UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
March 2, 1999
(Date of Report (Date of earliest event reported))
UBARTER.COM INC.
(Exact name of Registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
0-24005 91-1739746
- ---------------------------------- -----------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
21400 International Blvd., Suite 207
Seattle, Washington 98198
- ------------------------------------ ------------------------------------
Address of principal executive offices) (Zip Code)
(206) 870-9290
(Registrant's telephone number, including area code)
International Barter Corp.
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On March 2, 1999, pursuant to a Share Purchase Agreement among
International Barter Corp. (which has changed its corporate name to "Ubarter.com
Inc."), Barter Business Exchange, Inc. ("BBE"), an Ontario corporation, and Bob
Bagga ("Bagga"), the selling shareholder of BBE, Ubarter.com Inc. acquired one
hundred percent (100%) of the issued and outstanding shares of BBE ("Shares")
from Bagga, the seller and registered and beneficial owner of all the issued and
outstanding shares of BBE. A copy of the Purchase Agreement is filed as an
exhibit to this report and is incorporated by reference. Unless otherwise
specified, all dollar amounts stated in this report are denominated in Canadian
dollars.
The total amount of consideration payable by Ubarter.com Inc. to Bagga,
pursuant to the Purchase Agreement is CN $2,450,000. The aggregate consideration
payable to Bagga is subject to adjustment and includes: (i) the payment of CN
$850,000 (including funds advanced Bagga prior to closing) and payment in lawful
money of the United States of the amount of $US 100,000; (ii) a Promissory Note
(the "Note") in the principal amount of CN $850,000 (subject to adjustment, if
applicable, pursuant to the terms of the Purchase Agreement); (iii) the payment
of Ubarter.com Inc. Trade Dollars (barter dollars) in the amount of CN $250,000;
and (iv) the issuance by Ubarter.com Inc. to Bagga of 150,000 shares of
Ubarter.com Inc. common stock which have a minimum aggregate value, upon
registration and resale, of CN $350,000.
The Note in the principal amount of CN $850,000 is subject to reduction, if
applicable, pursuant to the terms of the Share Purchase Agreement. The Note
provides that the principal will be reduced by the amount, if any, that 10% of
the consolidated cash revenues of BBE for the period from March 1, 1999 to
February 29, 2000, is less than CN $750,000. If the cash revenues of BBE exceed
CN $750,000 during this period, then Ubarter.com Inc. will pay Bagga the amount
over CN $750,000 in equivalent value of common shares of Ubarter.com Inc. These
shares must be registered and freely tradeable, with a value per share equal to
the closing trading price on the business day immediately preceding March 1,
2000. The 10% cash revenues do not include trade dollar revenues, and include
any incremental consolidated cash revenues to Ubarter.com Inc. from any
acquisitions by Ubarter.com or any of its subsidiaries of a majority interest
(whether for cash or shares) in any entities during the period, including cash
revenues derived from strategic alliances or joint ventures, provided that only
any increase in cash revenues after the effective date of the acquisition are
included. A copy of the Note is filed as an exhibit to this report and is
incorporated by reference.
The obligations of Ubarter.com Inc. under the Note are secured by a Share
Pledge Agreement, by which Ubarter.com Inc. pledged the Shares to Bagga. The
Share Pledge Agreement constitutes a security interest in first position until
such time as the Note is paid and the obligations of Ubarter.com Inc. have been
satisfied. A copy of the Share Pledge Agreement is filed as an exhibit to this
report and is incorporated by reference.
Ubarter.com Inc. agreed to register the resale of the 150,000 shares issued
to Bagga within sixty (60) days after Closing. Upon registration, the
Ubarter.com Inc. Shares shall have a minimum aggregate value of Three Hundred
Fifty Thousand Dollars (CN $350,000). In the event the minimum aggregate value
falls below this amount, then Ubarter.com will make up the
<PAGE>
difference, at its option, either by (i) a payment of cash; or (ii) through the
issuance of additional shares of common stock of Ubarter.com Inc.
