UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
- --------------------------------------------------------------------------------
FORM 10-KSB/A
(Mark One)
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended March 31, 1999.
Or
[] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from -------- to --------.
-----------------------------------
Commission file number 0-24005
-----------------------------------
UBARTER.COM INC.
(Name of small business issuer in its charter)
NEVADA 91-1739746
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
21400 International Blvd. #207
Seattle, WA 98198
- --------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(206) 870-9290
(Issuer's telephone number)
---------------------------
Securities Registered Under Section 12(b) of the Exchange Act:
None
Securities Registered Under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for most recent fiscal year: $504,500
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates based on the average bid and asked price as of June 1, 1999:
$17,361,000.
<PAGE>
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 5,915,420 shares of Common Stock as
of March 31, 1999.
Documents Incorporated by Reference
Portions of Company's Current Report on Form 8-K/A (for event on March 2, 1999)
dated May 14, 1999 are incorporated by reference into Part III of this Form
10-KSB.
Transitional Small Business Format. Yes [ ] No [X]
2
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act
Directors and Executive Officers
The following table provides information as of March 31, 1999 concerning
our directors and executive officers.
Name Age Position
- ---- --- --------
Steven M. White 40 Chief Executive Officer, President,
Director and Chairman of the Board
Richard L. Mayer 59 Vice President, Chief Credit
Officer, Secretary and Director
Alan Zimmelman 54 Vice President and Director
Glen T. White 45 Director
Kevin R. Andersen 47 Chief Financial Officer
Bob Bagga 29 Chief Operating Officer
Following is a discussion of the business background of each of our
directors and executive officers.
Steven M. White has been a member of the Board of Directors and has served
as President and Chief Executive Officer since September 1996. From July 1983
until its merger with Ubarter.com in November of 1996, Mr. White served as
President of Cascade Trade Association, a private company involved in the barter
business. He has over nineteen years experience in sales and management,
including over fifteen years affiliated with companies involved in the barter
business. He is currently serving as Chairman of the Board of Directors of the
National Association of Trade Exchanges for the 1999-2000 term and served as its
President for the 1998-1999 term.
Richard L. Mayer has been a member of the Board of Directors since
September 1996. Mr. Mayer joined Ubarter.com as a Vice President in November
1996 and was appointed Corporate Secretary in November 1998 and Chief Credit
Officer in March 1999. From November 1995 until its merger with Ubarter.com, he
was Vice President of Marketing for Cascade Trade Association, a private company
involved in the barter business. He has over thirty years experience in sales
and management, including over six years affiliated with companies involved in
the barter business. From April 1989 to November 1995, he was the owner of Money
Mailer of the Sound, a private company involved in direct mail. From 1960 until
1989, he was employed by General Electric Capital Corp.
Alan Zimmelman has been a member of the Board of Directors since November
1997. Mr. Zimmelman joined Ubarter.com as its Vice President of Operations in
November 1997. From November 1987 to August 1996, he was President of BXI West
Los Angeles, a private company involved in the barter business. He 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.
Glen T. White has been a member of the Board of Directors since November
1997. Since June 1977, he has been in the US Navy and currently holds the rank
of Commander. Glen T. White is the brother of Steven M. White.
Kevin R. Andersen has served as Chief Financial Officer since joining
Ubarter.com in August 1998. Mr. Andersen has been partner with the firm of
Andersen, Andersen & Strong L.C. since 1990. He was formerly with the national
accounting firm of Laventhol & Horwath where he served in the Las Vegas,
3
<PAGE>
Nevada office and in the firm's national tax office in Washington D.C. Mr.
Andersen was on the Laventhol & Horwath Teaching Faculty and has been a
Professor of Taxation at the Washington College of Law. Mr. Andersen received a
B.S. degree in Accounting from the University of Utah in 1977, a Master of
Accountancy (Taxation) from UNLV in 1988, and has been a CPA since 1980.
Bob Bagga has served as Chief Operating Officer since joining Ubarter.com
in March 1999. Prior to joining Ubarter.com, Mr. Bagga was Chief Executive
Officer of Barter Business Exchange Inc. from 1997 and prior to that was Vice
President from 1992 to 1997. See "Item 12. Certain Relationships and Related
Transactions - Acquisition of Barter Business Exchange Inc."
Significant Employees and Consultants
We employ several administrative, technical, sales and support personnel
who perform various day-to-day tasks and conduct operations. In addition,
Ubarter.com from time to time uses consultants or consulting firms to assist us
in developing our business plan and operations. The following individuals are
significant employees or consultants of Ubarter.com.
Liad Y. Meidar, 24, is President of Astra Ventures LLC and since October
1998, has performed the duties of our Vice President, Strategic Development.
Ubarter.com retained Astra Ventures in October 1998 to advise the Chief
Executive Officer and Board of Directors on corporate planning, mergers and
acquisitions. From July 1997 to September 1998, Mr. Meidar was an investment
banker in the Financial Sponsors Group at BT Alex. Brown Incorporated where he
served financial sponsor clients in transactions involving high yield debt
issuances, senior debt underwriting and syndication and international
acquisitions. Mr. Meidar received a B.A. degree in Economics from Princeton
University in June 1997. See "Item 12. Certain Relationships and Related
Transactions Relationship with Astra Ventures LLC."
Dan C. Schneider, 45, has served as Chief Technology Officer since joining
Ubarter.com in August 1998. From 1985 to 1998, he worked at Darigold Inc. as
manager of its PC-related activities. He was responsible for the deployment of
UNIX-based, DOS-based, and Windows-based systems and networks, and managed
hardware and software support. In 1997, he developed the corporate website for
Darigold, and established a password-protected database allowing milk producers
to check daily quality control testing data. Mr. Schneider received a B.A.
degree in Business Administration from Central Washington University in 1977.
Board Committees and Meetings
During the fiscal year ended March 31, 1999, the Board of Directors held
six meetings. During this period, each of the directors attended or participated
in more than 75% of the total number of meetings of the Board of Directors.
Ubarter.com's Board of Directors also acts from time to time by written action
in lieu of meetings.
The Board of Directors has not yet established a Compensation Committee or
an Audit Committee. Ubarter.com does not intend to establish a Nominating
Committee. When established, the Compensation Committee will make
recommendations concerning the salaries and incentive compensation of employees
of, and consultants to, Ubarter.com, and will administer Ubarter.com's 1998
Stock Option Plan. When established, the Audit Committee will be responsible for
reviewing the results and scope of audits and other services provided by
Ubarter.com's independent auditors.
