<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
JUNE 30, 1998
Commission File Number: 0-24005
INTERNATIONAL BARTER CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada, 91-1739746
- ------------------------ ------------------------
(Place of Incorporation) (IRS Employer ID Number)
21400 International Blvd. #207, Seattle, Washington 98198
---------------------------------------------------------
(Address of registrant's principal executive office)
(206) 870-9290
--------------
(Registrant's telephone number)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Number of Shares of Common Stock, $0.001 Par Value Outstanding at
October 1, 1998
4,883,200
1
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INTERNATIONAL BARTER CORP.
FOR THE QUARTER ENDED
JUNE 30, 1998
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets:
- June 30, 1998 and March 31, 1998.....................................3
Consolidated Statements of Operations:
- For the Three Months Ended
June 30, 1998 and June 30, 1997......................................4
Consolidated Statements of Cash Flow:
- For the Three Months Ended
June 30, 1998 and June 30, 1997......................................5
Notes to Consolidated Financial Statements ....................................6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................8
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds..............................13
Item 6. Exhibits and Reports on Form 8-K.......................................13
</TABLE>
2
<PAGE> 3
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND MARCH 31, 1998
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1998 1998
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 502,743 $ 382,564
Accounts receivable, net of allowance for
doubtful accounts of $3,102 and $1,956
for 1998 and 1997, respectively 57,987 63,259
Trade Dollars earned in excess of issued 25,434 --
Notes receivable - current 2,406 2,406
Other current assets 1,162 571
--------- ---------
Total Current Assets 589,732 448,800
--------- ---------
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation 42,234 42,259
--------- ---------
OTHER ASSETS
Notes receivable - noncurrent 32,688 32,791
Deposits 1,200 1,200
--------- ---------
Total Other Assets 33,888 33,991
--------- ---------
$ 665,854 $ 525,050
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,614 $ 9,274
Commitments and contingencies -- --
Trade Dollars issued in excess of earned -- 5,439
Current portion of long-term debt 11,387 13,074
Other current liabilities 5,681 7,683
--------- ---------
Total Current Liabilities 18,682 35,470
--------- ---------
LONG-TERM DEBT 17,258 19,097
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; authorized 25,000,000 shares; issued and
outstanding 2,019,500 shares and 1,916,450 shares as of June 30, 1998 and
March 31,
1998, respectively (4,039,000 shares and 3,832,900 2,020 1,916
shares, respectively giving effect to stock split)
Additional paid-in capital 632,831 542,535
Subscribed shares, 97,750 shares and 50,000 shares as
of June 30, 1998 and March 31, 1998, respectively (195,000 shares
and 100,000 shares, respectively giving effect to stock-split) 97,750 37,500
Accumulated deficit (102,687) (111,468)
--------- ---------
Total Stockholders' Equity 629,914 470,483
--------- ---------
$ 665,854 $ 525,050
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
REVENUE $ 148,511 $ 160,686
COST OF SALES 17,166 46,889
----------- -----------
Gross Profit 131,345 113,797
----------- -----------
OPERATING EXPENSES
Selling, general and administrative 123,301 139,649
Depreciation 2,657 2,270
----------- -----------
Total Operating Expenses 125,958 141,919
----------- -----------
Income (Loss) from Operations 5,387 (28,122)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income 4,239 1,775
Interest expense (1,436) (1,297)
----------- -----------
Total Other Income (Expense)-net 2,803 478
----------- -----------
Net Income (Loss) Before Income Taxes 8,190 (27,644)
Income Tax Expense (Benefit) (591) --
----------- -----------
Net Income (Loss) $ 8,781 $ (27,644)
=========== ===========
Average Common and Equivalent Shares:
Basic 2,049,783 1,550,000
=========== ===========
Diluted 2,206,617 1,550,000
=========== ===========
Net Income (Loss) Per Common Share:
Basic $ .00 $ (.02)
=========== ===========
Diluted $ .00 $ (.02)
=========== ===========
Giving Effect to Stock-Split:
Average Common and Equivalent Shares
Basic 4,099,566 3,100,000
=========== ===========
Diluted 4,413,232 3,100,000
=========== ===========
Net Income (Loss) Per Common Share
Basic $ .00 $ (.01)
=========== ===========
Diluted $ .00 $ (.01)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) $ 8,781 $ (27,644)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation 2,657 2,270
Stock issued for services -- --
Deferred income taxes (591) (351)
