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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended: September 30, 2000
OR
[ ] 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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One East Broward Blvd.
Suite 410
Fort Lauderdale, Florida 33301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 745-7500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK, Nasdaq SmallCap Market
$.001 PAR VALUE
Securities registered pursuant to Section 12(g) of the Act: None
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-KSB. [ ]
Registrant's revenues for the fiscal year ended September 30, 2000 were
$522,809.
Aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant at December 27, 2000 (computed by reference to
the last reported sale price of the registrant's Common Stock on the Nasdaq
SmallCap Market on such date): $10,089,542.
Number of shares outstanding of each of the registrant's classes of
Common Stock at December 27, 2000: 17,152,478 shares of Common Stock, $.001 par
value per share.
Transactional Small Business Disclosure Format. Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive Proxy Statement
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended,
which will be filed with the Commission subsequent to the date hereof (the
"Proxy Statement"), are incorporated by reference into Part III of this Form
10-KSB.
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GENERAL
Unless otherwise indicated or the context otherwise requires, all
references in this Form 10-KSB to "BarPoint" or the "Company" include
BarPoint.com, Inc. and its consolidated subsidiaries. The Company disclaims any
intent or obligation to update "forward looking statements." All references to a
fiscal year are to the Company's fiscal year which ends September 30. As used
herein, fiscal 2000 refers to fiscal year ended September 30, 2000 and fiscal
1999 refers to fiscal year ended September 30, 1999.
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PART I
ITEM 1. Business
General
BarPoint is an online and wireless product information and shopping
service which also develops software applications for consumers and businesses.
BarPoint's product information and shopping service utilizes proprietary reverse
search technology to enable consumers to search for product information using
unique product identifiers, including universal product codes ("UPCs" or
"barcode numbers"). Barcode numbers are an international standard identifier for
retail products. BarPoint is continuing to compile an extensive product database
of retail products with barcode numbers. The service can be accessed from a
desktop computer or a wide variety of mobile devices, including Internet-enabled
personal digital assistants ("PDAs"), interactive pagers and cellular phones. By
typing or scanning the barcode numbers that manufacturers assign to their
products, consumers can easily access a variety of product specific information
gathered by BarPoint, including:
o manufacturer contact information
o product reviews, specifications and other related information;
o comparative pricing from a variety of sources; and
o links to purchase the item from a variety of vendors.
We launched the first phase of version 2.0 of our website,
www.barpoint.com, in October 2000 and intend to roll out continuing
enhancements. Our website was originally launched in a preview version, without
material advertising or promotion, on December 6, 1999. Through our service,
consumers can access our database to search for information in the following
select categories: books, music, movies and computers. We intend to add
categories and product information on an ongoing basis. In addition, visitors to
our website can download free software for the Palm VII PDA manufactured by Palm
Computing, which enables them to access our product information from the Palm
VII on a wireless basis. Our service will support any device that can connect
with the internet, including wireless communications and mobile computing
devices, such as Palm OS PDAs and Microsoft Pocket PCs, interactive pagers, and
Internet and digital enabled cellular phones. In November 2000, we announced
expansion of our service for digital and web enabled phones through the
introduction of a Short Messaging System (SMS) version of BarPoint.
Our technology allows the consumer to comparison shop and obtain
product information with a handheld wireless device and to purchase products
through our e-commerce and retail partners from our website. With the recent
addition of My BarPoint personalized services, our registered users can use any
device to seamlessly track their search history from device to desktop to
device. My BarPoint also allows users to save products they want to buy or have
bought in customized "want" and "have" lists. We believe that we have the
potential to revolutionize the way consumers and businesses make buying
decisions by providing easy and efficient access to the product specific
information required to make those buying decisions. We are partnering with both
traditional "brick and mortar" stores as well as their on-line counterparts. We
believe the BarPoint service helps our users save time, save money and make
better buying decisions both for in-store and on-line purchases.
During fiscal 2000, our software applications business, Synergy
Solutions, expanded retail distribution by introducing new products and
establishing relationships with retailers including Gateway, Office Depot,
CompUSA and MicroCenter. In November, we announced the introduction of SlideShow
Commander, an application that allows business presentations to be presented
from a handheld Palm device, and PDActivate 2.0, the new version of its suite of
productivity applications for Palm devices.
BarPoint is in the development stage as of September 30, 2000 for
financial reporting purposes. Although revenues have been generated from
software sales by Synergy Solutions, a wholly owned subsidiary, BarPoint has not
yet begun to generate significant revenues from its principal operations. We
expect revenues from the BarPoint
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online and wireless product information and shopping services to develop and
grow during the first half of calendar 2001. The successful completion of
BarPoint's development program and, ultimately, the attainment of profitable
operations is dependent upon future events, including maintaining adequate
financing to fulfill development activities and achieving a level of revenues
adequate to support BarPoint's cost structure.
Company History
Our company was incorporated in Delaware on December 19, 1995 under the
name The Harmat Organization, Inc., referred to as 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 its
stockholders to change direction away from the real estate business and began
making strategic investments in technology-oriented companies.
On June 3, 1999, Harmat acquired all of the shares of BarPoint.com,
Inc., a Florida corporation, known as BarPoint-Florida. The transaction was
accounted for as a reverse acquisition, as if BarPoint-Florida had acquired
Harmat, because the stockholders of BarPoint-Florida owned a majority of
Harmat's outstanding common stock after the transaction. Following the
acquisition, we changed our name from The Harmat Organization, Inc. to
BarPoint.com, Inc. and began to develop our current line of business. The
Florida corporation that we acquired is now our wholly-owned subsidiary.
On November 5, 1999, we acquired Synergy Solutions, Inc., which creates
commercial applications for Palm Computing devices. Synergy Solutions' products
are currently sold at major on-line, retail, and catalog software vendors. Today
our Synergy Solutions business, based in New York, handles the development of
software applications and mobile e-commerce solutions to further enable and
enhance consumer buying decisions and shopping experiences through UPC barcode
numbers, as well as general applications for mobile devices.
Recent Developments
In November 2000, we announced that Office Depot agreed to become a
BarPoint Premium Category Sponsor for the office products category of our
service. This strategic alliance will allow businesses and consumers to search
BarPoint's database of office products on a desktop or through a mobile device
and place orders directly with Office Depot.
In December 2000, BarPoint announced the planned relocation of its
headquarters to a newly leased 50,000 square foot office building in Deerfield
Beach, Florida. The lease is for a period of ten years and the initial annual
financial commitment will be approximately $650,000. BarPoint expects to
complete its relocation in early 2001.
Industry Overview
We believe that the development of alternative Internet access devices
is a principal factor in the growth of Internet traffic. The META Group
forecasts that internet-enabled mobile devices will outnumber PC workstations by
2003. Additionally, The Strategic Research Group predicts that the number of
individuals using cell phones for wireless data applications among the U.S.
Internet population will increase from 3% in mid-2000 to an estimated 78% by
mid-2001. Alternative Internet access devices include NetTV, Internet-enabled
phones and hand-held devices. We believe that handheld devices, including PDAs,
will become the most prevalent. The development of mobile Internet access over
the next few years will allow users to take advantage of many new mobile
applications, such as "point-of-sale" comparative shopping using enhanced
product-specific search technology, like the BarPoint Shopper(TM).
The Internet provides consumers with a wealth of information and
numerous sites to purchase items electronically. A greater number of Internet
users are spending an increasing amount of money online. International Data
Corporation estimates that the number of U.S. mobile commerce users was
approximately 400,000 in 2000 and will grow to approximately 29.1 million by the
end of 2004. Jupiter Communications, Inc. projected that online shopping in the
U.S. was approximately $7.8 billion in 1998 and will reach approximately $41
billion by 2002. Further, International Data Corporation also predicts that U.S.
mobile commerce transactions will
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reach $20.8 billion by 2004. We believe that, as e-commerce becomes more common,
more efficient product-specific search capabilities will be increasingly
attractive.
Most current search technology is text-based, relying on the searcher
to identify "key words" to search for the item. This search methodology can be
useful for searching text archives, but can be inexact and inefficient for
searching for particular products. To find a product using current search
methodologies, users often undertake multiple levels of searches in a
time-consuming process. In contrast, UPC barcode numbers and our "reverse
search" process provide an efficient search criteria to locate detailed
information regarding a particular product. Each UPC barcode number is unique to
a specific manufacturer's product. By using these barcodes and adding a wide
range of supplemental product information, we believe we have created a powerful
and efficient way to track and search for product-specific information regarding
the manufacturer, product and pricing. We also offer text and keyword searching
in the event our user does not have the barcode number available.
Strategy
Our objective is to establish BarPoint as both the leading product
information and shopping service for mobile and on-line commerce and a leading
developer of software applications dedicated to helping businesses and consumers
save time, save money and make more informed shopping decisions. To achieve this
goal we intend to:
o Integrate Our Technology Into New and Existing Avenues of
Internet Access. In addition to access through desktop
computers, we provide consumers the opportunity to enter a UPC
barcode number into a handheld device and access information
about the product, including competing prices and reviews.
Currently this is possible by downloading our BarPoint
Shopper(TM) application for Palm OS devices and by accessing
our website through Internet-enabled digital pagers, PDAs and
cellular phones. We are also working with handheld device
manufacturers to bundle our technology into their existing and
future products.
o Pursue Strategic Relationships with retailers, manufacturers
and technology partners. To enhance our service offerings and
expand access to our service, we plan to continue to pursue
strategic relationships with retailers, manufacturers and
technology partners. In particular, we are seeking top tier
retailers and manufacturers to become category sponsors,
expanding and enriching the product information and shopping
services we provide. In November 2000, we partnered with
Office Depot as a Premium Category Sponsor for office
products. Additionally, we plan to enhance our cross-promotion
and product bundling with technology manufacturers and
providers, including our existing strategic partners Verizon
Wireless, AT&T Wireless, Palm, GoAmerica, i3 Mobile, JP
Systems, OmniSky and Symbol.
o Develop compelling software applications for consumers and
businesses. Our Synergy Solutions business currently offers a
broad range of applications for use on Palm devices. We are
expanding their development activities to include applications
for a range of handheld devices and operating systems as well
as custom applications of the BarPoint technology for our
retail and manufacturing partners.
o Establish a Brand Identity. We will seek to build our brand
identity through on-line traditional advertising and
promotional vehicles as well as cross-promotion and marketing
opportunities with our distribution partners in order to
generate high traffic levels to the BarPoint website and build
consumer awareness of the BarPoint name.
o Capitalize on Multiple Avenues of Generating Revenues. While
many Internet sites hope to generate revenues solely from
advertising and e-commerce commissions, we intend to generate
revenues from these sources as well as product promotions,
manufacturer listings, category and product sponsorship and
data-mining. We also expect sales of our software to continue
to generate revenues. As with other heavily trafficked
websites, www.barpoint.com sells banner advertisements and
sponsorship buttons throughout its pages. Manufacturers and
retailers have
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the opportunity, for a fee, to add supplemental product
specific information to the BarPoint search results and to
ensure that their products appear in the comparative and
related products sections when searches are conducted for
similar and/or competitive products. In return for monthly
and/or annual fees, retailers and e-commerce sites will have
the opportunity to "sponsor" product categories resulting in
their link being given premium placement when a user views a
product information page in the sponsored product category. In
addition, we plan to offer data mining opportunities, subject
to compliance with our own privacy policy and the strictest
interpretation of existing regulations relating to the privacy
of confidential consumer information.
Database and Products
The BarPoint technology can be accessed via the Internet at
www.barpoint.com from desktops or mobile wireless devices. It is presently
available on a variety of hand-held and wireless devices including the Palm VII
from Palm Computing, interactive pagers such as those from Research In Motion
and Motorola, Internet capable mobile phones, and the SPT 1500, a Palm powered
handheld organizer with integrated laser scanner, manufactured by Symbol
Technologies. Our website currently allows UPC searches in the following
categories:
o books;
o music;
o movies; and
o computers.
We expect to add additional categories of products, including office
products, pet supplies, toys, consumer electronics and more on an ongoing basis.
We have recently introduced the My BarPoint service which allows
members to track their search history and store products in personalized "want"
and "have" lists. In addition, at the user's option, they will be able to
receive free e-mail messages about the stored products, such as coupon
information, warranty registration, new product releases, rebates, special
offers, recalls etc.
Strategic Relationships
We have established a number of strategic relationships with retailers,
technology providers and mobile device manufacturers and service providers.
Retailers
In November 2000, BarPoint announced that Office Depot agreed to become
a BarPoint Premium Category Sponsor for the office products category of our
service. Businesses and consumers will have the ability to search BarPoint's
database of office products on a desktop or through a mobile device and place
orders directly with Office Depot.
In addition, we have arrangements with Gateway, Inc., Office Depot,
CompUSA and MicroCenter to sell our Synergy Solutions software applications.
Gateway is offering the SimpleSketch application in its Mobile Pro Package in
Handspring Visors sold by Gateway.
Mobile Device Manufacturers and Service Providers
One main focus of our strategy involves making our service available
through a wide array of mobile devices. To achieve this goal, we have
established relationships with a number of manufacturers and service providers,
including:
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o relationships with Verizon Wireless, AT&T Wireless Services,
OmniSky and GoAmerica, Inc. to integrate our BarPoint Shopper
technology into their wireless internet service offerings;
o a strategic relationship with Palm, Inc. for Palm to
distribute our BarPoint Shopper application with future
handheld devices;
o an agreement with Motorola to make our service available
through their Internet-capable phones; and
o agreements with JP Systems, Inc. and i3 Mobile, Inc. to
integrate BarPoint Shopper technology into their content
packages for wireless devices.