Director Compensation
Except for grants of stock options and reimbursement of expenses,
Ubarter.com generally does not compensate our directors or officers for the
services they render us as directors. Ubarter.com does not compensate our
directors for committee participation or for performing special assignments for
the Board of Directors.
4
<PAGE>
Under our 1998 Stock Option Plan, non-employee directors receive automatic
grants of stock options to purchase 5,000 shares of common stock each year upon
their re-election at the annual meeting of shareholders, exercisable at not less
than the fair market value of our common stock on the day of grant. The options
vest and become exercisable on the one year anniversary of the director's
election or reelection to the Board of Directors. Mr. Glen White received
options to purchase 5,000 shares of common stock at an exercise price of $.813
per share upon his election as a director at the 1998 annual meeting of
shareholders. Mr. Steven White and Messrs. Zimmelman and Mayer each received
options to purchase 5,000 shares of common stock at an exercise price of $.813
per share for their service as directors. In the future, employees who also
serve as directors of Ubarter.com will receive no additional compensation for
their service as directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and all persons who beneficially own more than
10 percent of the outstanding shares of the Company's Common Stock to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of such Common Stock. Directors, executive officers and
such beneficial owners are also required to furnish the Company with copies of
all Section 16(a) reports they file. To the Company's knowledge, based solely
upon a review of the copies of such reports furnished to the Company and written
representations that no other reports were required during the fiscal year ended
March 31, 1999, all Section 15(a) reporting requirements applicable to the
Company's directors, executive officers and such beneficial owners were complied
with.
Item 10. Executive Compensation
Executive Compensation
The following table sets forth all compensation paid to or earned by
Ubarter.com's President and Chief Executive Officer. No other executive officer
of Ubarter.com received total annual salary, bonus and other compensation in
excess of $100,000 in the fiscal year ended March 31, 1999.
Summary Compensation Table
--------------------------
Long-Term
Compensation
Annual Compensation Awards
------------------- -------
Securities
Name and Principal Underlying
Position Year Salary Bonus Options
- -------- ---- ------ ----- -------
Steven M. White, 1999 $85,000 - 45,000
President and CEO 1998 75,000 -
Employment Contracts and Change in Control Agreements
Steven White. Pursuant to an Employment Agreement effective as of November
24, 1998, we employ Steven White as our President and Chief Executive Officer.
His term of employment commenced on December 1, 1998 and continues for a period
of three years. Mr. White's salary is $85,000 per annum, which may be increased
annually at the discretion of the Board of Directors.
5
<PAGE>
Richard L. Mayer. Pursuant to an Employment Agreement effective as of
November 24, 1998, we employ Richard Mayer as our Vice President of Marketing
and Operations. His term of employment commenced on December 1, 1998, and
continues for a period of three years. Mr. Mayer's initial salary is $50,000 per
annum, which may be increased annually at the discretion of the Board of
Directors.
Alan Zimmelman. Pursuant to an Employment Agreement effective as of
November 24, 1998, we employ Alan Zimmelman as our Vice President of Area Broker
Relations. His term of employment commenced on December 1, 1998, and continues
for a period of three years. Mr. Zimmelman's initial salary is $50,000 per
annum, which may be increased annually at the discretion of the Board of
Directors.
Kevin R. Andersen. Pursuant to an Employment Agreement effective as of
August 1, 1998, we employ Kevin Andersen on a part-time basis as our Chief
Financial Officer. His term of employment commenced on August 1, 1998, and
continues for a period of three years. Mr. Andersen's base salary is $75,000 per
annum, which may be increased on a temporary basis for additional
project-related accounting duties, or increased annually at the discretion of
the Board of Directors.
Bob Bagga. Pursuant to an Employment Agreement effective as of March 1,
1999, we employ Bob Bagga as our Chief Operating Officer for a period of two
years. Mr. Bagga's base salary is CD$120,000 (approximately US$80,000) per
annum, which may be increased annually at the discretion of the Board of
Directors.
Each of the agreements for Messrs. White, Zimmelman, Mayer, Andersen and
Bagga entitle them to receive options to purchase 40,000 shares of common stock
for each year of employment, which will vest 50% on the first anniversary of the
date of grant, 75% on the date which is 18 months from the grant date and be
fully vested on the second anniversary of the grant date. All agreements contain
a change of control provision that provides for the continuing employment of the
officer for the duration of the term of the agreement in the event of a merger,
acquisition of Ubarter.com or sale of substantially all of its assets. Upon the
change of control event the agreements provide that in addition to any payments
made for continued employment, individuals will receive additional payments from
us as follows: $150,000 each for Messrs. White, Bagga, Mayer and Zimmelman, and
$50,000 for Kevin Andersen.
Stock Options
The following tables summarize option grants made by the Company to its
Chief Executive Officer during the fiscal year ended March 31, 1999, and the
value of options granted during fiscal 1999 and held by such person at March 31,
1999. No stock options were exercised during fiscal 1999.
6
<PAGE>
Option Grants in Fiscal Year Ended March 31, 1999
<TABLE>
Percent of
Total
Options
Number of Granted Exercise
Securities To Employees or Base
Underlying Options In Fiscal Price Expiration
Name Granted Year 1998 ($/Share) Date(2)
- ---- ------- --------- --------- ------
<S> <C> <C> <C> <C>
Steven M. White, 45,000(1) 14.4% $0.8125 June 1, 2003
President and CEO
</TABLE>
- -----------------------------
(1) The options are 50% vested on June 1, 1999, 75% vested on December 1, 1999
and are fully vested on June 1, 2001. Upon the occurrence of certain
defined accelerating events, these options would become immediately
exercisable.
Aggregated Option Exercises During Year Ended
March 31, 1999 and Value of Options at March 31, 1999
<TABLE>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Value Options Options
Exercise Realized at March 31, 1999 at March 31, 1999 (1)
-------- -------- ----------------- ---------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven M. White - - - 45,000 - $75,960
</TABLE>
- -----------------------------
(1) "Value" has been determined based upon the difference between the per share
exercise price and the market value of the Common Stock at March 31, 1999.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of June 30, 1999 for (a) each person we know to
be a beneficial owner of five percent or more of our common stock, (b) each
executive officer named in the Summary Compensation Table above and director,
and (c) all directors and executive officers as a group. Except as otherwise
indicated, the shareholders listed in the table have sole voting and investment
power with respect to the Common Stock owned by them.