Net trade revenue earned over trade costs (30,873) 2,190
Changes in operating assets and liabilities:
Accounts receivable 5,272 (1,802)
Contracts receivable 103 240
Prepaids and other assets -- --
Accounts payable and other liabilities (9,662) (2,079)
--------- ---------
Net Cash Used by Operating Activities (24,313) (27,176)
--------- ---------
CASH USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment (2,632) (19,681)
--------- ---------
Net Cash Used by Investing Activities (2,632) (19,681)
--------- ---------
CASH PROVIDED BY FINANCING
ACTIVITIES:
Proceeds from sale of common stock 150,650 --
Proceeds from long-term debt -- 12,941
Repayment of notes payable (3,526) (4,606)
--------- ---------
Net Cash Provided by Financing Activities 147,124 8,335
--------- ---------
Net Increase (Decrease) in Cash 120,179 (38,522)
Cash at Beginning of Period 382,564 162,327
--------- ---------
Cash at End of Period $ 502,743 $ 123,805
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 1,436 $ 1,297
Cash paid for income taxes -- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three-month periods ended June 30, 1998 and
1997 are not necessarily indicative of the results to be expected for the full
year. The Notes to Consolidated Financial Statements included in the Company's
March 31, 1998 registration statement on Form 10-SB should be read in
conjunction with these consolidated financial statements.
NOTE 2 - TRADE DOLLARS
At June 30, 1998, the Company had earned 25,434 IBC Trade Dollars in excess of
the amount of Trade Dollars expended by the Company. The Company has classified
the net positive Trade Dollar balance as a current asset because the Company
expects to utilize the full amount within the 12 months following the balance
sheet date. At March 31, 1998, the Company had expended 5,439 IBC Trade Dollars
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". Trade Dollars expended in excess of earned by the Company is provided
for in the IBC Trading Rules that govern the Exchange. Such provisions allow the
Company to expend Trade Dollars in excess of earned within certain guideline
amounts. The Company would be ultimately obligated to provide goods and services
for sale to Exchange members to offset any amounts of Trade Dollars expended in
excess of earned.
NOTE 3 - CAPITAL STOCK
During the quarter ended June 30, 1998, "A" and "B" warrants were exercised for
103,050 common shares of which 97,750 shares remained unissued at June 30, 1998.
At June 30, 1998, the number of warrants issued and outstanding were as follows:
"A" warrants - 62,000, "B" warrants - 188,500, "C" warrants - 120,000, and "D"
warrants - 120,000.
NOTE 4 - 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.
On July 9, 1998, the Board of Directors passed a resolution for a 2-for-1 stock
split of the Company's common stock to be distributed to shareholders of record
after the close of market on July 24, 1998. In order to properly reflect
earnings per share on a prospective basis, the Company has provided earnings per
share disclosures assuming the stock split had occurred retroactively, along
with the earnings per share disclosures based upon actual shares outstanding as
of June 30, 1998 and March 31, 1998.
6
<PAGE> 7
INTERNATIONAL BARTER CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - INCOME (LOSS) PER SHARE (CONTINUED)
Following is a reconciliation of the numerators of the basic and
diluted income (loss) per share for the quarters ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------- -------------
<S> <C> <C>
Net income (loss) available to
common stockholders $ 8,781 $ (27,644)
========== =============
Weighted average shares 2,049,783 1,550,000
Effect of dilutive securities:
Warrants 156,833 --
---------- -------------
2,206,617 1,550,000
========== =============
Basic income (loss) per share (based on
weighted average shares) $ .00 $ (.02)
========== =============
Diluted income (loss) per share $ .00 $ (.02)
========== =============
Giving Effect to Stock Split:
Weighted average shares 4,099,566 3,100,000
Effect of dilutive securities:
Warrants 313,666 --
---------- -------------
4,413,232 3,100,000
========== =============
Basic income (loss) per share (based on
weighted average shares and giving effect to stock-split) $ .00 $ (.01)
========== =============
Diluted income (loss) per share (giving effect to stock-split) $ .00 $ (.01)
========== =============
</TABLE>
NOTE 5 - REVENUE
The following table summarizes the cash and trade (consisting of IBC
Trade Dollars) components of revenue for the quarters ended 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Trade $ 70,185 $ 91,297
Cash 78,326 70,248
-------- --------
$148,511 $161,545
======== ========
</TABLE>
NOTE 6 - STOCK OPTION PLAN
The Company adopted a Stock Option Plan (Plan) effective June 1, 1998 whereby,
stock options for up to 20% 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 5 years.