The purchase price and the terms for the transaction were determined in
arms-length negotiations between the parties. Each of the parties acknowledge
that the determination of the purchase price is based on assumptions relating to
the financial condition of the Corporation disclosed to Ubarter.com Inc. through
representations made by Bagga and the unaudited financial statements prepared by
BBE. The Purchase price is subject to adjustment to account for any change in
the revenues, accounts receivables, inventory, trade exchange deficit and
liabilities of BBE. In the event the financial condition of BBE differs from the
assumptions at Closing, the parties will enter into good faith negotiations for
a period not to exceed ten (10) business days from the closing. If the parties
cannot agree on an adjustment to the purchase price within the ten (10) business
days, then neither party will be obligated to consummate the acquisition of the
Purchased Shares under the Share Purchase Agreement. In that event Bagga will be
obligated to repay the principal amount of the Bridge Loan to Ubarter.com Inc.,
together with interest calculated at eight percent (8.0%) per annum.
Item 7. Financial Statements and Exhibits.
(a) The Registrant is filing as Exhibit 99.1 the audited Consolidated Financial
Statements, as of February 28, 1999 and 1998, of BBE (the acquired
business). These Consolidated Financial Statements are hereby incorporated
into this report by reference.
(b) The Registrant is filing as Exhibit 99.2 its unaudited Pro Forma Combined
Financial Information required by Item 7(b) of Form 8-K. This information
includes the following unaudited pro forma financial statements with
related notes:
(1) balance sheet reflecting the acquisition as if it occurred on December
31, 1998; and
(2) statements of operations data reflecting the combined operations of
the Registrant and BBE for the fiscal year ended March 31, 1998 and
nine months ended November 30, 1998.
This information is hereby incorporated into this report by reference.
(c) Exhibits.
*10.9 Share Purchase Agreement among Bob Bagga and International
Barter Corp. and Barter Business Exchange, Inc.
**10.10 Share Pledge Agreement between International Barter Corp., and
Bob Bagga, and Barter Business Exchange, Inc.
<PAGE>
**10.11
Promissory Note.
99.1 Audited Consolidated Financial Statements, as of February 28,
1999 and 1998, of Barter Business Exchange, Inc.
99.2 Unaudited Pro Forma Combined Financial Information including: (1)
a balance sheet reflecting the acquisition as if it occurred on
December 31, 1998; (2) statements of operations data reflecting
the combined operations of the Registrant and BBE for the fiscal
year ended March 31, 1998 and nine months ended November 30,
1998; and (3) related notes.
- --------------------------
* Previously filed with the Securities Exchange Commission on March 29, 1999
on Form 8-K.
** Previously filed with the Securities Exchange Commission on March 17, 1999
on Form 8-K.
<PAGE>
SIGNATURE
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 hereunto duly authorized.
UBARTER.COM INC.
(formerly, "International Barter Corp.")
/s/ Richard Mayer
By: -------------------------------------
Name: Richard Mayer
Title: Vice President and Secretary
Dated: May 14, 1999
<PAGE>
Exhibit Index
Exhibit
Number Exhibit Description
- ------ -------------------
*10.9 Share Purchase Agreement among Bob Bagga and International
Barter Corp. and Barter Business Exchange, Inc.
**10.10 Share Pledge Agreement between International Barter Corp., and
Bob Bagga, and Barter Business Exchange, Inc.
**10.11 Promissory Note.
99.1 Audited Consolidated Financial Statements, as of February 28,
1999 and 1998, of Barter Business Exchange, Inc.
99.3 Unaudited Pro Forma Combined Financial Information including: (1)
a balance sheet reflecting the acquisition as if it occurred on
December 31, 1998; (2) statements of operations data reflecting
the combined operations of the Registrant and BBE for the fiscal
year ended March 31, 1998 and nine months ended November 30,
1998; and (3) related notes.