7
<PAGE>
Amount and Nature
Name and Address(1) of Beneficial Percentage
of Beneficial Owner Ownership of Shares
- ------------------- --------- ---------
Steven M. White(2) 1,419,196 23.8%
Richard L. Mayer(2) 36,500 *
Alan Zimmelman(2) 41,400 *
Glen T. White(2) 10,000 *
New Horizons LP(3) 1,214,800 19.2%
248 West Park Avenue
Long Beach, NY 11561
Astra Ventures LLC(4) 631,500 9.6%
140 West 57th Street, Suite 8D
New York, NY 10019
All executive officers and 1,679,596 28.1%
directors as a group(2)
(6 persons)
- ---------------------------------
* Less than one percent.
(1) The business address of Steven White and all other directors and executive
officers is 21400 International Blvd., Suite 207, Seattle, WA 98198.
(2) Includes the following number of shares which could be acquired within 60
days of June 30, 1999, through the exercise of stock options: Steven White,
22,500 shares; Mr. Zimmelman, 22,500 shares; Mr. Mayer, 22,500 shares; and
all directors and executive officers, 107,500 shares.
(3) Sors Inc., as general partner, is also deemed the beneficial owner of the
shares of the common stock owned by New Horizons LP because of its power to
vote and dispose of those shares. Includes 400,000 shares which could be
acquired through the exercise of outstanding warrants.
(4) Includes 630,000 shares which could be acquired within 60 days of June 30,
1999, through the exercise of stock options. Liad Y. Meidar, President and
controlling equity owner of Astra Ventures LLC is also deemed the
beneficial owner of the options owned by Astra Ventures LLC because of his
power to vote and dispose of those shares. See "Item 12. Certain
Relationships and Related Transactions - Relationship with Astra Ventures
LLC."
Item 12. Certain Relationships and Related Transactions
Merger with Cascade Trade Association.
Prior to the November 1996 merger of Ubarter.com with Cascade Trade
Association, Steven White and Richard Mayer were executive officers of Cascade
Trade Association. In September 1996, Mr .White and Mr. Mayer were appointed
directors of Ubarter.com and Mr. White was appointed an officer. Mr. White was
the principal shareholder of Cascade Trade Association. In connection with the
merger, Mr. White was issued 1,800,000 shares of common stock of Ubarter.com.
Acquisition of Barter Business Exchange Inc.
In connection with our acquisition of Barter Business Exchange Inc.
effective March 1, 1999, Mr. Bagga, our Chief Operating Officer received
consideration of CD$2,450,000 (US$1,641,500)(subject to
8
<PAGE>
certain adjustments) consisting of: (i) cash payments of CD$850,000 (US$563,300)
and US$100,000 at closing; (ii) issuance of a promissory note in the principal
amount of CD$850,000 (US$563,300), which is subject to adjustment, if
applicable, as discussed below; (iii) payment of CD$250,000 (US$167,500) Ubarter
Dollars at closing; and (iv) issuance of 150,000 shares of our common stock
(having a value of US$375,000 as of the closing date). The promissory note bears
no interest and is payable March 1, 2000. The principal amount of the note will
be reduced by the amount, if any, that 10% of the consolidated cash revenues of
Ubarter.com for the period from March 1, 1999 to March 1, 2000, is less than
CD$750,000. The 10% cash revenues do not include trade dollar revenues but will
include any incremental cash revenues to Ubarter.com from any acquisitions of a
majority interest in any entities during the period and cash revenues derived
from strategic alliances or joint ventures during the period. Our obligations
under the note are secured by a share pledge agreement under which we pledged
the BBE shares to Mr. Bagga. If 10% of the consolidated cash revenues of
Ubarter.com during the period from March 1, 1999 to March 1, 2000, exceed
CD$750,000 (US$500,000), we must pay Mr. Bagga such amount over CD$750,000
(US$500,000) in equivalent value of our common stock. These shares are to be
registered and freely tradeable, with a value per share equal to the closing
trading price on the business day immediately proceeding March 1, 2000.
We agreed to register the resale of the 150,000 shares issued to Mr. Bagga
after the closing of the acquisition. Upon registration, those shares are to
have a minimum aggregate value of $350,000. If the minimum aggregate value is
below this amount, then we must make up the difference by making, at our option,
a cash payment or through issuing additional shares of our common stock. Mr.
Bagga has agreed not to sell any of those shares prior to September 1, 1999,
and, thereafter, not to sell more than 25,000 of those shares per month without
prior notice to Ubarter.com. As a part of the acquisition, we entered into a two
year employment agreement with Mr. Bagga and named him as our Chief Operating
Officer.
Relationship with Astra Ventures LLC.
We have entered into a consulting agreement with Astra Ventures LLC. Astra
Ventures has agreed to serve as our advisor through December 31, 2001, focusing
on potential acquisitions, strategic planning and business development. Liad Y.
Meidar is the President and controlling equity owner of Astra Ventures LLC. As a
part of the consulting arrangement with Astra Ventures, Mr. Meidar acts as our
Vice President, Strategic Development. For their services, Astra Ventures will
receive cash compensation of $100,000 per year and an aggregate total of 630,000
stock options on a fully diluted basis. All such options were fully vested as of
their date of grant and terminate on October 1, 2003. Of these options, 50,000
are exercisable at the price of $4.00; 40,000 at $6.00; 60,000 at $8.00; 80,000
at $10.00; 160,000 at $12.00; and 240,000 at $14.00. If we consummate a merger
or acquisition transaction during the term of the agreement or within one year
thereafter, Astra Ventures will receive a fee equal to 3% of the consideration
paid by us, payable in cash or, at Astra Ventures' option, in shares of our
common stock valued at fair market value. In connection with our acquisition of
Barter Business Exchange Inc. in March 1999, Astra Ventures elected to receive
options to purchase 40,000 shares of our common stock at an exercise price of
$2.75 per share in lieu of cash compensation. These options become 50% vested on
March 2, 2000, 75% vested on September 2, 2000 and fully vested on March 2,
2001. The options expire upon the earlier of (i) March 2, 2004 or (ii) in the
event the consulting agreement with Astra Ventures is terminated or not renewed,
on the expiration of 90 days from the date of termination of such agreement.
Relationship With New Horizons L.P.
New Horizons L.P. is one of our significant shareholders. The general
partner of New Horizons LP is Sors Inc., which is managed by Joseph MacDonald.