NOTE 7 - SUBSEQUENT EVENTS
A brokerage account was opened and funded for the sole purpose of repurchasing
up to 250,000 shares of the Company's common stock in the open market. As of
September 22, 1998, no shares have been repurchased.
As explained in Note 4, on July 9, 1998, the Board of Directors passed a
resolution for a 2-for-1 stock split of the Company's common stock to be
distributed to shareholders of record after the close of market on July 24,
1998. Earnings per share disclosures have been presented on both a "pre-split"
and "post-split" basis.
7
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying consolidated financial
statements.
RESULTS OF OPERATIONS:
Three Months Ended June 30, 1998 compared to the Three Months Ended June 30,
1997:
OVERALL OPERATING RESULTS
Revenues are generally derived from transaction fees charged (cash and trade)
based upon a percentage of the dollar amount of client trades. Total revenue
decreased 8% to $148,511 in the first quarter of fiscal 1998 from $160,686 in
the first quarter of fiscal 1997. The Company had a net income from operations
of $5,387 in the first quarter of fiscal 1998 and a net loss from operations of
$28,122 in the first quarter of 1997. The Company's gross margin increased to a
gross profit of $131,345 in the first quarter of 1998 from $113,797 in the first
quarter of fiscal 1997.
The gross margin in the first quarter of fiscal 1998 was much higher than the
gross margin in the first quarter of fiscal 1997 for the following reasons: The
Company sells inventory on consignment from its showroom. In the first quarter
of fiscal 1997, the Company focused on selling all of its showroom inventories
and did not rebuild them in fiscal 1998. There was therefore, a decrease in
revenue from sales of showroom inventory from fiscal 1997 to 1998. Since the
gross profit on sales of showroom inventory is much lower than from other types
of revenues, the gross margin was higher in the first quarter of 1998 than it
was in the first quarter of 1997.
The Company reported net income of $8,781, or $0.00 per share (rounded to the
nearest penny) ($.0.00 per share assuming stock-split), in the first quarter of
fiscal 1998 and a net loss of $27,644, or $0.02 per share ($0.01 per share
assuming stock-split) in the first quarter of fiscal 1997.
REVENUE
Total Revenue. Total revenue decreased 8% to $148,511 in the first quarter of
fiscal 1998 from $160,686 in the first quarter of fiscal 1997. Following, is a
summary of the components of revenue for the first quarters of fiscal 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Trade $ 70,185 $ 91,297
Cash 78,326 70,248
-------- --------
$148,511 $161,545
======== ========
</TABLE>
Trade Exchange Revenue. In the first quarter of fiscal 1998, the Company's
revenue from its core retail trade exchange business was $148,511, down from the
revenue in the first quarter of fiscal 1997. The Company focused on selling all
of its showroom inventories in the first quarter of 1997 and did not rebuild its
inventories in the first quarter of 1998. Total revenues decreased in the first
quarter of fiscal 1998 from the first quarter of fiscal 1997 due to a planned
decrease in revenues from the sale of showroom inventories.
8
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
COSTS, EXPENSES AND GROSS MARGINS
Costs of Trade Exchange Revenue. Costs of trade exchange revenue decreased to
$17,166 in the first quarter of fiscal 1998 from $46,889 in the first quarter of
fiscal 1997. The gross margin from trade exchange operations was $131,345 in the
first quarter of fiscal 1998 as compared to $113,797 in the first quarter of
fiscal 1997. Costs of trade exchange revenue were 12% of trade exchange revenue
in the first quarter of fiscal 1998 and 29% in the first quarter of fiscal 1997.