- ---------------------------
* Previously filed with the Securities Exchange Commission on March 29, 1999
on Form 8-K.
** Previously filed with the Securities Exchange Commission on March 17, 1999
on Form 8-K.
Exhibit 99.1
BARTER BUSINESS EXCHANGE INC.
INDEPENDENT AUDITOR'S REPORT
and
CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999 AND 1998
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
of Barter Business Exchange Inc.
We have audited the accompanying consolidated balance sheet of Barter Business
Exchange Inc. and Subsidiaries as of February 28, 1999 and 1998 and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Barter Business
Exchange Inc. and Subsidiaries as of February 28, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended, in accordance
with generally accepted accounting principles.
/s/ Moss Adams LLP
Seattle, Washington
April 17, 1999
1
<PAGE>
BARTER BUSINESS EXCHANGE INC.
CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1999 AND 1998
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
1999 1998
------------------ ------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 36,000 $ 99,600
Accounts receivable, net of allowance for doubtful accounts of $92,800
in 1999 and $70,600 in 1998 281,100 299,400
Inventory 310,400 271,600
Other current assets 9,200 9,800
------------------ ------------------
Total current assets 636,700 680,400
------------------ ------------------
EQUIPMENT AND LEASEHOLDS, net 274,900 142,100
------------------ ------------------
OTHER ASSETS
Investment 26,500 70,200
Intangible assets 88,800 85,500
------------------ ------------------
115,300 155,700
------------------ ------------------
Total Assets $ 1,026,900 $ 978,200
================== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 93,000 $ 61,100
Accrued liabilities 22,300 12,400
Unearned revenue 186,300 206,000
Trade dollars issued in excess of earned 1,980,500 1,499,600
Current portion of long-term obligations 26,800 21,400
------------------ ------------------
Total current liabilities 2,308,900 1,800,500
------------------ ------------------
LONG-TERM OBLIGATIONS, net of current portion 71,800 -
------------------ ------------------
COMMITMENTS (Note 10)
STOCKHOLDERS' DEFICIT
Common stock - -
Accumulated deficit (1,428,200) (844,900)
Accumulated other comprehensive income, net of tax 74,400 22,600
------------------ ------------------
(1,353,800) (822,300)
------------------ ------------------
Total Liabilities and Stockholders' Deficit $ 1,026,900 $ 978,200
================== ==================
</TABLE>
See accompanying notes 2
<PAGE>
BARTER BUSINESS EXCHANGE INC.
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED FEBRUARY 28, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
1999 1998
----------------- ------------------
<S> <C> <C>
REVENUE $ 2,731,500 $ 2,535,800
COST OF REVENUE 584,200 597,700
----------------- ------------------
Gross profit 2,147,300 1,938,100
----------------- ------------------
OPERATING EXPENSES
Selling, general and administrative 2,487,600 2,335,400
Depreciation and amortization 105,800 83,000
----------------- ------------------
2,593,400 2,418,400
----------------- ------------------
Loss from operations (446,100) (480,300)
----------------- ------------------
OTHER EXPENSE
Interest expense (23,200) (21,400)
Other (77,600) -
----------------- ------------------
(100,800) (21,400)
----------------- ------------------
NET LOSS $ (546,900) $ (501,700)
================= ==================
</TABLE>
See accompanying notes. 3
<PAGE>
BUSINESS BARTER EXCHANGE INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
YEARS ENDED FEBRUARY 28, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
Accumulated
Common Stock Other
------------------- Accumulated Comprehensive Comprehensive
Shares Amount Deficit Income Income Total
------------ ------------ ----------- ------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, February 28, 1997 200 $ - $ (343,200) $ - $ - $ (343,200)
Net loss - - (501,700) (501,700) - (501,700)
Foreign currency translation
adjustments, net of tax
expense of $18,700 - - - 22,600 22,600 22,600
=============
Comprehensive income - - - $ (479,100) - -
------------ ------------ ----------- ============= ---------------- -----------