The spouse of Mr. MacDonald, Mary Martin, entered into a consulting agreement
with us in August 1998. In exchange for investor relations and consulting
services rendered and for reimbursement of expenses, we paid Ms. Martin $2,000
per month and granted her 40,000 options, which were fully vested as of their
grant date, and are exercisable at $.8125 per share. The agreement was
terminated in April 1999.
9
<PAGE>
In July 1998, New Horizons LP purchased 400,000 units, consisting of one
share of common stock and one Warrant, offered by us in a private placement for
$1.25 per unit. The Warrants entitle New Horizons LP to purchase 400,000 shares
of common stock at a price of $1.50 per share.
10
<PAGE>
INDEPENDENT AUDITORS' REPORTS
and
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
of Ubarter.com Inc.
We have audited the consolidated balance sheet of Ubarter.com Inc. and
subsidiary as of March 31, 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ubarter.com Inc.
and subsidiary as of March 31, 1999, and the results of their operations and
their cash flows for the year then ended, in accordance with generally accepted
accounting principles.
/s/ Moss Adams LLP
Seattle, Washington
June 16, 1999
1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of Ubarter.com Inc. (formerly International Barter Corp.) and Subsidiary
Seattle, Washington
We have audited the consolidated financial statements of Ubarter.com (formerly
International Barter Corp.) and subsidiary for the year ended March 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, 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 the results of their
operations and their cash flows for the year then ended, in accordance with
generally accepted accounting principles.
/s/ Andersen Andersen & Strong L.C.
June 19, 1998
Salt Lake City, Utah
2
<PAGE>
UBARTER.COM INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
ASSETS
1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ............................................. $ 442,700 $ 382,600
Accounts receivable, net .............................................. 305,700 63,300
Inventory ............................................................. 310,400 -
Other current assets .................................................. 9,200 2,900
----------- -----------
Total current assets .......................................... 1,068,000 448,800
----------- -----------
EQUIPMENT AND LEASEHOLDS, net .............................................. 383,600 42,300
----------- -----------
OTHER ASSETS
Goodwill .............................................................. 2,750,900 -
Prepaid advertising ................................................... 135,000 -
Notes receivable ...................................................... 23,500 32,800
Other assets .......................................................... 28,700 1,200
----------- -----------
2,938,100 34,000
----------- -----------
$ 4,389,700 $ 525,100
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ...................................................... $ 111,400 $ 9,300
Accrued liabilities ................................................... 28,200 7,700
Unearned revenue ...................................................... 186,300 -
Trade dollars issued in excess of earned .............................. 2,147,900 5,400
Note payable to shareholder ........................................... 66,200 -
Current portion of long-term obligations .............................. 35,400 13,100
----------- -----------
Total current liabilities ..................................... 2,575,400 35,500
----------- -----------
LONG-TERM OBLIGATIONS ...................................................... 81,600 19,100
----------- -----------
COMMITMENTS (Note 9)
STOCKHOLDERS' EQUITY
Common stock
5,900 3,800
Additional paid-in capital ............................................ 2,649,300 540,700
Subscribed stock ...................................................... - 37,500
Accumulated deficit ................................................... (909,500) (111,500)
Treasury stock ........................................................ (13,000) -
----------- -----------
1,732,700 470,500
----------- -----------
$ 4,389,700 $ 525,100
=========== ===========
</TABLE>
See accompanying notes.
3
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
CONSOLIDATED STATEMENT OF OPERATIONS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
1999 1998
----------- -----------
REVENUE
<S> <C> <C>
Trade exchange revenue ................................................. $ 460,600 $ 540,600
Corporate trading revenue .............................................. 43,900 45,500
----------- -----------
504,500 586,100
----------- -----------
COSTS AND OPERATING EXPENSES
Cost of corporate trading revenue ...................................... 43,900 45,500
Sales and marketing .................................................... 94,700 73,900
Product development .................................................... 216,300 29,900
General and administrative ............................................. 990,600 407,000
----------- -----------
1,345,500 556,300
----------- -----------
INCOME (LOSS) FROM OPERATIONS ............................................... (841,000) 29,800
----------- -----------
OTHER INCOME (EXPENSE)
Interest income ........................................................ 45,700 8,800
Interest expense ....................................................... (2,700) (4,900)
----------- -----------
43,000 3,900
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ........................................... (798,000) 33,700
INCOME TAXES ................................................................ - 1,200
----------- -----------
NET INCOME (LOSS) ........................................................... $(798,000) $ 32,500
=========== ===========
AVERAGE COMMON AND EQUIVALENT SHARES
Basic .................................................................. 5,521,583 2,632,424
=========== ===========
Diluted ................................................................ 5,521,583 2,949,942
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE
Basic .................................................................. $ (0.14) $ 0.01
=========== ===========
Diluted ................................................................ $ (0.14) $ 0.01
=========== ===========
</TABLE>
See accompanying notes.