The reduced 1997 gross margin is attributable to the sale of inventory on
consignment from the Company's showroom, as discussed above.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including depreciation) decreased from $141,919 in the
first quarter of fiscal 1997 as compared to $125,958 in the first quarter of
fiscal 1998. The decrease was primarily attributable to a reduction in costs for
contract labor and software. One of the advantages available to barter
businesses is the ability to pay a significant portion of its operating costs
such as graphic design, advertising and printing using Trade Dollars. The
accumulated deficit at June 30, 1998 was $102,687, compared to $111,468 at March
31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company's working capital ratio was 31.6 to 1, based on
current assets of $589,732 and current liabilities of $18,682. The Company's
working capital ratio at March 31, 1998, was 12.7 to 1, based on current assets
of $448,800 and current liabilities of $35,470. The improvement in working
capital resulted primarily from the following factors:
(a) An increase in the Company's cash to $502,743 at June 30, 1998, from
$382,564 at March 31, 1998. This was primarily attributable to proceeds
from a private placement of its common stock from which the Company
received net proceeds of $72,000 and the exercise of warrants for which the
Company received net proceeds of $377,500.
(b) An increase in the Company's net IBC retail trade credits earned, which
increased the Company's account in the IBC Retail Exchange at June 30, 1998
to 25,434 Trade Dollars from a trade deficit of 5,439 Trade Dollars at
March 31, 1998. The Company has classified the net positive Trade Dollar
balance at June 30, 1998 as a current asset because the Company expects to
utilize the full amount within the next twelve months.
Total stockholders' equity increased to $629,914 at June 30, 1998, from $470,483
at March 31, 1998. This increase was primarily attributable to the following
factors:
(a) Profitable operations of the Company.
(b) Cash of $449,500 provided by the financing activities of the Company.
During the first quarter of 1998, the Company reported net cash used in
operations of $24,313 in the statement of cash flows, as compared to cash used
in operations of $27,176 in the first quarter of 1997. The decrease in cash used
in operations was primarily attributable to increased profitability in the first
quarter of 1998 over the first quarter of 1997.
9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
DEVELOPMENT ACTIVITIES
UBARTER. "Ubarter.com" (Ubarter) is an internet website for electronic barter
trading that was launched by the Company on July 20, 1998. The software, was at
that time, largely in the development stage and had design flaws that made
transacting trades somewhat cumbersome for the user. As a result, registration
was moderate and the project got off to a slow start. On September 9, 1998, an
updated version was released with major improvements and gave the website a new
"look and feel". The Company intends to invest much of its available resources
into the future development of Ubarter in order to attract a significant share
of the related internet commerce market.
The Company expects to experience negative cash flow and operating losses from
its investment of working capital during the development period, after which
positive cash flow and profitability is expected. Two full time personnel have
been hired by the Company to work almost exclusively on the future development
of Ubarter. The market focus of Ubarter is to draw customers who presently
engage in traditional barter transactions and to attract new customers who may
be unfamiliar with the barter concept but routinely engage in electronic
commerce. The ultimate goal of Ubarter is to provide a central, worldwide
clearinghouse for electronic barter transactions. However, there can be no
assurance that adequate funds from operations or investors will be available to
successfully complete the project as planned.
TRADE EXCHANGE ACQUISITIONS. The Company also intends to devote significant
financial and human resources to a strategic plan of acquiring existing
profitable barter trade exchanges in the United States and in other selected
countries throughout the world. Such acquisitions could result in negative cash
flows and operating losses initially but are expected to provide positive cash
flows and increase the overall profitability of the Company. However, there can
be no assurance that adequate funds will be available to successfully acquire
additional barter trade exchanges as planned.
DISCUSSION OF THE YEAR 2000 ISSUE
Background. Many computer programs have been written using two digits rather
than four to identify the year. Any computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. This situation is commonly referred as "Y2K".
Scope and Impact of Y2K on the Company.
The Company utilizes both proprietary software and software provided by outside
vendors which may be impacted by the Y2K problem. The operation of the IBC
Retail Trade Exchange is dependent upon the proper functioning of its computer
software. Management has assessed the potential impact of the Y2K issue on the
Company and does not believe that the Company's business, operations or
financial condition will be materially impacted by the Y2K issue as it relates
to the Company's proprietary software. Furthermore, it is expected that
potential impact of third parties' failure would not have a material impact on
the Company's business, operations or financial condition.
