<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
AMENDMENT NO. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
INTERNATIONAL BARTER CORP.
-----------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada, USA 91-1739746
------------------------ -----------------------------------
(State of Incorporation) (IRS Employer Identification No.)
21400 International Blvd. #207, Seattle, Washington 98198
-----------------------------------------------------------
(Address of principal executive offices)
Issuer's Telephone Number, (206) 870-9290)
Securities to be registered pursuant to Section 12(b) of the Act:
- --------------------------------------------------------------------------------
None
Securities to be registered pursuant to Section 12(g) of the Act:
- --------------------------------------------------------------------------------
Common Shares, with par value of $0.001
---------------------------------------
(Common Stock)
<PAGE> 2
INTERNATIONAL BARTER CORP.
FORM 10-SB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1. Description of Business........................................... 3
Item 2. Management's Discussion and Analysis
or Plan of Operation.............................................. 20
Item 3. Description of Property........................................... 30
Item 4. Security Ownership of Certain Beneficial Owners
and Management................................................... 31
Item 5. Directors, Executive Officers, Promoters
and Control Persons............................................... 33
Item 6. Executive Compensation............................................ 36
Item 7. Certain Relationships and Related Transactions.................... 40
Item 8. Legal Proceedings................................................. 40
Item 9. Market Price for Common Equity
and Related Stockholder Matters................................... 41
Item 10. Recent Sales of Unregistered Securities.......................... 42
Item 11. Description of Securities........................................ 43
Item 12. Indemnification of Directors and Officers........................ 44
Item 13. Financial Statements............................................. 45
Item 14. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure........................... 45
Item 15. Financial Statements and Exhibits................................ 45
</TABLE>
2
<PAGE> 3
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
International Barter Corp. (hereinafter is also referred to as the "Company"
and/or the "Registrant") offers barter services for retail, professional and
corporate clients. The Company provides a centralized barter currency, expansive
purchasing power, centralized data processing, standardized marketing and
support materials, co-op advertising, and ongoing training and promotion and
support to expand its client base.
The Company's head office is located at 21400 International Blvd. #207, Seattle,
Washington 98128. The contact person is Steven White,
Chairman/President/CEO/Treasurer/Director. The telephone number is (206)
870-9290; the facsimile number is (206) 878-7224. The e-mail address is
[email protected] and the Internet website address is: www.ibinc.com.
The Company's authorized capital includes 25,000,000 shares of common stock with
a par value of $0.001; at 3/31/98, the end of the most recent fiscal year,
1,916,450 shares of common stock were outstanding; at 6/30/98, 2,119,500 shares
were outstanding.
The Company's common stock trades on the NASD Electronic Bulletin Board with the
symbol "IBCX-BB".
The information in this Registration Statement is current as of 6/30/98, unless
otherwise indicated.
3
<PAGE> 4
HISTORICAL CORPORATE DEVELOPMENT
Incorporation and Merger
The Company was incorporated in Nevada, USA on 9/18/96. The purpose was to be
offered for sale and sold in its shell form prior to the issuance or sale of any
of the corporation's capital stock and/or election of permanent Directors or
Executive Officers and without further organizational procedures or the further
conduct of any business, internal or otherwise; any and all such matters,
privileges and responsibilities being deferred in favor of the new owners.
On 11/15/96, the Company merged with Cascade Trade Association ("CTA"), a
private company incorporated in Washington, USA. The Company was the "surviving
corporation" and obtained 100% of the ownership and debt of CTA through the
purchase of CTA's outstanding common stock through the issuance of 1,000,000
shares of the Company's common stock. CTA shareholders, Steven White and Norma
Fetz received 900,000 and 100,000 shares of the Company, respectively.
Presumably, the shareholders of CTA effected this merger to gain access to a
corporate shell with which to pursue public financing and a public market for
its common stock. The Company's strategic plans include using its common stock
to acquire other firms in the barter business.
CTA was in the barter business at the time of the merger, which became the
continuing business of the Company. CTA reported revenue of $452,673 and
$297,843 for fiscal years ended 3/31/97 and 3/31/96; and $247,574 and $288,545
for its fiscal years ended 12/31/95 and 12/31/94; Net Income (losses) was
($62,672) and $21,250; and ($8,607) and $5,651 for its fiscal years ended
12/31/95 and 12/31/94. Prior to the merger, the assets of CTA were $290,307,
$136,046, $185,741 and $162,910 at 3/31/97, 3/31/96, 12/31/95 and 12/31/94.
The merger was recorded as reverse takeover and the financial statements of CTA
became the historical financial statements of the Company.
Proposed Acquisition
The Company has an oral preliminary acquisition agreement whereby it proposes to
acquire R&B Corporation Inc., a Texas corporation. R&B Corporation Inc. is in
the barter business and carries on operations similar to those of the Company.
During that company's latest fiscal year ended 3/31/98, it reported revenue of
$931,000. That company had about 500 clients as of 6/30/98. Compensation is to
be 250,000 shares of common stock. There are several material contingencies
pending that need to be resolved and there can be no assurance that this
acquisition will be consummated.
4
<PAGE> 5
Financings during Fiscal 1997/1998 and Fiscal 1999-to-date
During January-March 1997, the Company issued 250,000 shares of common stock for
consulting services (deemed value of $125,000), pursuant to a private placement
in the United States under Section 4.2. The recipients were: Master Media Corp.
(an unrelated closely-held private company)(126,000 shares); Neal & Associates,
LLC (an unrelated closely-held private company (62,000 shares); and Dr. Mary
Martin (an unrelated person)(62,000 shares).
During March 1997, the Company completed, pursuant to a private placement in the
United States under Section 504 of Regulation D, a private placement of its
common stock to which 300,000 units were subscribed for $150,000 by 58
investors. Under the terms of the private placement, one "A" warrant and one "B"
warrant was issued with each one share of common stock issued. The warrants are
immediately exercisable and tradable after the closing of the private placement.
Each "A" warrant entitles the holder to purchase one additional share at a price
of $0.75 per share until 9-30-97 (extended to 3-31-98 by corporate resolution);
287,158 "A" warrants were exercised and the remainder expired. Each "B" warrant
entitles the holder to purchase one additional share at a price of $1.00 per
share until 12/31/97 (extended to 9/30/98 by corporate resolution); 11,300 "B"
warrants were exercised by 6/30/98. The warrants may be extended upon
appropriate notice being given by the Company.
During February 1998, the Company completed, pursuant to a private placement in
the United States under Section 504 of Regulation D, a private placement of its
common stock to which 120,000 shares were subscribed for $72,000 by five
investors. Under the terms of the private placement, one "C" warrant and one "D"
warrant was issued with each one share of common stock issued. The warrants are
immediately exercisable and tradable after the closing of the private placement.
Each "C" warrant entitles the holder to purchase one additional share at a price
of $0.80 per share until 6/30/98. Each "D" warrant entitles the holder to
purchase one additional share at a price of $1.10 per share until 6/30/98.
Expiration date extended to 9/30/98. The warrants may be extended upon
appropriate notice being given by the Company.
During July 1998, the Company completed, pursuant to a private placement in the
United States under Section 4(2) of the 1933 Act, a private placement of 500,000
units were subscribed for $1,250,000 by four venture funds. Under the terms of
the private placement, one "E" warrant were issued with each one share of common
stock issued. The warrants are immediately exercisable. Each "E" warrant
entitles the holder to purchase one additional share at a price of $3.00 per
share until 3/31/99. The shares of common stock and the shares issuable upon
exercise of the
5
<PAGE> 6
warrants are restricted under Rule 144 of the 1933 Act and they must be held for
a minimum of one year, plus other restrictions.
New Offices
The Company opened offices in Spokane, Washington and Yakima, Washington. The
Company has an experienced manager to run these offices and anticipates that the
two locations will be self-funding and require minimal capital investment by the
Company. The offices officially opened for business on 6/1/98; however, by
6/30/98, neither office had produced a sale or any income for the Company.
Ubarter.com
On 6/23/98, the Company announced that their Internet project currently under
development is scheduled to launch on 7/20/98. The web-site, Ubarter.com, will
open to the general public, both business entities and individuals that wish to
trade products and services on-line.
The web-site will allow these businesses and individuals the opportunity to
trade any type of product or service anywhere within the world. The parties are
primarily responsible for posting their items for trade, setting and assessing
the value of traded items, and shipping or delivering the products or services.
The Company's responsibility and purpose in this endeavor is to provide a forum
for clients to connect and trade over the Internet. It has no responsibility to
the client once a trade is closed. The Company intends to earn a profit from
providing this service to its clients.
The Company will generate revenues from each trade that is closed by its on-line
clients. For example, once both parties involved in a transaction close the
trade by making an on-line entry, their credit card accounts are immediately and
automatically charged. A client who initiates the trade by posting an item or
service first is the "seller" in the transaction. The client who offers a
product or service to the seller is the "buyer." Each party pays a "service" or
"transaction" fee in equal amounts based on the value of the items traded. The
Company believes that this method encourages fair-trading, creates an equitable
environment and builds a market where clients have incentive to both buy and
sell.
The Internet site is the first on-line bartering service of its kind. The site
provides general information about Ubarter.com and clearly spells out the
responsibilities of both the Company and the clients. The Company provides
security to the clients with respect to their personal information and only
discloses a trading profile created by other clients based on their prior
trading experiences. A leading system database for electronic commerce has been
engaged to capture of the economic results of the project's operation including
trading statistics and revenue. The Company looks forward to the project's
success, but provides
6
<PAGE> 7
no guarantee of the site producing a significant source of revenue or affecting
the Company's overall growth. The full implementation of the site will require
substantial capital.
7
<PAGE> 8
BUSINESS
DESCRIPTION OF THE BARTER BUSINESS
Conventional barter is the oldest form of commerce; historically involved a
direct person-to-person exchange of goods and services. Thus, conventional
barter was limited to a transaction between two parties. The development of
modern commercial barter was dependent on the development of an index of
valuation for establishing barter credits and debits. This index of valuation is
the industry-accepted "trade dollar". The trade dollar is a ledger entry by
which goods and services can be bought and sold. *Trade dollars are credited and
debited to each business's trade account, similar to a bank account. Exchange
clientele are serviced by trade brokers who operate in a manner similar to that
of a stock broker. In addition, barter clients can make transactions between
themselves without the services of a trade broker.
Retail trade exchanges are classified as third-party record keepers, having the
same fiduciary obligations as banks and stockbrokers under the Tax Equity and
Fiscal Responsibility Act of 1982. For tax purposes, trade dollars are taxable
in the year earned and reported on 1099B forms to the IRS.
Organized commercial barter is one of the fastest growing industries on the
1990s. The International Reciprocal Trade Association ("IRTA"), a trade group
that prepares annual estimates of commercial bartering in the United States and
Canada, estimates that the total value of products and services bartered by
corporate trade companies and trade exchanges rose to $9 billion during 1996.
Trade exchanges provide a marketplace offering a range of products and services,
such as media, travel, hotels, printing, and business equipment that may be
purchased with trade credits, which are dollar denominated units. The general
premise of retail barter is to generate new business to those that participate
and them to provide avenues to conserve cash flow.
IRTA estimates that trade exchange networks served over 400,000 trade clients in
1996. The average amount of trading by each trade exchange also rose, boosting
barter dollars by trade exchanges to $1.4 billion in 1996 compared with $1.2
billion in 1995 and $1.1 billion in 1994. However, IRTA estimates that less than
5% of the companies in the United States currently use the services of a barter
trade exchange. This virtually untapped market presents growth opportunities for
the barter industry.
8
<PAGE> 9
IRTA estimates that there are approximately 400 independent trade exchanges in
the United States and two national companies, ITEX Corporation ("ITEX"), a
public company, and BX International Inc. ("BXI"). The independent trade
exchanges for the most part are local or regional organizations with
approximately 500 clients, five employees, and gross revenue in the $100,000 to
$400,000 range. Significant time and energy is devoted to accounting and
bookkeeping, marketing and sales, and customer service. Most independent barter
exchanges have difficulty expanding beyond this level and tend to stagnate in a
"maintenance" mode of operation. It is difficult to make a great living as an
independent barter exchange owner, whereas a number of brokers in the national
barter exchanges do very well. Therefore, the Company believes that there will
be a tendency toward the creation of more national barter exchanges.
The advent of a global barter marketplace on the Internet will further encourage
firms to incorporate bartering into their business plans to reach new outlets,
ensure against unsold inventory, and finance larger advertising campaigns.
IRTA expects that the number of business engaged in barter in North American
will triple over the next decade. IRTA also expects that the number of clients
of barter companies to grow at 15% during the next decade, the same rate as over
the last decade. This still would represent only a 25% penetration rate of the
over six million businesses that have employees.
Therefore, IRTA anticipates expansion of existing barter exchanges and strong
growth in new start-ups. Independent barter companies account for about half of
the industry's growth. The Company believes that the barter industry would be
stimulated by the emergence of more public barter companies.
The two national companies have experienced significant growth over the last
five years, with ITEX revenue doubling to $29.2 million in their Fiscal 1997
from $14.8 million in Fiscal 1994, although revenue fell in 1997, according to
ITEX's Form 10-K. BXI does not publicly report its revenue.
The Company anticipates that beyond participating in the growth of the industry,
the capturing of market share will require barter companies to expand beyond
single office operations into regional/national organizations with the ability
to service a more diverse and dispersed clientele and the access to growth
capital. In that light the Company has taken the strategic tact of becoming a
public company trading on the NASD Electronic Bulletin Board and registered with
the SEC under the 1934 Act. The Company anticipates the use of its common stock
as a medium of exchange to acquire other barter exchange companies to facilitate
growth.
9
<PAGE> 10
BUSINESS
The Company offers barter services for retail, professional and corporate
clients through Area Offices. Currently the Company owns one Area Office
although it plans to acquire more. The Company provides Area Offices a
centralized barter currency, expansive purchasing power, centralized data
processing, standardized marketing and support and materials, co-op advertising,
and ongoing training and promotion and support to expand the Area Offices client
base.
The Company markets the Area Office's clients' products and services to other
clients through directories, newsletters, trade brokers and other means. When
Area Office's clients make barter purchases, the Company (through its software
and relationship with DWW Software) debits "trade dollars from the buyer's
account and credits the seller's account, similar to an ordinary bank account.
Generally, sales are at prevailing retail price and 100% barter. Monthly, Area
Office clients receive an account statement showing all activity for that
period.
The Company charges a 10%-12% cash commission when the client purchases and
monthly fees of $15 cash and $15 trade dollars. The Company is not in the retail
business; its focus and commitment is building and maintaining its barter
exchanges. That is, the Company, as with most corporate barter transactions,
serves in an agent capacity to clients. On an occasion when the Company may hold
immaterial amounts of merchandise in-house, the product is not sold for cash.
Instead, the merchandise is very quickly traded to other clients for IBC trade
dollars. This may happen, for example, in an instance in which the Company
attempts to accommodate a dissatisfied client in an effort to establish or
maintain client relationships. Therefore, the Company's financial statements
seldom reflect an amount for "inventory". At 3/31/98 and 6/30/98, the Company
held no material inventory.
The Company estimates that about 90% of its Area Office transactions reflect
actions of small business, especially those companies broadly defined as retail.
The remaining transactions usually involve corporate barter with companies with
gross sales over $10 million; corporate barter transactions are considerably
larger and more complex than retail barter transactions involving significantly
more time, negotiation and risk to complete.
The Company may effect barter transaction for its own account through its barter
exchange, earning and or paying trade dollars. Also, for corporate barters the
Company usually is acting as a principal party. Such transactions can result in
substantial variability in the Company's reported results; refer to ITEM #2.
10
<PAGE> 11
The Company usually act as agent when engaging in corporate barter transactions,
not so much as buying/selling of inventory.
At 6/30/98, the Company had 525 clients; 477 of whom are actively trading and 48
on "standby" or "hold" status.
Trade Dollars
The Company acts as a third-party record-keeper of client barter transactions
and account balances, which are denominated in trade dollars. A trade dollar is
an accounting unit used by the Company to record the value of barter trades as
established by the parties to the transactions. Trade dollars reflect the right
to receive and/or to provide goods/services available from other exchange
members. The Company does not redeem trade dollars for cash.
Client Profile
Barter is especially useful to those retail establishments where the variable
costs of its products/services are low; for example, hotels, media, and other
travel-related businesses. The hotel which does not fill its rooms by the end of
the day has lost revenue but still has incurred the large overhead associated
with owning/maintaining its facility. The radio station or newspaper that did
not fill an available advertising space has lost the opportunity to generate
revenue but still experienced virtually the same costs. Similarly, the tradesman
who provides construction services, or haircutting services, or massage
services, or professional services has his time to sell; failure to obtain
customers results in lower profitability.
A typical barter transaction might involve: a dentist needs to have his office
remodeled and through the Company's barter exchange hires a contractor who
agrees to perform the remodeling work for $500 in trade dollars; the dentist has
these trade dollars in his account because he provided dental work to the owner
of a vacation resort in exchange for $500 in trade dollars; and the resort owner
has these trade dollars because the contractor (or any other member of the
barter exchange) stayed at his vacation resort for $500 in trade dollars.
Each of these barter exchange clients probably expanded his revenue and business
through the offering of his services for trade dollars rather than just for
cash. Each of these barter exchange clients has facilitated his lifestyle and
business without the need for cash expenditures.
Each of these barter exchange clients will get at the end of the year, a copy of
the 1099-B form filed with the IRS detailing his transactions.
11
<PAGE> 12
Broker Licensing and Training
The Company is desirous of opening offices to service clients in cities
throughout the United States. When a qualified operator has been found, he/she
is provided with the necessary materials and information to properly maintain
the new and/or existing accounts. Further, letterhead, envelopes, business
cards, contracts, sales drafts, press kits, and other business-related inventory
is provided to the new office/licensee.
The Company will provide tradebroker training and guidance, as required, in
order to maintain a high broker/client rapport. Systems are explained and a
sales presentation is provided. A proactive approach with the broker is
anticipated to insure the success of his/her operation.