4
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<PAGE>
UBARTER.COM INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
Additional
Common Stock Paid-In Subscribed Accumulated Treasury Stock
Shares Amount Capital Stock Deficit Shares Amount Total
------ ------ ------- ----- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, March 31, 1997 ....... 1,250,000 $ 1,300 $ 131,900 $ 150,000 $ (144,000) -- -- $ 139,200
2-for-1 common stock split
effective July 24, 1998 ... 1,250,000 1,300 (1,300) -- -- -- -- --
--------- --------- ------------ --------- ------------- ------- --------- ----------
BALANCE, March 31, 1997 ....... 2,500,000 2,600 130,600 150,000 (144,000) -- -- 139,200
Issuance of subscribed stock 600,000 600 149,400 (150,000) --
Exercise of "A" and "B" 492,900 400 188,900 37,500 -- -- -- 226,800
warrants
Issuance of stock ........... 240,000 200 71,800 -- -- -- -- 72,000
Net income .................. -- -- -- -- 32,500 -- -- 32,500
--------- --------- ------------ --------- ------------- ------- --------- ----------
BALANCE, March 31, 1998 ....... 3,832,900 3,800 540,700 37,500 (111,500) -- -- 470,500
Issuance of subscribed stock 100,000 100 37,400 (37,500) -- -- -- --
Exercise of "B" warrants .... 563,500 500 278,000 -- -- -- -- 278,500
Exercise of "C" and "D"
warrants .................. 480,000 500 228,300 -- -- -- -- 228,800
Issuance of stock ........... 800,000 800 999,200 -- -- -- -- 1,000,000
Issuance of stock in
connection with acquisition 150,000 200 374,800 -- -- -- -- 375,000
Stock options granted ....... -- -- 190,900 -- -- -- -- 190,900
Treasury stock acquired ..... -- -- -- -- -- 10,980 (13,000) (13,000)
Net loss .................... -- -- -- -- (798,000) -- -- (798,000)
--------- --------- ------------ --------- ------------- ------- --------- ----------
BALANCE, March 31, 1999 ....... 5,926,400 $ 5,900 $2,649,300 $ -- $(909,500) 10,980 $(13,000) $ 1,732,700
========= ========= ============ ========= ============= ======= ========= ==========
</TABLE>
See accompanying notes. 5
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
1999 1998
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(798,000) $ 32,500
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation 18,400 10,800
Non-cash charges related to stock option grants 172,800 -
Net trade dollars earned (3,700) (106,600)
Accrued interest on notes receivable (2,400) -
Change in operating assets and liabilities
Accounts receivable 38,700 (2,400)
Prepaid advertising and other assets (133,100) 4,800
Accounts payable and other liabilities 7,300 12,900
--------------- ---------------
(700,000) (48,000)
--------------- ---------------
CASH FROM INVESTING ACTIVITIES
Acquisition of equipment and leaseholds (84,800) (13,900)
Purchase of Barter Business Exchange Inc. stock (647,300) -
Notes receivable collections 11,700 -
--------------- ---------------
(720,400) (13,900)
--------------- ---------------
CASH FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,507,300 298,900
Treasury stock acquired (13,000) -
Repayment of notes payable (13,800) (16,700)
--------------- ---------------
1,480,500 282,200
--------------- ---------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 60,100 220,300
CASH AND CASH EQUIVALENTS
Beginning of period 382,600 162,300
--------------- ---------------
End of period $ 442,700 $382,600
=============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the year for:
Interest $ 2,700 $ 5,100
=============== ===============
Income taxes $ - $ -
=============== ===============
NON-CASH INVESTING AND FINANCING ACTIVITIES
Furniture purchased with trade dollars $ - $ 13,700
=============== ===============
See Note 3 for additional disclosure of noncash transaction
</TABLE>
See accompanying notes. 6
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 1 - Description Of Business And Organization
Ubarter.com Inc., formerly International Barter Corp., was incorporated on
September 18, 1996, in the State of Nevada. Ubarter.com Inc. ("the
Company") operates a trade exchange offering bartering services for retail,
professional, media and corporate clients. Operations are primarily
transacted in the State of Washington. Operations of the Company's
subsidiary, Barter Business Exchange Inc. (see Note 3), are primarily
transacted in the Canadian provinces of Ontario and British Columbia. 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. The Company typically receives a cash commission on all
transactions charging both the buyer and seller 5% on the purchase and
sale.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and, effective March 31, 1999, the balance
sheet of its wholly-owned subsidiary, Barter Business Exchange Inc. (BBE).
The Company's fiscal year end is March 31. BBE's fiscal year end is
February 28. For purposes of consolidation the difference in fiscal
year-ends is not significant. All significant intercompany accounts and
transactions have been eliminated.
Stock Split - On July 9, 1998 the Board of Directors authorized a 2-for-1
split of its common stock to be distributed to stockholders of record at
the close of business on July 24, 1998. All per-share and shares
outstanding data in the accompanying consolidated financial statements have
been restated to reflect the stock split.
Foreign Currency Translation - Financial statements of the Company's
Canadian subsidiary, BBE, are translated into U.S. dollars using the
exchange rate at the balance sheet date for assets and liabilities. The
functional currency of BBE is the local currency, the Canadian dollar.
Translation adjustments, if necessary, are recorded as a separate component
of Stockholders' Equity. There were no translation adjustments required as
of March 31, 1999 and 1998.
Comprehensive Income - In 1999, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income".
This statement establishes rules for the reporting of comprehensive income
and its components. The adoption of SFAS No. 130 had no impact on total
stockholders' equity as of March 31, 1999.
7
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies (Continued)
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. Initiation and annual renewal
fees are nonrefundable, and are deferred and included in income over a
twelve month period.
Product Development Costs - Product development costs include expenses
incurred by the Company to develop, enhance, monitor and operate the
Company's website. Product development costs are expensed as incurred.
Trade Dollar Transactions - The Company uses the ratio of one Trade Dollar
to one local currency dollar (United States or Canadian) 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 the applicable local currency dollar prices that
are within reasonable ranges that might exist between prices of similar
U.S. dollar or Canadian dollar transactions.
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.
Cash and Cash Equivalents - The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
Inventory - At times, the Company acquires inventory for resale from
clients of the barter exchange. Inventory is stated at lower of cost
(first-in, first-out basis) or market.
Allowance for Uncollectible Accounts - The Company provides an allowance
for accounts receivable which are doubtful of collection. The allowance is
based upon management'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. At March 31, 1999 and 1998, the allowance for doubtful accounts
was $129,400 and $2,000, respectively.
Depreciation and Amortization - Equipment and leaseholds are stated at
cost. Depreciation is computed on the straight-line method over the
estimated useful lives of the assets, generally five to seven years.
Leasehold improvements are amortized on a straight-line basis over the
shorter of the estimated useful lives or the term of the lease.
8
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies (Continued)
Goodwill - Goodwill resulting from the acquisition of BBE was estimated by
management to be primarily associated with the acquired workforce,
infrastructure and technological expertise. As a result of the rapid
technological changes occurring in the Internet industry and the intense
competition for qualified professionals, goodwill is amortized on a
straight-line basis over the estimated life of the benefit of 24 months
(see Note 3).
Income Taxes - Income taxes are computed using the asset and liability
method. Under this method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and tax
bases of assets and liabilities and are measured using the currently
enacted tax rates and laws. Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes, requires a valuation allowance against
deferred tax assets if, based on the weight of available evidence, it is
more likely than not that some or all of its deferred tax assets will not
be realized.
Basic and Diluted Net Income (Loss) per Share - Basic net income (loss) per
share is computed using the weighted average number of shares outstanding
during the period. Diluted net income (loss) per share is computed using
the weighted average number of common shares and common equivalent shares
outstanding during the period. Common equivalent shares consist of shares
issuable upon the exercise of stock options and stock warrants.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenue and
expenses during the reported period. Actual results could differ from those
estimates.