10
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Remediation plans. The Company's software vendor has begun reprogramming of its
proprietary software which is approximately 40% completed. The remaining portion
is mainly related to a small segment of data fields. The Company anticipates
that the project will be completed sometime in the first quarter of 1999. The
cost of such reprogramming is not material and is not expected to have a
material effect on the Company's results of operations when incurred. With
respect to software supplied by third parties, the Company has determined that
such software is already Y2K compliant or will be compliant well before the year
2000 or, alternatively, that any such software will be replaced at a cost which
is not material to the Company's results of operations.
Uncertainties and Contingencies. The Company presently believes that with
modifications to existing software and conversions to new software, the Y2K
issue can be mitigated. However, even if such modifications or conversions are
not made, or are not completed timely, the Company would be able to continue
operations manually. This would result in more cumbersome and less efficient
operations but is not expected to have a material effect on the Company's
business, operations or financial condition.
However, there is no guarantee that the software of other companies on which the
Company's software relies will be timely converted, or that a failure to convert
by another company, or a conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company and its
operations.
The materiality of the costs of becoming Y2K compliant and the date upon which
the Company plans to complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
from those plans. Specific factors that might cause such differences include,
but are not limited to, the availability and cost of personnel trained in this
area, the ability to locate and correct all relevant computer codes, and similar
uncertainties.
FORWARD LOOKING INFORMATION
Except for disclosures that report the Company's historical results, the
statements set forth in this sections contain forward-looking statements. 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" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the Reform Act).
Actual results could differ materially form those projected in forward-looking
statements. Additional information and factors that could cause actual results
to differ materially from those in the forward-looking statements are set forth
in this Form 10-QSB, and in the section entitled "Risk Factors" in the Company's
Form 10-SB on file with the Securities and Exchange Commission. The Company
desires to take advantage of certain provisions in the Private Securities
Litigation Reform Act of 1995, that provided a safe harbor for forward-looking
statements made by or on behalf of the Company. The Company hereby cautions
stockholders, prospective investors in the Company, and other readers to not
place undue reliance on these forward-looking statements, which can only address
known events as of the date of this report.
11
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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: 1)
variations in the mix of revenues, 2) possible inability of the Company to
attract investors for its investor securities or otherwise raise adequate funds
from any source, 3) increased governmental regulation of the barter industry,
and 4) a decrease in the cash fees and commissions realized by the Company based
upon a substantial decrease in retail trade exchange transactions.
INFLATION
The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a significant effect on its
operations in the future.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
During the quarter ended June 30, 1998, "A" and "B" warrants were exercised for
103,050 common shares of which 97,750 shares remained unissued at June 30, 1998.
The issuances of common stock on or before June 5, 1998, were deemed to be
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended ("Securities Act"), in reliance upon Rule 504 of Regulation D
promulgated under the Securities Act. Subsequent to June 5, 1998, the issuances
of common stock to investors upon exercise of warrants were deemed to be either
exempt from registration under the Securities Act in reliance on Section 4(2) of
the Securities Act as transactions by an issuer not involving any public
offering, or issued in violation of Section 5 of the Securities Act. The
recipients of securities in each such transaction had pre-existing relationships
with the Company, were not contacted through advertising or general
solicitation, and had adequate access, through their relationships with the
Company, to information about the Company.
(2) Pursuant to the Company's 1998 Stock Option Plan, the Company granted stock
options to eleven persons, consisting of directors, officers, employees and
consultants, to purchase an aggregate total of 149,500 shares at an exercise
price of $1.625 per share. The granting of stock options did not require
registration under the Securities Act, or an exemption therefrom, since the
grants did not involve a "sale" as the term is used in Section 2(3) of the
Securities Act.
Item 6. Exhibits and Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter ended June
30, 1998. The exhibits filed as part of this report are listed below:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
(10.1.) Stock Option Plan
(10.2.) Form of Stock Option Agreement
</TABLE>
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
INTERNATIONAL BARTER CORP.