Company Cost Structure
The Company's operations are substantially fixed cost, related to the expenses
of office space, computers and other equipment, and personnel costs. The Company
estimates that its variable costs associated with each barter account is about
$2; while, the commission are 10%-12% of the value.
The trade brokers receive 25% of their total compensation related to the volume
of barter transactions they complete; however, the Company does incur certain
fixed costs related to their activities.
Profitability for the Company is associated with its ability to generate
sufficient commissions on barter transactions and monthly fees on each account
to cover its costs.
The Company is operating profitably at the present time; however, the nature of
its business is that improved profitability is tied to the Company's ability to
acquire and integrate additional barter exchanges into its current structure.
12
<PAGE> 13
Growth Plan
The Company currently owns and operates one Area Office, located in its
headquarters facilities. The Company plans to aggressively acquire select
independent and national franchise barter exchanges to form a national client
base, expanding barter purchasing power, creating a centralized currency,
standardizing marketing and support materials, and providing ongoing training
and promotion to support and expand the Company's client base.
The Company anticipates that some of the acquired barter exchanges will be
company-owned and operated and other will be "licensed" and that both types will
be operated as Area Offices. The Company's management will approach select
independent and national franchise barter exchanges on joining the Company and
becoming an Area Office. The key sell points to become an Area Office are:
data processing;
transactions authorizations, and billing will be centralized;
centralized currency;
expanded trade dollar purchasing power;
equity ownership in a public company;
standardized marketing and support materials; and
a barter board of governors.
The Company anticipates a combination of cash and Company common stock will be
used to acquire barter exchanges.
The Company has announced the preliminary oral agreement to acquire a barter
exchange; however, there are contingencies and the acquisition, if completed,
would not close before Fall 1998. Further, the Company hopes to acquire or open
additional Area Offices during Fiscal 1999 and Fiscal 2000.
Advertising and Promotion
The Company's advertising and promotion strategy is to focus on Area Office
client base development, positioning the Company as a leading barter company
across the country.
The Company anticipates utilizing the following media and methods to drive its
message home to potential barter clients:
industry publications;
local, regional and national print advertising;
direct mail;
Internet; and
radio talk shows.
The Company anticipates that it will budget 2.5% of total sales on its
advertising programs.
For Ubarter.com, the Company plans to utilize various methods of print, radio
and Internet advertising. A portion of the amount
13
<PAGE> 14
spent on this project may be but not limited to the Company's trade dollars.
COMPETITION
The Company competes: with about 400 independent barter exchanges each with only
one-to-three barter offices; and with large national barter companies, ITEX
Corporation ("ITEX") and BX International Inc. ("BXI"), each with over 100
barter offices.
All companies charge competitive prices, ranging from 10% to 15% commissions on
purchases/sales and monthly/quarterly or annual fees.
Major cities, like the Seattle metroplex, can have several barter offices;
however, most smaller cities only have one or two barter offices. Most clients
are local and do not require the national barter opportunities offered by the
two large companies. Nevertheless, clients demands for wider availability of
products/ services locally and nationally, strong customer service, and better
computer servicing technology have resulted in a very competitive industry.
STRATEGIC ALLIANCES
The Company is a member of the National Association of Trade Exchanges (NATE)
and Barter Association National Currency (BANC).
Through these relationships the Company gathers information on its business,
fosters increased cooperation between the Company and other barter exchanges,
improves the Company visibility to the barter industry, and facilitates the
Company's competitiveness.
SIGNIFICANT SUPPLIER
The Company relies on DWW Software to supply the software necessary for each
Area Office and the centralized processing of transactions and new client
processing along with a toll-free authorization line. DWW supplies its software
as a stand-alone product to other barter companies for their use on their
computers. However, the Company is the only barter company for whom DWW is
providing centralized processing. This service relieves the Company from the
requirement of having an in-house staff and equipment to process transactions,
keep client records, and supply reports to clients.
14
<PAGE> 15
PATENTS/TRADEMARKS/PROPRIETARY PROTECTION
The Company has developed its only client servicing software, BarterServe(R), a
copyrighted and trademarked Windows-based network base of travel information,
providing the Company's clients with a nationwide access to barter
opportunities.
The Company has also copyrighted and trademarked IBC(R) and International Barter
Corp.(R).
The Company has licensing agreements with its Area Office for directories,
newsletters, software, business lists, and corporate policies.
The Company uses TradeWorks(R) and TradeWorks Online(R), products and services
of DWW Software, to provide centralized processing client transactions. The
outsourcing of this service allows the Company to focus its efforts on expanding
its client base and the servicing of existing clients.
Client servicing and the ability to offer an ever expanding variety of barter
product/services is the source of the Company's growth and competitiveness. The
Company anticipates that it will acquire additional barter companies during the
next several years and that this expansion will have the effect of multiplying
the Company's competitiveness.
SEASONALITY
The Company is not aware of any significant seasonal influences on its business.
Rather, the nature of products/services shift modestly with shifts in weather
with no material impact on the totals. The Company has observed a modest upturn
in business during weaker economic times as clients tend to use barter more when
cash business is weaker.
EMPLOYEES
At 6/30/98 the Company operated with the services of its Directors, Executive
Officers, and seven additional employees and consultants, three of which are
full-time. There is no collective bargaining agreement in place. The Company
estimates that successful implementation of its growth plan would result in four
additional employees by the end of Fiscal 1999.
NEED FOR GOVERNMENT APPROVAL OF PRINCIPAL SERVICES. Not Applicable
SPENDING ON RESEARCH AND DEVELOPMENT ACTIVITIES. Not Applicable
COMPLIANCE COSTS/EFFECTS RE: ENVIRONMENTAL LAWS. Not Applicable
15
<PAGE> 16
RISK FACTORS
Competition
The Company will continue to attempt, without assurance, to find a niche in the
barter industry. However, there are established entities in this industry which
have greater financial resources and experience than the Company. Accordingly,
the Company will encounter competition in its efforts to expand its barter
business. Another barter company may begin actively acquiring independent trade
exchanges and could acquire the most desirable exchanges. In addition, there can
be no assurance that a group of independent barter exchanges will not join
forces to create another national barter company.
Funds May Be Insufficient to Complete Plans for Growth
The Company believes the proceeds from its recent units offering, existing
working capital, and cash flow from operations will be sufficient to allow the
Company to meet the expected growth in demand for their services. However, there
is no guarantee that this will happen. There is no assurance that the Company
will be able to expand as projected. If market acceptance of there services
slows, margins and profitability may suffer. There is no assurance that the
Company will be able to utilize its common stock as the primary medium of
exchange in its attempt to acquire other barter exchange.
No Guarantee of Future Acquisitions
The Company may fail to acquire a sufficient number of exchanges to develop a
substantial market share of the retail barter exchange industry.
No Guarantee of Continued Growth in Barter Industry
There is no guarantee that the retail barter industry will continue to grow at
the rapid rates of the last several years. In this case, the Company might face
heightened competition with resultant weaken profitability.
Financing Risks
The Company has no history of significant earnings, and due to the nature of its
business, there can be no assurance that the Company will continue to be
profitable. The Company has paid no dividends on its common shares since
incorporation and does not anticipate doing so in the foreseeable future. The
only present source of funds to finance expansion available to the Company is
through the issuance of its equity shares. While the Company may generate
additional working capital through further equity offerings, there is no
assurance that such funds will be available. If available, future equity
financing may result in substantial dilution to purchasers under such offerings.
At present, it is impossible to determine what amounts of additional funds, if
any, may be required.
16
<PAGE> 17
Shares Eligible for Future Sale
Sales of a substantial number of shares of the Company's common stock in the
public market could adversely affect the market price. Of the 2,119,500 shares
outstanding at 6/30/98, 1,301,502 are freely tradable. 817,998 shares are
eligible for sale in the public market, subject to compliance with Rule 144
under the Securities Act of 1933, as amended (the "Securities Act"). Rule 144
generally provides that beneficial owners of shares who have held such shares
for one year may sell within a three-month period a number of shares not
exceeding the greater of 1% of the total outstanding shares or the average
trading volume of the share during the four calendar weeks preceding such sale.
The outstanding 818,498 shares, as of 6/30/98, of restricted common stock held
by Executive Officers and Directors could be sold in accordance with Rule 144
commencing 11/15/97 and at various times thereafter. The 250,000 shares of
restricted common stock issued in stock-for-services transactions could be sold
in accordance with Rule 144 commencing 7/2/98 and at various times thereafter.
300,000 "B" warrants issued in the March 1997 initial public offering are
expected to be exercised before their 9/30/98 expiration date (11,300 "B"
warrants exercised by 6/30/98); the common stock into which these warrants are
exercisable will be freely tradable. 120,000 "C" warrants and 120,000 "D"
warrants issued in the February 1998, secondary public offering are exercisable
until 9/30/98; the common shares into which these warrants are exercisable will
be freely tradable. 500,000 shares and 500,000 warrants issued in the July 1998
private placement are restricted under Rule 144 of the 1933 Act for at least one
year.
Increased Regulation
The barter industry is a self-regulated industry. The Company is required by the
Federal government to file 1099-B forms for each client transaction on an annual
basis. The Company has obtained all required federal and state/local permits,
licenses, and bonds to operate its facilities. There can be no assurance that
the Company's operations will not be subject to more restrictive government
regulations or that the Company's profitability will not be subject to increased
taxation by federal and state/local agencies.
17
<PAGE> 18
Key Employees
The success of the Company and its ability to continue to carry on operations is
dependent upon its ability to retain the services of certain key employees and
members of its board of directors. The Company does not have any written
employment agreements in place with its key employees nor its directors and the
loss of their services to the Company may have a material adverse effect on the
Company. The Company's chief executive officer and its corporate secretary are
material shareholders. However, the other two executive officers do not own any
shares. The Company initiated a stock option plan for management and employees
as a method of motivation and retaining key employees.
Penny Stock Reform Act:
Possible Inability to Sell in the Secondary Market
In October 1990, Congress enacted the "Penny Stock Reform Act of 1990" (the
"1990 Act") to counter fraudulent practices common in penny stock transactions.
Rule 3a51-1 of the Exchange Act defines a "penny stock" as an equity that is
not, among other things: a) a reported security; b) a security registered or
approved for registration and traded on a national securities exchange that
meets certain guidelines, where the trade is effected through the facilities of
that national exchange; c) a security listed on NASDAQ (does not include the
NASD Electronic Bulletin Board); d) a security of an issuer that meets certain
minimum financial requirements ("net tangible assets" in excess of $2 million or
$5 million, respectively, depending upon whether the issuer has been
continuously operating for more or less than three years, or "average revenue"
of at least $6 million for the last year); or e) a security with a price of at
least $5.00 per share in the transaction in question or that has a bid quotation
(as defined by the Rule) of at least $5.00 per share. The common stock of the
Company fall within the definition of "penny stock" under Rule 3151-1. Pursuant
to the 1990 Act, brokers provide investors with written disclosure documents
containing information concerning various aspects involved in the market for
penny stocks as well as specific information about the penny stock and the
transaction involving the purchase and sale of that stock (e.g. price quotes and
broker-dealer and associated person compensation). Subsequent to the
transaction, the broker will be required to deliver monthly or quarterly
statements containing specific information about the penny stock. These added
disclosure requirements negatively affect the ability of the purchasers of the
Company's common stock to sell their securities in the secondary market.
Dividends
The Company has not, since the date of its incorporation, declared or paid any
dividends on its common shares and does not currently intend to pay dividends.
Earnings, if any, will be retained to finance further growth and development of
the business of the Company.
18
<PAGE> 19
YEAR 2000 DISCLOSURE
The Year 2000 issue is, in most cases, a matter of dates not processing
correctly when used in arithmetic calculations, data comparisons, and sorting.
It is important to understand that a Year 2000 related problem (usually) does
not cause programs and systems to fail. A Year 2000 problem manifests itself in
the results and messages which the software or hardware produces.
The most significant potential Year 2000 issue for the Company to deal with is
the systems which support the Company's service and business. Systems such as
Window NT Server, Windows NT Workstation, Windows 95, etc.; and the applications
which the company uses which are not under our control. However, Microsoft has
undertaken an aggressive approach to the Year 2000 problem. Updates to all
Microsoft operating systems and software have been distributed to licensed users
of their products.
The Company has carefully research its non-Microsoft products (including DWW
Software) and, where applicable, applied patches and updates to resolve any Year
2000 issues which may be outstanding. The Company's accounting software is
certified to be Year 2000 compliant. Companies and banks which the Company
relies on for support and commerce are all responsible for providing proof that
have achieved Y2K compliance.
For the reasons described in the discussion above, the Company does not believe
that the issue will materially affect its business, operations and financial
condition. Furthermore, a review of the potential impact of third parties'
failure to remedy their own Y2K issues indicates that such failure would not
have a material impact on the Company's business, operations or financial
condition.
19
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
SELECTED FINANCIAL DATA
The selected financial data in Table No. 1 for Fiscal 1998/1997 ended March 31st
was derived from the financial statements of the Company which were audited by
Andersen Andersen & Strong L.C., independent Certified Public Accountants, as
indicated in their report which is included elsewhere in this Registration
Statement. The selected financial data for Fiscal 1996/1995/1994 was derived
from unaudited financial statements of the Company, not included herein.
The selected financial data was extracted from the more detailed financial
statements and related notes included herein and should be read in conjunction
with such financial statements and with the information appearing under the
heading, "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
Table No. 1
Selected Financial Data
($ in 000, expect per share data)
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
3/31/98 3/31/97 3/31/96 12/31/95 12/31/94
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue $ 684 $ 453 $ 298 $ 248 $ 289
Net Income (Loss) 33 (63) 21 (9) 6
Basic Earnings (loss) Per Share $0.02 ($0.14) $2.13 ($0.86) $0.57
Diluted Earnings (loss) Per Share $0.02 ($0.14)
Dividends Per Share $0.00 $0.00 $0.00 $0.00 $0.00
Basic Wtg. Avg. Shares (000) 1316 438 10 10 10
Diluted Wtg. Avg. Shares (000) 1475 438 10 10 10
Working Capital $ 413 $ 107 $ (98) $ (6) $ (5)
Long-Term Debt 19 33 49 41 56
Shareholders' Equity 470 139 (73) 2 14
Total Assets 525 290 136 186 163
</TABLE>
20
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of the financial condition, changes in financial
condition and results of operations of the Company for the fiscal years ended
3/31/98 and 3/31/97 should be read in conjunction with the financial statements
of the Company and related notes included therein.
Incorporated on 9/18/96 as a shell company, until the merger noted below, the
Company issued no shares and conducted no business.
On 11/15/96, the Company merged with Cascade Trade Association ("CTA"). The
Company was the "surviving corporation" and obtained 100% of the ownership and
debt of CTA through the purchase of CTA's outstanding common stock through the
issuance of 1,000,000 shares of the Company's common stock.
CTA was in the barter business at the time of the merger, which became the
continuing business of the Company. The merger was recorded as reverse takeover
and the financial statements of CTA became the historical financial statements
of the Company.
CTA, as a corporation, was dissolved during January 1998 with the business of
this formerly wholly-owned subsidiary being absorbed by the Company.
Prior to the merger, CTA financed its activities through internal cash flow.
Since the merger, the Company has financed its activities through the
distribution of equity capital, including the issuance of 250,000 shares for
$125,000 of consulting services, a private placement of 300,000 units for
$150,000; a private placement of 215,000 units for $129,000 (February 1998); and
a private placement of 500,000 units for $1,250,000 (July 1998).
In July 1998, the Company completed a private placement of 500,000 units at
$2.50 per unit. Each unit consisted of one share of common stock and an "E"
warrant entitling the holder to acquire an additional share at $3.00 per share;
the warrant is exercisable until 3/31/99. The unit and shares therein are not
being registered under the 1933 Act and resale is subject to the restrictions of
Rule 144. The purpose of the equity offering is to fund the launching of the
e-commerce site, Ubarter.com, and boost working capital.
The Company anticipates having to raise additional funds by equity issuance in
the next several years, as the Company expects to grow at rates that will
require more funds than will be generated by profitable operations which the
Company expects to report during Fiscal 1999 and thereafter.
21
<PAGE> 22
The barter business creates unique financial reporting because of transactions
being effected in trade dollars as well as cash.
The Company uses the ratio of one trade dollar to one US Dollar in measuring and
recording purchases/sales. This one-to-one ratio is the standard within the
barter industry.
The Company occasionally engages in barter trading for its own account and has a
blended cash-trade purchasing program in which it spends trade dollars and US
Dollars have been earned by the Company to pay for goods and services used by
the Company in its operations.
Any negative trade dollar balance of the Company is shown as a liability in the
balance sheet. The contractual relationship between the Company and clients of
its barter exchange permit the Company to "borrow" trade dollars through the
issuance of trade dollars in excess of the amount specifically earned by the
Company, within certain specified limitations. This provides the Company with
additional liquidity and the opportunity to complete advantageous purchase
transactions that benefit the Company and barter exchange clients. The Company
would be ultimately obligated to provide goods/services to barter exchange
clients to offset any amounts of trade dollars expended in excess of earned.
This could be accomplished by the sale for trade dollars of the assets or offset
against fees charged in trade dollars. At 3/31/96, 3/31/97 and 3/31/98, the
Company had expended $137,823, $98,274 and $5,439 trade dollars in excess of the
amount of trade dollars earned by the Company. The Company has been reducing
this trade dollar liability and considers the current level manageable.
At each balance sheet date, in accordance with generally accepted accounting
principles, any positive trade balance of the Company would be evaluated for net
realizable value. The Company would adjust the carrying value of the trade
dollars if the fair market value of the trade dollars is less than the carrying
value or it is probable that not all trade dollars will be used.
22
<PAGE> 23
Trade Broker Commissions. Trade brokers associated with the Area Office service
the Company's clients. These trade brokers are entitled to a portion of the
commissions collected by the Company from clients of the Company/broker. This
compensation, which is payable within 30 days, typically represents 25% of the
commission collected by the Company.
Stock-based compensation. The Company has not adopted FASB Statement No. 123,
"Accounting for Stock-Based Compensation" as of 3/31/98. Through 3/31/98, the
Company had no stock option plan or other compensation program that would have
resulted in any reportable data under Statement 123.