Technology
We utilize patent pending "reverse search" technology that enables
consumers to access our Internet database and search for product-specific
information using a unique product identifier such as UPC barcode numbers. When
a UPC barcode number is entered, our technology and database is used to first
identify the item, as well as its manufacturer and product category. Then, using
that information, our search technology collects a wide range of product
details, links and related information. All of this information is returned to
the consumer on our search results page on any device.
Currently, our website is hosted on Unix based equipment from Sun
Microsystems and our primary database is stored using Oracle 8i software. The
server equipment is located in California at Global Center, Inc., a subsidiary
of Global Crossing, Ltd. We are in negotiations with a vendor that will provide
a complete infrastructure solution for the new website. This includes hardware,
software, network hosting, bandwidth and managed services.
Our service is available by accessing www.barpoint.com from any device
that can access the internet. UPC barcode number searches can be executed by
simply typing or scanning in a UPC barcode number. If a visitor to our site does
not have the UPC barcode number handy for the product they are interested in,
they can also conduct a search by entering a text description of the desired
item. We have also introduced the BarPoint Shopper(TM) web clipping application
for the Palm VII wireless organizer from Palm Computing, and will be releasing
versions of the BarPoint Shopper(TM) and other applications for many wireless
mobile devices including other Palm OS and Microsoft Pocket PC handheld
computers. Users of web-enabled interactive pagers and cellular phones can
access our service by simply pointing their mobile browser to our website. When
consumers or businesses see an item they wish to purchase or want to know more
about, they can enter the item's barcode into a handheld device and obtain
detailed product information, including comparative prices from a variety of
vendors.
Sales and Marketing
Currently our revenues are derived mainly from the sale of software
applications. However, with the rollout of the new website in October 2000, we
expect to begin to generate additional revenues in the following ways:
o entering into sponsorship agreements and providing promotional
opportunities for product lines and product categories with
retailers and manufacturers, both on our website and on mobile
devices;
o selling advertising;
o offering manufacturers and retailers the opportunity to list
supplemental product information with our search results for
their products;
o offering manufacturers and retailers the opportunity to list
their product in our comparative and related product sections
when searches are done for similar or competitive products;
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o entering into revenue sharing arrangements with retail
partner's sites for any transactions initiated from BarPoint
customers;
o exploiting data mining opportunities; and
o continued sales of Synergy Solutions software as well as
expansion into custom applications for our retail and
manufacturing partners.
With our launch of the My BarPoint service in November 2000, we are
able to provide manufacturers, retailers and others the ability to send e-mail
or other notifications to persons who store a particular UPC barcode number on
the service and desire this information. My BarPoint users indicate when they
register if they would like to receive such messages.
Research and Development
We believe that strong product development capabilities are essential
to our strategy of continuing to enhance and improve our product offerings both
on our website and on mobile devices. This process involves continued investment
in equipment, services and qualified personnel to optimize our ability to adapt
to rapidly changing technologies and evolving customer expectations. Our
patent-pending "reverse search" technology has been developed to provide access
to our database of UPC linked product information from a variety of Internet
capable devices, using industry standard software platforms. Our in-house web
development team includes programmers, engineers, graphic designers, and
database administrators.
Research and development expenses were approximately $78,000 for fiscal
year 1999 and approximately $1.2 million for fiscal year 2000. Research and
development expenses were primarily due to development of our product database,
content and technology infrastructure.
Intellectual Property
Our future success and ability to compete depend significantly on our
proprietary technology. We have applied for six patents related to our
technology. We cannot assure our stockholders that any of these patents will be
issued, or if issued that any of them will be upheld against challenges. In
addition, we rely on copyright, trademark and trade secret laws and
confidentiality agreements with our employees and third parties to protect our
intellectual property. We have applied for registration of several trademarks,
including the BarPoint name and our logo in the United States and will seek to
register additional service marks and trademarks as appropriate.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy or otherwise obtain and use our proprietary
information or technology. The laws of some foreign countries do not protect
proprietary rights to the same extent as the laws of the United States and we
currently do not have any patents in any foreign country. In addition, others
could possibly independently develop substantially equivalent intellectual
property. If we do not effectively protect our intellectual property, our
business could suffer.
Companies in the computer software industry frequently resort to
litigation regarding intellectual property rights. We may have to litigate to
enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of other parties' proprietary rights. This type
of litigation, even if we are successful, could be time-consuming and expensive,
divert management's attention, cause product or service delays or require us to
enter into royalty or licensing agreements on terms that may not be acceptable
to us. A successful claim of infringement against us could materially adversely
affect our business, financial condition and results of operations.
Competition
The electronic and mobile commerce markets are relatively new and are
growing rapidly. We face competition from a number of established competitors
who offer consumer goods and product information on the Internet including
Yahoo!, Lycos, Excite, mysimon.com, e-compare, dealtime.com, Qode,
Infospace.com,
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iChoose.com and upcsmart.com. Many of our competitors have greater financial,
technical, marketing and other resources than us. Because barriers to entry are
low, new competitors will continue to emerge.
Our ability to compete successfully depends in part upon our ability to
attract and retain personnel with a wide range of technical capabilities.
Competition for experienced and technically capable personnel is intense, and is
expected to increase in the future. We cannot assure our stockholders that we
will be able to attract and retain the necessary personnel to develop and expand
our business.
We believe that we are the first system utilizing reverse search
technology on the Internet to provide detailed product specific information
using UPC barcode numbers as the primary search parameter. If another company
develops similar or superior capabilities or if our concept and technology do
not achieve market acceptance, our business, financial condition and results of
operations will be materially adversely affected.
Employees
As of September 30, 2000, we had 62 full-time employees. Our employees
are not represented by any collective bargaining agreements, and we have never
experienced a work stoppage. We believe our employee relations are good.
ITEM 2. Properties
Our corporate headquarters are currently located in Fort Lauderdale,
Florida. We lease approximately 13,742 square feet of space in Fort Lauderdale,
Florida under leases that expire in 2004. In November 2000, BarPoint entered
into a ten year lease for an approximately 50,000 square foot headquarters
building in Deerfield Beach, Florida. Initial annual payments for this new lease
will be approximately $650,000. We expect to exercise certain early termination
rights under the Fort Lauderdale leases and relocate our headquarters to
Deerfield Beach during the first quarter 2001.
In addition, we lease approximately 5,400 square feet in New York City
primarily to house the sales and development operations of our wholly-owned
subsidiary, Synergy Solutions, Inc. We hold this property under a lease that
expires in 2005. Annual payments for this lease will range from approximately
$189,000 to $211,000.
We also lease approximately 1,274 square feet in Plano, Texas, which
serves primarily as a field sales office. This lease expires in 2005 and has an
annual rent payment of approximately $24,000.
ITEM 3. Legal Proceedings
On April 4, 2000, PriceBee.com, LLC submitted a claim for arbitration
to the American Arbitration Association with respect to our termination of an
agreement and plan of merger, whereby we had agreed to acquire PriceBee.
PriceBee alleged that our termination of the agreement and plan of merger were
wrongful and sought specific performance and/or $5.0 million in damages. We
submitted a counterclaim against PriceBee alleging breach of the agreement and
plan of merger on the part of PriceBee and seeking $7.0 million in damages.
Subsequent to year end, the parties agreed to settle the dispute for an amount
that had no material impact on our financial statements.
We are not a party to or aware of any legal proceedings or claims that
we believe, individually or in the aggregate, will have a material adverse
effect on our business, prospects, financial condition or operating results.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
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PART II
ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters
Market Price
Our common stock is traded on the Nasdaq SmallCap Market under the
symbol "BPNT." Before June 27, 2000, our common stock was traded on the OTC
Bulletin Board under the symbol BPNT.OB. Before we changed our name to BarPoint,
our common stock traded on the OTC Bulletin Board under the symbol HMAT. Our
common stock began public trading on September 9, 1996. The following table sets
forth the high and low bid quotations for our common stock:
<TABLE>
<CAPTION>
Fiscal Year High Low
---------------------------------------------- ------------- ----------
<S> <C> <C>
2001
First Quarter (through December 27)........... $ 3 7/32 $ 1
2000
First Quarter................................. $ 14 1/8 $ 4 3/4
Second Quarter................................ $ 28 $ 8 1/2
Third Quarter................................. $ 17 3/4 $ 4 11/16
Fourth Quarter................................ $ 6 $ 3
1999
First Quarter................................. $ 5/8 $ 1/4
Second Quarter................................ $ 3 1/2 $ 9/16
Third Quarter................................. $ 6 3/16 $ 3 1/8
Fourth Quarter................................ $ 5 19/32 $ 4 1/16
</TABLE>
The above quotations prior to June 27, 2000, reflect inter-dealer
prices, without retail mark-up, mark-down or commission. These quotes are not
necessarily representative of actual transactions or of the value of our common
stocks, and are in all likelihood not based upon any recognized criteria of
securities valuation as used in the investment banking community.
As of December 22, 2000, there were 146 holders of record of the Common
Stock.
Dividend Policy
Generally we do not pay dividends and we have no present intention of
paying cash dividends in the foreseeable future. However, prior to the reverse
acqusition with BarPoint.com, we declared a stock dividend to stockholders of
record of the Harmat Organization on June 2, 1999 payable pro rata to
stockholders on October 19, 1999, of an aggregate of 878,770 shares of our
common stock.
Sale of Securities
In April 2000, we issued five-year warrants to purchase 18,000 shares
at an exercise price of $14.00 to Palm, Inc., in connection with an agreement to
distribute our BarPoint Shopper application with their devices. BarPoint
believes this issuance is exempt from registration under 4(2) of the Securities
Act of 1933.
In June 2000, we issued three-year warrants to purchase 60,000 shares
at an exercise price of $6.13 to Wunderman Cato Johnson, our advertising and
direct marketing provider, and three-year warrants to purchase 75,000 shares at
an exercise price of $6.00 to GE Information Services, Inc., a data provider, in
connection with our agreements with each of them. BarPoint believes these
issuances are exempt from registration under 4(2) of the Securities Act of 1933.
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In July 2000, we issued three-year warrants to purchase 250,000 shares
at an exercise price $8.38 to AT&T Wireless Services, Inc. in connection with an
agreement to become a content provider on their wireless subscription data
service. BarPoint believes this issuance is exempt from registration under 4(2)
of the Securities Act of 1933.
Effective September 30, 2000, we granted Matthew Schilowitz options to
purchase 125,000 shares of common stock at an exercise price of $2.00 per share
as part of an agreement relating to his resignation as a consultant. See Note 7
to the notes to the consolidated financial statements. BarPoint believes this
issuance is exempt from registration under 4(2) of the Securities Act of 1933.
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ITEM 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
BarPoint.com is an online and wireless product information and shopping
service. As a content provider, retail sales facilitator, and applications
developer, BarPoint is dedicated to helping businesses and consumers make better
buying decisions. BarPoint's service uses unique product identifiers, such as
the UPC barcode number, and patent pending "reverse search" technology to
simplify the process of finding meaningful product information. The Company is
uniquely positioned to benefit from the growth in mobile commerce as wireless
communications, mobile computing and scanning technologies converge. BarPoint
has previously announced strategic alliances with companies such as AT&T
Wireless (NYSE:AWE), Motorola (NYSE:MOT), Verizon Wireless, Go America
(Nasdaq:GOAM), i3 Mobile, Inc. (Nasdaq: IIIM), JP Systems, and Symbol
Technologies (NYSE:SBL) and last year acquired Synergy Solutions, which is now a
wholly owned BarPoint.com subsidiary. Whether using a handheld device to scan or
manually enter the product's UPC or accessing BarPoint's website from a desktop
computer, BarPoint provides a direct route to product information.
BarPoint is in the development stage as of September 30, 2000. Although
revenues have been generated from software sales by Synergy Solutions, a wholly
owned subsidiary, BarPoint has not yet begun to generate significant revenues
from its principal operations. We expect revenues from the BarPoint online and
wireless product information and shopping services to develop and grow during
the first half of calendar 2001. The successful completion of BarPoint's
development program and, ultimately, the attainment of profitable operations is
dependent upon future events, including maintaining adequate financing to
fulfill development activities and achieving a level of revenues adequate to
support BarPoint's cost structure.
BarPoint began operations as a development stage company in October
1998. It became a public corporation in June 1999 through the reverse
acquisition of The Harmat Organization, Inc., whose name was then changed to
BarPoint.com, Inc. BarPoint.com, Inc. began trading on the NASDAQ-SmallCap
market in June 2000. The preview website was launched in December 1999 and the
beginning of the expanded functionality was introduced in October 2000, with
ongoing enhancements to be rolled out over the next few years.
Between June 1999 and April 2000, BarPoint was able to generate
approximately $50 million in cash to support development, infrastructure
investment and rollout of the BarPoint service. From June through August 1999,
we issued 4,499,868 shares of BarPoint common stock in private placements to
accredited investors for gross proceeds of approximately $6.2 million. In March
2000, we sold marketable securities obtained in the reverse acquisition of
Harmat for approximately $24.7 million. In April 2000, we issued 1,477,500
shares of BarPoint common stock in private placements for gross proceeds of
approximately $17.7 million.