(Registrant)
Date: October 13, 1998
/s/ Stephen White
- ------------------------------------------------
Steven White, Chairman of the Board of Directors,
President and Chief Executive Officer (principal
executive officer and director)
Date: October 13, 1998
/s/ Kevin R. Andersen
- ------------------------------------------------
Kevin R. Andersen, Chief Financial Officer
(principal accounting officer)
14
<PAGE> 1
EXHIBIT 10.1
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, .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."
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.
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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 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.
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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.
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").
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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 such other corporation and the Company
or any subsidiary of the Company may be granted involving 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.
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:
<TABLE>
<CAPTION>
NUMBER OF YEARS PERCENTAGE OF TOTAL OPTION
FOLLOWING DATE OF GRANT TO BE EXERCISABLE
<S> <C>
1 50%
1.5 75%
2 100%
</TABLE>
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.
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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 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.
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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 assignees
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 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.
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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 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.
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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 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 Initial 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
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
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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
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.
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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 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.
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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 opportunity
to make appropriate arrangements to prosecute or defend the same.
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: _____________, 1998
International Barter Corp.
----------------------------------------
by:
Corporate Secretary
11
<PAGE> 1
EXHIBIT 10.2
INTERNATIONAL BARTER CORP.
STOCK OPTION AGREEMENT
NEITHER THIS OPTION NOR THE UNDERLYING SHARES OF COMMON STOCK HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"). THIS
OPTION OR THE UNDERLYING COMMON SHARES MAY NOT BE SOLD OR TRANSFERRED UNLESS:
(I) THERE IS AN EFFECTIVE REGISTRATION COVERING THE OPTION OR SHARES, AS THE
CASE MAY BE, UNDER THE SECURITIES ACT AND APPLICABLE STATES SECURITIES LAWS;
(II) THE COMPANY FIRST RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE
BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY
THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND
APPLICABLE STATES SECURITIES LAWS; OR, (III) THE TRANSFER IS MADE PURSUANT TO
RULE 144 UNDER THE SECURITIES ACT.
BETWEEN:
("Optionee")
AND
International Barter Corp. ("Company")
a Nevada corporation
1.0 RECITALS
1.1 The Company has adopted the 1998 Stock Option Plan ("Plan"),
incorporated herein by reference, that provides for the grant of options to
purchase shares of Common Stock ("Shares") of the Company. Unless otherwise
defined in this Agreement, the terms defined in the Plan shall have the same
defined meanings in this Agreement.
1
<PAGE> 2
2.0 NOTICE OF GRANT
2.1 Optionee has been granted an option to purchase Shares of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
GRANT NUMBER: _________________________
DATE OF GRANT: _________________________
VESTING COMMENCEMENT DATE: _________________________
EXERCISE PRICE PER SHARE: _________________________
TOTAL NUMBER OF SHARES GRANTED: _________________________
TOTAL EXERCISE PRICE: $________________________
TYPE OF OPTION: ___ Incentive Stock Option
___ Nonstatutory Stock Option
EXPIRATION DATE: _________________________
VESTING SCHEDULE: This Option may be exercised, in whole or in part, in
accordance with the following schedule: 100% of the Shares subject to the Option
shall immediately vest on the Vesting Commencement Date
TERMINATION PERIOD: This Option may be exercised for 90 days after
Optionee ceases to be a Service Provider. Upon the death or Disability of the
Optionee, this Option may be exercised for such longer period as provided in the
Plan. In no event shall this Option be exercised later than the Expiration Date
as provided above.
3.0 GRANT OF OPTION
3.1 Subject to the terms and conditions of the Plan and of this
Agreement, the Plan Administrators of the Company grant to the Optionee named
above an option ("Option") to purchase the number of Shares, as set forth above
in Section 2.0 entitled "Notice of Grant", at the exercise price per share set
forth above in Notice of Grant ("Exercise Price"). Subject to any mutual
amendments of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Agreement, the terms
and conditions of the Plan shall prevail.
3.2 If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonqualified Stock Option ("NQO").
2
<PAGE> 3
4.0 EXERCISE OF OPTION
4.1 Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set forth above in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.