Statement 123 also applies to transactions in which a company issues its own
common stock to acquire goods/services from non-employees. Because the Statement
123 method of accounting has not been applied to common stock issued during
Fiscal 1997 for services, the resulting pro forma compensation costs may not be
representative of that to be expected in future years. The implementation of
Statement 123 may have a material effect on the Company's financial statements
and the pro forma disclosures in the notes thereto in future periods; however,
the impact on future years is not known or reasonably estimable.
Revenue Recognition: Cash vs. Trade Dollars
During Fiscal 1995 ended 12/31/95, Fiscal 1996 ended 3/31/96, Fiscal 1997 ended
3/31/97 and Fiscal 1998 Ended 3/31/98, the Company reported $191,467, $202,349,
$345,831 and $379,302 of its revenue as cash and the remaining revenue in trade
dollars.
Business Concentration
No customers accounted for more than 10% of Company trading revenue for Fiscal
1998/1997/1996/1995.
Cash Balances
The Company maintains its major cash balances at one financial institution
located in Las Vegas, Nevada. The balances are insured by the Federal Deposit
Insurance Corporation up to $100,000. At 3/31/98, the uninsured cash balances
totaled $282,564.
Commitments and Contingencies
The Company leases its office facility in Seattle, Washington. Future minimum
rental commitments pursuant to this lease are $22,200 for Fiscal 1999. Of the
minimal rental commitment due in Fiscal 1999: $15,600 is payable in cash and
$6,600 is payable in trade dollars.
23
<PAGE> 24
LIQUIDITY AND CAPITAL RESOURCES
Fiscal 1998
Cash Used In Fiscal 1998 ended 3/31/98 Operating Activities totaled ($47,986),
including the $32,509 Net Income; the primary adjusting item was ($106,570) net
trade revenue earned over trade costs.
Cash Used in Fiscal 1998 Ended 3/31/98 Investing Activities totaled ($13,915).
Cash Supplied by Fiscal 1998 Ended 3/31/98 Financing Activities totaled $282,138
which primarily reflected $298,850 from the exercise of warrants and ($16,712)
from repayment of notes payable.
During February 1998, the Company completed, pursuant to a private placement in
the United States under Section 504 of Regulation D, a private placement of its
common stock to which 120,000 units were subscribed for $72,000 by five
investors. Under the terms of the private placement, one "C" warrant and one "D"
warrant was issued with each one share of common stock issued. The warrants are
immediately exercisable and tradable after the closing of the private placement.
Each "C" warrant entitles the holder to purchase one additional share at a price
of $0.80 per share until 9/30/98. Each "D" warrant entitles the holder to
purchase one additional share at a price of $1.10 per share until 9/30/98. The
warrants may be extended upon appropriate notice being given by the Company.
During the fourth fiscal quarter, 287,158 "A" warrants from the March 1997
private placement were exercised, raising $215,369. Also, during the fourth
fiscal quarter, 11,300 "B" warrants from the March 1997 private placement were
exercised, raising $11,300.
During February 1998 and April 1998, Company entered into an agreements whereby
two Area Offices would be opened in Spokane, Washington and Yakima, Washington.
These offices opened in June 1998.
Finally, during February 1998, the Company entered into negotiations to acquire
a barter exchange company. The preliminary oral agreement is subject to numerous
contingencies and there is no assurance that the acquisition will be
consummated.
24
<PAGE> 25
Most of the 300,000 "A" warrants issued in the March 1997 initial public
offering were exercised before their 3/31/98 expiration date; such exercises
resulted in the issuance of 287,158 common shares and the raising of $215,369.
The 300,000 "B" warrants issued in the March 1997 initial public offering are
expected to be exercised before their 9/30/98 expiration date, given that the
current stock price exceeds the exercise price. Such exercise is expected to
result in the issuance of 300,000 common shares and the raising of $300,000.
Through 6/30/98, 11,300 "B" warrants were exercised, raising $11,300.
The 120,000 "C" warrants and 120,000 "D" warrants issued in the February 1998
secondary unit offering are expected to be exercised before their 6/30/98
expiration date given that the current stock price exceeds the exercise price.
Such exercises are expected to result in the issuance, during Fiscal 1999, of
240,000 common shares and the raising of $228,000.
During Fiscal 1999, the Company anticipates nearly doubling revenue and gross
profits. The Company expects to spend less than $1 million on selling, general
and administrative expenses; the Company expects to report positive Net Income.
Approximately $25,000 to $50,000 is expected to be expended on capital assets.
With the completion of the July 1998 units offering, and the anticipated
exercise of the "B", "C", "D" and "E" warrants, the Company believes that it
will have sufficient working capital to fund all operations through at least
Fiscal 2000.
The Company anticipates that it will acquire and/or open up additional barter
exchanges prior to the end of Fiscal 1999. Such acquisitions are not likely to
result in the Company becoming liable for lease/rent expenses associated with
the facilities of these acquired barter exchanges. Such acquisitions are likely
to result in the Company employing additional employees associated with the
operation of each acquired/opened barter exchange.
The Company is yet unaware of the details of the cash requirements associated
with any possible future acquisitions of other barter exchanges or other
corporate activities; however, the Company believes that with the anticipated
exercise of the warrants from the March 1997 units offering and the exercise of
the warrants from the February 1998 units offering, sufficient funds will be
available to consummate all planned acquisitions and corporate actions through
Fiscal 1999.
If the warrants are not exercised and if existing funds prove insufficient and
if the Company is unsuccessful in raising additional equity capital, the Company
anticipates it will continue to grow, however at a slower pace than presently
planned.
25
<PAGE> 26
Fiscal 1997 Ended 3/31/97 and Fiscal 1996/1995/1994/1993
Cash Used In 1997 Operating Activities totaled $21,768, including the ($62,672)
Net Loss; the primary adjusting items were $125,000 of common stock issued for
services, ($39,549) net trade revenue earned over trade costs, $9,080 in
depreciation, and ($10,221) net changes in non-cash operating working capital.
Cash Used in 1997 Investing Activities totaled zero. Cash provided by 1997
Financing Activities totaled $135,540, which primarily came from the sale of
common stock detailed above and ($14,460) in repayment of notes payable.
Cash Used In 1996 Operating Activities totaled ($36,871), including the $21,250
Net Income; the primary adjusting items were $40,649 net trade revenue earned
over trade costs, $7,395 in depreciation, and ($45,294) net changes in non-cash
operating working capital. Cash Used in 1995 Investing Activities totaled zero.
Cash Used by 1996 Financing Activities totaled ($12,722) which came from the
repayment of notes payable.
26
<PAGE> 27
RESULTS OF OPERATIONS
Fiscal 1998 ended 3/31/98
For Fiscal 1998 Ended 3/31/98, revenue increased to $684,062 as a result of
increased fees, an increase in the number and quality of clients, and increases
in corporate trade. Another factor in increased revenue is the maturing client
base; the more a client used the system, the more barter relationships they make
which in turn generates more repeat business. Roughly one-half of revenue is
comprised of cash revenue and one-half of trade revenue; these generally being
generated by commissions on client trades. Revenue is recognized for monthly
dues after the fees have been earned and collected; one-time set-up fees are
recognized as collected and are considered immaterial to net income.
Gross Profit totaled $540,637, or 79% of revenue. The major types of costs
included in "cost of sales" were industry specific items such as script and
consignment. Management attributes the continued high gross profit margin to
investments in new technology, outsourcing data processing, and centralizing
accounts receivable.
Selling, General and Administrative expenses were $500,073, a 26% increase
reflecting expanded broker staff, legal/accounting fees related to the now
public company reporting requirements, and additional personnel for
administrative staff. Payroll was the largest category consuming $186,858. Taxes
were $1,207 and commissions were $28,884.
Net Income was $32,509 compared with a loss of ($62,542). Earnings Per Share was
$0.02 compared with ($0.14).
The weighted average number of shares used in the calculation of Basic Earnings
Per Share was 1,316,212; for diluted EPS was 1,474,970 reflecting outstanding
warrants.
27
<PAGE> 28
Fiscal 1997 Ended March 31, 1997 and Fiscal 1996/1995/1994
The Company has experienced significant revenue growth in the last several
years: $452,673 and $297,843 for fiscal years ended 3/31/97 and 3/31/96; and
$247,574 and $288,545 for fiscal years ended 12/31/95 and 12/31/94,
respectively.
Management attributes this growth to growing awareness by the public of the
advantages of using barter in their daily lives and by businesses in fueling
growth through attracting new customers who use barter.
Gross Profit margins have expanded: 73%, 74%, 70% and 69%. Management attributes
this increased profitability to investments in technology and economies of
scale.
Selling, General and Administrative expenses have risen rapidly:
$395,306 and $184,560 for fiscal years ended 3/31/97 and 3/31/96; and $165,860
and $192,739 for fiscal year ended 12/31/95 and 12/31/94. Management attributes
the Fiscal 1997 to increased preparation for becoming a public company and in
anticipation of an even greater revenue stream; other factors in the rise of
costs include additional personnel and investments in technology.
For Fiscal 1997, the Company reported a loss from Operations of ($60,560)
compared with $20,601. Fiscal 1997 Net Income was ($62,452) compared with
$21,250. Fiscal 1997 Earnings Per Share was ($0.14) compared with $2.13. The
weighted average number of shares used in the calculation of Earnings Per Share
was 437,500 for Fiscal 1997 compared with 10,000 for Fiscal 1996; the increase
related to the November 1996 merger between the Company and CTA with the initial
issuance of 1,000,000 shares, the January-March 1997 issuance of 250,000 shares
for services and the March 1997 private placement of 300,000 units of common
stock and warrants.
Fiscal 1996 Ended 3/31/96 Net Income (loss) was $21,250 and Fiscal 1995 Ended
12/31/95 Net Loss was ($8,607). Earning (loss) per Share was $2.13 and ($0.86),
respectively. The weighted average number of shares used in the calculation of
EPS was 10,000 for Fiscal 1996 and Fiscal 1995.
Inflation
The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a material impact on its operations
in the future.
28
<PAGE> 29
FORWARD-LOOKING STATEMENTS
From time-to-time, the Company or its representatives may have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filing made by the Company with the Securities and Exchange Commission
or other regulatory agencies. Words or phrases "will likely result", "are
expected to", "will continue", " is anticipated", "estimate", "project or
projected", or similar expressions are intended to identify "forward-looking
statements". The Company wishes to ensure that such statements are accompanied
by meaningful cautionary statements. Accordingly, such statements are qualified
in their entirety by reference to and are accompanied by the following
discussion of certain important factors that could cause actual results to
differ materially from such forward-looking statements.
Management is currently unaware of any trends or conditions that could have a
material adverse effect on the Company's financial position, future results of
operations, or liquidity.
However, investors should also be aware of factors that could have a negative
impact on the Company's prospects and the consistency of progress in the areas
of revenue generation, liquidity, and generation of capital resources. These
include: (i) variations in the mix of corporate trade and trade exchange
revenue; (ii) possible inability of the Company to attract investors for its
equity securities or otherwise raise adequate funds from any source, (iii)
increased governmental regulation of the barter business, (iv) a decrease in the
cash fees and commission realized by the Company based on a material decrease in
corporate or retail barter transactions and (v) the inability of the Company to
acquire additional barter exchanges in a timely manner and the inability to
integrate these acquisitions in a profitable manner.
The risks identified here are not inclusive. Furthermore, reference is also made
to other sections of this Registration Statement that include additional factors
that could adversely impact the Company's business and financial performance.
Also, the Company operates in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible
for management to predict all such risk factors, nor can it access the impact of
all such risk factors on the Company's business or the extent to which any
factor or combination of factors may cause actual results to differ
significantly from those contained in any forward-looking statements.
Accordingly, forward-looking statements should not be relied upon as a
prediction of actual results.
29
<PAGE> 30
ITEM 3. DESCRIPTION OF PROPERTY
The Company has rented approximately 1,800 square feet of office space at 21400
International Blvd. #207, Seattle, Washington 98198 for administrative efforts
since October 1994. The Company's lease runs through September 1999. The Company
considers the facility adequate for current purposes.
Real Estate Activities
The Company may from time to time invest in real estate as part of its barter
activities for its own account. The Company has no formal policy regarding its
possible investment in real estate, including the percentage of assets which may
be invested in any one investment or the type of real estate, and its
Articles/By-Laws do not require shareholder approval for such investment
activities. Similarly, the Company has no formal policy regarding whether it is
the Company's policy to acquire assets primarily for possible capital gain or
primarily for income. The Company does not expect that real estate investment
will form a substantial portion of its future business activities.
During July 1991, the Company acquired six 10-acre parcels located in Spokane,
Washington for $120,000. The property was sold during August 1991 - November
1994; compensation included ten-year and fifteen-year notes receivables totaling
$37,700 earning interest at rates from 10% to 10.75%, respectively. These notes
receivables (secured by the property) totaled $32,791, $35,072 and $34,333 at
3/31/98, 3/31/97 and 3/31/96, respectively. It was not the Company's intention
to invest capital in real estate mortgages; rather, the terms of the sale were
advantageous and the Company did not expect that such notes receivables would
represent a material portion of the Company's total assets as it implements its
growth plan. The Company's purpose of this investment was primarily for possible
capital gain.
30
<PAGE> 31
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Registrant is a publicly-owned corporation, the shares of which are owned by
United States residents and Canadian residents. The Registrant is not controlled
directly or indirectly by another corporation or any foreign government. There
are no arrangements which may result in a change of control of the Registrant.
Table No. 2 lists as of 6/30/98 all persons/companies the Registrant is aware of
as being the beneficial owner of more than five percent (5%) of the common stock
of the Registrant.
Table No. 2
5% Shareholders
<TABLE>
<CAPTION>
Title Amount and Nature Percent
of of Beneficial of
Class Name/Address_of Beneficial Owner Ownership Class #
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Common Steven M. White (1)(2) 698,498 33.0%
Common New Horizons LP (3) 200,000 9.2%
TOTAL 898,498 42.2%
</TABLE>
(1) Addresses: c/o International Barter Corp.
21400 International Blvd. #207, Seattle, WA 98198
(2) Excludes 22,500 stock options, not currently exercisable Excludes 90,000
shares owned by members of Mr. White's family where he does not have voting
power, exercise disposition control, or have any beneficial interest.
(3) Address: 248 West Park Avenue, Long Beach, NY 11561 The General Partner is
Sors Inc.; the President of Sors Inc. is Joseph MacDonald.
Includes 25,000 "C" warrants exercisable until 9/30/98; and
Included 25,000 "D" warrants exercisable until 9/30/98.
# Based on 2,119,500 shares outstanding as of 6/30/98 and warrants and stock
options exercisable within sixty days held by each individual beneficial
owner.
31
<PAGE> 32
Table No. 3 lists as of 6/30/98 all Directors and Executive Officers who
beneficially own the Registrant's voting securities and the amount of the
Registrant's voting securities owned by the Directors and Executive Officers as
a group.
Table No. 3
Shareholdings of Directors and Executive Officers
<TABLE>
<CAPTION>
Title Amount and Nature Percent
of of Beneficial of
Class Name/Address of Beneficial Owner Ownership Class #
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Common Steven M. White (1) 698,498 33.0%
Common Norma Fetz 100,000 4.7%
Common Alan Zimmelman (2) 7,500 0.4%
Common Richard Mayer (3) 7,000 0.3%
Common Glen White (4) 5,000 0.2%
TOTAL 817,998 38.6%
</TABLE>
(1) Excludes 22,500 stock options not currently exercisable. Excludes 90,000
shares owned by members of Mr. White's family where he does not have voting
power, exercise disposition control, or have any beneficial interest.
(2) Excludes 22,500 stock options not currently exercisable.
(3) Excludes 22,500 stock options not currently exercisable.
(4) Excludes 2,500 stock options not currently exercisable.
# Based on 2,119,500 shares outstanding as of 6/30/98 and warrants and stock
options exercisable within sixty days held by each individual beneficial
owner.
32
<PAGE> 33
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
Table No. 4 lists as of 6/30/98 the names of the Directors of the Company. The
Directors have served in their respective capacities since their election at the
9/30/97 Annual Meeting of Shareholders and will serve until the next Annual
Shareholders' Meeting or until a successor is duly elected, unless the office is
vacated in accordance with the Articles/By-Laws of the Company. All Directors
are residents and citizens of the USA.
Table No. 4
Directors
<TABLE>
<CAPTION>
Date First Elected
Name Age or Appointed
- -----------------------------------------------------------------
<S> <C> <C>
Richard Mayer 58 September 1996
Glen T. White 43 November 1997
Steven M. White 40 September 1996
Alan Zimmelman 53 November 1997
</TABLE>
(1) Member of Audit Committee.
Table No. 5 lists, as of 6/30/98, the names of the Executive Officers and
certain significant employees of the Company. The Executive Officers serve at
the pleasure of the Board of Directors. All Executive Officers are
residents/citizens of the United States.
Table No. 5
Executive Officers/Significant Employees
<TABLE>
<CAPTION>
Name Position Date of Board Approval
- ---------------------------------------------------------------------
<S> <C> <C>
Steven M. White Chairman/President/CEO/Treasurer September 1996
Norma K. Fetz Corporate Secretary September 1996
Richard Mayer VP Marketing/Sales Director September 1996
Alan Zimmelman VP Operations September 1997
</TABLE>
33
<PAGE> 34
Business Experience
Norma K. Fetz, age 42, has over twenty years in sales, management and corporate
operations, including over thirteen years affiliated with companies involved in
the barter business. From April 1984 until the merger with the Company, she was
Vice President of Cascade Trade Association, a private company involved in the
barter business. She spends less than one-fourth of her time on the affairs of
the Company.
Richard Mayer has over thirty years experience in sales and management,
including over six years affiliated with companies involved in the barter
business. From 1960 until 1989, he was with General Electric Capital Corp. From
April 1989 until November 1995, he was the owner of Money Mailer of the Sound, a
private company involved in direct mail. From November 1995 until the merger
with the Company, he was Vice President Marketing of Cascade Trade Association,
a private company involved in the barter business. He spends full time on the
affairs of the Company.