Concentration of Credit Risk - Financial instruments that potentially
subject the Company to significant concentration of credit risk consists
primarily of cash and accounts receivable. Cash is deposited with high
credit, quality financial institutions. Accounts receivable are typically
unsecured and are derived from revenues earned from customers primarily
located in the Pacific Northwest and the Canadian provinces of Ontario and
British Columbia. The Company performs ongoing credit evaluations of its
customers and maintains reserves for potential credit losses; historically,
such losses have been within management's expectations. At March 31, 1999
and 1998, no one customer accounted for 10% or more of the accounts
receivable balance.
9
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies (Continued)
Fair Value of Financial Instruments - The Company's financial instruments,
including cash, accounts receivable, accounts payable, notes payable and
long-term obligations are carried at cost, which approximates their fair
value because of the short-term maturity of these instruments.
Advertising - The Company recognizes advertising expenses in accordance
with Statement of Position 93-7, "Reporting on Advertising Costs". As such,
the Company expenses the cost of communicating advertising in the period in
which the advertising space or airtime is used. Advertising expenses
amounted to $51,700 and $22,800 for the years ended March 31, 1999 and
1998, respectively.
Stock-based Employee Compensation - The Company accounts for stock-based
employee compensation arrangements in accordance with the provisions of
Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock
Issued to Employees", and complies with the disclosure provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation". Under APB 25,
compensation cost is recognized over the vesting period based on the
difference, if any, on the date of grant between the fair value of the
Company's stock and the amount an employee must pay to acquire the stock.
Impairment of Long-Lived Assets - The Company evaluates the recoverability
of long-lived assets in accordance with "SFAS" No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed of". SFAS No. 121 requires
recognition of impairment of long-lived assets in the event the net book
value of such assets exceeds the future undiscounted cash flows
attributable to such assets.
Recent Accounting Pronouncements - In March 1998, the American Institute of
Certified Public Accountants issued Statement of Position 98-1 (SOP 98-1),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". This standard requires companies to capitalize qualifying
computer software costs which are incurred during the application
development stage and amortize them over the software's estimated useful
life. SOP 98-1 is effective for fiscal years beginning after December 15,
1998. The Company does not expect that the adoption of SOP 98-1 will have a
material impact on its consolidated financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5
is effective for the Company's fiscal year ending March 31, 2000. SOP 98-5
requires costs of start-up activities and organization costs to be expensed
as incurred. Adoption is not expected to have a material effect on the
Company's consolidated financial statements.
10
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies (Continued)
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for fiscal
years beginning after June 15, 1999. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it is, the
type of hedge transaction. The Company does not expect that the adoption of
SFAS No. 133 will have a material impact on its consolidated financial
statements because the Company does not currently hold any derivative
instruments.
Reclassifications - Certain prior year balances have been reclassified to
conform to the current year presentation.
Note 3 - Acquisition
Acquisition of Barter Business Exchange, Inc. - On March 2, 1999, the
Company entered into a stock purchase agreement to acquire all of the
outstanding capital stock of Barter Business Exchange Inc. (BBE), a
privately-held Canadian corporation which presently operates a trade
exchange in the Canadian Provinces of Ontario and British Columbia. The
total purchase price of approximately $1,270,200 is comprised of cash in
the amount of $663,300; a promissory note in the principal amount of
$66,200 (Note 7); Ubarter.com Trade dollars in the amount of $165,700; the
issuance of 150,000 shares of Ubarter.com common stock which had a value of
$375,000 at the acquisition date. In addition, the purchase agreement
provides for contingent consideration. The terms of the note payable
provide for additional payments of up to $500,000 dependent upon attainment
of certain operating results. Additionally, if 10% of the cash revenues, as
defined in the agreement, exceed $500,000, the Company will be required to
pay the amount exceeding $500,000 in common shares of the Company.
The purchase has been accounted for under the purchase method of
accounting. Under the purchase method of accounting, the purchase price is
allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the date of the acquisition. The excess purchase
price over the estimated fair value of the assets acquired and liabilities
assumed has been allocated to goodwill. The Company estimated the economic
useful life of the goodwill to be two years.
11
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 3 - Acquisition (Continued)
The consolidated financial statement combines the Company's balance sheet
as of March 31, 1999 with the balance sheet of BBE as of February 28, 1999.
The consolidated statement of operations presents the results of operations
of the Company and excludes the results of operations of BBE. Results of
operations of BBE will be consolidated with the Company from the date of
purchase, March 1, 1999. However, due to the differing year-ends, the
results of operations of BBE for the fiscal year from March 1, 1999 through
February 28, 2000 will be consolidated with the Company's results of
operations for the fiscal year ended March 31, 2000.
Statement of Cash Flows - The acquisition of BBE resulted in a non-cash
transactions which increased assets in the amount of $3,069,700 and
liabilities in the amount of $2,610,400. Non-cash consideration included
150,000 shares of the Company's common stock, trade dollars, and a note
payable (Note 7).
Unaudited Pro Forma Disclosures of Significant Acquisition - The following
unaudited pro forma consolidated results of operations give effect to the
acquisition of BBE as if it had occurred as of the beginning of the period.
<TABLE>
Year Ended
March 31,
---------------------------------------
------------------- ------------------
1999 1998
------------------- ------------------
<S> <C> <C>
Revenue $ 3,289,900 $ 3,219,900
Net loss $(2,682,100) $(1,739,800)
Net loss per share - basic $ (0.49) $ (0.66)
Net loss per share - diluted $ (0.49) $ (0.66)
Shares used in per share calculation - basic and diluted 5,521,583 2,632,424
</TABLE>
Note 4 - Notes Receivable
At March 31, 1999 and 1998, the Company had notes receivable amounting to
$23,500 and $32,800 which bear interest ranging from 10% to 10.75%.
Although the Company periodically receives payments, the notes are
currently in default. The notes are collateralized by real estate.
