock based compensation and marketing expense 200,000
Valuation allowance (398,800)
-----------
Balance June 30, 2000 $ 479,000
Unrealized gain on marketable securities $ 1,179,899
-----------
$ 700,899
===========
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.
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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
========
The following are summarized unaudited pro forma results of operations for the
three months ended June 30, 2000 and the nine months ended June 30, 2000,
assuming the acquisition occurred on October 1, 1999 and October 1, 1998
respectively.
From Inception
Three Months Nine Months October 1998 through
June 30, 2000 Ended June 30, 2000 June 30, 2000
Total revenue $ 192,346 $ 432,290 $ 432,290
Net loss (1,269,549) 10,763,936 10,325,335
Loss per common share
Basic and diluted $ (0.08) $ 0.62 $ 0.75
These pro forma results are not indicative of either future financial
performance or actual results, which would have occurred had the acquisition
been made as of October 1, 1998.
NOTE M SUBSEQUENT EVENTS
On August 4, 2000 the SEC declared effective the Company's shelf Registration
Statement on Form S-1 relating to the offering by selling shareholder 5%
5,301,211 shares of common stock of BarPoint.com Inc. The Company will not
receive any proceeds from the sale of stock by selling stockholders under this
prospectus. The selling stockholders acquired the shares of common stock being
sold under this prospectus from the Company in a private placement transaction.
On August 11, 2000 the Company filed Form 8-K a change in Registrant's Certified
Public Accountants. The Company engaged the accounting firm of Deloitte & touche
LLP as independent accountants to audit the consolidated financial statements
for the fiscal year ended September 30, 2000.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations For the Nine months ended June 30, 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 totaling approximately $24.6 million in cash and
cash equivalents.
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, anytime,
anywhere.
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."
In March 2000, Matthew Schilowitz, then 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)
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<PAGE>
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
this 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.
On April 5, 2000 the Company completed a private offering of common stock at a
price of $12 per share by the Company and selling stockholders. 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
(BPNT).
Results of Operations
Net loss was $1,269,549 or $0.08 per common share basic and diluted for the
three months ended June 30, 2000 compared to a net loss of $92,879 or $0.01 for
the three months ended June 30, 1999. We had a net income of $10,733,681 or
$0.61 per common share basic and diluted for the nine months ended June 30,
2000, compared to a net loss of $162,796 or $0.02 for the nine months ended June
30, 2000. Net income was primarily due to a gain on the sale of marketable
securities. As of June 30, 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 $2,433,034 for the three
months ended June 30, 2000, compared to $102,484 for the three months ended June
30, 1999 or a $2,330,550 increase. Selling, general and administration expenses
were $7,739,659 for the nine months ended June 30, 2000, compared to $171,810
for the nine months ended June 30, 1999 or a $7,567,849 increase. The primary
reason for the increases in selling, general and administration expenses was due
to an increase in salaries, marketing, professional fees, hiring of personnel,
travel and entertainment.
Advertising expenses were $96,821 for the three months ended June 30, 2000 and
$1,020,073 for the nine months ended June 30, 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. The comparable June 30, 1999 financials had no advertising expense.
Research and development expenses were $379,996 for the three months ended June
30, 2000 and $989,143 for the nine months ended June 30, 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. The
comparable June 30, 1999 financials had no research and development expense.
Interest income was $646,126 for the three months ended June 30, 2000 and
$932,826 for the nine months ended June 30, 2000. Interest income was $9,605 for
the three months ended June 30, 1999 and for the nine months ended June 30,
1999. The increase in interest income was primarily due to an increase in
interest earned form our money market account due to cash generated from the
gain on sales of marketable securities.
Other income 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. This comparable June 30, 1999 financial statements
had no gain on sale of marketable securities.
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 price of $671,703. During the nine
months ended June 30, 2000 we had sold 1,675,254 Socket Communications common
shares totaling approximately $24.6 million in cash and cash equivalents.
As of June 30, 2000, we had approximately $41.5 million in cash and cash
equivalents and $3.3 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 nine months ended June 30, 2000 and June 30, 1999, we had cash flows
used by operations of $6,086,418 and $800,220 respectively. The negative cash
flow was primarily due to the net loss from operations.
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For the nine months ended June 30, 2000 and June 30, 1999, net cash provided by
investing activities of $23,508,661 and $129,904, respectively, was primarily
the result of and sale of marketable securities.
For the nine months ended June 30, 2000 and June 30, 1999, net cash provided by
financing activities of $18,070,005 and $984,134, respectively, was primarily
the result of proceeds from the private placements. From June through August
1999, we issued a total of 4,499,868 shares of our common stock in private
placements to accredited investors for gross proceeds of approximately
$7,195,000, which includes a subscription note receivable of $750,000. The
subscription note receivable was paid in full February 11, 2000. In April 2000
we issued a total of 1,477,500 shares of our common stock in private placements
to accredited investors for gross proceeds of approximately $16,931,000.