Glen T. White has over twenty years experience in management. Since June 1977,
he has been in the US Navy and currently holds the rank of Commander. He spends
less than 10% of his time on the affairs of the Company.
Steven M. White has over nineteen years experience in sales and management,
including over fifteen years affiliated with companies involved in the barter
business. From July 1983 until the merger with the Company, he was President of
Cascade Trade Association, a private company involved in the barter business. He
has been on the Board of Directors of the National Association of Trade
Exchanges ("NATE") since 1995 and is President for 1998-1999; he also serves on
the Board of Directors of BANC (Barter Association National Currency). He spends
full time on the affairs of the Company.
Alan Zimmelman has over twenty-six years experience in sales and management,
including over ten years affiliated with companies involved in the barter
business, twelve years affiliated with companies in the hotel industry and five
years affiliated with companies in hospital administration. From November 1987
until August 1996, he was President of BXI West Los Angeles, a private company
involved in the barter business. He joined the Company in September 1996 and was
appointed VP Operations in September 1997. He spends full time on the affairs of
the Company.
34
<PAGE> 35
Involvement in Certain Legal Proceedings
There have been no events during the last five years that are material to an
evaluation of the ability or integrity of any director, person nominated to
become a director, executive officer, promoter or control person including:
a) any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
b) any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
c) being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
enjoining, barring, suspending or otherwise limiting his/her involvement in any
type of business, securities or banking activities; and
d) being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
Family Relationships
Glen T. White is the brother of Steven M. White.
Other Relationships/Arrangements
There are no arrangements or understandings between any two or more Directors or
Executive Officers, pursuant to which he/she was selected as a Director or
Executive Officer. There are no material arrangements or understandings between
any two or more Directors or Executive Officers.
35
<PAGE> 36
ITEM 6. EXECUTIVE COMPENSATION
The Company has no standard or any other arrangements pursuant to which
Directors are compensated for any services provided as a director, including any
additional amounts payable for committee participation or special assignments.
During the last completed fiscal year ended 3/31/98, no Director received and/or
accrued any compensation for his services as a Director, including committee
participation and/or special assignments.
Directors are entitled to reimbursement for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors.
The Company has no material bonus or profit sharing plans pursuant to which cash
or non-cash compensation is or may be paid to the Company's Directors or
Executive Officers.
The Company has no compensatory plan or arrangements, including payments to be
received from the Registrant, with respect to any Executive Officer or Director,
where such plan or arrangement would result in any compensation or remuneration
being paid resulting from the resignation, retirement or any other termination
of such Executive Officer's employment with the Registrant or from a
change-in-control of the Registrant or a change in such Executive Officer's
responsibilities following a change-in-control and the amount, including all
periodic payments or installments, where the value of such compensation or
remuneration exceeds $100,000 per Executive Officer.
During the last completed fiscal year ended 3/31/98, no funds were set aside or
accrued by the Company to provide pension, retirement or similar benefits for
Directors or Executive Officers.
The Company has no long-term incentive plan or other long-term compensation
program and no SARs have been granted in the last three years.
The Company has no written employment agreements.
36
<PAGE> 37
Stock Options to purchase securities from the Company are grantable to Directors
and Employees of the Company. The Company's Stock Option Plan (the "Plan") was
approved by the Directors on 6/1/98.
The Plan provides that eligible persons thereunder include any director,
employee (full-time or part-time), officer or consultant of the Company or any
subsidiary thereof. A consultant means an individual (including an individual
whose services are contracted through a personal holding corporation) with whom
the Company or a subsidiary has a contract for substantial services.
The Plan is administered by the Board of Directors of the Company, hereby
designated "Plan Administrators". The Plan Administrators have the authority to
determine among other things, subject to the terms and conditions of the Plan,
the terms, limitations, restrictions and conditions respecting the grant of
share options under the Plan.
The Plan Administrators are authorized to grant stock options to acquire up to
20% of the Company's outstanding Common Stock. If any outstanding Option expires
or is terminated for any reason, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option to the same
Optionee or to a different person eligible under this Plan.
Options granted under the Plan must be exercised no later than five years after
date of grant and options are not transferable. If an optionee ceases to be an
eligible person for any reason whatsoever other than death, each option held by
such optionee will be cease to be exercisable on the expiry of 90 days from the
termination date (being the date on which such optionee ceases to an eligible
person). If an optionee dies, the legal representa-ive of the optionee may
exercise the optionee's options with the first six months after the date of the
optionee's death but only up to and including the original expiry date.
The Plan Administrators have the authority under the Plan to establish the
option price at the time each share option is granted which shall in all cases
be not less than the closing market price of the common shares on the business
day immediately preceding the date of the grant.
Stock options vest according to the following schedule:
after twelve months - 50%
after eighteen months - 75%
after twenty-four months - 100%
37
<PAGE> 38
The names and titles of the Directors and Executive Officers of the Company to
whom outstanding stock options have been granted and the number of common shares
subject to such options are set forth in Table No. 6 as of 6/30/98, as well as
the number of options granted to Directors and all employees as a group. All
outstanding options were granted at the closing price on 6/1/98. All outstanding
stock options are vested 25% at the end of the first year, and 25% at the end of
each subsequent six-month period.
Table No. 6
Stock Options Outstanding
<TABLE>
<CAPTION>
Number of Shares of CDN$
Common Exer. Expiration
Name Stock Price Date
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Steve White 22,500 $1.625 6/1/2003
Richard Mayer 22,500 $1.625 6/1/2003
Alan Zimmelman 22,500 $1.625 6/1/2003
Glen White 2,500 $1.625 6/1/2003
Total Officers/Directors (4 persons) 70,000
Total Employees/consultants(7 persons) 78,500 $1.625 6/1/2003
TOTAL OFFICERS/DIRECTORS/EMPLOYEES 148,500
</TABLE>
38
<PAGE> 39
Table No. 7 details compensation paid during Fiscal 1998 Ended 3/31/98 to the
Chief Executive Officer and the next four highly paid Executive Officers, to the
extent they were compensated in excess of $100,000. The table also lists
aggregate compensation paid to all Executive Officers to the extent they were
not compensated in excess of $100,000 and aggregate compensation to all
Executive Officers. Compensation paid prior to the Registrant's 11/15/96 merger
with CTA reflects compensation paid by CTA. CTA had a December 31st fiscal year
prior to the merger.
Table No. 7
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Name and Annual Securities All
Principal Fiscal Compensation Underlying Other
Position Year Salary Other Options/SARS Compensation
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Steven White, CEO 1998 $75,000 $0 0 $246
1997 $73,000 0 0 0
1996 $20,000 0 0 0
Other Officers/Directors 1998 $ 9,122 $0 0 $0
1997 $32,319 0 0 0
1996 $11,484 0 0 0
</TABLE>
39
<PAGE> 40
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Steven White/Richard Mayer/Norma K. Fetz and CTA Prior to Merger Mr. White and
Mr. Mayer were appointed Directors of the Company and Mr. White and Ms. Fetz
were appointed Executive Officers of the Company prior to the merger with CTA
where they were Executive Officers and/or shareholders.
Other than discussed above, there have been no transactions since 3/31/95, or
proposed transactions, which have materially affected or will materially affect
the Company in which any Director, Executive Officer, or beneficial holder of
more that 10% of the outstanding common stock, or any of their respective
relatives, spouses, associates or affiliates has had or will have any direct or
material indirect interest. Management believes the tran-sactions referenced
above were on terms at least as favorable to the Company as the Company could
have obtained from unaffiliated parties.
ITEM 8. LEGAL PROCEEDINGS
The Company knows of no material, active or pending legal proceedings against
them; nor is the Company involved as a plaintiff in any material proceeding or
pending litigation.
The Company knows of no active or pending proceedings against anyone that might
materially adversely affect an interest of the Company.
40
<PAGE> 41
ITEM 9. MARKET PRICE FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the NASD Electronic Bulletin Board in the
United States, having the trading symbol "IBCX" and CUSIP# 459108-10-6. The
common stock commenced public trading on 2/12/98.
Trading volume and high/low/closing prices from 2/12/98 through 3/31/98 was
209,700 shares and $1.875/$1.00/$1.75, respectively. Trading volume and
high/low/closing prices from 4/1/98 through 6/30/98 was 834,700 shares and
$6.62/$1.375/$6.62, respectively. These quotations reflect may reflect
inter-dealer prices, without retail mark-up/mark-down/commission, and may not
reflect actual transactions.
The Company's common stock is issued in registered form. Securities Transfer
Corporation (located in Dallas, Texas) is the registrar and transfer agent for
the common stock.
On 6/30/98, the shareholders' list for the Company's common shares showed 70
registered shareholders and 2,119,500 shares outstanding.
As of 6/30/98, the Company estimates there are over 300 total beneficial
shareholders of its common stock.
As of 6/30/98, the Company estimates that it had about 50 holders of its 138,700
"B" warrants, issued in the January-March 1997 private placement.
As of 6/30/98, the Company estimates that it had six holders of its 120,000 "C"
and "D" warrants, issued in the February 1998 private placement.
There are no restrictions that limit the Company's ability to pay dividends on
its common stock. The Company has not declared any dividends since incorporation
and does not anticipate that it will do so in the foreseeable future. The
present policy of the Company is to retain future earnings for use in its
operations and expansion of its business.
41
<PAGE> 42
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On 11/15/96, the Company merged with Cascade Trade Association ("CTA"), a
private company incorporated in Washington, USA. The Company was the "surviving
corporation" and obtained 100% of the ownership and debt of CTA through the
purchase of CTA's outstanding common stock through the issuance of 1,000,000
shares of the Company's common stock. CTA shareholders, Steven M. White and
Norma K. Fetz received 900,000 and 100,000 shares of the Company, respectively.
During January-March 1997, the Company issued 250,000 shares of common stock for
consulting services (deemed value of $125,000), pursuant to a private placement
in the United States under Section 4.2 of the 1933 Act. The recipients were:
Master Media Corp. (an unrelated closely-held private company)(126,000 shares);
Neal & Associates, LLC (an unrelated closely-held private company)(62,000
shares); and Dr. Mary Martin (an unrelated person)(62,000 shares).
During March 1997, the Company completed, pursuant to a private placement in the
United States under Section 504 of Regulation D, a private placement of its
common stock to which 300,000 units were subscribed for $150,000 by 58
investors. Under the terms of the private placement, one "A" warrant and one "B"
warrant was issued with each one share of common stock issued. The warrants are
immediately exercisable and tradable after the closing of the private placement.
Each "A" warrant entitled the holder to purchase one additional share at a price
of $0.75 per share until 9/30/97 (extended to 3/31/98 by corporate resolution);
287,158 "A" warrants were exercised prior to expiration. Each "B" warrant
entitles the holder to purchase one additional share at a price of $1.00 per
share until 12/31/97 (extended to 9/30/98 by corporate resolution); 11,300 "B"
warrants were exercised before 6/30/98; warrants may be extended upon
appropriate notice being given by the Company. All investors in the private
placement were unrelated persons, companies and, partnerships; no
officers/directors/ employees/affiliates participated in the offering.
During February 1998, the Company completed, pursuant to a private placement in
the United States under Section 504 of Regulation D, a private placement of
120,000 units were subscribed for $72,000 by five investors. Under the terms of
the private placement, one "C" warrant and one "D" warrant was issued with each
one share of common stock issued. The warrants are immediately exercisable and
tradable after the closing of the private placement. Each "C" warrant entitles
the holder to purchase one additional share at a price of $0.80 per share until
6/30/98 (expiration extended to 9/30/98 by corporate resolution). Each "D"
warrant entitles the holder to purchase one additional share at a price of $1.10
per share until 6/30/98 (expiration extended to 9/30/98 by corporate
resolution). The warrants may be extended upon appropriate notice being given by
the Company. All investors were unrelated persons and partnerships; no
officers/directors/employees/affiliates participated in the offering.
42
<PAGE> 43
During July 1998, the Company completed, pursuant to a private placement in the
United States under Section 505 of Regulation D, a private placement of 500,000
units were subscribed for $1,250,000 by four venture funds. Under the terms of
the private placement, one "E" warrant were issued with each one share of common
stock issued. The warrants are immediately exercisable. Each "E" warrant
entitles the holder to purchase one additional share at a price of $3.00 per
share until 3/31/99. The shares of common stock and the shares issuable upon
exercise of the warrants are restricted under Rule 144 of the 1933 Act and they
must be held for a minimum of one year, plus other restrictions. All investors
were unrelated parties; no officers/directors/employees/affiliates participated
in the offering.
ITEM 11. DESCRIPTION OF SECURITIES
Common Stock
The authorized capital of the Registrant is 25,000,000 shares of common stock
with par value of $0.001 of which 1,916,450 were issued and outstanding at
3/31/98, the end of the most recent fiscal year. At 6/30/98, there were
2,119,500 shares of common stock outstanding.
All of the authorized common stock of the Registrant are of the same class and,
once issued, rank equally as to dividends, voting powers, and participation in
assets. Holders of common stock are entitled to one vote for each share held of
record on all matters to be acted upon by the shareholders.
Holders of common stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors, in its discretion, out of
funds legally available therefore.
Upon liquidation, dissolution or winding up of the Registrant, holders of common
stock are entitled to receive pro rata the assets of the Registrant, if any,
remaining after payments of all debts and liabilities. No shares have been
issued subject to call or assessment. There are no pre-emptive or conversion
rights and no provisions for redemption or purchase for cancellation, surrender,
or sinking or purchase funds.
There are no restrictions on the repurchase or redemption of shares of the
Registrant while there is any arrearage in the payment of dividends or sinking
fund installments.
Debt Securities to be Registered. Not applicable.
Other Securities to be Registered. Not applicable.
43
<PAGE> 44
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-Laws address indemnification under Article V.
The corporation shall indemnify any and all of its Directors and Officers, and
it former Directors and Officers, or any person who may have served at the
corporation's request as a Director or Officer of another corporation in which
it owns shares of capital stock or of which it is a creditor, against expenses
actually and necessarily incurred by them in connection with the defense of any
action, suit or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been Director(s) or Officer(s) of the
corporation, or of such other corporation, except, in relation to matters as to
which any such Director or Officer or former Director or Officer or person shall
be judged in such action, suit or proceeding to be liable for negligence or
misconduct in the performance of duty. Such indemnification shall not be deemed
exclusive of any other rights to which those indemnified may be entitled, under
By-Law, agreement, vote of shareholders or otherwise.
44
<PAGE> 45
ITEM 13. FINANCIAL STATEMENTS
The financial statements and notes thereto as required under ITEM #13 are
attached hereto and found immediately following the text of this Registration
Statement. The audit report of Andersen Andersen & Strong LC, independent
Certified Public Accountants, is included herein immediately preceding the
financial statements.
Audited Financial Statements
for Fiscal 1998/1997/1996 Ended March 31st
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
The financial statements and notes thereto as required under ITEM #13 are
attached hereto and found immediately following the text of this Registration
Statement. The audit report of Andersen Andersen & Strong LC, independent
Certified Public Accountants, for the audited financial statements and notes
thereto is included herein immediately preceding the audited financial
statements.
Audited Financial Statements:
Fiscal 1998/1997/1996 Ended March 31st
Auditor's Report, dated 6/19/98
Consolidated Balance Sheets at 3/31/98 and 3/31/97
Consolidated Statements of Operations
for the fiscal years ended 3/31/98 and 3/31/97
Consolidated Statements of Cash Flows
for the fiscal years ended 3/31/98 and 3/31/97
Consolidated Statements of Stockholders' Equity
for the fiscal years ended 3/31/98 and 3/31/97
Notes to Financial Statements
45
<PAGE> 46
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
MARCH 31, 1998 AND 1997
<PAGE> 47
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of International Barter Corp. and Subsidiary
Seattle, Washington
We have audited the consolidated financial statements of International Barter
Corp. and subsidiary for the years ended March 31, 1998 and 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Barter Corp. and subsidiary as of March 31, 1998 and 1997, and the results of
their operations and their cash flows for the years then ended, in accordance
with generally accepted accounting principles.
Andersen Andersen & Strong L.C.