12
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 5 - Equipment and Leaseholds
At March 31, 1999 and 1998, equipment and leaseholds consisted of the
following:
<TABLE>
1999 1998
---------------- ----------------
<S> <C> <C>
Computer equipment $ 183,100 $ 13,900
Equipment 121,800 81,200
Furniture and fixtures 141,500 29,000
Leasehold improvements 57,100 19,700
Automobile 25,600 25,600
---------------- ----------------
529,100 169,400
Less: accumulated depreciation (145,500) (127,100)
---------------- ----------------
$ 383,600 $ 42,300
================ ================
</TABLE>
Note 6 - Excess of Trade Dollars Issued Over Trade Dollars Earned
In accordance with the guidelines established by the International
Reciprocal Trade Association, the Company has the right to borrow from the
exchange and spend within the exchange systems. Such a practice is used by
barter exchanges, worldwide, to cover inventory purchases, capital
purchases, operating expenses and to control the supply of trade dollars in
the exchange economy. The Company is obligated to provide goods and
services to clients to offset any amounts of Trade Dollars issued in excess
of earned. At March 31, 1999 and 1998, the Company had expended $2,147,900
and $5,400 Trade Dollars respectively, in excess of the amount of Trade
Dollars earned by the Company.
Note 7 - Notes Payable
The Company has a $67,000 revolving note payable with a Canadian bank. The
note payable is subject to annual renewal. There were no borrowings
outstanding as of March 31, 1999. Borrowings on the line of credit are
secured by cash and cash equivalents on deposit with the bank.
In connection with the acquisition of BBE (Note 3), the Company has a
$66,200 note payable to a shareholder. The non-interest bearing note is due
on March 1, 2000.
13
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 8 - Long-Term Obligations
At March 31, 1999 and 1998, long-term obligations consisted of the
following:
<TABLE>
1999 1998
---------------- ----------------
<S> <C> <C>
Note payable to Financial Services, Inc. at $800 per
month, including interest at 10% per annum
(collateralized by real estate), due 2002 $ 18,400 $ 26,300
Note payable to bank, interest at prime plus 2 1/2%,
payable in monthly installments of $1,400 plus
interest, maturing July 2004, partially guaranteed
by a stockholder and collateralized by equipment 73,800 -
Capital lease for leasehold improvements, due in
monthly installments of $900, including imputed
interest of 19%, due December 2001 21,800 -
Note payable to bank, paid in full in 1999 - 5,900
Other 3,000 -
---------------- ----------------
117,000 32,200
Less current portion (35,400) (13,100)
---------------- ----------------
$ 81,600 $ 19,100
================ ================
</TABLE>
Maturities of long-term obligations for future years ending March 31 are as
follows:
<TABLE>
Capital
Principal Lease
Payments Obligation Total
--------------- ---------------- ----------------
<S> <C> <C> <C>
2000 $ 28,400 $ 10,800 $ 39,200
2001 25,400 10,800 36,200
2002 17,800 7,600 25,400
2003 16,700 - 16,700
2004 6,900 - 6,900
--------------- ---------------- ----------------
95,200 29,200 124,400
Amount representing interest - (7,400) (7,400)
--------------- ---------------- ----------------
$ 95,200 $ 21,800 $ 117,000
=============== ================ ================
</TABLE>
14
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 9 - Commitments
The Company leases office space under non-cancelable operating leases
expiring in May 2003. Future minimum lease payments under the leases are as
follows for the years ending March 31:
2000 $ 119,100
2001 91,400
2002 79,300
2003 75,500
2004 18,900
-------------
$ 384,200
Rent expense amounted to $23,500 and $20,900 for the years ended March 31,
1999 and 1998, respectively.
Note 10 - Stockholders' Equity
The Company is authorized to issue 25,000,000 shares of $.001 par value
common stock. As of March 31, 1999 and 1998, the Company has 5,915,420 and
3,832,900 shares of common stock outstanding, respectively.
During fiscal 1997, the Company completed a private placement (Offering) of
its common stock pursuant to which 600,000 shares were subscribed for
$150,000. Under the terms of the Offering, one "A" warrant and one "B"
warrant were issued with each issued share of common stock issued. During
fiscal 1998, "A" and "B" warrants were exercised for 492,900 shares of
common stock for $226,800. During the fiscal year 1999, the remaining
outstanding "B" warrants were exercised for 563,500 shares of common stock
with proceeds totaling $278,500.
During fiscal 1998, the Company completed a private placement (Placement)
of its common stock pursuant to which 240,000 shares of common stock 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.
During fiscal 1999, all outstanding "C" and "D" warrants were exercised for
480,000 shares of common stock with proceeds totaling $228,800.
15
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 10 - Stockholders' Equity (Continued)
During fiscal 1999, the Company received cash for common stock and warrants
through a private placement whereby, 800,000 units were sold at $1.25 per
unit. Each unit consists of one share of common stock and one "E" warrant
exercisable at $1.50 per share. The warrants expire June 20, 2000. At March
31, 1999, there were 800,000 "E" warrants issued and outstanding.
During fiscal 1999, 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. In October of 1998, 10,980 shares were repurchased for
approximately $13,000 and classified as treasury stock.
Note 11 - Stock Options
The Company adopted a Stock Option Plan ("the Plan") effective June 1, 1998
whereby, non-qualified and incentive stock options for up to 1,155,040
shares of common stock may be granted to Directors, Officers, Employees and
Consultants. Options granted under the Plan are not to have a life in
excess of five years from the date of grant and vest 50% after 12 months,
75% after 18 months, 100% after 24 months from the date of grant. The
provisions of the Plan allow the administrators to determine the vesting
period of options granted.
In June 1998, the Company granted options under the Plan to purchase 55,000
shares of common stock at an exercise price of $0.82 per share to the
Company's non-employee Director and to certain consultants. The options
granted to the non-employee Director vest 100% in November 1999, and the
options granted to the consultants are fully vested. The options expire
five years from the date of grant and were valued at $11,400, which was
recognized as expense in 1999.
In October 1998, the Company granted options to purchase 630,000 shares of
common stock to a consultant. The options are fully vested and expire five
years from the date of grant. The exercise prices of the options range from
$4.00 to $14.00 per share and have a weighted average exercise price of
$11.11 per share. The options were valued at $243,800. The Company is
recognizing consulting expense related to these options granted over the
consultant's contractual period of 39 months. In 1999, the Company
recognized consulting expense of $37,500 related to the stock options. The
consulting agreement also contains an anti-dilutive provision whereby the
consultant will be granted additional options from time to time so that the
options will equal approximately 10.4% of common stock outstanding on a
fully diluted basis.
16
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 11 - Stock Options (Continued)
In November 1998, the Company granted options under the Plan to purchase
25,000 shares of common stock at $2.00 per share to other service
providers. The options vest over one year and expire five years from the
date of grant. The options were valued at $11,400, which was recognized as
consulting expense during 1999.