The 1999 private placements included a strategic investment by Symbol
Technologies, Inc. giving them an approximately 7.7% interest in BarPoint. As a
result of this relationship, BarPoint will promote the use of Symbol scanning
devices, develop applications that improve the functionality of scanning
devices, and will arrange for the sale of such devices to BarPoint partners
through Symbol, for which BarPoint will receive commissions on sales of Symbol
hardware and royalties on bundled BarPoint software.
At September 30, 2000 we had $34.3 million in cash and $4.3 million in
marketable securities. We estimate that these resources are adequate to cover
operating expenses and capital expenditures for approximately one year. We also
expect to begin generating increasing revenues from the BarPoint service during
the first six months of calendar 2001, as well as continued growth in Synergy
Solutions software sales. However, there is no assurance that sales will
materialize as expected and that we will not require additional capital prior to
the end of such period.
Background
On June 3, 1999, The Harmat Organization, Inc. acquired all issued and
outstanding shares of BarPoint.com, Inc., a Florida Corporation known as
BarPoint-Florida in exchange for 6,634,042 shares of its common stock. The
transaction was accounted for in a manner similar to a reverse acquisition, as
if BarPoint-Florida acquired Harmat,
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because the former shareholders of BarPoint-Florida owned a majority of Harmat
common stock after the transaction. Management has determined that the
transaction is equivalent to common stock issued by a private company for the
net monetary assets of a publicly traded shell corporation accompanied by a
recapitalization, rather than a business combination. The accounting is
identical to that resulting from a reverse acquisition, except that no goodwill
or other intangible assets were recorded. Following the acquisition, we changed
the name The Harmat Organization, Inc. to BarPoint.com, Inc. 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 for the periods prior to the
effective date of the acquisition only include the accounts of BarPoint-Florida,
because of the reverse acquisition accounting. The consolidated statement of
shareholders' equity has been converted from BarPoint-Florida's capital
structure to Harmat's capital structure to reflect the exchange of shares
pursuant to the stock purchase agreement.
As part of the Harmat acquisition, we received marketable securities
representing investments in Socket Communications, Inc. and FinancialWeb.com,
Inc.
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. In March 2000 we sold 1,675,254 Socket Communications common shares
for proceeds totaling approximately $24.7 million in cash.
On November 5, 1999, BarPoint acquired Synergy Solutions, Inc. for
$100,000 cash and 150,000 shares of BarPoint common stock. Of the 150,000
shares, 75,000 shares were held in escrow subject to earn-out provisions. In
October 2000, an agreement was reached with the Synergy shareholders to waive
the earn-out provisions in exchange for release of the 75,000 shares. Synergy
Solutions produces software applications that are currently sold at major
on-line, retail, and catalog software vendors.
On December 16, 1999, pursuant to a stock exchange agreement, all Class
A Warrants and Class B Warrants were cancelled in exchange for 325,000 shares of
common stock and $50,000 in cash. As part of that transaction voting rights were
allocated to the Series A Class I, II and III preferred shares due to the
cancellation of the Class A and B warrants. The preferred shares were issued to
Leigh Rothschild, our Chairman, on June 3, 1999, one Class I share, one Class II
share and one Class III share. The Class I share votes with the common stock and
has 216,667 votes, the Class II share votes with the common stock and has
108,333 votes, and the Class III share votes with the common stock and has
346,766 votes. None of these shares of preferred stock are entitled to
dividends. All voting rights for these preferred shares end on June 7, 2004.
On December 18, 1999 we closed on the sale of land held for sale for
$174,000. We recognized income of approximately $24,000, before commissions and
other selling expenses.
In February 2000, BarPoint entered into an agreement to acquire
PriceBee.com, a price comparison "shopbot." On March 31, 2000, BarPoint gave
notice of termination of the agreement with PriceBee.com. PriceBee.com disputed
BarPoint's termination of the agreement. The dispute was settled subsequent to
year end for an amount that had no material impact on our financial statements.
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) agreed to lock-up the
shares he owns and the shares underlying his options until October 2, 2000 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, were not subject to lock-up restrictions. The remainder of his shares
and options were locked up until October 2, 2000. Mr. Schilowitz's consulting
agreement with BarPoint remained in effect until September 30, 2000, when he
resigned from his position as a consultant to pursue other interests. In
connection with his resignation, Schilowitz and BarPoint agreed that BarPoint
would continue payment of Schilowitz's base fee through June 3, 2002, as
required by the consulting agreement. In addition, in exchange for the receipt
of certain releases, non-competition and confidentiality obligations, and the
performance of other specified obligations, we agreed to make a cash payment to
Schilowitz of
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$150,000 on January 2, 2001, and grant him 125,000 options at an exercise price
of $2.00 per share. The parties also agreed that the resignation would not
trigger any clause that would otherwise accelerate an option expiration date in
other options previously granted to Mr. Schilowitz.
On March 30, 2000, BarPoint announced the appointment of John C.
Macatee, former President and Chief Operating Officer of Office Depot, as
President and Chief Executive Officer of BarPoint. Mr. Macatee brings with him
proven capabilities in leading and growing multibillion-dollar retail, consumer
and business-to-business operations. Then current CEO, Leigh M. Rothschild,
continues as Chairman of the Board, working closely with Mr. Macatee.
On April 5, 2000, BarPoint completed a private offering of common stock
at a price of $12 per share by the Company and selling stockholders. BarPoint
received gross proceeds of approximately $17.7 million for the sale of 1,477,500
shares of BarPoint Common Stock.
In June 2000, BarPoint was approved for trading on the Nasdaq small cap
market (BPNT).
Results of Operations
Revenues for the year ended September 30, 2000 were $522,809.
BarPoint's revenues for the year were from software sales by Synergy Solutions,
a wholly owned subsidiary offering applications for mobile devices. There were
no revenues in the comparable 1999 period, as the Company essentially began its
operations in June 1999 and did not acquire Synergy until November 1999.
Revenues during the fourth quarter were less than the prior quarter primarily
due to the timing of new product launches which caused Synergy to reduce the
flow of PDActivate(TM) into the distribution pipeline because it was about to
introduce PDActivate 2.0.
For the year ended September 30, 2000, BarPoint reported net income of
$4,067,511, or $0.25 per share basic and $0.23 per share diluted, compared to a
net loss of $438,595, or $0.05 per share basic and diluted, in the comparable
1999 period. Net income for the year resulted primarily from gains on the sale
of marketable securities of approximately $23.5 million, partially offset by
losses of approximately $4.1 million during the fourth quarter due to the
write-off of BarPoint's investment in FinancialWeb.com, Inc.
For the year ended September 30, 2000, losses from operations were
$13,817,891, compared to losses of $910,202 in the comparable 1999 period. The
increase in operating losses from the comparable 1999 period is primarily due to
the fact that BarPoint did not begin significant operations until after the June
3, 1999 Harmat/BarPoint.com reverse acquisition and related private placement
financing. Losses from operations for the quarter ended September 30, 2000 were
$5,463,108, compared to $2,643,375 in the prior quarter. The quarter to quarter
increase in losses from operations results primarily from an $682,000 write-off
of the unamortized balance of the Symbol Technologies product supply and license
agreement, the amortization of warrants granted to strategic partners and
vendors amounting to $843,000, and $689,000 for contractual obligations and
other expenses related to the dissolution of an agreement with a shareholder and
former director of BarPoint. The remaining $400,000 increase results primarily
from additions to staff and other development expenses. The write-offs related
to Symbol Technologies and the dissolution of the agreement with a former
director are one-time events, and the majority of the amortization of warrants
will be completed during the first nine months of the fiscal year beginning
October 1, 2000. In addition, the majority of our technology infrastructure
development and implementation efforts should be complete by the end of March
2001.
Selling, general and administrative expenses were $13,118,424 for the
year ended September 30, 2000, compared to $832,290 the year ended September 30,
1999. The primary reason for the increases in selling, general and
administrative expenses is growth of headcount from 10 at September 30, 1999 to
62 at September 30, 2000, and the corresponding increases in salaries and
benefits, facilities and administration.
Advertising expenses, which are included in selling, general and
administrative expenses, were $1,290,222 and $90,800 for the years ended
September 30, 2000 and 1999 respectively. The increase in advertising is due to
the fact that BarPoint did not begin significant operations until after the June
3, 1999 Harmat/BarPoint.com reverse acquisition. Advertising expenses were
primarily related to developing brand recognition and the launch of our
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preview website. We expect to increase the level of marketing and advertising
expense as we develop our partnerships with manufactures and retailers and build
traffic on the site.
Research and development expenses were $1,169,563 and $77,912 for the
years ended September 30, 2000 and 1999, respectively. Research and development
spending was primarily due to the development of our product database, content
and technology infrastructure. The increase in research and development expense
from the comparable 1999 period is primarily due to the fact that BarPoint did
not begin significant operations until after the June 3, 1999
Harmat/BarPoint.com reverse acquisition. While the majority of the development
and implementation of our technology infrastructure is expected to be completed
by the end of March 2001, there will be ongoing development of website
functionality and software applications.
Interest income was $1,536,033 and $63,607 for the years ended
September 30, 2000 and 1999 respectively. The increase in interest income was
due to an increase in cash balances generated from proceeds from private
placements and sales of marketable securities. The interest was earned from the
investment of these balances in money market funds, AAA rated government
securities and A1/P1 rated commercial paper.
Other income consisted of gains on the sale of 1,675,254 common shares
of Socket Communications of $23.5 million during the year ended September 30,
2000. Those gains were offset by impairment charges of $4.1 million recognized
on an investment in FinancialWeb.com, Inc. There was no such other income in the
year ended September 30, 1999.
Liquidity and Capital Resources
As of September 30, 2000, the Company had approximately $34.3 million
in cash and cash equivalents and $4.3 million in marketable securities. These
marketable securities consisted of 278,836 shares of common stock of Socket
Communications, Inc.
For the years ended September 30, 2000 and 1999, the Company had cash
used in operations of $10,071,306 and $679,293 respectively. The increase in net
cash used in operations is primarily due to the fact that BarPoint did not begin
significant operations until after the June 3, 1999 Harmat/BarPoint.com reverse
acquisition. The increases are driven by increased headcount related to the
development of the company's infrastructure and sales staff, as well as the
acquisition of Symbol Technologies SPT1500 scanning PDA devices included in
inventories.
For the year ended September 30, 2000, net cash provided from investing
activities was $20.3 million and was derived primarily from the sales of
approximately 1.7 million shares of Socket Communications which yielded proceeds
of approximately $24.7 million. The proceeds from the sale of marketable
securities were offset by purchases of property and equipment of $2.7 million
and software development costs of $1.1 million. For the year ended September 30,
1999, cash provided from investing activities consisted of the net cash received
from the reverse acquisition.
For the years ended September 30, 2000 and 1999, net cash provided by
financing activities of $18.1 and $6.3 million respectively, resulted primarily
from the proceeds from the private placement of common stock. During the year
ended September 30, 2000 we issued a total of 1,477,500 shares of our common
stock in private placements to accredited investors for net proceeds of
approximately $16,931,000. During the year ended September 30, 1999, we issued a
total of 4,499,868 shares of our common stock in private placements to
accredited investors for net proceeds of approximately $6,274,000, which
included a subscription note receivable of $750,000. The subscription note
receivable was paid in full February 11, 2000.
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) to $286,000 each year.
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We believe that cash and cash equivalents and marketable securities at
September 30, 2000 will be adequate to cover operating expenses for the next
year. In addition, we believe that revenues from the BarPoint services, expected
to begin during the first half of calendar 2001, and continued growth in
software sales will fund ongoing operations. However, no assurance exists that
we will not require additional capital prior to the end of such period.
CAUTIONARY STATEMENT RELATING TO FORWARD LOOKING STATEMENTS
This Form 10-KSB 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-KSB 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
factors listed below under "Factors Affecting Our Operating Results, Business
Prospects and Market Price of Stock."
FACTORS AFFECTING OUR OPERATING RESULTS,
BUSINESS PROSPECTS AND MARKET PRICE OF STOCK
Our operating history is limited.
While The Harmat Organization, Inc. was founded in 1995, we only began
our current operations under the new name BarPoint.com, Inc. with the completion
of the reverse acquisition of BarPoint-Florida in June 1999. When the reverse
acquisition was completed, BarPoint-Florida had only been in existence since
October 1998. Therefore our results of operations from prior periods are not
indicative of our future results. We face substantial difficulties as a
development stage company in a new and rapidly evolving industry, and do not
have historical financial results that are relevant to evaluate our business and
our prospects.
We have a history of operating losses and expect to continue to post losses.
We have incurred net losses from operations of approximately $14.7
million from our inception through September 30, 2000. Prior to our acquisition
of Synergy Solutions in November 1999, we had no revenues. We expect to continue
to incur operating losses in the foreseeable future due to the costs associated
with advertising, research and development, selling, general and administrative
expenses involved in launching and marketing our service. We are just beginning
to generate operating revenues and we are unable to assure our stockholders that
we will achieve operating profitability, or sustain it if attained in the
future. Substantially all of our revenues were derived from the sale of software
applications.
Rapid technological changes in electronic commerce and internet access devices
may increase our costs and competition and may adversely affect our business.