June 19, 1998
Salt Lake City, Utah
<PAGE> 48
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
================================================================================
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 2) $ 382,564 $ 162,327
Accounts receivable, net of allowance for
doubtful accounts of $1,956 and $5,860
for 1998 and 1997, respectively (Note 2) 63,259 58,936
Notes receivable - current (Note 3) 2,406 2,052
Other current assets 571 2,056
--------- ---------
Total Current Assets 448,800 225,371
--------- ---------
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation (Notes 2 and 5) 42,259 25,364
--------- ---------
OTHER ASSETS
Notes receivable - noncurrent (Note 3) 32,791 35,072
Deposits 1,200 4,500
--------- ---------
Total Other Assets 33,991 39,572
--------- ---------
$ 525,050 $ 290,307
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,274 $ 444
Trade Dollars issued in excess of earned (Notes 2 and 6) 5,439 98,274
Current portion of long-term debt (Note 7) 13,074 15,978
Other current liabilities 7,683 3,582
--------- ---------
Total Current Liabilities 35,470 118,278
--------- ---------
LONG-TERM DEBT (Note 7) 19,097 32,905
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; authorized 25,000,000
shares; issued and outstanding 1,916,450 shares in 1998
and 1,250,000 shares in 1997 (Notes 1 and 8) 1,916 1,250
Additional paid-in capital (Note 8) 542,535 131,851
Subscribed shares, 50,000 shares in 1998 and 300,000
shares in 1997 (Note 8) 37,500 150,000
Accumulated deficit (111,468) (143,977)
--------- ---------
Total Stockholders' Equity 470,483 139,124
--------- ---------
$ 525,050 $ 290,307
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 49
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
================================================================================
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
REVENUE $ 684,062 $ 452,673
COST OF SALES 143,425 108,847
----------- -----------
Gross Profit 540,637 343,826
----------- -----------
OPERATING EXPENSES
Selling, general and administrative 500,073 395,306
Depreciation 10,755 9,080
----------- -----------
Total Operating Expenses 510,828 404,386
----------- -----------
Income (Loss) from Operations 29,809 (60,560)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income 8,826 4,028
Interest expense (4,919) (6,010)
----------- -----------
Total Other Income (Expense)-net 3,907 (1,982)
----------- -----------
Net Income (Loss) Before Income Taxes 33,716 (62,542)
Income Tax Expense (Notes 2 and 9) 1,207 130
----------- -----------
Net Income (Loss) $ 32,509 $ (62,672)
=========== ===========
Average Common and Equivalent Shares (Note 11):
Basic 1,316,212 437,500
=========== ===========
Diluted 1,474,970 437,500
=========== ===========
Net Income (Loss) Per Common Share:
Basic $ .02 $ (.14)
=========== ===========
Diluted $ .02 $ (.14)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 50
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
================================================================================
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN SUBSCRIBED ACCUMULATED
SHARES AMOUNT CAPITAL STOCK DEFICIT TOTAL
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1996 10,000 $ 8,101 $ -- $ -- $ (81,305) $ (73,204)
Exchange of 1 share of CTA for 100
shares of IBC; change from no par
to $.001 per share. (Notes 1 and 8) 990,000 (7,101) 7,101 -- -- --
Stock issued for services at $.50 per share 250,000 250 124,750 -- -- 125,000
Shares subscribed at $.50 per share -- -- -- 150,000 -- 150,000
Net loss -- -- -- -- (62,672) (62,672)
--------- --------- --------- --------- --------- ---------
BALANCE AT MARCH 31, 1997 1,250,000 1,250 131,851 150,000 (143,977) 139,124
Issuance of subscribed stock 300,000 300 149,700 (150,000) -- --
Exercise of "A" and "B" warrants 246,450 246 189,104 37,500 -- 226,850
Issuance of stock at $.60 per share 120,000 120 71,880 -- -- 72,000
Net income -- -- -- -- 32,509 32,509
--------- --------- --------- --------- --------- ---------
BALANCE AT MARCH 31, 1998 1,916,450 $ 1,916 $ 542,535 $ 37,500 $(111,468) $ 470,483
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 51
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
================================================================================
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income (loss) $ 32,509 $ (62,672)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation 10,755 9,080
Stock issued for services -- 125,000
Deferred income taxes 1,207 130
Net trade revenue earned over trade costs (106,570) (39,549)
Changes in operating assets and liabilities:
Accounts receivable (4,323) (6,275)
Contracts receivable 1,927 129
Prepaids and other assets 3,578 113
Accounts payable and other liabilities 12,931 (4,188)
--------- ---------
Net Cash Provided by Operating Activities (47,986) 21,768
--------- ---------
CASH USED IN INVESTING ACTIVITIES (13,915) --
--------- ---------
CASH PROVIDED BY FINANCING
ACTIVITIES
Proceeds from subscribed stock 298,850 150,000
Repayment of notes payable (16,712) (14,460)
--------- ---------
Net Cash Provided by Financing Activities 282,138 135,540
--------- ---------
Net Increase in Cash 220,237 157,308
Cash at Beginning of Period 162,327 5,019
--------- ---------
Cash at End of Period $ 382,564 $ 162,327
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 5,128 $ 5,785
Cash paid for income taxes -- 5,000
NON-CASH INVESTING AND FINANCING ACTIVITIES
Furniture purchased with Trade Dollars $ 13,735 $ --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 52
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
================================================================================
1. DESCRIPTION OF BUSINESS AND ORGANIZATION
The Company is engaged in operations in the retail barter exchange area of the
commercial barter industry. The Company acts as a third-party record-keeper of
clients' transactions and balances, which are denominated in Trade Dollars. A
Trade Dollar is an accounting unit used to record the value of trades as
determined by the buying and selling parties in barter transactions. Trade
Dollars denote the right to receive goods or services available from other
clients or the obligation to provide goods or services to other clients. Trade
Dollars may not be redeemed for cash. Trade Dollars are not legal tender,
securities, or commodities. Clients pay cash and Trade Dollar fees and
commissions to the Company. For these services, the Company typically receives a
cash commission of 10% on the purchases made by clients. The Company has also
developed and will operate an Internet "e-commerce" site for bartering products
and services. Users will be able to post and/or search for items available for
barter. Clients will pay a 2%-3% fee to complete each transaction.
The Company operates with the objectives of long-term equity-building while also
ensuring availability of sufficient cash for current operating requirements.
Accordingly, the Company may in any period report significant revenue, profits,
and increases in net assets from transactions denominated in Trade Dollars or
other noncash consideration.
International Barter Corp. (IBC) was incorporated on September 18, 1996, in the
State of Nevada. On November 15, 1996, IBC effected a merger agreement with
Cascade Trade Association (CTA) wherein IBC issued 1,000,000 shares of stock in
exchange for 10,000 shares (100%) of the issued and outstanding stock of CTA.
The corporate existence of CTA will cease to exist upon the filing of
appropriate articles of merger, after a suitable transition period in which both
entities will operate. For accounting purposes, the acquisition has been treated
as a reverse acquisition; the acquisition of IBC by CTA and as a
recapitalization of CTA. The historical financial statements prior to November
15, 1996 are those of CTA.
<PAGE> 53
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 AND 1997
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. Intercompany transactions have been eliminated.
Trade Dollar Transactions
Normal Valuation of Trade Dollars. The Company uses the ratio of one Trade
Dollar to one United States dollar in measuring and accounting for purchases and
sales. This one-for-one ratio is the pervasive standard with the Company and
throughout the barter industry. The Company does not recognize any accounting
implications if differences are observed between trade dollar and U.S. dollar
prices that are within reasonable ranges that might exist between prices of
similar U.S. dollar transaction.
Trade Dollar Valuation in the Statements of Operations and the Balance Sheets.
The ratio of $1 per Trade Dollar is applicable to revenue and costs and expenses
in the statement of operations.
The negative Trade Dollar balance of the Company is shown as a liability in the
balance sheet. This occurs as a result of the Company "borrowing" trade dollars
through the issuance of Trade Dollars in excess of the amounts earned by the
Company.
At each balance sheet date, in accordance with generally accepted accounting
principles, any positive trade dollar balance of the Company would be evaluated
for net realizable value. The Company would adjust the carrying value of the
trade dollars if the fair value of the trade dollars is less than the carrying
value of it is probable that not all trade dollars will be used.
Information that would be used to support the net realizable value of a
significant positive trade dollar balance at a balance sheet date would include
the Company's past track record of utilizing Trade Dollars, evident ability and
intent to utilize the Trade Dollars in a reasonable time, indicated by the
quantity of Trade Dollars relative to the size of the Company's procurement
budget for items the Trade Dollars may be used for, and preparation of a trade
plan for timely utilization on a $1 per Trade Dollar basis for goods and
services that will be available.
Revenue Recognition
The Company recognizes revenue equal to the cash to be received from the
commission earned when the buyer has made an unconditional commitment to pay and
the earnings process has been completed by the finalization of a trade
transaction. Revenue is recognized for monthly dues after the fees have been
earned and collected. One time set-up fees are recognized as collected and are
considered immaterial to net income (loss) for the years ended March 31, 1998
and 1997.
<PAGE> 54
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 AND 1997
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) -
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of certain assets and
liabilities for financial and tax reporting. The deferred taxes represent the
future tax return consequences of those differences which will either be taxable
or deductible when the assets and liabilities are recovered or settled.
Income (Loss) Per Share
Income (loss) per share of common stock is computed on the basis of the weighted
average shares of common stock outstanding, plus common equivalent shares
arising from the effect of dilutive stock warrants under the treasury stock
method.
Depreciation and Amortization
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method for financial statement purposes. Estimated useful lives
range from 5 to 7 years.
Allowance for Uncollectible Accounts
The Company provides an allowance for accounts receivable which are doubtful of
collection. The allowance is based upon managment's periodic analysis of
receivables, evaluation of current economic conditions, and other pertinent
factors. Ultimate losses may vary from the current estimates and, as additions
to the allowance become necessary, are charged against earnings in the period in
which they become known. Losses are charged and recoveries are credited to the
allowance.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amount of assets, liabilities, revenue,
expenses, gains and losses, and also disclosures about contingent assets and
liabilities. Actual results may vary from estimates and assumptions that were
used in preparing the financial statements.
Concentration of Credit Risk Arising from Cash Deposits in
Excess of Insured Limits
The company maintains its major cash balances at two financial institutions. The
balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. At March 31, 1998, the Company's uninsured cash balances total
$282,564.
<PAGE> 55
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 AND 1997
================================================================================
3. NOTES RECEIVABLE
At March 31, 1998 and 1997, notes receivable consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Note receivable from individual, payable over a ten-year period
in monthly installments of $125, including
interest at 10% per annum (collateralized by real estate) $ 11,025 $ 11,516
Note receivable from individual, payable over a ten-year
period in monthly installments of $185, including interest at
10% per annum (collateralized by real estate) 11,457 12,893
Note receivable from individual, payable over a fifteen-year
period in monthly installments of $146, including interest
at 10.75% per annum (payments in arrears) (collateralized
by real estate) $ 12,715 $ 12,715
-------- --------
35,197 37,124
Less current portion (2,406) (2,052)
-------- --------
$ 32,791 $ 35,072
======== ========
</TABLE>
4. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company estimates that the fair value of all financial instruments at March
31, 1998 and 1997 does not differ materially from the aggregate carrying values
of its financial instruments recorded in the accompanying balance sheets.
5. PROPERTY AND EQUIPMENT
At March 31, 1998 and 1997, property and equipment consisted of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Computer equipment $ 13,915 $ --
Equipment 81,170 81,170
Furniture and fixtures 29,015 15,280
Leasehold improvements 19,706 19,706
Automobile 25,588 25,588
--------- ---------
169,394 141,744
Less, accumulated depreciation (127,135) (116,380)
--------- ---------
$ 42,259 $ 25,364
========= =========
</TABLE>
Depreciation expense for the years ending March 31, 1998 and 1997, was $10,755
and $9,080, respectively.
<PAGE> 56
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 AND 1997
================================================================================
6. EXCESS OF TRADE DOLLARS ISSUED OVER TRADE DOLLARS EARNED
At March 31, 1998 and 1997, the Company had expended 5,439 and 98,274 Trade
Dollars respectively, in excess of the amount of Trade Dollars earned by the
Company. This situation is commonly referred to in the commercial barter
industry as a "negative trade balance".
This provides the Company with additional liquidity and the opportunity to
complete advantageous purchase transactions that benefit the Company. The
Company would be ultimately obligated to provide goods and services to clients
to offset any amounts of Trade Dollars issued in excess of earned.
7. LONG-TERM DEBT
At March 31, 1998 and 1997, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Note payable to Key Bank at $894 per month, including
interest at prime plus 2 1/2% per annum (collateralized by
equipment) $ 5,925 $ 15,410
Note payable to Financial Services, Inc. at $793 per month,
including interest at 10% per annum (collateralized by
real estate) 26,246 33,473
-------- --------
32,171 48,883
Less, current maturities (13,074) (15,978)
-------- --------
$ 19,097 $ 32,905
======== ========
</TABLE>
The annual maturities of long-term debt for the next five years are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31, AMOUNT
----------- --------
<S> <C>
1999 $ 13,074
2000 7,898
2001 8,849
2002 2,350
2003 --
-------
Total $ 32,171
=======
</TABLE>
<PAGE> 57
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 AND 1997
================================================================================
8. CAPITAL STOCK
Cascade Trade Association (CTA) was organized on October 26, 1987, in the State
of Washington. Subsequent to its organization, it issued 10,000 shares of common
stock for $8,101. The Company was incorporated on September 18, 1996, in the
State of Nevada. On November 15, 1996, the Company effected a merger agreement
with CTA wherein the Company issued 1,000,000 shares of common stock in exchange
for all of the issued and outstanding shares of CTA.
On January 2, 1997, the Company issued 250,000 shares of common stock in
exchange for services valued at $.50 per share.
In January through March of 1997, the Company completed a private placement
(Offering) of its common stock pursuant to which 300,000 shares were subscribed
for $150,000. Under the terms of the Offering, one "A" warrant and one "B"
warrant was issued with each one share of common stock issued. The warrants are
immediately exercisable and tradeable after the closing of the offering. Each
"A" warrant entitles the holder to purchase one additional share at a price of
$.75 per share during a six-month period after the closing of the Offering. Each
"B" warrant entitles the holder to purchase one additional share at a price of
$1.00 per share during a nine-month period after closing of the Offering. The
warrants may be extended upon appropriate notice given shareholders by the
management.
In February of 1998, the Company completed a private placement (Placement) of
its common stock pursuant to which 120,000 shares were issued for $72,000. Under
the terms of the Placement, one "C" warrant and one "D" warrant was issued with
each one share of common stock issued. The warrants are immediately exercisable
and tradeable after the closing of the Placement. Each "D" warrant entitles the
holder to purchase one additional share at the price of $1.10 per share during a
three-month period after closing of the Placement. The warrants may be extended
upon appropriate notice given shareholders by the management.
During fiscal 1998, "A" and "B" warrants were exercised for 246,450 shares of
common stock (of which 50,000 shares remained unissued at March 31, 1998) for
$226,850. Also during fiscal 1998, 300,000 shares of previously subscribed stock
were issued.
At March 31, 1998, the number of warrants issued and outstanding were as
follows: "A" warrants - 12,850, "B" warrants - 288,700, "C" warrants - 120,000,
and "D" warrants - 120,000.
<PAGE> 58
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 AND 1997
================================================================================
9. INCOME TAXES
The components of the provision for income taxes at December 31, 1998 and 1997
are as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Current - Federal $ -- $ --
Deferred - Federal 1,207 130
------ ------
Income tax expense $1,207 $ 130
====== ======
</TABLE>
A reconciliation of the consolidated income tax expense on income per the U.S.
Federal statutory rate to the reported income tax follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Taxes at U.S. Federal statutory rate $ -- $ --
Non-deductible expenses -- --
Depreciation and bad debts allowance 1,207 130
------ ------
Effective tax $1,207 $ 130
====== ======
</TABLE>
Deferred tax liabilities (assets) consisted of the following at March 31, 1998
and 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Depreciation $ 231 $ 351
-------- --------
Gross deferred tax liabilities 231 351
-------- --------
Bad debt allowance (665) (1,992)
Loss carryforwards (10,078) (20,604)
-------- --------
Gross deferred tax assets (10,743) (22,596)
Valuation allowance - deferred tax asset 10,078 20,604
-------- --------
$ (434) $ (1,641)
======== ========
</TABLE>
The net change in the valuation allowance for deferred taxes was a decrease of
$10,526 for fiscal year 1997. The change relates to a loss carryforward from
fiscal year 1997.
As of March 31, 1998, approximately $30,000 of loss carryforwards are available
for future use. Their use, however, is limited to future earnings of the
Company. The carryforwards expire in fiscal year 2012. No benefit for such
amounts have been recognized in the financial statements.
<PAGE> 59
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 AND 1997
================================================================================
10. COMMITMENTS AND CONTINGENCIES
The Company leases office space for $1,850 per month, payable $1,300 per month
in cash and $550 in Trade Dollars. Future minimum rental commitments consist of
the following:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31, AMOUNT
----------- --------
<S> <C>
1999 $ 22,200
2000 11,100
------
Total $ 33,300
========
</TABLE>
Of the minimum rental commitments due, $23,400 is payable in cash and $9,900 is
payable in Trade Dollars.
11. INCOME (LOSS) PER SHARE
During the current fiscal year, the Company adopted FASB Statement No. 128,
Earnings Per Share. Statement 128 requires presentation of basic earnings per
share and diluted earnings per share. Basic earnings per share excludes
potential dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Diluted earnings per share is
computed similarly to fully diluted earnings per share under previous generally
accepted accounting principles in the United States. All prior year earnings per
share data are restated to conform with Statement 128 for consistent
presentation of all years.
Following is a reconciliation of the numerators of the basic and diluted income
(loss) per share at March 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Net income (loss) available to
common stockholders $ 32,509 $ (62,672)
========== ==========
Weighted average shares 1,316,212 437,500
Effect of dilutive securities:
Warrants 158,759 --
---------- ----------
1,474,970 437,500
========== ==========
Basic income (loss) per share (based on
weighted average shares) $ .02 $ (.14)
========== ==========
</TABLE>
<PAGE> 60
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998 AND 1997
================================================================================
12. REVENUE
The following table summarizes the cash and trade (consisting of IBC Trade
Dollars) components of revenue for the years ended July 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Trade $ 304,760 $106,842
Cash 379,302 345,831
-------- --------
$684,062 $452,673
======== ========
</TABLE>
13. SUBSEQUENT EVENT
The Company adopted a Stock Option Plan (Plan) effective June 1, 1998 whereby,
stock options for up to 10% of the shares of common stock outstanding may be
granted at the fair market price at the date of grant to Directors, Officers,
Employees and Consultants. Pursuant to the Plan, effective June 1, 1998, the
Company granted 148,500 stock options to eleven individuals and entities;
exercisable at $1.625 per share for up to five years.
<PAGE> 61
(B) INDEX TO EXHIBITS:
3. Corporate Charter/Certificate of Existence/
Articles of Incorporation/By-Laws of the Company*
4. Instruments Defining Rights of Security Holders.
- Refer to Exhibit No. 3. -
6. Opinion re: Discount on Capital Shares. Not Applicable
7. Opinion re: Liquidation Preference. Not Applicable
9. Voting Trust Agreements. Not Applicable
10. Material Contracts:
a. Merger Agreement for CTA, dated 11/15/96*
11. Statement re: Computation of EPS. Not Applicable
12. Statement re: Computation of Ratios. Not Applicable
14. Material Foreign Patents. Not Applicable
16. Letter re: Change of Accountant. Not Applicable
21. Subsidiaries of the Registrant. Not Applicable
24. Power of Attorney. Not Applicable
27. Financial Data Schedule. Not Applicable
28. Information from Reports Furnished to State Insurance
Regulatory Authorities. Not Applicable
99. Other Material Documents:
a. Information Statement regarding 300,000 unit
private placement, dated 1/3/97.*
b. Final Form D regarding 300,000 unit
private placement, dated 1/3/97.*
c. Final NY Form M-11 regarding 300,000 unit
private placement, dated 1/3/97.*
d. Information Statement regarding 120,000 unit
private placement, dated 2/7/98.*
e. Final Form D regarding 120,000 unit
private placement, dated 2/7/98.*
f. Final NY Form M-11 regarding 120,000 unit
private placement, dated 2/7/98.*
g. Notice/Agenda/Minutes regarding
Annual Meeting of Shareholders held 9/30/97.*
h. Stock Option Plan, dated 6/1/98.**
i. Spokane Office Agreement, dated 2/15/98.*
j. Yakima Office Agreement, dated 4/7/98.*
SIGNATURE PAGE.*
* Filed previously.