The following table summarizes the Company's stock option activity:
<TABLE>
Weighted-
Number Average
of Exercise
Shares Price
---------------- ----------------
<S> <C> <C>
Balance, April 1, 1998 - $ -
Options granted 1,069,000 7.80
Options forfeited (1,000) 2.75
Options exercised - -
---------------- ----------------
Balance, March 31, 1999 1,068,000 $ 7.17
================ ===============
</TABLE>
The following table summarizes information about options outstanding and
exercisable at March 31, 1999:
<TABLE>
Options Outstanding Options Exercisable
------------------------------------------------- -------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- ---------------------------- --------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
$ 0.8125 - $ 2.75 438,000 4.5 years $ 1.49 90,000 $ 0.81
$ 4.00 - $ 6.00 90,000 4.5 years 4.89 90,000 4.89
$ 8.00 - $10.00 140,000 4.5 years 9.14 140,000 9.14
$12.00 - $14.00 400,000 4.5 years 13.20 400,000 13.20
--------------- --------------- ------------- --------------- -------------
1,068,000 4.5 years $ 7.17 720,000 $ 9.82
=============== ===============
</TABLE>
17
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 11 - Stock Options (Continued)
The Company applies Accounting Principles Board Opinion No. 25 (APB No. 25)
in accounting for stock options. Accordingly, no compensation cost is
recognized from options issued under the Company stock option plan if the
exercise price equals the fair value at the date of grant. During 1999,
40,000 options were granted to one employee that were fully vested and had
an exercise price less than the fair value of the common stock on the date
of grant. Using the intrinsic value method required by APB No. 25 the
Company has recorded compensation expense in the amount of $112,500 in
1999.
An alternative method of accounting for stock options is SFAS No. 123 (Note
2). Under SFAS No. 123, employee stock options are valued at grant date
using the Black-Scholes option-pricing model and compensation cost is
recognized ratably over the vesting period. Had compensation cost for the
Company's stock option plan been determined based on the Black-Scholes
value at the grant dates for awards as prescribed by SFAS No. 123, pro
forma statement of operations for fiscal 1999 would have been as follows:
Year Ended March 31, 1999
----------------------------------------------------------------------
Net loss
As Reported $ (798,000)
Pro forma $ (836,800)
Net loss per common share
As Reported $ (0.14)
Pro forma $ (0.15)
----------------------------------------------------------------------
The effects of applying SFAS No. 123 for the pro forma disclosures are not
representative of the effects expected on reported net earnings and
earnings per share in future years. In addition, valuations are based on
highly subjective assumptions about the future, including stock price
volatility and exercise patterns.
The weighted average fair market value of an option granted during 1999 was
$1.69 using the Black-Scholes option-pricing model. The following
assumptions were applied in determining the pro forma compensation cost:
Year Ended March 31, 1999
----------------------------------------------------------------------
Interest rate 6.0%
Dividend yield 0.0%
Expected volatility 122.8%
Expected useful life in years 5
----------------------------------------------------------------------
18
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 12 - Income Taxes
The components of the provision for income taxes at March 31, 1999 and 1998
are as follows:
<TABLE>
1999 1998
---------------- ----------------
<S> <C> <C>
Current - Federal $ - $ -
Deferred - Federal - 1,200
---------------- ----------------
Income tax provision $ - $ 1,200
================ ================
</TABLE>
A reconciliation of the consolidated income tax provision to the amount
expected using the U.S. Federal statutory rate follows:
<TABLE>
1999 1998
---------------- ----------------
<S> <C> <C>
Expected amount using
U.S. Federal statutory rate $ - $ -
Non-deductible expenses - -
Depreciation and bad debts allowance - 1,200
---------------- ----------------
Effective tax $ - $ 1,200
================ ================
</TABLE>
Deferred tax assets (liabilities) consisted of the following at March 31,
1999 and 1998:
<TABLE>
1999 1998
---------------- ----------------
<S> <C> <C>
Deferred tax assets
Bad debt allowance $ 11,900 700
Stock options 58,800 -
Net operating loss carryforwards 746,100 10,100
---------------- ----------------
816,800 10,800
Deferred tax liability
Property and equipment (500) (300)
---------------- ----------------
816,300 10,500
Valuation allowance (816,300) (10,500)
---------------- ----------------
$ - $ -
================ ================
</TABLE>
As of March 31, 1999, the Company has domestic net operating loss
carryforwards of approximately $646,000 and Canadian net operating loss
carryforwards of approximately $1,212,200. The domestic carryforwards
begin to expire in fiscal year 2012. The Canadian carryforwards begin to
expire in fiscal year 2000. Deferred tax assets have been reduced by a
valuation allowance because of uncertainties as to future recognition of
taxable income to assure realization.
19
- --------------------------------------------------------------------------------
<PAGE>
UBARTER.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 13 - Income (Loss) Per Share
Following is a reconciliation of the numerators of the basic and diluted
income (loss) per share for the years ended March 31, 1999 and 1998:
<TABLE>
1999 1998
---------------- ----------------
<S> <C> <C>
Net income (loss) available to common stockholders $ (798,000) $ 32,500
================ ================
Weighted average shares 5,521,583 2,632,424
Effect of dilutive securities:
Options - -
Warrants - 317,518
---------------- ----------------
5,521,583 2,949,942
================ ================
Basic income (loss) per share (based on weighted
average shares) $ (.14) .01
================ ================
</TABLE>
1,028,000 options and 800,000 warrants to purchase shares of common stock
were excluded from the computation in 1999 because their effect would be
anti-dilutive.
Note 14 - Geographic Segment Information
<TABLE>
1999 1998
---------------- ----------------
<S> <C> <C>
Assets
U.S. operations $ 700,700 $ 525,100
Canadian subsidiary 3,689,000 -
---------------- ----------------
$ 4,389,700 $ 525,100
================ ================
</TABLE>
Note 15 - Revenue
The following table summarizes the cash and trade dollars components of
revenue for the years ended March 31, 1999 and 1998:
<TABLE>
1999 1998
---------------- ----------------
<S> <C> <C>
Trade $ 263,900 279,100
Cash 240,600 307,000
---------------- ----------------
$ 504,500 $ 586,100
================ ================
</TABLE>
20
- --------------------------------------------------------------------------------
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UBARTER.COM INC.
(Registrant)
By: /s/ Steven M. White
------------------------------------
Steven M. White
President and Chief Executive Officer
<PAGE>