4.2 Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A ("Exercise Notice"), which
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised ("Exercised Shares"), and such other
representations and agreements as may be required by the Company pursuant to the
provisions of the Plan. The Exercise Notice shall be completed by the Optionee
and delivered to the Company. The Exercise Notice shall be accompanied by
payment of the aggregate Exercise Price as to all Exercised Shares. This Option
shall be deemed to be exercised upon receipt by the Company of the fully
executed Exercise Notice accompanied by the aggregate Exercise Price.
5.0 COMPLIANCE WITH APPLICABLE LAW
5.1 No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with applicable state or federal law,
including securities laws, corporate laws, the Code or any stock exchange or
quotation system. If the Plan Administrators at any time determine that
registration or qualification of the Shares or the Option under state or federal
law, or the consent approval of any governmental regulatory body is necessary or
desirable, then the Option may not be exercised, in whole or in part, until such
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Plan Administrators.
Assuming compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
5.2 If required by the Company at the time of any exercise of the
Option in order to comply with federal or state securities laws, as a condition
to such exercise, the Employee shall enter into an agreement with the Company in
form satisfactory to counsel for the Company by which the Employee: (i) shall
represent that the Shares are being acquired for the Employee's own account for
investment and not with a view to, or for sale in connection with, any resale or
distribution of such Shares; and, (ii) shall agree that if the Employee should
decide to sell, transfer, or otherwise dispose of any such Shares, the Employee
may do so only if the Shares are registered under the Securities Act and the
relevant state securities law, unless, in the opinion of counsel for the
Company, such registration is not required, or the transfer is pursuant to the
Securities and Exchange Commission Rule 144.
3
<PAGE> 4
6.0 METHOD OF PAYMENT
6.1 Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) certified or cashier's check;
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(d) with the Plan Administrator's consent, surrender of other Shares
which (i) in the case of Shares acquired upon exercise of an option, have been
owned by the Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the aggregate
Exercise Price of the Exercised Shares; or
(e) with the Plan Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form approved by Plan Administrators, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of a Security Agreement in the form
approved by Plan Administrators. The Note shall bear interest at the "applicable
federal rate" prescribed under the Code and its regulations at time of purchase,
and shall be secured by a pledge of the Shares purchased by the Note pursuant to
the Security Agreement.
7.0 NON-TRANSFERABILITY OF OPTION
7.1 This Option may not be transferred in any manner otherwise than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of Optionee.
8.0 TERM OF OPTION
8.1 This Option may be exercised only within the term set forth above
in the Notice of Grant, and may be exercised during that term only in accordance
with the Plan and the terms of this Option Agreement.
9.0 TAX CONSEQUENCES
Some of the federal tax consequences relating to this Option, as of the
date of this Option, are set forth below. THIS SUMMARY IS INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
9.1 Exercising the Option.
9.1.1 Nonqualified Stock Option. The Optionee may incur regular federal
income tax liability upon exercise of a NQO. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is an
Employee or a former Employee, the Company will be required to withhold from his
or her compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if these withholding amounts are not delivered at the time of
exercise.
4
<PAGE> 5
9.1.2 Incentive Stock Option. If this Option qualifies as an ISO, the
Optionee will have no regular federal income tax liability upon its exercise,
although the excess, if any, of the Fair Market Value of the Exercised Shares on
the date of exercise over their aggregate Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal tax purposes and
may subject the Optionee to alternative minimum tax in the year of exercise. In
the event that the Optionee ceases to be an Employee but remains a Service
Provider, any Incentive Stock Option of the Optionee that remains unexercised
shall cease to qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonqualified Stock Option on the date three (3) months and one (1)
day following this change of status.
9.2 Disposition of Shares.
9.2.1 NQO. If the Optionee holds NQO Shares for at least one year,
except for that portion treated as compensation income at the time of exercise,
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
9.2.2 ISO. If the Optionee holds ISO Shares for at least one year after
exercise and two years after the grant date, any gain realized on disposition of
the Shares will be treated as long-term capital gain for federal income tax
purposes. If the Optionee disposes of ISO Shares within one year after exercise
or two years after the grant date, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the lesser of (i) the difference between the Fair
Market Value of the Shares acquired on the date of exercise and the aggregate
Exercise Price, or (ii) the difference between the sale price of such Shares and
the aggregate Exercise Price. Any additional gain will be taxed as capital gain,
short-term or long-term depending on the period that the ISO Shares were held.