The electronic and mobile commerce markets are relatively new. These
markets have undergone and are expected to continue to undergo significant and
rapid technological changes. Market penetration and customer acceptance of our
shopping service will depend upon our ability to develop successful marketing
strategies as well as our ability to adapt to rapid technological changes in the
industry and integrate our technology into emerging wireless access devices and
other Internet appliances. If our technology is not accessible from widely-used
wireless access devices and other Internet appliances, our business and
prospects will be adversely affected. We also expect that new competitors may
introduce systems or services that are directly or indirectly competitive with
ours. These
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competitors may succeed in developing systems and services that have greater
functionality or are less costly than our systems and services, and may be more
successful in marketing such systems and services.
Technological changes have lowered the cost of operating communications
and computer systems and purchasing software. These changes reduce our cost of
providing services but also facilitate increased competition by reducing
competitors' costs in providing similar services. This competition could
increase price competition and reduce anticipated profit margins.
We recently launched our website and may not achieve market acceptance.
We launched version 2.0 of our website in October 2000 to replace our
preview website that was launched in December 1999. Our success depends on a
sufficient number of end users and business affiliates utilizing our specific
technology to enable us to achieve profitable operations. We cannot predict
whether the technology, licenses and business plan we have developed will appeal
as a package to Internet users. We also cannot predict whether the software
applications we develop will be accepted by the market. Wide market acceptance
will be necessary to generate profits and enable us to continue in the
marketplace.
We are dependent on the Internet and our host provider to conduct business.
We are dependent on the Internet and third party Internet providers to
conduct our business. If the Internet were to experience technical difficulties
that limit our ability to provide information through our website, limit our
customers' access to our website or impair our ability to effectively process
information through the Internet, our business would be adversely affected. We
have an agreement with a third party to host our website from their facility in
California. We do not have a redundant host center. If our host center in
California experiences technical difficulties, our website may be unavailable
and our business, reputation, financial condition and results of operations may
suffer. We will experience similar risks if we migrate our service to a new
provider, as anticipated.
Our current officers and directors can act together to significantly influence
the actions of our company.
As of September 30, 2000, our executive officers and directors own a
total of 2,397,297 shares, representing approximately 7.1% of our outstanding
common stock. In addition, Leigh Rothschild, our Chairman of the Board, holds
three shares of Series A Preferred Stock that vote with the common stock and
have a total of 671,766 votes. Jay Howard Linn, one of our directors, is the
trustee of Irrevocable Trust No. III, the beneficiaries of which are Mr.
Rothschild and his family members and which owns 4,593,239 shares of our common
stock. Mr. Linn is also the trustee of the Rothschild Children Present Interest
Trust, the beneficiaries of which are members of Mr. Rothschild's family, which
owns 156,736 shares of our common stock. Mr. Linn disclaims all beneficial
ownership of these shares. Including the shares held by the trusts, our
executive officers and directors control approximately 46.2% of the vote. As a
result, our officers and directors are able to significantly influence the
election of directors and the outcome of other matters that come before the
stockholders. They may defeat a proposed merger or acquisition which some of our
stockholders may consider to be in their best interest. Management's stock
ownership and voting control may also discourage potential acquirers from making
a tender offer or other proposal to obtain control of our company, even at a
premium to the then prevailing stock price.
We are uncertain as to the issuance of patents for our technology.
We have filed six patent applications and may file additional
applications. Because of the growth of the Internet and Internet related
businesses, a significant number of patent applications are being filed in our
areas of interest. We cannot assure you that a patent will be issued protecting
the BarPoint technology. If we do not receive patent protection for our
technology, other companies may be able to use our technology to compete with
us. Even if a patent is issued, it may not be upheld against challenges and
other patents may exist upon which our product infringes. Any challenges to the
validity of our current and future patents and patent applications may result in
requests or mandates to modify our systems accordingly or even discontinue our
operations. In addition, we are aware of third parties who hold patents relating
to the use of barcodes and/or scanning equipment. While we do not believe our
intellectual property infringes on the intellectual property of these third
parties, we cannot assure you
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that they will not assert claims of infringement against us. Any claims asserted
against us may potentially lead to costly and time-consuming litigation.
We may need to incur litigation expenses in order to defend our intellectual
property rights and might nevertheless be unable to adequately protect these
rights.
We believe that our future success will depend on our ability to
protect our trademarks and internally developed technologies, including our
Internet systems, which we seek to protect through a combination of patent,
trademark, copyright and trade secret laws. Protection of our trademarks is
crucial as we attempt to build our brand name and reputation. Despite actions we
take to protect our intellectual property rights, it may be possible for third
parties to copy or otherwise obtain and use our intellectual property without
authorization or to develop similar technology independently. We may need to
engage in costly litigation to enforce our intellectual property rights, to
protect our trade secrets or to determine the validity and scope of the
intellectual property rights of others. We cannot assure you that our efforts to
prevent misappropriation or infringement of our intellectual property will be
successful. An adverse determination in any litigation of this type could
require us to make significant changes to the structure and operation of our
online services and features or to license alternative technology from another
party. Implementation of any of these alternatives could be costly and
time-consuming and may not be successful. Any intellectual property litigation
would be likely to result in substantial costs and diversion of resources and
management attention. In addition, legal standards relating to the validity,
enforceability and scope of protection of intellectual property rights in
Internet-related businesses are uncertain and still evolving.
We may be unable to compete successfully in the highly competitive Internet
consumer business.
The Internet consumer market is a new and rapidly emerging area. We
face competition from a number of established competitors who offer consumer
goods and items on the Internet, including Yahoo, Lycos and Excite, which
provide search engines to potential consumers. In addition to these search
engines comparative price shopping websites also compete with us, including
mysimon.com, e-compare, dealtime.com, Qode, Infospace.com, iChoose.com and
upcsmart.com. These websites offer comparative price shopping services similar
to ours and are expected to be among our main competitors. Many of our
competitors have greater financial, technical, marketing and other resources. We
expect competition to intensify in the future. As the Internet continues to
supplement traditional ways of shopping and consumer spending, we believe that
the companies involved in providing online consumer information and comparative
price shopping, will increase their efforts to develop services and marketing
programs that compete with our approach. We are unable to anticipate which other
companies are likely to offer competitive services and marketing approaches in
the future.
We are dependent on the proliferation of Internet access products manufactured
and marketed by third parties.
One aspect of our strategy depends on integrating our technology and
software into mobile Internet access devices such as PDAs, interactive pagers
and cellular phones including the Palm VII and Internet capable phones. If the
devices that contain our software or for which our software is available, do not
achieve market acceptance, we may not generate sufficient traffic and revenues
to offset the costs associated with this strategy. Even if these devices achieve
market acceptance, if technical difficulties limit access to our database, our
business could be adversely affected. Failure of consumers to be able to attain
easy access to our technology through the widespread distribution of these
products would have a negative impact on our business and our ability to grow.
In addition, our success is somewhat dependent upon our ability to
enter into additional agreements with third parties to make our technology
available through new handheld devices and renew our current and future
agreements on favorable terms after their expiration. If these agreements
terminate, or if our third party partners experience technical difficulties
causing us to lose access to these devices, our business would be materially and
adversely affected.
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We have a need for highly qualified personnel.
The success of our business will depend upon our ability to attract and
retain personnel with a wide range of technical capabilities, including
programming and integrating our database with new and emerging technologies.
Competition for such personnel is intense, and is expected to increase in the
future. If we are unable to attract and retain qualified personnel, our business
and results of operations will be adversely affected.
We may be vulnerable to attempts by unauthorized computer users to penetrate our
network security.
Someone may be able to misappropriate proprietary information and cause
interruptions in our services. We may need to expend significant capital and
resources to protect against the threat of such security breaches or to
alleviate problems caused by such breaches. In addition to security breaches,
inadvertent transmission of computer viruses could expose us to risk of loss or
litigation and possible liability.
An economic downturn may materially adversely affect our ability to generate
revenues.
Our system is dependent upon our customers' shopping habits, consumer
spending capability and their ability to access the Internet. In the event of an
economic downturn or change in consumer patterns, our business could be
adversely affected. For example, if the economy declines, the public's ability
and desire to shop or spend money may significantly decrease. A shift in the
economic environment may cause the public to limit their consumer spending. In
addition, a customer's ability to purchase a computer or mobile access device
and access the Internet and our service may equally be affected in an economic
downturn.
Our stock price has and may continue to be volatile.
The trading price of our common stock has been and is likely to
continue to be volatile. Since January 1, 2000, our stock price has ranged from
$1.00 to $28.00. The market price for our common stock may be significantly
affected by such factors as our financial results, changes in technology,
changes in the Internet, new competition, consumer demands, a shift in products
that carry our technology or any change in consumer spending habits.
Additionally, in recent years, the stock market has experienced a high
level of price and volume volatility, and market prices for many companies,
particularly small and emerging growth companies as well as Internet/high tech
companies, the stocks of which trade on the Nasdaq SmallCap Market, have
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. The market price for our common stock may be
affected by general stock market volatility.
We may be subject to increased government regulations in the future.
We are subject to the risks associated with changes in United States
regulatory requirements. If more stringent regulatory requirements and/or safety
and quality standards are issued in the future, they may have an adverse effect
on our business. In addition, use of our website could be adversely affected if
our Internet system provider or the Internet system providers of our customers,
adopts stricter safety standards or becomes more heavily regulated by the
Federal Communications Commission.
Our success depends on the success of third party retailers, suppliers and
distributors.
We expect to derive a significant portion of our future revenues from
commissions on sales by other companies. While the customer accesses information
regarding the product from our website, the products are sold by third party
retailers and suppliers and distributed by third party distributors. Our success
depends on the success of these third parties. The retailers, suppliers and
distributors we rely on are subject to a number of risks, including credit,
inventory and business concentration risks. Failure of these distributors,
retailers and suppliers to satisfy our customers' needs could harm our
reputation, decrease traffic to our site and adversely affect our results of
operations.
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The sale of our investment securities may affect our liquidity and capital
resources.
As of September 30, 2000, we had $4.3 million in marketable securities.
These securities consist of 278,836 common shares of Socket Communications, Inc.
and may be traded at any time. In the event these marketable securities
substantially decline in value, our liquidity and capital resources could be
materially and adversely affected.
The fair value of the Company's marketable securities declined from
approximately $4.3 million at September 30, 2000 to approximately $1.8 million
at November 22, 2000. Management does not believe that this represents an other
than temporary decline.
Our authorized and unissued preferred stock may have anti-takeover effects.
Our certificate of incorporation authorizes the issuance of up to
5,000,000 shares of preferred stock, $.001 par value per share. Only three
shares of preferred stock have been designated and issued. Our board of
directors is authorized to issue shares of preferred stock from time to time
with the relative conversion rights, voting rights, terms of redemption and
liquidation preferences the directors designate. If shares of preferred stock
with voting rights are issued, such issuance could affect the voting rights of
the holders of our common stock by increasing the number of outstanding shares
having voting rights, and by the creation of class or series voting rights. If
our board of directors authorizes the issuance of shares of preferred stock with
conversion rights, the number of shares of our common stock outstanding could
potentially be increased by up to the authorized amount. Issuance of shares of
preferred stock could, under certain circumstances, have the effect of delaying
or preventing a change in control of our company and may adversely affect the
rights of holders of our common stock. Also, the preferred stock could have
preferences over the common stock (and other series of preferred stock) with
respect to dividends and liquidation rights. In addition, the terms of any
series of preferred stock, could adversely affect the rights of holders of the
common stock. The issuance of preferred stock could make the possible takeover
of our company or the removal of our management more difficult, discourage
hostile bids for control of our company in which stockholders may receive
premiums for their shares of common stock or otherwise dilute the rights of
holders of common stock and the market price of the common stock.
Sales of substantial amounts of shares eligible for future sale may adversely
affect our stock price.
As of September 30, 2000, we had issued and outstanding 16,934,237
shares of our common stock and approximately 5,526,345 shares of common stock
are issuable upon exercise of outstanding options and warrants. In addition we
have registered the resale of 5,288,094 shares of stock on a registration
statement. The possibility that substantial amounts of our common stock may be
issued and/or freely resold in the public market may adversely affect prevailing
market prices for our common stock and could impair our ability to raise capital
through the sale of our equity securities. We believe approximately 8,171,373
shares of our common stock, excluding the shares covered by the registration
statement prior to the sale of those shares under the registration statement,
are "restricted securities", as that term is defined under Rule 144 promulgated
under the Securities Act, and may be resold in compliance with Rule 144.
In general, under Rule 144, a person (or persons whose shares are
aggregated) including an affiliate, who has beneficially owned such shares for
one year, may sell in the open market within any three-month period a number of
shares that does not exceed the greater of (i) 1% of the then outstanding shares
of our common stock or (ii) the average weekly trading volume in our common
stock on the Nasdaq SmallCap Market during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain limitations on the
manner of sale, notice requirements and availability of current public
information about us. A person (or persons whose shares are aggregated) who is
deemed not to have been an "affiliate" of ours at any time during the 90 days
preceding a sale by that person and who has beneficially owned his shares for at
least two years, will be able to sell his shares in the public market under Rule
144(k) without regard to the volume limitations, manner of sale provisions,
notice requirements or availability of current information referred to above.
Restricted shares properly sold in reliance upon Rule 144 are thereafter freely
tradable without restrictions or registration under the Securities Act, unless
thereafter held by an "affiliate" of ours.
ITEM 7. Financial Statements
The financial statements included herein, commencing at page F-1, have
been prepared in accordance with Regulation S-B.