** Filed herewith.
<PAGE> 62
SIGNATURE PAGE
Pursuanto to the requirements of Section 12g of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
of Form 10 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
International Barter Corp.
Registrant
August 10, 1998 \s\ Steven M. White
- --------------- ----------------------------------------------------------
Date Steven M. White, Chairman/President/CEO/Treasurer/Director
<PAGE> 1
EXHIBIT 99.H
INTERNATIONAL BARTER CORP.
1998 STOCK OPTION PLAN
This 1998 Stock Option Plan ("Plan") provides for the grant of options to
acquire shares of common stock, $0.001 par value ("Common Stock") of
International Barter Corp., a Nevada corporation ("Company"). Stock options
granted under this Plan are referred to in this Plan as "Options." Options that
qualify under Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), are referred to in this Plan as "Incentive Stock Options." Options
granted under this Plan that do not qualify under Section 422 of the Code are
referred to as "Nonqualified Stock Options."
1.0 PURPOSES
1.1 The purposes of this Plan are (i) to retain the services of a management
team, qualified employees of the Company and non-employee advisors or
consultants as the Plan Administrators shall select in accordance with this
Plan; (ii) to retain the services of valued non-employee directors pursuant to
Section 5.15 below; (iii) to provide these persons with an opportunity to obtain
or increase a proprietary interest in the Company, to provide incentives for
effective service and high-level performance, to strengthen their incentive to
achieve the objectives of the shareholders of the Company; and (iv) to serve as
an aid and inducement in the hiring or recruitment of new employees,
consultants, non-employee directors and other persons needed for future
operations and growth of the Company. Employees, non-employee advisors and
consultants are referred to in this Plan as "Service Providers."
2.0 ADMINISTRATION
2.1 This Plan shall be administered by, or in accordance with the recommendation
of, the Board of Directors of the Company ("Board"). The Board may, in its
discretion, establish a committee composed of two or more members of the Board
to administer this Plan ("Committee") which may be an executive, compensation or
other committee, including a separate committee especially created for this
purpose. The Committee shall have the powers and authority as the Board may
delegate to it, including the power and authority to interpret any provision of
this Plan or of any Option. The members of the Committee shall serve at the
discretion of the Board. The Board, and/or the Committee if one has been
established by the Board, are referred to in this Plan as the "Plan
Administrators."
<PAGE> 2
2.2 Following registration of any of the Company's securities under Section 12
of the Securities Exchange Act of 1934, as amended ("Exchange Act"), the Plan
Administrators shall not take any action which is not in full compliance with
the exemption from Section 16(b) of the Exchange Act provided by Rule 16b-3, as
amended, or any successor rule or rules, and any other rules or regulations of
the Securities and Exchange Commission, a national exchange, the Nasdaq Stock
Market, the NASD Bulletin Board, or any other applicable regulatory authorities,
and any such action shall be void and of no effect.
2.3 Except as limited by Section 5.15 below, and subject to the provisions of
this Plan, and with a view to effecting its purpose, the Plan Administrators
shall have sole authority, in their absolute discretion, to (i) construe and
interpret this Plan; (ii) define the terms used in this Plan; (iii) prescribe,
amend and rescind rules and regulations relating to this Plan; (iv) correct any
defect, supply any omission or reconcile any inconsistency in this Plan; (v)
select the Service Providers to whom Options shall be granted under this Plan
and whether the Option is an Incentive Stock Option or a Nonqualified Stock
Option; (vi) determine the time or times at which Options shall be granted under
this Plan; (vii) determine the number of shares of Common Stock subject to each
Option, the exercise price of each Option, the duration of each Option and the
times at which each Option shall become exercisable; (viii) determine all other
terms and conditions of Options; (ix) approve the forms of agreement to be used
under the Plan; (x) to determine the "Fair Market Value", as defined in Section
2.4 below; (xi) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by the
Option shall have declined since the date the Option was granted; (xii) to
institute a program whereby outstanding options are surrendered in exchange for
options with a lower exercise price; (xiii) to allow Optionees to satisfy
withholding tax obligations by electing to have the Company withhold from the
shares of Common Stock to be issued upon exercise of an Option that number of
shares having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined. All elections by
an Optionee to have shares withheld for this purpose shall be made in such form
and under such conditions as the Plan Administrators may deem necessary or
advisable; (xiv) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option previously granted by the
Plan Administrators; and (xv) make all other determinations necessary or
advisable for the administration of this Plan. All decisions, determinations and
interpretations made by the Plan Administrators shall be binding and conclusive
on all participants in this Plan and on their legal representatives, heirs and
beneficiaries. None of the Plan Administrators shall
<PAGE> 3
be liable for any action taken or determination made in good faith with respect
to the Plan or any grant.
2.4 "Fair Market Value" shall be deemed to be, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a
national market system, or if the principal market for the Common Stock is the
over-the-counter market, including without limitation Nasdaq NMS or Nasdaq
SmallCap of the Nasdaq Stock Market, the NASD Electronic Bulletin Board or
over-the-counter, as the case may be, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system for the last market trading day immediately
preceding the date of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) In the absence of an established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Administrator.
3.0 ELIGIBILITY
3.1 Incentive Stock Options may be granted to any individual who, at the time
the Option is granted, is an employee of the Company or any parent, subsidiary
or other corporation permitted by the Code, including employees who are
directors of the Company ("Employees"). Nonqualified Stock Options may be
granted to Service Providers as the Plan Administrators shall select, and to
non-employee directors of the Company pursuant to the formula set forth in
Section 5.15 below. Options may be granted in substitution for outstanding
Options of another corporation in connection with the merger, consolidation,
acquisition of property or stock or other reorganization between such other
corporation and the Company or any subsidiary of the Company. Options also may
be granted in exchange for outstanding Options. Any person to whom an Option is
granted under this Plan is referred to as an "Optionee."
4.0 NUMBER OF SHARES AVAILABLE
4.1 The Plan Administrators are authorized to grant Options to acquire up to a
total of 20% of the total number of outstanding shares of the Company's Common
Stock. The number of shares with respect to which Options may be granted
hereunder is subject to adjustment as set forth below in Section 5.14. If any
outstanding Option expires or is terminated for any reason, the shares of Common
Stock allocable to the unexercised portion of such Option may again be subject
to an Option to the same Optionee or to a different person eligible under this
Plan.
<PAGE> 4
5.0 TERMS AND CONDITIONS OF OPTIONS
5.1 Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Plan Administrators ("Agreement"). Agreements may
contain such additional provisions, not inconsistent with this Plan, as the Plan
Administrators in their discretion may deem advisable. All Options also shall
comply with the following requirements.
5.2 Number of Shares and Type of Option. Each Agreement shall state the number
of shares of Common Stock to which it pertains and designate whether the Option
is intended to be an Incentive Stock Option or a Nonqualified Stock Option. In
the absence of action or designation to the contrary by the Plan Administrators
in connection with the grant of an Option, all Options shall be Nonqualified
Stock Options. The aggregate Fair Market Value, determined at the Date of Grant,
as defined below, of the stock with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year, granted
under this Plan and all other Incentive Stock Option plans of the Company, a
related corporation or a predecessor corporation, shall not exceed $100,000, or
such other limit as may be prescribed by the Code as it may be amended from time
to time. Any Option which exceeds the annual limit shall not be void but rather
shall be a Nonqualified Stock Option.
5.3 Date of Grant. Each Agreement shall state the date the Plan Administrators
have deemed to be the effective date of the Option for purposes of, and in
accordance with, this Plan ("Date of Grant").
5.4 Option Price. Each Agreement shall state the price per share of Common Stock
at which it is exercisable. The exercise price shall be fixed by the Plan
Administrators at whatever price the Plan Administrators may determine in the
exercise of its sole discretion; provided, that the per share exercise price for
any Option granted following the effective date of registration of any of the
Company's securities under the Exchange Act shall not be less than the Fair
Market Value per share of the Common Stock at the Date of Grant as determined by
the Plan Administrators in good faith; and, provided further, that Incentive
Stock Options granted in substitution for outstanding Options of another
corporation in connection with the merger, consolidation, acquisition of
property or stock or other reorganization involving such other corporation and
the Company or any subsidiary of the Company may be granted with an exercise
price equal to the exercise price for the substituted Option of the other
corporation, subject to any adjustment consistent with the terms of the
transaction pursuant to which the substitution is to occur.
<PAGE> 5
5.5 Duration of Options. At the time of the grant of the Option, the Plan
Administrators shall designate, subject to paragraph 5.8 below, the expiration
date of the Option, which date shall not be later than 5 years from the Date of
Grant; provided, that the expiration date of any Incentive Stock Option granted
to a greater-than-10 percent shareholder of the Company (as determined with
reference to Section 424(d) of the Code) shall not be later than five years from
the Date of Grant. In the absence of action to the contrary by the Plan
Administrators in connection with the grant of a particular Option, and except
in the case of Incentive Stock Options as described above, all Options granted
under this Plan shall expire 5 years from the Date of Grant.
5.6 Vesting Schedule. No Option shall be exercisable until it has vested. The
vesting schedule for each Option shall be specified by the Plan Administrators
at the time of grant of the Option; provided, that if no vesting schedule is
specified at the time of grant or in the Agreement, the entire Option shall vest
according to the following schedule:
NUMBER OF YEARS FOLLOWING DATE OF GRANT and
PERCENTAGE OF TOTAL OPTION TO BE EXERCISABLE
After first twelve months 50%
After eighteen months 75%
After twenty-four months 100%
5.7 Acceleration of Vesting. The vesting of one or more outstanding Options may
be accelerated by the Plan Administrators at such times and in such amounts as
it shall determine in its sole discretion. The vesting of Options also shall be
accelerated under the circumstances described below in Section 5.14.
5.8 Term of Option.
5.8.1 Vested Options shall terminate, to the extent not previously exercised,
upon the occurrence of the first of the following events: (i) the expiration of
the Option, as designated by the Plan Administrators; (ii) the expiration of 90
days from the date of an Optionee's termination of employment, contractual or
director relationship with the Company or any Related Corporation for any reason
whatsoever other than death or Disability, as defined below, unless, in the case
of a Nonqualified Stock Option, the exercise period is otherwise defined by
terms of an agreement with Optionee entered into prior to the effective date of
the Plan, or the exercise period is extended by the Plan Administrators until a
date not later than the expiration date of the Option; or (iii) the expiration
of one
<PAGE> 6
year from (A) the date of death of the Optionee or (B) cessation of an
Optionee's employment, contractual or director relationship with the Company or
any Related Corporation by reason of Disability (as defined below) unless, in
the case of a Nonqualified Stock Option, the exercise period is extended by the
Plan Administrators until a date not later than the expiration date of the
Option. If an Optionee's employment, contractual or director relationship with
the Company or any Related Corporation is terminated by death, any Option held
by the Optionee shall be exercisable only by the person or persons to whom such
Optionee's rights under such Option shall pass by the Optionee's will or by the
laws of descent and distribution of the state or county of the Optionee's
domicile at the time of death. "Disability" shall mean that a person is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period of
not less than 12 months. The Plan Administrators shall determine whether an
Optionee has incurred a Disability on the basis of medical evidence acceptable
to the Plan Administrators. Upon making a determination of Disability, the
Committee shall, for purposes of the Plan, determine the date of an Optionee's
termination of employment, contractual or director relationship.
5.8.2 Unless accelerated as set forth above, unvested Options shall terminate
immediately upon termination of Optionee's employment, contractual or director
relationship with the Company or any Related Corporation for any reason
whatsoever, including death or Disability. If, in the case of an Incentive Stock
Option, an Optionee's relationship with the Company changes (e.g., from an
employee to a non-employee, such as a consultant, or a non-employee director),
such change shall not necessarily constitute a termination of an Optionee's
contractual relationship with the Company but rather the Optionee's Incentive
Stock Option shall automatically be converted into a Nonqualified Stock Option.
For purposes of this Plan, transfer of employment between or among the Company
and/or any Related Corporation shall not be deemed to constitute a termination
of employment with the Company or any Related Corporation. For purposes of this
subsection with respect to Incentive Stock Options, employment shall be deemed
to continue while the Optionee is on military leave, sick leave or other bona
fide leave of absence as determined by the Plan Administrators. The foregoing
notwithstanding, employment shall not be deemed to continue beyond the first 90
days of such leave, unless the Optionee's re-employment rights are guaranteed by
statute or by contract.
5.8.3 Unvested Options shall terminate immediately upon any material breach, as
determined by the Plan Administrators, by Optionee of any employment,
non-competition, non-disclosure or similar agreement by and between the Company
and Optionee.
<PAGE> 7
5.9 Exercise of Options. Options shall be exercisable, either all or in part, at
any time after vesting, until the Option terminates for any reason set forth
under this Plan, unless the exercise period is extended by the Plan
Administrators until a date not later than the expiration date of the Option. If
less than all of the shares included in the vested portion of any Option are
purchased, the remainder may be purchased at any subsequent time prior to the
expiration of the Option term. No portion of any Option for less than fifty (50)
shares, as adjusted pursuant to Section 5.14 below, may be exercised; provided,
that if the vested portion of any Option is less than fifty (50) shares, it may
be exercised with respect to all shares for which it is vested. Only whole
shares may be issued pursuant to an Option, and to the extent that an Option
covers less than one share, it is unexercisable. Options or portions thereof may
be exercised by giving written notice to the Company, which notice shall specify
the number of shares to be purchased, and be accompanied by payment in the
amount of the aggregate exercise price for the Common Stock so purchased, which
payment shall be in the form specified in this Plan. The Company shall not be
obligated to issue, transfer or deliver a certificate of Common Stock to any
Optionee, or to his personal representative, until the aggregate exercise price
has been paid for all shares for which the Option shall have been exercised and
adequate provision has been made by the Optionee for satisfaction of any tax
withholding obligations associated with such exercise. During the lifetime of an
Optionee, Options are exercisable only by the Optionee and those assigees
specified in Section 5.12 of this Plan.
5.10 Payment upon Exercise of Option. Upon the exercise of any Option, the
aggregate exercise price shall be paid to the Company in cash or by certified or
cashier's check. In addition, upon approval of the Plan Administrators, an
Optionee may pay for all or any portion of the aggregate exercise price by (i)
delivering to the Company shares of Common Stock previously held by Optionee
which have been owned by Optionee for more than six (6) months on the date of
surrender; (ii) having shares withheld from the amount of shares of Common Stock
to be received by the Optionee; (iii) delivery of an irrevocable subscription
agreement obligating the Optionee to take and pay for the shares of Common Stock
to be purchased within one year of the date of such exercise; (iv) consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan; (v) a reduction in the amount of any
Company liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement; or (vi) such other consideration and method of payment for the
issuance of shares to the extent permitted by Applicable Laws. The shares of
Common Stock received or withheld by the Company as payment for shares of Common
Stock purchased upon the exercise of Options shall have a Fair Market Value at
the date of exercise (as
<PAGE> 8
determined by the Plan Administrators) equal to the aggregate exercise price (or
portion thereof) to be paid by the Optionee upon such exercise.
5.11 Rights as a Shareholder. An Optionee shall have no rights as a shareholder
with respect to any shares covered by an Option until such Optionee becomes a
record holder of the shares, irrespective of whether such Optionee has given
notice of exercise. Subject to the provisions of Section 5.14 of this Plan, no
rights shall accrue to an Optionee and no adjustments shall be made on account
of dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights declared on, or created in, the
Common Stock for which the record date is prior to the date the Optionee becomes
a record holder of the shares of Common Stock covered by the Option,
irrespective of whether such Optionee has given notice of exercise.
5.12 Transfer of Option. Options granted under this Plan and the rights and
privileges conferred by this Plan may not be transferred, assigned, pledged or
hypothecated in any manner, whether by operation of law or otherwise, other than
by will, by applicable laws of descent and distribution or to family members,
entities owned by family members and trusts benefitting family members or, with
respect to Nonqualified Stock Options, pursuant to a domestic relations order,
and shall not be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
Option or of any right or privilege conferred by this Plan contrary to the
provisions hereof, or upon the sale, levy or any attachment or similar process
upon the rights and privileges conferred by this Plan, such Option shall
thereupon terminate and become null and void.
5.13 Securities Regulation and Tax Withholding.
5.13.1 Shares shall not be issued with respect to an Option unless the exercise
of such Option and the issuance and delivery of such shares shall comply with
all relevant provisions of law, including, without limitation, any applicable
state securities laws, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations thereunder and the requirements of any stock exchange
upon which such shares may then be listed. The issuance shall be further subject
to the approval of counsel for the Company with respect to such compliance,
including the availability of an exemption from
<PAGE> 9
registration for the issuance and sale of such shares. The inability of the
Company to obtain from any regulatory body the authority deemed by the Company
to be necessary for the lawful issuance and sale of any shares under this Plan,
or the unavailability of an exemption from registration for the issuance and
sale of any shares under this Plan, shall relieve the Company of any liability
with respect to the non-issuance or sale of such shares.
5.13.2 As a condition to the exercise of an Option, in order to comply with
federal or state securities laws the Plan Administrators may require the
Optionee to represent and warrant in writing at the time of such exercise that
the shares are being purchased only for investment and without any then-present
intention to sell or distribute such shares. At the option of the Plan
Administrators, a stop-transfer order against such shares may be placed on the
stock books and records of the Company, and a legend indicating that the stock
may not be pledged, sold or otherwise transferred unless an opinion of counsel
is provided stating that such transfer is not in violation of any applicable law
or regulation, may be stamped on the certificates representing such shares in
order to assure an exemption from registration. The Plan Administrators also may
require such other documentation as may from time to time be necessary to comply
with federal and state securities laws. THE COMPANY HAS NO OBLIGATION TO
UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK ISSUABLE UPON THE
EXERCISE OF OPTIONS.