9.3 Notice of Disqualifying Disposition of ISO Shares. If the Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of (i) two years after the grant date, or (ii) one year
after the exercise date, the Optionee shall immediately notify the Company in
writing of the disposition. The Optionee agrees that he or she may be subject to
income tax withholding by the Company on the compensation income recognized from
such early disposition of ISO Shares by payment in cash or out of the current
earnings paid to the Optionee.
10.0 SHAREHOLDERS' AGREEMENT
10.1 Optionee acknowledges and agrees that whatever period determined
appropriate by the Company, underwriter, or federal and state regulatory
officials including, but not limited to, the Securities and Exchange Commission,
National Association of Securities Dealers and NASDAQ, following the effective
date of a registration statement of the Company covering common stock (or other
securities) of the Company to be sold on its behalf in an underwriting, Optionee
will not sell or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) Shares of the Company held by Optionee at any time
during such period except securities included in that registration.
5
<PAGE> 6
10.2 Optionee acknowledges and agrees that if for purposes of a
registration statement of the Company the underwriter or federal or state
regulatory officials fix a specific Common Stock or Option lockup period, such
fixed lockup period shall apply to Optionee under this Agreement.
11.0 NO GUARANTEE OF CONTINUED SERVICE
11.1 Optionee acknowledges and agrees that the vesting of shares
pursuant to the vesting schedule set forth in this Agreement is earned only by
continuing as a Service Provider at the will of the Company, and not through the
act of being hired, being granted an option or purchasing shares under this
Agreement. Optionee further acknowledges and agrees that this Agreement, the
transactions contemplated and the vesting schedule set forth in it do not
constitute an express or implied promise of continued engagement as a Service
Provider for the vesting period, for any period, or at all, and shall not
interfere with Optionee's right or the Company's right to terminate Optionee's
relationship as a Service Provider at any time, with or without cause.
12.0 SIGNATURES
Dated _________________, 1998
International Barter Corp.
By: __________________________
Steven White
President/CEO
Optionee acknowledges and represents that he or she has received a copy of the
Plan, has reviewed the Plan and this Agreement in their entirety, is familiar
with its and fully understands its terms and provisions. Optionee accepts this
Option subject to all the terms and provisions of the Plan and this Agreement.
Optionee has had an opportunity to obtain the advice of counsel prior to
executing this Agreement. Optionee agrees to accept as binding, conclusive and
final all decisions or interpretations of the Plan Administrators upon any
questions arising under the Plan and Agreement. Optionee further agrees to
notify the Company upon any change in the residence address indicated on the
first page of this Agreement.
Dated _________________, 1998
OPTIONEE:
_____________________________________
Signature
_____________________________________
Print Name
6
<PAGE> 7
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and approves the terms and
conditions of the Plan and this Agreement. In consideration of the Company's
granting his or her spouse the right to purchase Shares as set forth in the Plan
and this Agreement, the undersigned agrees to be irrevocably bound by the terms
and conditions of the Plan and this Option Agreement and further agrees that any
community property interest shall be similarly bound. The undersigned hereby
appoints the undersigned's spouse as attorney-in-fact for the undersigned with
respect to any amendment or exercise of rights under the Plan or this Agreement.
______________________________
Spouse of Optionee
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THREE
MONTHS ENDED JUNE 30, 1998 AND 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10Q-SB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 502,743
<SECURITIES> 0
<RECEIVABLES> 61,089
<ALLOWANCES> 3,102
<INVENTORY> 0
<CURRENT-ASSETS> 29,002
<PP&E> 172,026
<DEPRECIATION> 129,792
<TOTAL-ASSETS> 665,854
<CURRENT-LIABILITIES> 18,682
<BONDS> 17,258
0
0
<COMMON> 2,020
<OTHER-SE> 627,894
<TOTAL-LIABILITY-AND-EQUITY> 665,854
<SALES> 0
<TOTAL-REVENUES> 148,511
<CGS> 0
<TOTAL-COSTS> 17,166
<OTHER-EXPENSES> 124,812
<LOSS-PROVISION> 1,146
<INTEREST-EXPENSE> 1,436
<INCOME-PRETAX> 8,190
<INCOME-TAX> (591)
<INCOME-CONTINUING> 8,781
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,781
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