20
<PAGE>
ITEM 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
On August 9, 2000, BarPoint notified its independent accountants, Marks
Shron & Company LLP, that the auditing services of Marks Shron & Company LLP
would no longer be required. Marks Shron & Company LLP's dismissal was approved
by BarPoint's board of directors. Marks Shron & Company LLP originally was
selected as the independent accountants for the Harmat Organization, BarPoint's
predecessor on November 4, 1997 to audit its consolidated financial statements
as of and for the year ended September 30, 1997.
During Harmat's fiscal year ended September 30, 1998, during BarPoint's
fiscal 1999, and during the interim period preceding their dismissal as
BarPoint's independent accountants, there were no disagreements with Marks Shron
& Company LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement(s), if
not resolved to the satisfaction of Marks Shron & Company LLP, would have caused
it to make reference to the subject matter of the disagreement(s) in connection
with its report. None of the events listed in paragraph (B) through (D) of
Regulation S-B Item 304(a)(1)(iv) occurred. The report of Marks Shron & Company
LLP, dated December 15, 1999, on BarPoint's consolidated financial statements as
of and for the year ended September 30, 1999 included in BarPoint's 1999 Annual
Report on Form 10-KSB, did not contain an adverse opinion and was not qualified
or modified as to audit scope or accounting principles. The report of Marks
Shron & Company LLP, dated January 11, 1999, on Harmat's consolidated financial
statements as of and for the year ended September 30, 1998 included in Harmat's
1998 Annual Report on Form 10-KSB, did not contain an adverse opinion and was
not qualified or modified as to audit scope or accounting principles.
On August 10, 2000, BarPoint engaged the accounting firm of Deloitte &
Touche LLP as independent accountants to audit BarPoint's consolidated financial
statements for the fiscal year ending September 30, 2000. The engagement was
authorized by BarPoint's board of directors. During the fiscal year ended
September 30, 1999, and the subsequent period, neither BarPoint nor any person
on BarPoint's behalf consulted Deloitte & Touche LLP regarding either the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
BarPoint's consolidated financial statements.
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The information required in response to this item is incorporated by
reference to the registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
ITEM 10. Executive Compensation
The information required in response to this item is incorporated by
reference to the registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
ITEM 11. Security Ownership Of Certain Beneficial Owners And Management
The information required in response to this item is incorporated by
reference to the registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
21
<PAGE>
ITEM 12. Certain Relationships And Related Transactions
The information required in response to this item is incorporated by
reference to the registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
22
<PAGE>
ITEM 13. Exhibits and Reports on Form 8-K
(a)(1) Financial Statements
Reference is made to the Index set forth on Page F-1 of this Annual
Report on Form 10-KSB.
(a)(2) Financial Statement Schedules
None
(a)(3+) Exhibits
3.1 Registrant's Articles of Incorporation as amended to date,
incorporated herein by Reference to Exhibit 3.1 to Registrant's
Registration Statement on Form SB-2, File No. 333-3501.
3.2 Registrant's Certificate of Amendment to the Certificate of
Incorporation of the Registrant authorizing the Series A Preferred
Stock, incorporated herein by Reference to Exhibit 6 to the
Registrant's Report on Form 8-K on June 3, 1999.
3.3 Registrant's Certificate of Amendment to the Certificate of
Incorporation of the Registrant changing the name of the
corporation, incorporated herein by Reference to Exhibit 1 to the
Registrant's Report on Form 8-K on June 15, 1999.
3.4 Registrant's Certificate of Amendment to the Certificate of
Incorporation of the Registrant changing the number of authorized
shares.
3.5 Registrant's Amended and Restated By-Laws.
4.1 Form of Common Stock Certificate, incorporated herein by Reference
to Exhibit 4.1 to Registrant's Registration Statement on Form
SB-2, File No. 333-3501.
4.3 Form of Representative's Purchase Option, incorporated herein by
Reference to Exhibit 4.4 to Registrant's Registration Statement on
Form SB-2, File No. 333-3501.
4.4 Registrant's 1996 Stock Option Plan incorporated herein by
Reference and as amended June 19, 1997 (Exhibit 4.5 to
Registrant's Registration Statement on Form SB-2, File No.
333-3501).
10.1 Amended and Restated Employment Agreement, dated as of April 4,
2000 between the Registrant and John C. Macatee incorporated by
reference to Exhibit 10.1 to the Registrant's Report on Form
10-QSB for the quarter ended March 30, 2000
10.2 Employment Agreement between the Registrant and Leigh M.
Rothschild, incorporated herein by Reference to Exhibit 10.2 to
the Registrant's Report on Form 10-QSB for the quarter ended March
30, 2000.
10.3 Employment Agreement between the Registrant and Jeffrey W. Sass,
incorporated herein by Reference to Exhibit 10.3 to the
Registrant's Report on Form 10-QSB for the quarter ended March 30,
2000.
10.4 Commercial Lease, by and between the Registrant and FG 2200, LLC,
dated as of November 30, 2000.
21 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Marks Paneth & Shron LLP
(b) Reports on Form 8-K
1. Form 8-K, dated as of November 20, 2000.
2. Form 8-K, dated as of August 9, 2000 (as amended).
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BARPOINT.COM, INC.
By: /s/ John C. Macatee
-------------------------------------
John C. Macatee
President and Chief Executive Officer
Dated: December 29, 2000
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Position Date
<S> <C> <C>
By: /s/ Leigh M. Rothschild Chairman of the Board of Directors December 28, 2000
-----------------------------------
Leigh M. Rothschild
By: /s/ John C. Macatee President, Chief Executive Officer and December 29, 2000
----------------------------------- Director (Principal Executive Officer)
John C. Macatee
By: /s/ Jeffrey W. Sass Chief Operating Officer, Executive Vice December 28, 2000
----------------------------------- President and Secretary
Jeffrey W. Sass
By: /s/ Michael A. Karmelin Chief Financial Officer December 29, 2000
----------------------------------- (Principal Financial Officer)
Michael A. Karmelin
By: /s/ Seymour G. Siegel Director December 27, 2000
-----------------------------------
Seymour G. Siegel
By: /s/ David W. Sass Assistant Secretary and Director December 29, 2000
-----------------------------------
David W. Sass
By: /s/ Jay Howard Linn Director December 26, 2000
-----------------------------------
Jay Howard Linn
By: /s/ Kenneth Jaeggi Director December 28, 2000
-----------------------------------
Kenneth Jaeggi
By: /s/ David Wachter Director December 29, 2000
-----------------------------------
David Wachter
By: /s/ Gerald C. McDonough Director December 28, 2000
-----------------------------------
Gerald C. McDonough
By: /s/ Marguerite W. Sallee Director December 28, 2000
-----------------------------------
Marguerite W. Sallee
</TABLE>
24
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
REPORT OF DELOITTE & TOUCHE LLP...................................................................... F-1
REPORT OF MARKS SHRON & COMPANY LLP.................................................................. F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of September 30, 2000 and 1999................................... F-3
Consolidated Statements of Operations for the Years Ended September 30,
2000 and 1999 and for the period from October 1, 1998 (date of inception)
through September 30, 2000...................................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 2000 and 1999..................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended September 30,
2000 and 1999 and for the period from October 1, 1998 (date of inception)
through September 30, 2000...................................................................... F-6
Notes To Consolidated Financial Statements...................................................... F-8 - F-22
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of BarPoint.com, Inc.:
We have audited the accompanying consolidated balance sheet of BarPoint.com,
Inc. and subsidiaries (a development stage company) (the "Company") as of
September 30, 2000, the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended and the related
consolidated statements of operations and of cash flows for the period from
October 1, 1998 (date of inception) to September 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The Company's consolidated financial statements for the period from
October 1, 1998 (date of inception) through September 30, 1999 (as restated)
were audited by other auditors whose report, dated December 15, 1999, expressed
an unqualified opinion on those statements. The consolidated financial
statements for the period from October 1, 1998 (date of inception) through
September 30, 1999 reflect no revenues and a net loss of $438,595 of the related
totals. The other auditors' report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for such prior period, is based
solely on the report of such other auditors.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of the Company at September 30, 2000 and the results of its
operations and its cash flows for the year then ended and for the period from
October 1, 1998 (date of inception) to September 30, 2000, in conformity with
accounting principles generally accepted in the United States of America.
The Company is in the development stage as of September 30, 2000. As discussed
in Note 1 to the consolidated financial statements, successful completion of the
Company's development program and, ultimately, the attainment of profitable
operations is dependent upon future events, including maintaining adequate
financing to fulfill its development activities and achieving a level of
revenues adequate to support the Company's cost structure.
Deloitte & Touche LLP
Miami, Florida
November 22, 2000
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of BarPoint.com, Inc.
We have audited the accompanying consolidated balance sheet of BarPoint.com,
Inc. and subsidiaries (a development stage company) as of September 30, 1999,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of BarPoint.com, Inc. and subsidiaries as of September 30, 1999, and
the results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Marks Shron & Company LLP
Great Neck, New York
December 15, 1999
F-2
<PAGE>
BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
September 30,
---------------------------
2000 1999
------------ -----------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents.......................................................... $34,278,727 $5,973,956
Marketable securities, at market................................................... 4,321,958 3,223,123
Accounts receivable................................................................ 85,245 -
Inventories........................................................................ 2,400,881 -
Prepaid expenses................................................................... 1,542,311 -
Other current assets............................................................... 534,331 312,322
----------- -----------
Total Current Assets............................................................... 43,163,453 9,509,401
----------- -----------
Land............................................................................... - 149,750
Property and equipment, net of accumulated depreciation of $462,978 in 2000 and
$20,269 in 1999.................................................................. 3,586,984 282,000
----------- -----------
3,586,984 431,750
----------- -----------
OTHER ASSETS
Goodwill, net of accumulated amortization of $65,828 in 2000....................... 652,299 -
Other, net......................................................................... 80,333 1,500,000
----------- -----------
732,632 1,500,000
----------- -----------
TOTAL ASSETS....................................................................... $47,483,069 $11,441,151
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses.............................................. $2,185,870 $337,637
Income taxes payable............................................................... 4,930,840 -
----------- -----------
Total Current Liabilities.......................................................... 7,116,710 337,637
OTHER LIABILITIES
Deferred income taxes payable...................................................... 770,604 215,899
----------- -----------
TOTAL LIABILITIES 7,887,314 553,536
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
STOCKHOLDERS' EQUITY
Preferred stock: $.001 par value; authorized 5,000,000 shares; 3 issued and
outstanding...................................................................... - -
Common stock: $.001 par value; authorized 100,000,000 shares in 2000 and
20,000,000 shares in 1999; issued and outstanding 16,934,237 in 2000 and
13,846,410 in 1999............................................................... 16,934 13,846
Paid in capital.................................................................... 33,427,939 13,078,029
Subscription receivable............................................................ - (750,000)
Retained earnings (deficit accumulated during development stage)................... 3,628,916 (438,595)
Accumulated other comprehensive income (loss)...................................... 2,521,966 (1,015,665)
----------- -----------
Total Stockholders' Equity......................................................... 39,595,755 10,887,615
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $47,483,069 $11,441,151
=========== ===========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Period
from October 1,
1998 (date of
inception),
Year Ended September 30, through
------------------------ September
2000 1999 30, 2000
---------- --------- ----------
<S> <C> <C> <C>
Sales......................................................... $522,809 $ - $522,809
Cost of sales................................................. 52,713 - 52,713
---------- --------- ----------
Gross profit.................................................. 470,096 - 470,096
---------- --------- ----------
Operating Expenses:...........................................
Selling, general and administrative........................... 13,118,424 832,290 13,950,714
Research and development...................................... 1,169,563 77,912 1,247,475
---------- --------- ----------
Total Operating Expenses...................................... 14,287,987 910,202 15,198,189
---------- --------- ----------
Loss from operations.......................................... (13,817,891) (910,202) (14,728,093)
---------- --------- ----------
Other Income:
Interest and other income..................................... 1,573,637 63,607 1,637,244
Net gains on sales of marketable securities................... 19,412,051 - 19,412,051
---------- --------- ----------
Total Other Income............................................ 20,985,688 63,607 21,049,295
---------- --------- ----------
Income (loss) before income tax (expense) benefit............. 7,167,797 (846,595) 6,321,202
Income tax (expense) benefit.................................. (3,100,286) 408,000 (2,692,286)
---------- --------- ----------
Net income (loss)............................................. $4,067,511 $(438,595) $3,628,916
========== ========= ==========
Income (loss) per common share--
Basic........................................................ $0.25 $(0.05) $0.30
========== ========= ==========
Income (loss) per common share--
Diluted...................................................... $0.23 $(0.05) $0.27
========== ========= ==========
Weighted average common shares
shares outstanding - Basic................................... 15,992,356 8,221,278 12,106,817
========== ========= ==========
Weighted average common shares................................
shares outstanding - Diluted................................. 17,393,271 8,221,278 13,407,275
========== ========= ==========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
BarPoint.com Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
Years Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Retained
earnings
(deficit Accumulated
Common Stock Note accumulated Other
# of Shares ------------------ Additional Receivable during Compre-
of Preferred Par Paid-in from development hensive
Stock Shares Value Capital Stockholder stage) Income (loss) Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BarPoint.com, Inc. capitalization
at inception..................... 100 100 241,400 241,500
Reverse acquisition:
Shares outstanding and net assets
of The Harmat Organization at
June 3, 1999................... 2,662,500 2,662 4,525,668 4,528,330
Issuance of shares to BarPoint.com
shareholders................... 6,633,942 6,534 (6,534) --
Private Placements and Subscription
note receivable.................. 4,499,868 4,500 8,300,015 (750,000) 7,554,515
Exercise of Stock Options.......... 50,000 50 17,450 17,500
Issuance of Preferred Stock........ 3 -- 30 30
Comprehensive income (loss):
Change in unrealized Gain on
Marketable Securities (Net of
Income Tax Benefit of $376,459).. (1,015,665) --
Net Loss........................... (438,595) --
Total comprehensive loss........... (1,454,260)
-----------------------------------------------------------------------------------------------
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 - Record Date
June 2, 1999..................... 878,770 879 (879) --
Stock Options Exercised............ 12,186 13 4,581 4,594
Cancellation of all Class A and
Class B Warrants in exchange for
325,000 common shares and $50,000 325,000 325 (50,325) (50,000)
Cashless exercise of Warrants...... 195,372 195 (195) --
Warrants Exercised................. 97,339 97 434,309 434,406
Payment of Subscription Note 750,000 750,000
Receivable.......................