BALANCE, February 28, 1998 200 - (844,900) 22,600 (822,300)
Net loss - - (546,900) (546,900) (546,900)
Foreign currency translation
adjustments, net of tax
expense of $41,500 - - - 51,800 51,800 51,800
=============
Comprehensive income - - - $ (495,100) - -
=============
Cash dividends paid - - (36,400) - (36,400)
------------ ------------ ----------- ---------------- -----------
BALANCE, February 28, 1999 200 $ - $(1,428,200) $ 74,400 $(1,353,800)
============ ============ ============ ================ =============
</TABLE>
See accompanying notes. 4
<PAGE>
BARTER BUSINESS EXCHANGE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED FEBRUARY 28, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
1999 1998
----------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (546,900) $ (501,700)
Adjustments to reconcile net loss to cash from operating activities
Depreciation and amortization 105,800 83,000
Loss on disposal of equipment 45,100 -
Write-down of investment 43,700 -
Non-compete agreement (43,500) -
Net change in operating assets and liabilities
Accounts receivable 18,300 6,900
Inventory (38,800) (118,100)
Other current assets 600 57,000
Accounts payable 31,900 (34,600)
Accrued liabilities 9,900 (36,500)
Unearned revenue (19,700) 15,800
Trade dollars issued in excess of earned 480,900 655,400
----------------- ---------------
87,300 127,200
----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in common stock - (70,200)
Purchase of equipment and leaseholds (231,100) (59,000)
----------------- ---------------
(231,100) (129,200)
----------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on long-term obligations 87,400 -
Repayment of long-term obligations (34,900) (50,600)
Dividends paid to company's stockholders (36,400) -
----------------- ---------------
16,100 (50,600)
----------------- ---------------
EFFECT OF EXCHANGE RATE CHANGES 64,100 40,800
----------------- ---------------
NET CHANGE IN CASH (63,600) (11,800)
CASH AND CASH EQUIVALENTS, beginning of year 99,600 111,400
----------------- ---------------
CASH AND CASH EQUIVALENTS, end of year $ 36,000 $ 99,600
================= ===============
NON-CASH FINANCING ACTIVITIES
Purchase of equipment through capital lease obligations $ 26,700 $ -
================= ===============
</TABLE>
See accompanying notes. 5
<PAGE>
BARTER BUSINESS EXCHANGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 1 - Description of Business
The Company operates as a trade exchange offering bartering services
for retail, professional, media and corporate clients. Operations are
primarily transacted in the Canadian provinces of Ontario and British
Columbia. The Company is incorporated in the province of Ontario,
Canada. 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.
Subsequent to February 28, 1999 the remaining shareholder of the
Company entered into an agreement to sell 100% of the outstanding
shares to Ubarter.com Inc. (formerly International Barter
Corp.).
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company, its wholly-owned subsidiary
Vancouver Barter Business Exchange Inc., and its 50% owned subsidiary
Barter Business Exchange (Windsor) Inc. All intercompany transactions
and balances have been eliminated.
Functional Currency and International Operations - The functional
currency of the Company is the local currency, the Canadian dollar.
The financial statements are translated to United States dollars using
year-end rates of exchange for assets and liabilities, and average
rates of exchange for the year for revenues, costs, and expenses.
Translation gains, which are net of tax, are deferred and accumulated
as a component of shareholders equity.
Trade Dollar Transactions - The Company uses the ratio of one Trade
Dollar to one Canadian dollar in measuring and accounting for
purchases and sales. This one-for-one ratio is the pervasive standard
with the Company and throughout the barter industry. The Company does
not recognize any accounting implications if differences are observed
between trade dollar and Canadian dollar prices that are within
reasonable ranges that might exist between prices of similar 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 with a maturity of three months or less when purchased to
be cash equivalents.