5.13.3 As a condition to the exercise of any Option granted under this Plan, the
Optionee shall make such arrangements as the Plan Administrators may require for
the satisfaction of any federal, state or local withholding tax obligations that
may arise in connection with such exercise. Alternatively, the Plan
Administrators may provide that a Grantee may elect, to the extent permitted or
required by law, to have the Company deduct federal, state and local taxes of
any kind required by law to be withheld upon such exercise from any payment of
any kind due to the Grantee. Without limitation, at the discretion of the Plan
Administrators, the withholding obligation may be satisfied by the withholding
or delivery of shares of Common Stock.
5.13.4 The issuance, transfer or delivery of certificates of Common Stock
pursuant to the exercise of Options may be delayed, at the discretion of the
Plan Administrators, until the Plan Administrators are satisfied that the
applicable requirements of the federal and state securities laws and the
withholding provisions of the Code have been met.
5.14 Stock Dividend, Reorganization or Liquidation.
5.14.1 If (i) the Company shall at any time be involved in a transaction
described in Section 424(a) of the Code (or any successor provision) or any
"corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common
<PAGE> 10
Stock or (iii) any other event with substantially the same effect shall occur,
the Plan Administrators shall, with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock and/or the exercise
price per share so as to preserve the rights of the Optionee substantially
proportionate to the rights of the Optionee prior to such event, and to the
extent that such action shall include an increase or decrease in the number of
shares of Common Stock subject to outstanding Options, the number of shares
available under Section 4.0 of this Plan shall automatically be increased or
decreased, as the case may be, proportionately, without further action on the
part of the Plan Administrators, the Company or the Company's shareholders.
5.14.2 If the Company is liquidated or dissolved, the Plan Administrators shall
allow the holders of any outstanding Options to exercise all or any part of the
unvested portion of the Options held by them; provided, however, that such
Options must be exercised prior to the effective date of such liquidation or
dissolution. If the Option holders do not exercise their Options prior to such
effective date, each outstanding Option shall terminate as of the effective date
of the liquidation or dissolution.
5.14.3 The foregoing adjustments in the shares subject to Options shall be made
by the Plan Administrators, or by any successor administrator of this Plan, or
by the applicable terms of any assumption or substitution document.
5.14.4 The grant of an Option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure, to merge, consolidate or dissolve, to
liquidate or to sell or transfer all or any part of its business or assets.
5.15 Option Grants to Non-Employee Directors.
5.15.1 Automatic Grants. Upon the initial appointment of a Non-Employee
Director, as defined below, the Plan Administrators are authorized to grant
initial Options ("Initial Options") to each Non-Employee Director in such
amounts and upon such terms, provisions and vesting schedule as determined in
the sole discretion of the Plan Administrators. After the Initial Options are
fully vested, or in the event no Inital Options are granted to a Non-Employee
Director, Options shall be granted to Non-Employee Directors under the terms and
conditions of this Section 5.15 of this Plan. Unless the number of shares
available under Section 4.0 of this Plan shall have been decreased to less than
15,000, immediately after each annual meeting of shareholders at which he or she
is elected a director, each Non-Employee Director, as defined below, of the
Company shall automatically be granted a Nonqualified Stock Option to purchase
<PAGE> 11
2.500 shares of Common Stock for each year included in the term for which such
he or she was elected a director at such meeting; provided, however, that if a
director is appointed to fill a vacancy in the Company's Board of Directors, a
Non-Employee Director shall be granted a Nonqualified Stock Option to purchase
that number of shares of Common Stock equal to 2.500 multiplied by a fraction,
the numerator of which shall be equal to the number of months from the date of
his or her appointment until the next regularly scheduled annual meeting of
shareholders at which directors are to be elected (as determined by the
Company's bylaws and rounded to the nearest whole number) and the denominator of
which shall be twelve (12). "Non-Employee Director" shall have the meaning set
forth in Rule 16b-3 under the Exchange Act as such rule is in effect on the date
this Plan is approved by the shareholders of the Company, as it may be amended
from time to time, or any successor rule or rules.
5.15.2 Option Price. The option price for the Options granted under Section 5.15
shall be not less than one hundred percent (100%) of the Fair Market Value of
the shares of Common Stock on the Date of Grant, as determined by the Plan
Administrators in good faith in accordance with the definition set forth in
Section 2.4 of this Plan. Each such Option shall have a five-year term from the
Date of Grant, unless earlier terminated pursuant to Section 5.8.
5.15.3 Vesting Schedule. No Option shall be exercisable by a Non-Employee
Director until it has vested. For Options granted in connection with the
election of a director at an annual meeting of shareholders, each Option shall
vest as to 2,500 shares of Common Stock for each year of service as a director
on each anniversary date of the annual meeting. For Options granted in
connection with the appointment of a director, each Option shall vest as to
2,500 shares of Common Stock (or, if a lesser number of shares of Common Stock
remain unvested, the remaining number of shares) for each year of service as a
director on each anniversary date of such appointment.
5.16 Common Stock Repurchase Rights
5.16.1 Repurchase Option. At the sole discretion of the Plan Administrators,
each Option granted under this Plan may contain repurchase provisions pursuant
to which, after exercise of the Option, the Company is granted an irrevocable,
exclusive option ("Repurchase Option") to purchase from Optionee the Common
Stock issued upon exercise of the Option. If the Plan Administrators determine
that Options granted under the Plan will be subject to a Repurchase Option,
Service Providers shall be notified by the Plan Administrators of the terms,
conditions and restrictions of the Repurchase Option by means of a Restricted
Stock Purchase Agreement, and Options shall be accepted by Service Providers by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Plan Administrators. Unless the Plan
<PAGE> 12
Administrators determine otherwise, the Restricted Stock Purchase Agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's service with the Company for any
reason (including death or disability).
5.16.2 Purchase Price and Duration. The purchase price for shares of Common
Stock repurchased pursuant to the Restricted Stock Purchase Agreement shall be
the original price per share paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The Repurchase
Option shall lapse after one year following the date of exercise, unless the
repurchase period is shortened in accordance with a rate determined by the Plan
Administrators.
5.16.3 Escrow of Shares. The Restricted Stock Purchase Agreement may also
provide that the shares of Common Stock be delivered and deposited with an
escrow holder designated by the Company until such time as the Repurchase Option
expires.
5.16.4 Other Provisions. The Restricted Stock Purchase Agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion.
5.16.5 Rights as a Shareholder. Once the Option is exercised and unless and
until the Repurchase Option is exercised by the Company, the purchaser shall
have the rights equivalent to those of a shareholder, and shall be a shareholder
when his or her purchase is entered upon the records of the duly authorized
transfer agent of the Company.
6.0 EFFECTIVE DATE; TERM
6.1 This Plan shall be effective as of June 1, 1998. The Plan shall include all
options granted by Plan Administrators prior to the effective date of the Plan,
in accordance with the effective Date of Grant and other terms of each agreement
with Optionee. Incentive Stock Options may be granted by the Plan Administrators
from time to time thereafter until June 1, 2003. Nonqualified Stock Options may
be granted until this Plan is terminated by the Board in its sole discretion.
Termination of this Plan shall not terminate any Option granted prior to such
termination. Any Incentive Stock Options granted by the Plan Administrators
prior to the approval of this Plan by a majority of the shareholders of the
Company shall be granted subject to ratification of this Plan by the
shareholders of the Company within 12 months after this Plan is adopted by the
Board, and if shareholder ratification is
<PAGE> 13
not obtained, each and every Incentive Stock Option shall become a Nonqualified
Stock Option.
7.0 NO OBLIGATIONS TO EXERCISE OPTION
7.1 The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
8.0 NO RIGHT TO OPTIONS OR TO EMPLOYMENT, CONTRACTUAL OR
DIRECTOR RELATIONSHIP
8.1 Except as provided in Section 5.15 above, whether or not any Options are to
be granted under this Plan shall be exclusively within the discretion of the
Plan Administrators, and nothing contained in this Plan shall be construed as
giving any person or Service Provider any right to participate under this Plan.
The grant of an Option shall in no way constitute any form of agreement or
understanding binding on the Company or any Related Corporation, express or
implied, that the Company or any Related Corporation will employ, contract with,
or use any efforts to cause to continue service as a director by, an Optionee
for any length of time.
9.0 APPLICATION OF FUNDS
9.1 The proceeds received by the Company from the sale of Common Stock issued
upon the exercise of Options shall be used for general corporate purposes,
unless otherwise directed by the Board.
10.0 INDEMNIFICATION OF PLAN ADMINISTRATOR
10.1 In addition to all other rights of indemnification they may have as members
of the Board, members of the Plan Administrators shall be indemnified by the
Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof, provided that such settlement is
approved by independent legal counsel selected by the Company, except to the
extent that such expenses relate to matters for which it is adjudged that such
Plan Administrators member is liable for willful misconduct; provided, that
within 15 days after the institution of any such action, suit or proceeding, the
Plan Administrator member involved therein shall, in writing, notify the Company
of such action, suit or proceeding, so that the Company may have the
<PAGE> 14
opportunity to make appropriate arrangements to prosecute or defend the same.
<PAGE> 15
11.0 AMENDMENT OF PLAN
11.1 Except as otherwise provided above in Section 5.15, the Plan Administrators
may, at any time, modify, amend or terminate this Plan and Options granted under
this Plan; provided, that no amendment with respect to an outstanding Option
shall be made over the objection of the Optionee thereof; and provided further,
that if required in order to keep the Plan in full compliance with the exemption
from Section 16(b) of the Exchange Act provided by Rule 16b-3, as amended, or
any successor rule or rules, or any other rules or regulations of the Securities
and Exchange Commission, a national exchange, the Nasdaq Stock Market, the NASD
Bulletin Board, or other regulatory authorities, amendments to this Plan shall
be subject to approval by the Company's shareholders in compliance with the
requirements of any such rules or regulations.
Without limiting the generality of the foregoing, the Plan Administrators may
modify grants to persons who are eligible to receive Options under this Plan who
are foreign nationals or employed outside the United States to recognize
differences in local law, tax policy or custom.
Date Approved by Board of Directors of Company: June 1, 1998
International Barter Corp.
by: Norma Fetz
--------------------------
Corporate Secretary
<PAGE> 1
EXHIBIT 99.I
AREA OFFICE
AGREEMENT
International Barter Corp.
21400 International Blvd. Suite 207
Seattle, Washington 98198-6086
<PAGE> 2
AREA OFFICE AGREEMENT
PARTIES:
International Barter Corporation (IBC)
a Nevada Corporation
21400 International Blvd., Suite 206
Seattle, WA. 98198-6086
Vonnie Reed (Area Office (AO)
- --------------------
S 4011 Dearborn
- --------------------
Spokane, Wa 99223
- --------------------
EFFECTIVE DATE: June 1, 1998
RECITALS:
A. IBC has developed and established a Trade Exchange for retail and corporate
businesses utilizing a computerized system for tracking barter transactions.
B. IBC owns the "IBC" trade name and other proprietary marks. IBC has registered
the proprietary marks with the U.S. Trademark Office.
C. Area Office desires to enroll into the IBC system and actively solicit and
service IBC client members in their geographic locale.
AGREEMENT:
IBC hereby agrees to allow Area Office (AO) to operate under the IBC name and
manage the area designated Eastern Washington, subject to the following
stipulations:
1a. AO is not an employee of IBC and is not entitled to any of the benefits IBC
may bestow upon IBC employees.
1b. The term of this agreement begins upon the date of execution by both parties
and continues until either party advises the other by 30 days written notice of
its intent to terminate this agreement.
1c. The AO shall maintain an office in a suitable location conducive to
conducting professional business with customers and clients of IBC.
1d. AO is an `independent contractor' of IBC. AO is responsible for paying all
state, local, federal and employee tax's on him/herself or other employees. AO
is not an agent
2
<PAGE> 3
or employee of IBC for any purpose and the employees of AO are not entitled to
any of the benefits IBC provides IBC employees.
INCOME AND FEES:
2a. SERVICE FEES: IBC currently charges 12% on purchases to all AO clients made
through the IBC system, 10% if paid by automatic deposit by bank or credit card.
AO retains 75% of these fees.
2b. MEMBERSHIP FEES: IBC suggested membership fee for clients entering the IBC
system is $495 cash. AO retains 100% of this fee.
2c. MONTHLY MAINTENANCE FEES: IBC charges clients $15 cash and $15 trade per
month as a maintenance fee. AO retains $10 cash and $10 trade of these fees.
2d. LATE CHARGES: IBC charges client's $10 cash or 1 1/2% per month for all cash
fees that are 30 days past due. AO retains 50% of these fees. AO can reverse
late fees, with written documentation to IBC and IBC approval.
2e. INTEREST CHARGES: IBC charges clients 1% trade per month for all clients who
are in a negative balance for a loan loss reserve. IBC has set up a national
`reserve fund' for AO's to keep the IBC system balanced. IBC retains this charge
exclusively for bad debt. If a surplus of trade dollars occurs in the loan loss
reserve or acquisition float accounts the INTEREST CHARGE will either be reduced
or eliminated.
2f. MONTHLY MINIMUM: Area Office monthly minimum is $500 to maintain an area.
The percentage paid to AO first comes from monthly maintenance fees and second
from service fees.
2g. INCIDENTALS: One hundred dollars ($100) per month will be deducted from AO's
income allocated for annual service contract for DWW Software and annual dues in
either NATE or IRTA at the AO's discretion. IBC's total financial commitment is
not to exceed $1200 per year for both expenses.
IBC reserves the right to increase client fees from time to time if agreed on by
the Board of Governors. Any increase in fees shall not affect the AO commission
schedule, unless agreed to in writing by AO.
RECIPROCAL TRADE AGREEMENTS:
3a. AO may set up reciprocal trade agreements (RTA) with bona fide barter
companies. It is recommended, but not mandatory that barter company be a member
in good standing with either the National Association of Trade Exchanges (NATE)
or the International Reciprocal Trade Association (IRTA)
3
<PAGE> 4
3b. All RTA companies must sign a membership application and abide by IBC
trading rules and regulations. All fees and charges will be waived with the
exception of the Monthly Association Fees.
3c. AO retains $10 cash and $10 trade of the RTA monthly association fees.
CONFIDENTIALITY:
4a. Area Office recognizes and acknowledges that the services, which AO performs
for IBC, will be of a confidential nature, that the goodwill of IBC depends,
among other things, on keeping the nature of such services, and information
related to such services, confidential. Unauthorized disclosure would
irreparably damage IBC. The names of IBC clients, client account activities and
other information provided to AO are and shall remain the exclusive property of
IBC and are of great value to IBC and the IBC system.
4b. AO agrees that at no time will AO undertake efforts to solicit or otherwise
agree privately with IBC customers to provide individual consultation and
support related to any other barter program other than the IBC system.
4c. Upon termination of this agreement, AO shall return to IBC all information,
brochures, client materials, hardware, software and other items relating to the
IBC system.
4d. AO will assure that the employees and agents of AO who obtain confidential
information do not disclose the information except as may be authorized by IBC.
COMPUTER EQUIPMENT AND SOFTWARE:
5a. AO will utilize computer equipment, which is IBM compatible with the
technology used by IBC. IBC will provide the necessary software for record
keeping and the cost to use the software will be included in the original set-up
fee.
IBC software will constantly be upgraded with the latest technology and
will be a major key in the AO's success.
5b. Software Licensing Agreement is wholly owned by IBC. AO has rights to
utilize software as long as AO is in good standing with IBC.
5c. AO must have dedicated line for Internet access and outgoing broadcast
faxing. IBC will provide software for broadcast fax.
5d. IBC will provide standard documents for faxes, memo's, newsletters, Hot
List's and the Trader. These documents are standardized and must be utilized by
all AO's.
4
<PAGE> 5
5e. IBC will pay an annual service agreement to DWW Software or any company
maintaining the IBC barter software. See 2h.
SET-UP FEE:
6a. The initial set-up fee for enrollment into the IBC system as an Area Office
is $2,500.00 This fee is payable upon execution by the AO of this agreement
unless other arrangements are made and referenced to this agreement by addendum.
6b. AO receives computer software, rights to IBC logo, internal and external
forms, marketing plans and consultation for this fee.
RIGHT OF INSPECTION:
7a. IBC shall have access to the premises of AO at all times to inspect place of
business and to verify compliance with this Agreement. Inspection shall be
during AO's normal business hours without advance notice. At the time of
inspection, IBC shall give advice and assistance regarding AO's operations and
recommendations for educational training programs. AO shall cooperate with IBC
representatives at the time of inspection and shall provide IBC with access to
AO's books and records and for an audit, if IBC, in its sole discretion, deems
an audit necessary.
OTHER AGREEMENTS:
8a. USE OF IBC NAME AND LOGO: AO will be allowed and expected to use the IBC
logo on all business forms used in soliciting and maintaining trade clients in
the IBC system. Use of the IBC logo in non-IBC related business is prohibited.
8b. ADVERTISING: IBC will provide, at IBC's expense, artwork for standard ads,
which can be used for print media in a variety of sizes
8c. OPERATIONS MANUAL: IBC will provide a manual describing the guidelines of
IBC's operations, sales and marketing programs. The manual will be amended as
necessary and will, due to its proprietary nature, remain the exclusive property
of IBC. The manual is designed to aid the AO and its staff in the establishment
and administration of its office.
5
<PAGE> 6
8d. STATEMENTS AND FORMS: IBC will provide original artwork for all printed
materials containing the IBC name and logo.
8e. EDUCATION AND TRAINING: IBC will schedule a 3 day training program to be
normally held at IBC Headquarters, although at the sole discretion of IBC, it
could be scheduled at the AO location or other selected site. All travel
expenses incurred by the AO are their responsibility. The training sessions are
usually scheduled beginning the second Wednesday of each month.