Issuance of Stock Options below
Market Value..................... 227,752 227,752
Issuance of Common Shares for
services performed............... 26,660 26 86,979 87,005
Acquisition of Synergy Solutions, 75,000 75 628,050 628,125
Inc..............................
Issuance of common stock through
Private Placements............... 1,477,500 1,478 16,929,519 16,930,997
Warrants issued in exchange for
services performed............... 1,876,329 1,876,329
Options issued as Settlement for a
claim asserted................... 213,790 213,790
Comprehensive income (loss):
Change in Unrealized Gain on
Marketable Securities (Net of 3,537,631 --
Income Taxes of $1,545,721)......
Net Income......................... 4,067,511 --
Total comprehensive income......... 7,605,142
-----------------------------------------------------------------------------------------------
Balance September 30, 2000......... 3 16,934,237 $16,934 $33,427,939 $ -- $3,628,916 $2,521,966 $39,595,755
===============================================================================================
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
BarPoint.com, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the
Period from
October 1,
1998 (date of
inception),
Year Ended September 30, through
------------------------------ September
2000 1999 30, 2000
------------ ---------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................................. $ 4,067,511 $ (438,595) $ 3,628,916
Adjustments to reconcile net income (loss) to net cash used
by operating activities:
Depreciation and amortization.............................. 1,335,827 15,678 1,351,505
Write-off of licensing fee................................. 681,818 -- 681,818
Amortization of warrants issued in exchange for services... 843,060 -- 843,060
Issuance of common stock in exchange for services.......... 87,005 -- 87,005
Issuance of stock options as settlement of a claim......... 213,790 -- 213,790
Issuance of stock options below market price............... 227,752 -- 227,752
Non cash administration expenses........................... 9,998 20,500 30,498
Gain on sale of land....................................... (23,866) -- (23,866)
Gain on sale of marketable securities...................... (23,521,270) -- (23,521,270)
Impairment charges on marketable securities................ 4,109,219 -- 4,109,219
Deferred income tax benefit................................ (1,664,045) (408,000) (2,072,045)
Changes in operating assets and liabilities:
Accounts receivable........................................ (85,245) -- (85,245)
Inventories................................................ (2,400,881) -- (2,400,881)
Prepaid expenses........................................... (509,043) -- (509,043)
Other assets............................................... (222,009) (36,459) (258,468)
Accounts payable and accrued expenses...................... 1,848,233 167,583 2,015,816
Income taxes payable....................................... 4,930,840 -- 4,930,840
------------ ---------- ------------
Net Cash Used in Operating Activities......................... (10,071,306) (679,293) (10,750,599)
------------ ---------- ------------
INVESTING ACTIVITIES:
Proceeds from sales of marketable securities.................. 24,741,301 -- 24,741,301
Purchases of property and equipment........................... (2,742,412) (24,659) (2,767,071)
Software development costs.................................... (1,094,721) (53,019) (1,147,740)
Purchases of marketable securities............................ (671,704) -- (671,704)
Proceeds from sale of land.................................... 173,616 -- 173,616
Acquisition costs............................................. (100,000) (189,000) (289,000)
Cash received in acquisition.................................. -- 628,227 628,227
------------ ---------- ------------
Net Cash Provided by Investing Activities..................... 20,306,080 361,549 20,667,629
------------ ---------- ------------
FINANCING ACTIVITIES:
Private placements of common stock............................ 16,930,997 6,274,200 23,205,197
Proceeds from subscription receivable......................... 750,000 -- 750,000
Proceeds from exercise of warrants............................ 434,406 -- 434,406
Payments to cancel warrants................................... (50,000) -- (50,000)
Stock options exercised....................................... 4,594 17,500 22,094
------------ ---------- ------------
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
For the
Period from
October 1,
1998 (date of
inception),
Year Ended September 30, through
------------------------------ September
2000 1999 30, 2000
------------ ---------- ------------
<S> <C> <C> <C>
Net Cash Provided by Financing Activities..................... 18,069,997 6,291,700 24,361,697
------------ ---------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS..................... 28,304,771 5,973,956 34,278,727
CASH AND CASH EQUIVALENTS - beginning of period............... 5,973,956 -- --
------------ ---------- ------------
CASH AND CASH EQUIVALENTS - end of period..................... $ 34,278,727 $ 5,973,956 $ 34,278,727
============ ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Taxes......................................................... $ -- $ 591 $ 591
============ ========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Issuance of warrants in exchange for services, including
$843,060 amortized during the fiscal year................... $ 1,876,328 $ -- $ 1,876,328
============ ========== ===========
Software development costs for services rendered by certain
shareholders................................................ -- 220,000 220,000
============ ========== ===========
Product supply and technology license agreement acquired
through issuance of common stock............................ -- 1,500,000 1,500,000
============ ========== ===========
Non-cash administration expenses.............................. 9,998 20,500 30,498
============ ========== ===========
Finders fee applied to shareholder loan....................... -- 218,655 218,655
============ ========== ===========
</TABLE>
See notes to consolidated financial statements
F-7
<PAGE>
BARPOINT.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 2000 AND 1999
1. BUSINESS AND BASIS OF PRESENTATION
BarPoint.com, Inc. and subsidiaries ("BarPoint" or the "Company") is an
online and wireless product information and shopping service. As a
content provider, retail sales facilitator, and applications developer,
BarPoint is dedicated to helping businesses and consumers make better
buying decisions. BarPoint uses unique product identifiers, such as UPC
barcode numbers, and patent pending "reverse search" technology to
simplify the process of finding meaningful product information.
The Company is in the development stage as of September 30, 2000.
Although revenues have been generated from software sales by Synergy
Solutions, a wholly owned subsidiary, BarPoint has not yet begun to
generate significant revenues from its principal operations. BarPoint
management expects revenues from the BarPoint online and wireless
product information and shopping services to develop and grow during
the first half of calendar 2001. The successful completion of the
Company's development program and, ultimately, the attainment of
profitable operations is dependent upon future events, including
maintaining adequate financing to fulfill its development activities
and achieving a level of revenues adequate to support the Company's
cost structure.
The Company launched its preview website in December 1999. In October
2000, the Company launched the new BarPoint website and plans to roll
out continuing enhancements. During November 2000 the Company announced
the introduction of My BarPoint, a suite of personalized services that
allows users to register with BarPoint and helps them track and store
information from their product searches and purchases. My BarPoint can
also be accessed from a wide range of internet enabled devices such as
pagers, PDA's and cell phones. The Company has also announced it is
extending its mobile shopping and information service to all digital
phone users by introducing an SMS (Short Messaging System) version of
the BarPoint Shopper.
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 stockholders of the Company to change its
direction away from the real estate business and 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 known as BarPoint-Florida.
The transaction was accounted for in a manner similar to a reverse
acquisition, as if BarPoint-Florida acquired Harmat, due to the fact
that the former shareholders of BarPoint-Florida owned a majority of
Harmat common stock after the transaction. Management has determined
that the transaction is equivalent to common stock issued by a private
company for the net monetary assets of a publicly traded shell
corporation accompanied by a recapitalization, rather than a business
combination. The accounting is identical to that resulting from a
reverse acquisition, except that no goodwill or other intangible assets
were recorded. Following the acquisition, the name of The Harmat
Organization, Inc. was changed to BarPoint.com, Inc. The Florida
corporation is now a wholly owned subsidiary. 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 statements of stockholders'
equity have been converted from BarPoint's capital structure to
Harmat's capital structure to reflect the exchange of shares pursuant
to the Acquisition Agreement. The consolidated group of companies are
collectively referred to herein as the "Company."
On November 5, 1999, BarPoint acquired Synergy Solutions, Inc., which
creates applications for mobile devices, for $100,000 cash and 150,000
shares of BarPoint common stock. Synergy Solutions software products
are currently sold at major on-line, retail and catalog software
vendors.
F-8
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
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 intercompany amounts have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with an original
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 financial
institutions and invests these funds in various short term interest
bearing instruments. The amount of deposits in any one institution that
exceeds federally insured limits is subject to credit risk. Such
amounts were approximately $ 34,126,000 at September 30, 2000 and
$5,814,000 at September 30, 1999.
MARKETABLE SECURITIES
The Company accounts for its investments pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain
Investments in Debt and Equity Securities. SFAS No. 115 addresses the
accounting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt
securities. Those investments are to be classified into the following
three categories: held-to-maturity debt securities; available-for-sale
securities and trading securities.
Management determines the appropriate classification of its investments
in debt and equity securities at the time of purchase and reevaluates
such determination at each balance sheet date. At September 30, 2000
and 1999 all marketable securities were classified as available for
sale. Unrealized gains and losses for available-for-sale securities are
excluded from earnings and reported as a net amount of accumulated
other comprehensive income, a separate component of stockholders'
equity, until realized. Management periodically evaluates the market
value of securities to determine if other than temporary declines in
value exist. Any decline in value which is deemed other than temporary
is realized and recorded as impairment expense in the period
identified.
INVENTORIES
Inventories are carried at the lower of cost or market. Cost is
computed on a specific identification basis.
F-9
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation
and amortization. Property and equipment are depreciated on a
straight-line basis over the estimated useful lives of the assets. The
useful lives are as follows:
Computer hardware, software and other equipment.......... 3 years
Furniture and fixtures................................... 5 years
Software development costs primarily consist of payroll and related
costs for website and order fulfillment system development, systems
personnel, consultants, and other website and order fulfillment
infrastructure costs. Software development costs are capitalized in
accordance with Statement of Position No. 98-1 ("SOP 98-1"), Accounting
for the Costs of Computer Software Developed or Obtained for Internal
Use, which was issued by the American Institute of Certified Public
Accountants ("AICPA") in 1998. The Company adopted this statement
effective October 1, 1999. SOP 98-1 requires the Company to capitalize
certain payroll and payroll related costs and other costs that are
directly related to the development of certain systems of the Company.
The Company amortizes these costs on a straight-line basis over a
period of three years, beginning upon completion of the development
software. All costs that are not capitalized under SOP 98-1 are
recorded as research and development expense. In March 2000, The
Emerging Issues Task Force ("EITF") issued EITF 00-2, Accounting for
Website Development Costs. EITF 00-2 provides guidance on accounting
for website development costs. The Company believes that its current
accounting practices for website development costs comply with EITF
00-2.
LONG LIVED ASSETS
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. Recoverability of assets is measured by comparison of the
carrying amount of the asset to net undiscounted future cash flows
expected to be generated from the asset. No impairment has been
recognized in the accompanying consolidated financial statements.
DEFERRED STOCK COMPENSATION COSTS
Deferred stock compensation cost assets consist of the fair value of
warrants and stock issued to vendors in connection with service
agreements and software development projects. These amounts are
recorded as prepaid expense in the financial statements. Amortization
is computed using the straight-line method over the estimated useful
lives of the assets or the term of the underlying agreements.
EARNINGS (LOSS) PER SHARE
SFAS No.128, Earnings Per Share, 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 dilutive outstanding options and
warrants.
The reconciliation of the basic and diluted earnings per common share
is as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------
2000 1999
---------- ---------
<S> <C> <C>
Weighted average common shares outstanding - basic....... 15,992,356 8,221,278
Dilutive effect of:
Stock options....................................... 1,094,362 --
Warrants............................................ 306,353 --
---------- ---------
Weighted average common shares outstanding - diluted..... 17,393,271 8,221,278
---------- ---------
</TABLE>
F-10
<PAGE>
For the year ended September 30, 2000, options to purchase 644,600
shares of common stock and 18,000 warrants were outstanding but were
not included in the computation of diluted EPS since the effect would
be antidilutive.
For the year ended September 30, 1999, no effect was given to
outstanding options and warrants since the effect would be
antidilutive.
SEGMENT INFORMATION
SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information requires public companies to report selected segment
information in its financial reports to shareholders. The Company has
determined that it has only one reportable segment. BarPoint is an
online and wireless product information and shopping service that
encompasses providing content, facilitating retail sales and developing
applications for mobile devices, as well as for BarPoint partners to
facilitate the use of BarPoint services.