For the fiscal year ended September 30, 1999, the Company had federal net
operating loss carryforwards (NOL) of approximately $1,680,000 and expects these
NOL's 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 August 4, 2000 the SEC declared effective the Company's shelf Registration
Statement on Form S-1 relating to the offering by selling shareholder 5%
5,301,211 shares of common stock of BarPoint.com Inc. The Company will not
receive any proceeds from the sale of stock by selling stockholders under this
prospectus. The selling stockholders acquired the shares of common stock being
sold under this prospectus from the Company in a private placement transaction.
On August 11, 2000 the Company filed Form 8K a change in Registrant's Certified
Public Accountants. The Company engaged the accounting firm of Deloitte & Touche
LLP as independent accountants to audit the consolidated financial statements
for the fiscal year ended September 30, 2000.
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 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.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On April 4, 2000, PriceBee.com, Inc. submitted a claim for arbitration to
the American Arbitration Association with respect to the Company's termination
of an agreement and plan of merger, whereby the Company had agreed to acquire
PriceBee. PriceBee alleges that the Company's termination of the agreement and
plan of merger was wrongful and seeks specific performance and/or $5.0 million
in damages. The Company has submitted a counterclaim against PriceBee alleging
breach of the agreement and plan of merger on the part of PriceBee and is
seeking $7.0 million in damages. Each of the Company and PriceBee have selected
an arbitrator and a third independent arbitrator will be selected shortly.
ITEM 2 - CHANGES IN SECURITIES
On April 5, 2000 the Company completed a private placement of 1,477,600
common shares to institutional accredited investors at a price of $12 per share.
Jefferies & Company acted as the placement agent and received a commission of 5%
of the gross proceeds and warrants to purchase 250,000 shares of BarPoint common
stock at an
11
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exercise price of $7.38 per share, expiring December 7, 2004. The Company
believes the private placement is exempt from registration under 4(2) of the
Securities Act of 1933, as amended, and under Rule 506 promulgated under the
Securities Act.
ITEM 3- DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 4, 2000, at the annual meeting of stockholders of the Company, the
following persons were elected as directors of the Company for a term of one
year or until a successor has been elected and qualified: Leigh M. Rothschild,
Seymour G. Siegel, David W. Sass, Jeffrey W. Sass, John C. Macatee, Jay Howard
Linn and Kenneth Jaeggi.
Name Votes in Favor Votes Withheld
---- -------------- --------------
Leigh M. Rothschild 12,775,080 11,800
Seymour G. Siegel 12,775,080 11,800
David W. Sass 11,916,070 870,810
Jeffrey W. Sass 12,775,080 11,800
John C. Macatee 12,775,080 11,800
Jay Howard Linn 12,775,080 11,800
Kenneth Jaeggi 12,773,596 13,284
In addition the following proposals were passed:
1. Adoption of the Company's 1999 Equity Incentive Plan
Votes in Favor Votes Withheld Against
-------------- -------------- -------
10,290,278 5,425 66,232
2. Ratification of the granting of options to certain key employees and
directors of the Company
Votes in Favor Votes Withheld Against
-------------- -------------- -------
10,290,508 4,645 67,232
3. Adoption of amendment of the Certificate of Incorporation of the
Company to increase the number of shares of common stock that the Company may
issue.
Votes in Favor Votes Withheld Against
-------------- -------------- -------
12,738,042 2,625 46,213
ITEM 5 - OTHER INFORMATION
On March 24, 2000, John Macatee became a director, the new President
and Chief Executive Officer of BarPoint. His employment agreement provides for a
term of two years, with automatic one-year renewals unless either party gives
written notice. Mr. Macatee's base salary will be $400,000 in the first year and
$450,000 in the second year and is eligible for bonuses under a bonus plan to be
established by BarPoint and he shall receive a monthly car allowance of $750.00
plus insurance and maintenance. On April 4, 2000 the Board of Directors amended
Mr. Macatee's employment agreement, and he was granted options to purchase
300,000 shares of BarPoint common stock at an exercise price of $12.75 per
share. These options vest 100,000 each year for three years beginning on the
first anniversary of his employment and expiring after five years. The
employment agreement also includes non-competition and confidentiality
provisions
12
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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.
ITEM 6 - EXHIBITS
(a) Exhibits
10.1 Amended and Restated Employment Agreement, dated as of April
4, 2000 between the Company and John C. Macatee.
10.2 Employment Agreement, dated as of March 27, 2000, between the
Company and Leigh Rothschild.
10.3 Employment Agreement, dated as of March 27, 2000, between the
Company and Jeffrey Sass.
27 Financial Data Schedule.
(b) Reports on Form 8-K
Form 8-K as of April 5, 2000
Form 8-K as of August 9, 2000
13
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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 14, 2000
BarPoint.com, Inc.
By: /s/ John Macatee
-------------------------------------
John Macatee
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Michael Karmelin
-------------------------------------
Michael Karmelin
Chief Financial Officer
(Principal Accounting Officer)
14
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Exhibit Index
Exhibit No. Description
----------- -----------
10.1 Amended and Restated Employment Agreement, dated as of April
4, 2000 between the Company and John C. Macatee.
10.2 Employment Agreement, dated as of March 27, 2000, between the
Company and Leigh Rothschild.
10.3 Employment Agreement, dated as of March 27, 2000, between the
Company and Jeffrey Sass.
27 Financial Data Schedule.