8f. NEW CLIENT SOLICITATION: AO agrees to actively solicit new members for
enrollment into the IBC system and to actively manage the client base. A minimum
of 100 active clients should be reached during the first year of IBC membership.
AO must grow by a minimum of 10% per year. Further details of client
solicitation are contained in the Operations Manual.
8g. PAYMENT PROCESSING: All checks, cash and other monetary forms of payment
received by the AO from the IBC client base must be mailed to the IBC Data
Processing Center on the same day received. Procedures covering this program are
covered in detail in the Operations Manual.
8h. MARKETING/SALES: The Operations Manual contains information relative to
these programs and should be reviewed in detail.
8i. LOCAL, STATE AND FEDERAL LAWS: The AO agrees and acknowledges that they will
conduct their business in full compliance of all laws, ordinances and
regulations and further agrees it will abide by all IRS regulations with
reference to their business entity. IBC will file 1099-B forms to the federal
government, as required by law, on magnetic media and mail forms to each IBC
client.
8j. INDEMNIFICATION AND HOLD HARMLESS: AO shall indemnify and hold harmless IBC,
its agents, employees, officers, shareholders and directors from and against any
and all fines, penalties, losses, costs, damages, injuries, claims, expenses or
other liabilities arising out of, resulting from or in connection with this
Agreement of the performance of this Agreement and caused by the acts or
omissions, negligent or otherwise, of AO, employees or agents. This shall
include, but is not limited to, claims of third parties arising out of or
resulting from or in connection with the rendering of advice, information,
services or consultation by AO to customers of IBC.
8k. A Board of Governors consisting of Area Offices will handle arbitration and
mediation between AO's. The Board will be elected annually by a vote of the
AO's.
NON COMPETITION:
6
<PAGE> 7
9a. During the term of this Agreement and for two (2) years after its
termination, AO shall not engage in any business competitive with IBC. For the
purpose of this Paragraph, a "competitive" business means the franchising,
licensing, operation, or provision of record keeping, counseling, and
promotional services in connection with trade transactions and any form of trade
membership system within a fifty (50) mile radius of the business address of any
office of IBC or its brokers.
DEFAULT AND TERMINATION; REMEDIES
TERMINATION:
10a. Either party may terminate this Agreement by giving the other 30 days
advance written notice of its intent to terminate this Agreement. Termination
shall be effective at the end of the 30-day period.
Either party may terminate this Agreement at any time for failure of the
other to comply with the terms and conditions of this Agreement. If AO violates
the provisions of this Agreement, IBC may immediately terminate this Agreement
without further obligation except to pay AO compensation for services, which
have been delivered in accordance with the terms of this Agreement.
AO'S FAILURE TO PERFORM:
11a. If AO fails to perform any act of acts required by this Agreement, IBC has
the right, but not the obligation, to perform the act or acts on behalf of AO
and may charge to AO all expenses, including salaries and reasonable attorney's
fees incurred by IBC. IBC may not act on behalf of AO pursuant to this Section,
unless it has given AO five days notice of intent to do so and AO has not
remedied the failure.
LITIGATION:
12a. If either party is the prevailing party in any arbitration, suit, action or
appeal, the other party, in addition to any other damages being awarded, shall
pay the prevailing party all its expenses for the prosecution or defense of the
arbitration, suit, action or appeal including, but not limited to, reasonable
attorney's fees, cost of preparation, and all other actual expenses incurred by
the prevailing party including any expenses necessarily incurred to enforce the
judgment.
MISCELLANEOUS:
ILLEGALITY:
7
<PAGE> 8
13a. AO acknowledges that IBC will add numerous Area Offices though out the
United States and Canada on terms and conditions similar to those set forth in
this Agreement. It is of mutual benefit to AO and to IBC that these terms and
conditions are uniformly interpreted. If any provision of this Agreement is or
shall become in conflict with laws, ordinances or regulations of any
governmental entity or body having jurisdiction over this Agreement, the
provision shall be automatically deleted and the remaining terms and conditions
of this Agreement shall remain in full force and effect.
ENTIRE AGREEMENT; MODIFICATION:
14a. This Agreement constitutes the entire agreement of the parties into which
all prior negotiations, commitments, representations and undertakings are
merged. There are no oral or other written understandings or agreements between
the parties relating to the subject matter of this Agreement.
14b. No addition or modification of this Agreement shall be binding unless in
writing signed by both IBC and AO. No course of dealing may be used to imply or
impose any consent to modification of this Agreement.
PERSONAL EFFORT:
15a. AO acknowledges that IBC has made no warranties or representations other
than those contained in this Agreement. Because of the highly competitive nature
of the business involved, AO understands that the success of the IBC brokerage
will depend upon the best efforts and abilities of, and management by, AO, as
well as general economic trends and other local conditions.
REPRESENTATION:
16a. The AO acknowledges that it has read and fully understands the content of
this agreement and that no person has made any other representation, which is
not expressly set forth in this agreement. AO acknowledges it has received and
fully understands the entire IBC Operations Manual.
INTERNATIONAL BARTER CORP. AREA OFFICE
By Steven White By Vonnie Reed
----------------------------------- -------------------------
(President & Chief Executive Officer) Area Office/Spokane
Print Steven White Print Vonnie Reed
-------------- -------------
Date 2/15/98 Date 2/15/98
--------- ----------
8
<PAGE> 1
EXHIBIT 99.J
AREA OFFICE
AGREEMENT
International Barter Corp.
21400 International Blvd. Suite 207
Seattle, Washington 98198-6086
AREA OFFICE AGREEMENT
<PAGE> 2
PARTIES:
International Barter Corporation (IBC)
a Nevada Corporation
21400 International Blvd., Suite 206
Seattle, WA. 98198-6086
Dr. Dennis Cozzocrea
- ----------------------------
IBC Central Washington
- ----------------------------
Yakima, WA (Area Office (AO)
- ----------------------------
EFFECTIVE DATE: 4/7/98
RECITALS:
A. IBC has developed and established a Trade Exchange for retail and corporate
businesses utilizing a computerized system for tracking barter transactions.
B. IBC owns the "IBC" trade name and other proprietary marks. IBC has registered
the proprietary marks with the U.S. Trademark Office.
C. Area Office desires to enroll into the IBC system and actively solicit and
service IBC client members in their geographic locale.
AGREEMENT:
IBC hereby agrees to allow Area Office (AO) to operate under the IBC name and
manage the area designated IBC Central, subject to the following stipulations:
1a. AO is not an employee of IBC and is not entitled to any of the benefits IBC
may bestow upon IBC employees.
1b. The term of this agreement begins upon the date of execution by both parties
and continues until either party advises the other by 30 days written notice of
its intent to terminate this agreement.
1c. The AO shall maintain an office in a suitable location conducive to
conducting professional business with customers and clients of IBC.
1d. AO is an `independent contractor' of IBC. AO is responsible for paying all
state, local, federal and employee tax's on him/herself or other employees. AO
is not an agent or employee of IBC for any purpose and the employees of AO are
not entitled to any of the benefits IBC provides IBC employees.
INCOME AND FEES:
2
<PAGE> 3
2a. SERVICE FEES: IBC currently charges 12% cash on purchases to all AO clients
made through the IBC system, 10% cash if paid by automatic deposit by bank or
credit card. AO retains 75% of these fees.
2b. MEMBERSHIP FEES: IBC suggested membership fee for clients entering the IBC
system is $495 cash. AO retains 100% of this fee.
2c. MONTHLY MAINTENANCE FEES: IBC charges clients $15 cash and $15 trade per
month as a maintenance fee. AO retains $10 cash and $10 trade of these fees.
2d. LATE CHARGES: IBC charges client's $10 cash or 1 1/2% per month for all cash
fees that are 30 days past due. AO retains75% of these fees. AO can reverse late
fees, with written documentation to IBC and IBC approval.
2e. INTEREST CHARGES: IBC charges clients 1% trade per month for all clients who
are in a negative balance for a loan loss reserve. IBC has set up a national
`reserve fund' for AO's to keep the IBC system balanced. IBC retains this charge
exclusively for bad debt. If a surplus of trade dollars occurs in the loan loss
reserve or acquisition float accounts the INTEREST CHARGE will either be reduced
or eliminated.
2f. MONTHLY MINIMUM: Area Office monthly minimum is $500 cash to maintain an
area. The percentage paid to AO first comes from monthly maintenance fees and
second from service fees. For the first 90 days, this minimum cash guarantee is
reduced to $250 per month.
2g. (INTENTIONALLY LEFT BLANK)
RECIPROCAL TRADE AGREEMENTS:
(INTENTIONALLY LEFT BLANK)
CONFIDENTIALITY:
4a. Area Office recognizes and acknowledges that the services, which AO performs
for IBC, will be of a confidential nature, that the goodwill of IBC depends,
among other things, on keeping the nature of such services, and information
related to such services, confidential. Unauthorized disclosure would
irreparably damage IBC. The names of IBC clients, client account activities and
other information provided to AO are and shall remain the exclusive property of
IBC and are of great value to IBC and the IBC system.
4b. AO agrees that at no time will AO undertake efforts to solicit or otherwise
agree privately with IBC customers to provide individual consultation and
support related to any other barter program other than the IBC system.
3
<PAGE> 4
4c. Upon termination of this agreement, AO shall return to IBC all information,
brochures, client materials, hardware, software and other items relating to the
IBC system.
4d. AO will assure that the employees and agents of AO who obtain confidential
information do not disclose the information except as may be authorized by IBC.
COMPUTER EQUIPMENT AND SOFTWARE:
5a. AO will utilize computer equipment, which is IBM compatible with the
technology used by IBC. IBC will provide the necessary software for record
keeping and the cost to use the software will be included in the original set-up
fee.
IBC software will constantly be upgraded with the latest technology and
will be a major key in the AO's success.
5b. Software Licensing Agreement is wholly owned by IBC. AO has rights to
utilize software as long as AO is in good standing with IBC.
5c. (INTENTIONALLY LEFT BLANK)
5d. (INTENTIONALLY LEFT BLANK)
5e. (INTENTIONALLY LEFT BLANK)
SET-UP FEE:
6a. The initial set-up fee for enrollment into the IBC system as an Area Office
is $2,500.00 cash. This fee is payable upon execution by the AO of this
agreement unless other arrangements are made and referenced to this agreement by
addendum.
6b. AO receives computer software, rights to IBC logo, internal and external
forms, marketing plans and consultation for this fee.
6c. Included in this set-up fee are the following:
-Initial supply of letterhead and envelopes
-Initial supply of Business cards
-Weekly distribution of the Hotlist & Trader
-Annual Membership Directory
-Initial supply of IBC Trade Slips
RIGHT OF INSPECTION:
7a. IBC shall have access to the premises of AO at all times to inspect place of
business and to verify compliance with this Agreement. Inspection shall be
during AO's normal
4
<PAGE> 5
business hours without advance notice. At the time of inspection, IBC shall give
advice and assistance regarding AO's operations and recommendations for
educational training programs. AO shall cooperate with IBC representatives at
the time of inspection and shall provide IBC with access to AO's books and
records and for an audit, if IBC, in its sole discretion, deems an audit
necessary.
OTHER AGREEMENTS:
8a. USE OF IBC NAME AND LOGO: AO will be allowed and expected to use the IBC
logo on all business forms used in soliciting and maintaining trade clients in
the IBC system. Use of the IBC logo in non-IBC related business is prohibited.
8b. ADVERTISING: IBC will provide, at IBC's expense, artwork for standard ads,
which can be used for print media in a variety of sizes
8c. OPERATIONS MANUAL: IBC will provide a manual describing the guidelines of
IBC's operations, sales and marketing programs. The manual will be amended as
necessary and will, due to its proprietary nature, remain the exclusive property
of IBC. The manual is designed to aid the AO and its staff in the establishment
and administration of its office.
8d. STATEMENTS AND FORMS: IBC will provide original artwork for all printed
materials containing the IBC name and logo.
8e. EDUCATION AND TRAINING: IBC will schedule a 3 day training program to be
normally held at IBC Headquarters, although at the sole discretion of IBC, it
could be scheduled at the AO location or other selected site. All travel
expenses incurred by the AO are their responsibility. The training sessions are
usually scheduled beginning the second Wednesday of each month.
8f. NEW CLIENT SOLICITATION: AO agrees to actively solicit new members for
enrollment into the IBC system and to actively manage the client base. A minimum
of 100 active clients should be reached during the first year of IBC membership.
AO should strive to grow by a minimum of 10% per year. Further details of client
solicitation are contained in the Operations Manual.
8g. PAYMENT PROCESSING: All checks, cash and other monetary forms of payment
received by the AO from the IBC client base must be mailed to the IBC Data
Processing Center by the end of the next business day. Procedures covering this
program are covered in detail in the Operations Manual.
8h. MARKETING/SALES: The Operations Manual contains information relative to
these programs and should be reviewed in detail.
5
<PAGE> 6
8i. LOCAL, STATE AND FEDERAL LAWS: The AO agrees and acknowledges that they will
conduct their business in full compliance of all laws, ordinances and
regulations and further agrees it will abide by all IRS regulations with
reference to their business entity. IBC will file 1099-B forms to the federal
government, as required by law, on magnetic media and mail forms to each IBC
client.
8j. INDEMNIFICATION AND HOLD HARMLESS: AO shall indemnify and hold harmless IBC,
its agents, employees, officers, shareholders and directors from and against any
and all fines, penalties, losses, costs, damages, injuries, claims, expenses or
other liabilities arising out of, resulting from or in connection with this
Agreement of the performance of this Agreement and caused by the acts or
omissions, negligent or otherwise, of AO, employees or agents. This shall
include, but is not limited to, claims of third parties arising out of or
resulting from or in connection with the rendering of advice, information,
services or consultation by AO to customers of IBC.
8k. A Board of Governors consisting of Area Offices will handle arbitration and
mediation between AO's. The Board will be elected annually by a vote of the
AO's.
8l. COLLECTION ACCOUNTS: In the event IBC Corporate deems it necessary to refer
a past due receivable to an attorney for collection and possible litigation, the
account will be removed from the A/O's receivables and will be followed in the
Corporate office. In the event the account is reinstated as an active IBC
client, the receivable may be returned to the A/O.
NON COMPETITION:
9a. During the term of this Agreement and for two (2) years after its
termination, AO shall not engage in any business competitive with IBC. For the
purpose of this Paragraph, a "competitive" business means the franchising,
licensing, operation, or provision of record keeping, counseling, and
promotional services in connection with trade transactions and any form of trade
membership system within a fifty (50) mile radius of the business address of any
office of IBC or its brokers.
DEFAULT AND TERMINATION; REMEDIES
TERMINATION:
6
<PAGE> 7
10a. Either party may terminate this Agreement by giving the other 30 days
advance written notice of its intent to terminate this Agreement. Termination
shall be effective at the end of the 30-day period.
Either party may terminate this Agreement at any time for failure of the
other to comply with the terms and conditions of this Agreement. If AO violates
the provisions of this Agreement, IBC may immediately terminate this Agreement
without further obligation except to pay AO compensation for services, which
have been delivered in accordance with the terms of this Agreement.
10b. In the event, after 24 months from the date of this agreement and providing
there are no violations of this agreement in effect, if either party of this
agreement desires to terminate this agreement, the following formula will be in
effect for compensating the Area Office for termination: IBC will pay the Area
Office thirty seven and one-half percent (37 1/2%) of the previous last 12
months gross cash fees collected, excluding cash membership fees collected. This
figure will be paid in IBC Stock.
AO'S FAILURE TO PERFORM:
11a. If AO fails to perform any act of acts required by this Agreement, IBC has
the right, but not the obligation, to perform the act or acts on behalf of AO
and may charge to AO all expenses, including salaries and reasonable attorney's
fees incurred by IBC. IBC may not act on behalf of AO pursuant to this Section,
unless it has given AO five days notice of intent to do so and AO has not
remedied the failure.
LITIGATION:
12a. If either party is the prevailing party in any arbitration, suit, action or
appeal, the other party, in addition to any other damages being awarded, shall
pay the prevailing party all its expenses for the prosecution or defense of the
arbitration, suit, action or appeal including, but not limited to, reasonable
attorney's fees, cost of preparation, and all other actual expenses incurred by
the prevailing party including any expenses necessarily incurred to enforce the
judgment.
MISCELLANEOUS:
ILLEGALITY:
7
<PAGE> 8
13a. AO acknowledges that IBC will add numerous Area Offices though out the
United States and Canada on terms and conditions similar to those set forth in
this Agreement. It is of mutual benefit to AO and to IBC that these terms and
conditions are uniformly interpreted. If any provision of this Agreement is or
shall become in conflict with laws, ordinances or regulations of any
governmental entity or body having jurisdiction over this Agreement, the
provision shall be automatically deleted and the remaining terms and conditions
of this Agreement shall remain in full force and effect.
ENTIRE AGREEMENT; MODIFICATION:
14a. This Agreement constitutes the entire agreement of the parties into which
all prior negotiations, commitments, representations and undertakings are
merged. There are no oral or other written understandings or agreements between
the parties relating to the subject matter of this Agreement.
14b. No addition or modification of this Agreement shall be binding unless in
writing signed by both IBC and AO. No course of dealing may be used to imply or
impose any consent to modification of this Agreement.
PERSONAL EFFORT:
15a. AO acknowledges that IBC has made no warranties or representations other
than those contained in this Agreement. Because of the highly competitive nature
of the business involved, AO understands that the success of the IBC brokerage
will depend upon the best efforts and abilities of, and management by, AO, as
well as general economic trends and other local conditions.
REPRESENTATION:
16a. The AO acknowledges that it has read and fully understands the content of
this agreement and that no person has made any other representation, which is
not expressly set forth in this agreement. AO acknowledges it has received and
fully understands the entire IBC Operations Manual.
INTERNATIONAL BARTER CORP. AREA OFFICE
By Dick Mayer By Dennis Cozzocrea
--------------------- -------------------------
(VP of Marketing) Area Office
Print R L Mayer Print Dennis Cozzocrea
------------------ ----------------------
Date 4-7-98 Date 4-7-98
------------------- -----------------------
8