GOODWILL
On November 5, 1999, the Company acquired all of the outstanding common
stock of Synergy Solutions, Inc. ("Synergy") for $100,000 cash and
150,000 shares of the Company's common stock. Of the 150,000 shares,
75,000 were held in escrow subject to earn-out provisions of the
acquisition agreement. In October 2000, an agreement was reached with
the Synergy shareholders to waive all earn-out provisions in exchange
for the release of the 75,000 shares of BarPoint common stock held in
escrow. The total fair value of the consideration paid, excluding the
75,000 shares held in escrow, was $728,125. The acquisition has been
recorded under the purchase method of accounting. The cost in excess of
net assets acquired of $718,128 was recorded as goodwill. Goodwill is
being amortized over a ten year period on a straight-line basis.
The following are summarized, unaudited pro forma results of operations
for the year ended September 30, 2000 and the year ended September 30,
1999, assuming the acquisition occurred on October 1, 1999 and October
1, 1998, respectively.
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Total revenue...................................... $542,463 $408,269
Net income (loss)................................ 4,037,262 (378,304)
Income (loss) per common share--
basic............................................ $0.25 $(0.05)
========= =========
Income (loss) per common share-- diluted........... $0.23 $(0.05)
========= =========
</TABLE>
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.
OTHER ASSETS
Included in the balance of other assets as of September 30, 2000 and
1999 are the net book value of licensing agreements. The Company is
amortizing these over the estimated life, currently three to five
years.
In August 1999, the Company entered into a strategic partnership with
Symbol Technologies, Inc., referred to as Symbol. As part of that
partnership, Symbol purchased 1,315,789 shares of the Company's common
stock valued at $2,500,000 in exchange for $1,000,000 cash and an
agreement to make available to the Company up to 110,000 Symbol SPT
1500 machines at a special price, plus a royalty free license to use
F-11
<PAGE>
Symbol's scanner patents. During the second half of the fiscal year
ended September 30, 2000, the Company acquired 10,000 SPT 1500 machines
in accordance with the agreement for approximately $3.0 million. Prior
to September 30, 2000, management determined that it is not in the
Company's best interest to be responsible for the logistics and
financial requirements associated with maintaining inventory related to
hardware sales. As a result, the Company reached an agreement in
principle with Symbol to dissolve the product supply and license
agreement and enter into a new sales and royalty agreement. Under this
new agreement, the Company will continue to promote the use of Symbol
scanning devices and will continue to develop applications that improve
the functionality of scanning devices, but will now arrange for the
sale of the devices to BarPoint partners through Symbol for which the
Company will receive commissions on sales of Symbol hardware and
royalties on bundled BarPoint software.
As a result of this restructuring, the Company determined that the
value of the agreement was permanently impaired and recorded a charge
of approximately $682,000 at September 30, 2000, which was the
remaining book value of the asset before the impairment charge.
REVENUE RECOGNITION
The only revenues recognized by the Company through September 30, 2000
are from the sale of Synergy Solutions software products. Revenue is
recognized when earned. The Company's revenue recognition policies are
in compliance with all applicable accounting regulations, including SOP
97-2, Software Revenue Recognition, and SOP 98-9, Modification of SOP
97-2, With Respect to Certain Transactions. Revenue from Synergy
Solutions packaged software product sales to and through distributors
and resellers is recorded when related products are sold to end users.
Revenue from product sales on the Company's website are recognized when
the software is delivered to and paid for by the customer. Revenue from
software product sales are recognized net of any discounts. The Company
offers a 30 day return policy on all Synergy Solutions software product
sales. Historical returns have not been significant.
COST OF SALES
Cost of sales includes direct costs to produce and distribute software
products and direct costs to facilitate product sales on the Company's
Synergy Solutions Website.
INCOME TAXES
The Company accounts for income taxes by utilizing the asset and
liability method. Deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts, based on
enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect the taxable income.
Valuation allowances are established when necessary to reduce net
deferred tax assets to the amount that is more likely than not to be
ultimately realized.
ADVERTISING COSTS
The Company recognizes advertising expenses in accordance with SOP No.
93-7, Reporting on Advertising Costs. As such, advertising costs are
expensed as incurred. Advertising expense was $1,290,222 (including
$843,060 related to the value of warrants granted to vendors) and
$90,800 for the years ended September 30, 2000 and 1999, respectively.
These amounts are included in the financial statements under selling,
general and administrative expenses.
FAIR VALUE
The carrying amount of the Company's financial instruments (cash and
cash equivalents, marketable securities, accounts receivable and
accounts payable) approximate fair value because of the short-term
maturity of these instruments or the fact that they are carried at fair
value, as applicable.
F-12
<PAGE>
STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations, in accounting for its employee (and non-employee
member of the Board of Directors) stock options, and complies with the
disclosure requirements of 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 (See Note 9). All stock-based awards to non-employees, other than
members of the board of directors, are accounted for at their
fair-value in accordance with SFAS No. 123.
COMPREHENSIVE INCOME
The Company complies with the provisions of SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting
comprehensive income and its components in the financial statements.
Comprehensive income as defined, includes all changes in equity during
a period from non-owner sources. The only item of other comprehensive
income (loss) that the Company currently reports is unrealized gains
and losses on investments in marketable securities.
NEW ACCOUNTING PRONOUNCEMENTS AND INTERPRETATIONS
In December 1999, the staff of the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"). SAB 101
summarizes certain areas of the SEC's views in applying generally
accepted accounting principles to revenue recognition in the financial
statements. The Company believes that its current revenue recognition
principles comply with SAB 101.
In July 2000, the FASB issued SFAS No. 138, Accounting for Certain
Derivative Instruments and Hedging Activities, (an amendment of SFAS
No. 133), which amends SFAS No. 133 to provide additional guidance and
to exclude certain provisions. SFAS No. 133 requires the recognition of
all derivatives as either assets or liabilities measured at fair value
and is effective for fiscal years beginning after June 15, 2000.
Management has determined the impact of the transition to SFAS No. 133
will not be material to the consolidated financial statements.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
current year presentation.
3. MARKETABLE SECURITIES
Marketable securities consist of investments in equity securities at
market value. As of September 30, 2000, the unrealized gain, net of
deferred federal income tax, was $2,521,966. There were no unrealized
losses for the year then ended.
As of September 30, 1999, the unrealized loss, net of deferred federal
income tax, was $(1,410,495), the net unrealized gains, and the net of
federal income tax, was $394,830.
The Company realized gains on the sale of marketable securities
totaling $23,521,270 for the year ended September 30, 2000. There were
no realized gains or losses for the year ended September 30, 1999. The
Company uses the weighted average cost for the purpose of determining
gains and losses on the sales of marketable securities.
At September 30, 2000 the Company held 450,000 shares of common stock
in FinancialWeb.com, Inc. ("FWEB"). As of September 30, 2000,
management estimates that this investment has no fair value.
Furthermore management believes that this decline in value was other
than temporary. On November 15, 2000, FWEB announced that its principal
secured creditor had foreclosed on substantially all of the operating
F-13
<PAGE>
and intangible assets of the Company. FWEB also announced that the net
proceeds received for its remaining assets would be insufficient to
meet the outstanding debt and other obligations of FWEB, therefore it
was unlikely that any of the equity holders would receive any of those
proceeds. As such, the Company has recorded impairment charges as of
September 30, 2000 in the amount of $4,109,219, the original historical
cost of this investment which represent the total of realized losses
for the year ended September 30, 2000.
The fair value of the Company's marketable securities declined from
approximately $4.3 million at September 30, 2000 to approximately $1.8
million at November 22, 2000. Management does not believe that this
represents an other than temporary decline.
4. INVENTORIES
The Company's inventories consist primarily of handheld computing
devices and related accessories with a net carrying value of
approximately $2.4 million at September 30, 2000.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
2000 1999
------------ ---------
<S> <C> <C>
Furniture and fixtures.......................... $ 36,596 $ 726
Computer equipment and software.................. 2,730,625 28,524
Website development costs........................ 1,282,741 273,019
------------ ---------
Total............................................ 4,049,962 302,269
Less accumulated depreciation.................... (462,978) (20,269)
------------ ---------
Property and equipment, net...................... $ 3,586,984 $ 282,000
============ =========
</TABLE>
Depreciation expense totaled $442,709 and $20,269 for the years ended
September 30, 2000 and 1999, respectively.
6. INCOME TAXES
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
For the year ended 9/30/00 For the year ended 9/30/99
------------------------------------ ------------------------------------
Current Deferred Total Current Deferred Total
----------- ------------ ----------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Federal $ 4,410,263 $ (1,554,736) $ 2,855,527 $ 0 $ (391,000) $ (391,000)
State 378,022 ( 133,264) 244,759 0 ( 17,000) ( 17,000)
----------- ------------ ----------- ------- ---------- ----------
Total $ 4,788,286 $ (1,688,000) $ 3,100,286 $ 0 $ (408,000) $ (408,000)
=========== ============ =========== ======= ========== ==========
</TABLE>
F-14
<PAGE>
A reconciliation of the provision for federal income taxes from the
federal statutory rate to the effective income tax rate as reported is
as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
2000 1999
---------------------------------------------------------
Amount Rate Amount Rate
---------------------------------------------------------
<S> <C> <C> <C> <C>
Statutory rate applied to income before $2,508,738 35.00% $(288,000) (34.00%)
taxes and extraordinary items
Increase in income taxes resulting from:
State Income taxes, net of benefit 244,759 3.41% (17,000) (2.0%)
Meals and entertainment 87,500 1.22%
Estimated tax penalty 87,500 1.22%
Change in valuation allowance (103,000) (12.19%)
Other 171,789 2.40%
---------------------------------------------------------
Total $3,100,286 43.25% $(408,000) (48.19%)
=========================================================
</TABLE>
The following is a summary of the significant components of the
Company's deferred tax assets and liabilities:
<TABLE>
<CAPTION>
As of September 30,
Deferred tax assets 2000 1999
-------------------------------
<S> <C> <C>
Inventory Reserve $ 170,500 --
Bad Debts 14,500 --
NOLs prior to Acquisition 530,000 909,800
Stock Compensation 294,500 279,000
Stock Warrants Issued 295,500
Valuation Allowance (530,000) (501,800)
-------------------------------
775,000 687,000
Deferred tax liability
Unrealized gain on marketable securities (1,545,604) (902,899)
-------------------------------
Total $ (770,604) $ (215,899)
-------------------------------
</TABLE>
For the fiscal year ended September 30, 1999, the Company had federal
net operating loss carryforwards (NOL) of approximately $2,760,000 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 on June 3, 1999, the Company's ability to utilize $1,680,000 of
NOL's generated prior to the ownership change are restricted under
Section 382 of the Internal Revenue Code (IRC) to approximately
$286,000 per year. The amount of NOL utilized during the year ended
September 30, 2000 is as follows:
NOL Generated June 3, 1999 to September 30, 1999........... $1,080,000
Amount of pre-change NOL released under Section 382........ 286,000
----------
Total NOL Utilized......................................... $1,366,000
==========
Pursuant to IRC Section 382, of the remaining $1,394,000 of NOL, at
September 30, 2000, $286,000 will be released each year for the next
five years until the entire pre-change NOL is available to reduce the
federal income tax liability of the Company. Because of the projected
losses in the immediate future as well as the limitation on NOL usage,
management cannot conclude that NOL usage, and therefore, realization
of the related deferred tax asset, is more likely than not.
F-15
<PAGE>
7. COMMITMENTS AND CONTINGENCIES
OFFICE LEASES
As of September 30, 2000, the Company was committed to an unrelated
third party for the rental of office space under operating leases.
Minimum annual lease payments due under these noncancellable agreements
are as follows:
Year Ending
September 30,
---------------------
2001 $ 489,737
2002 570,900
2003 591,059
2004 611,390
2005 330,791
--------------
$ 2,593,877
==============
EMPLOYMENT AGREEMENTS
In March 2000, the Company entered into an employment agreement with
John Macatee, President and Chief Executive Officer, which was amended
in April 2000. His employment agreement, as amended, provides for a
term of two years, with automatic one year renewals unless either party
gives written notice. Mr. Macatee's base salary is $400,000 in the
first year and $450,000 in the second year and he is eligible for
bonuses under the Company's bonus incentive plan. In addition, he
receives a monthly car allowance of $750 plus insurance and
maintenance. Upon entering into the employment agreement, Mr. Macatee
was granted options to purchase 300,000 shares of BarPoint common stock
at an exercise price of $12.75 per share, the market price at the date
of grant. These options vest 100,000 each year for three years
beginning on the first anniversary of his employment and expire after
ten years. The employment agreement also includes non-competition and
confidentiality provisions. Upon termination other than for death or
disability, Mr. Macatee will continue to receive his base salary for
the remainder of the term and retain any stock options whether or not
vested or exercisable.
Also in March 2000, the Company entered into new employment agreements
with Leigh Rothschild and Jeffrey Sass. The original employment
agreements were entered into in June 1999. The new agreement with Mr.
Rothschild provides that he shall serve as the Chairman of the Board
with an annual salary of $300,000 and a $50,000 increase in one year.
The Company's new employment agreement with Mr. Sass provides that he
shall serve as Executive Vice President, Chief Operating Officer and
Secretary with an annual salary of $250,000 and a $50,000 increase in
one year. The new employment agreements for Messrs. Rothschild and Sass
also provide for two year terms with automatic renewals unless either
party gives written notice, participation in our bonus incentive plan,
participation in our employee benefits plans and a car allowance of
$750 per month plus insurance and maintenance. Upon termination other
than for death or disability, each will continue to receive his base
salary for the remainder of the term and retain any stock options
whether or not vested or exercisable.
SETTLEMENT AGREEMENT
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) agreed to lock-up the shares he owns and the shares
underlying his options until October 2, 2000 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
F-16
<PAGE>
disclaims beneficial ownership, were not subject to lock-up
restrictions. The remainder of his shares and options were locked up
until October 2, 2000. Mr. Schilowitz's consulting agreement with
BarPoint remained in effect until September 30, 2000, when he resigned
from his position as a consultant to pursue other interests. In
connection with his resignation, Schilowitz and BarPoint agreed that
BarPoint would continue payment of Schilowitz's base fee through June
3, 2002, as required by the consulting agreement. In addition, in
exchange for the receipt of certain releases, non-competition and
confidentiality obligations, and the performance of other specified
obligations, the Company agreed to make a cash payment to Schilowitz of
$150,000 on January 2, 2001, and grant him 125,000 options on the
effective date of the releases, at an exercise price of $2.00 per
share. The parties also agreed that the resignation would not trigger
any clause that would otherwise accelerate an option expiration date in
other options previously granted to Mr. Schilowitz.
The Company calculated the fair value of these options utilizing an
options pricing model. The fair value was calculated to be
approximately $214,000 which was recorded in selling, general and
administrative expense for the year ended September 30, 2000 along with
the $150,000 cash payment and the total remaining base fees of
$316,667.
Additionally, the Company agreed that the resignation would not trigger
any clause that would otherwise accelerate an option expiration date in
other options granted, thus creating a new measurement date for these
options. The Company calculated the fair value of these options
utilizing a Black-Scholes options pricing model with an additional
expense of approximately $8,000 for the year ended September 30, 2000,
which represents the difference between the fair value of the options
at the date of amendment and the expense recorded upon original
issuance.
LEGAL PROCEEDINGS
On April 4, 2000, PriceBee.com, LLC 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 alleged that the Company's
termination of the agreement and plan of merger was wrongful and sought
specific performance and/or $5.0 million in damages. The Company
submitted a counterclaim against PriceBee alleging breach of the
agreement and plan of merger on the part of PriceBee and sought $7.0
million in damages. Subsequent to year end the parties agreed to settle
the dispute for an amount that had no material impact to the financial
statements.
The Company is not party to or aware of any legal proceedings or claims
that the Company believes will have individually or in the aggregate a
material adverse effect on our business, prospects, financial condition
or operating results.
8. STOCKHOLDERS' EQUITY
EXERCISE OF OPTIONS
During the year ended September 30, 2000, options to purchase 12,186
shares of the Company's common stock were exercised. Total proceeds
received by the Company in conjunction with this exercise of options
were $4,594.
F-17
<PAGE>
CANCELLATION OF WARRANTS
On December 16, 1999, pursuant to a stock exchange agreement, all Class
A Warrants and Class B Warrants were cancelled in exchange for 325,000
shares of common stock and $50,000 in cash. As part of that transaction
voting rights were allocated to the Series A Class I, II and III
preferred shares due to the cancellation of the Class A and B warrants.
The preferred shares were issued to Leigh Rothschild, the Company's
Chairman, on June 3, 1999, one Class I share, one Class II share and
one Class III share. The Class I share votes with the common stock and
has 216,667 votes, the Class II share votes with the common stock and
has 108,333 votes, and the Class III share votes with the common stock
and has 346,766 votes. None of these shares of preferred stock are
entitled to dividends. All voting rights for these preferred shares end
on June 7, 2004.
EXERCISE OF WARRANTS
During the current fiscal year, warrants to purchase a total of 292,711
shares of the Company's common stock were exercised. Total proceeds
received by the Company in conjunction with this exercise of warrants
were $434,406.
RECEIPT OF SUBSCRIPTION RECEIVABLE
In February 2000, the Company received payment of the subscription note
receivable. Total proceeds received by the Company were $750,000. The
note was secured by 394,737 shares of common stock of the Company as
part of the 4,499,828 shares of BarPoint common stock issued in private
placements between June and August 1999.
ISSUANCE OF COMMON STOCK FOR SERVICES RENDERED
The Company issued 26,660 shares of common stock to a consultant in
exchange for services rendered. The fair value of these shares totaled
$87,005 and was recorded in selling, general and administrative expense
during the current fiscal year.
ISSUANCE OF COMMON STOCK IN ACQUISITION OF SYNERGY
As described in Note 2, the Company issued 150,000 shares of its common
stock to purchase all of the outstanding shares of Synergy.
PRIVATE PLACEMENT
The Company issued 1,477,500 shares of its common stock at a price of
$12 per share. Net proceeds received by the Company from this
transaction were approximately $16.9 million.
9. STOCK OPTION PLANS AND WARRANTS
The Company has five stock-based compensation plans, which are
described below. The Company applies APB No. 25 and related
interpretations in accounting for its plans. Accordingly, compensation
cost for options issued to employees has been recognized only for
options that are granted with exercise prices that are less than the
fair value of the underlying stock at the time of issuance.
a) The Plan for Incentive Compensation for Mathew 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 options 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
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<PAGE>
reflected in the operations of Harmat prior to June 3, 1999.
There was no activity in this option plan during the year
ended September 30, 2000.
b) In February 1996, the Board of Directors adopted the 1996
Joint Incentive and 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 Harmat. During 1998, 10,000 of these
options were forfeited with the termination of employment of a
key employee. In March 1998, Harmat's chief executive officer
and principal shareholder was granted 300,000 shares at an
exercise price of $2.337 per share ($.35, as amended). The
exercise price and number of options have been amended to $.30
and 346,049 respectively due to the dilutive effect of the
acquisition. During the year ended September 30, 1999, 50,000
options were exercised. As of September 30, 2000, all such
options were fully vested. There was no activity in the plan
during the year ended September 30, 2000.
c) As part of the reverse 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. Due to the nature of the vesting of these
options, they are considered variable options. As of September
30, 2000 and 1999, an aggregate of 800,000 and 560,000 options
have been granted, respectively. As of September 30, 2000,
249,999 of these options were vested. Non-qualified awards
under this plan may be granted to employees, officers,
consultants and advisors of the Company provided such
consultants and advisors render bona fide services not in
connection with the offer and sale of securities in a
capital-raising transaction.
d) As part of the acquisition and in connection with a
consulting agreement with Mr. Schilowitz, the Company granted
Mr. Schilowitz options to purchase 190,615 shares of the
Company's common stock at an exercise price of $1.90 per
share. Such options vested immediately.
e) The BarPoint Equity Incentive Plan was adopted by the Board of
Directors on September 17, 1999, and was approved by
stockholders in April 2000, authorizing the Company to grant
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. In April 2000, the board of directors amended
this plan to increase the number of shares available to
3,000,000. As of September 30, 2000, an aggregate of 2,850,433
options have been granted under this plan. Non-qualified
awards under this plan may be granted to employees, officers,
consultants and advisors of the Company provided such
consultants and advisors render bona fide services not in
connection with the offer and sale of securities in a
capital-raising transaction.
A summary of the status of the Company's stock option plans as of
September 30, 2000, and the changes during the years ending September
30, 2000 and 1999, is presented below:
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<PAGE>
<TABLE>
<CAPTION>
Weighted-average
Fixed Options Number of Options Exercise Price
--------------------------------------- ----------------- ----------------
<S> <C> <C>
Balance at October 1, 1998............. 922,797 $ 0.30
Granted................................ 495,115 $ 3.03
Exercised.............................. (50,000) $ 0.35
Forfeited.............................. (10,000) $ 0.35
--------- ----------
Balance at September 30, 1999.......... 1,357,912 $ 1.29
Granted................................ 2,724,100 $ 7.26
Exercised.............................. -- $ --
Forfeited.............................. (118,167) $ 9.84
--------- ----------
Balance at September 30, 2000.......... 3,963,845 $ 5.14
=========
Weighted-average fair value of options
granted during the year................ $ 6.53
=========
</TABLE>
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
--------------------------------------- ---------------------------------
Number
Weighted- Exercisable
Weighted- average at
Range of Number average Remaining September 30, Weighted-average
Exercise Prices Outstanding Exercise Price Life 2000 Exercise Price
---------------------- ------------- -------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.30 -- $0.30 922,797 $0.30 2.32 922,797 $0.30
$1.90 -- $1.90 190,615 $1.90 3.67 190,615 $1.90
$3.25 -- $6.97 1,578,333 $4.49 4.64 403,999 $5.73
$8.20 -- $12.75 1,238,300 $9.77 4.19 674,499 $8.52
$13.00 -- $19.69 33,800 $16.27 4.49 -- --
</TABLE>
The following information concerning the Company's stock option plans
is provided in accordance with SFAS No. 123. The fair value of each
option grant is estimated on the grant date using a Black-Scholes
option-pricing model with the following weighted-average assumptions
used for grants in 2000: dividend yield of 0%, risk-free interest rate
of 6.4%, expected volatility of 139%, and expected lives of 5 years for
the options.
If the Company had used the fair value based method of accounting for
its employee stock option plans, as prescribed by SFAS No. 123,
compensation cost included in the consolidated statements of operations
for the years ended September 30, 2000 and 1999 would have increased by
approximately $4.5 million and $1.3 million, respectively. The increase
in compensation costs would have resulted in a net income (loss) of
$1.7 million and $(1.2) million, net of tax, and a basic and diluted
net income (loss) per share of $0.10 and $(0.15) for the years ended
September 30, 2000 and 1999, respectively.
10. RELATED PARTY TRANSACTIONS
In August 1999, BarPoint entered into a strategic partnership with
Symbol. As part of that partnership, Symbol purchased 1,315,789 shares
of the Company's common stock valued at $2,500,000 in exchange for
$1,000,000 cash and an agreement to make available to BarPoint up to
110,000 Symbol SPT 1500 machines at a special price, plus a royalty
free license to use Symbol's scanner patents. During the second half of
our fiscal year ended September 30, 2000, BarPoint acquired 10,000 SPT
1500 machines in accordance with the agreement for approximately $3.0
million. Prior to September 30, 2000, the Company's management
determined that it is not in the Company's best interest to be
responsible for the logistics and financial requirements associated
with maintaining inventories related to hardware sales. As a result,
the Company reached an agreement in principle with Symbol to dissolve
the product supply and license agreement and enter into a new sales and
royalty agreement. Under this new agreement, BarPoint will continue to
promote the use of Symbol scanning devices and will continue to develop
applications that improve the functionality of scanning devices, but
will now arrange for the sale of the devices to BarPoint partners
F-20
<PAGE>
through Symbol for which BarPoint will receive commissions on sales of
Symbol hardware and royalties on bundled BarPoint software.
In June 1999, the Company paid a finders fee to a stockholder of the
Company in the amount of $246,455 in connection with the private
placements. The fee was offset against the stockholder's loan balance
of $218,655 as payment in full plus Harmat's expenses of approximately
$27,800. In addition the Company repaid an advance to the Chairman in
August of 1999 in the amount of $110,000.
The law firm of McLaughlin & Stern, LLP of which a Board Member is a
principal, received legal fees of approximately $149,000 and $69,000
for the years ended September 30, 2000 and 1999 respectively.
11. SUBSEQUENT EVENTS
CHANGE IN FISCAL YEAR
On November 20, 2000, the Board of Directors of the Company approved a
change of the Company's fiscal year end from September 30 to December
31.
OFFICE LEASE
On November 30, 2000 the Company entered into a ten year lease of a
50,000 square foot office building located at 2200 SW 10th Street,
Deerfield Beach, Florida 33442. The Company will be relocating its
corporate headquarters to this location in early 2001. The base annual
rental payments will commence on January 1, 2001 and are as follows:
Year Ending
September 30,
-------------
2001 $ 487,503
2002 650,004
2003 650,004
2004 650,004
2005 650,004
Thereafter 4,013,013
------------
Total $ 7,100,532
============
The building will undergo various renovations which are estimated to
cost approximately $525,000. In accordance with the terms of the lease,
$400,000 of these improvements will be paid for by the landlord, and
any excess will be paid by the Company. In addition, the Company
estimates that furniture, primarily modular cubicles, will cost
approximately $675,000.
The Company's lease on its current headquarters in Fort Lauderdale
contains a provision for early termination at December 31, 2001. The
lease also contains a sublet provision and the Company expects to
sublet the space prior to the early termination date, thus limiting its
exposure to double rent during the January 1 to December 31, 2001
period.
ACQUISITION OF SYNERGY SOLUTIONS, INC.
In connection with the November 5, 1999 acquisition of Synergy, the
Company placed 75,000 shares of common stock in escrow for earn-out
provisions in the original agreement. On October 10, 2000, an amendment
to the November 5, 1999 Merger Agreement was executed. The Company and
former Synergy shareholders agreed to eliminate the earn-out provisions
in the original agreement in exchange for the payment of the additional
75,000 shares common stock of the Company to the former Synergy
shareholders. As a result, there will be no further payments owed to
the former Synergy shareholders. The
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<PAGE>
fair value of the additional shares issued totaled $201,600 and has
been recorded as goodwill as of October 10, 2000.
F-22
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
3.4 Certificate of Amendment dated April 4, 2000 to the
Registrant's Certificate of Incorporation.
3.5 Amended and Restated Bylaws.
10.4 Commercial Lease, by and between the Registrant and FG
2200, LLC, dated as of November 30, 2000.
21 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Marks Paneth & Shron LLP