Inventory - Inventories are stated at lower of cost (first-in,
first-out basis) or market.
Revenue Recognition - The Company recognizes revenue equal to the cash
to be received from the commission earned when the buyer and seller
have made an unconditional commitment to complete the transaction and
the Company has debited and credited the appropriate account. Revenue
is recognized for quarterly administrative fees 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.
6
<PAGE>
BARTER BUSINESS EXCHANGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies (Continued)
Depreciation - Equipment and leaseholds are stated at cost.
Depreciation is computed under accelerated methods over the estimated
useful lives of the assets, generally five to seven years. Leasehold
improvements are amortized on a straight-line basis over the term of
the lease.
Intangible Assets - Goodwill represents the excess of the purchase
price over the fair value of assets acquired and is being amortized on
a straight-line basis over 5 years. Total goodwill of $111,800 is
stated net of accumulated amortization of $52,100 and $26,300 at
February 28, 1999 and 1998, respectively.
In January 1999, the Company entered into a non-competition agreement
with a former shareholder, which is being amortized over the six month
life of the agreement. Accumulated amortization on the $43,500
agreement amounted to $14,400 at February 28, 1999.
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.
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
consist 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 Canada. 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 February 28, 1999 and 1998, no one
customer accounted for 10% or more of the accounts receivable balance.
Fair Value of Financial Instruments - The Company's financial
instruments, including cash, accounts receivable, accounts payable,
notes payable and capital lease 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 $202,700 and $220,542 for the
years ended February 28, 1999 and 1998, respectively.
Comprehensive Income - In June 1997, the Financial Accounting
Standards Board (FASB) issued SFAS 130, Reporting Comprehensive
Income, which was adopted by the Company in the first quarter of
fiscal 1999. SFAS 130 establishes standards for reporting
comprehensive income and its components in a financial statement.
Comprehensive income as defined includes all changes in equity (net
assets) during a period from non-owner sources. Accumulated other
comprehensive income consists of the cumulative translation adjustment
resulting from the translation of the Company's functional currency,
the Canadian dollar, to its reporting currency, the United States
dollar.
7
<PAGE>
BARTER BUSINESS EXCHANGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 2 - Summary of Significant Accounting Policies (Continued)
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 incurred
during the application development stage; such costs are amortized
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 adoption of SOP 98-1 will have a material impact on its
consolidated financial statements.
Note 3 - Equipment and Leaseholds
Equipment and leaseholds consists of the following at February 28:
<TABLE>
1999 1998
----------------- ---------------
<S> <C> <C>
Computers and equipment $ 245,900 $ 187,100
Furniture and fixtures 140,400 75,300
Leasehold improvements 46,700 72,700
----------------- ---------------
Less accumulated depreciation and amortization 433,000 335,100
(158,100) (193,000)
----------------- ---------------
$ 274,900 $ 142,100
</TABLE>
Leaseholds improvements under capital lease totaled $26,700, and
related accumulated amortization was $4,800 as of February 28, 1999.
There were no assets under capital lease as of February 28, 1998.
Note 4 - Investment
During 1999 the Company wrote down an investment in common stock of
another company, which was historically recorded at cost. The write
down of $40,100 is included in other expense, and reduced the carrying
value of the investment. The carrying value was further reduced $3,600
due to currency translation, with the offsetting effect included in
other comprehensive income.
Note 5 - Note Payable to Bank
The Company has a $67,000 revolving note payable with a bank. The note
payable is subject to annual renewal. As of February 28, 1999 and
1998, no borrowings were outstanding. Borrowings made throughout the
year on the line of credit are secured by cash and cash equivalents on
deposit with the bank.
8
<PAGE>
BARTER BUSINESS EXCHANGE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999 AND 1998
- --------------------------------------------------------------------------------
Note 6 - Long-Term Obligations
<TABLE>
1999 1998
---------------- -------------
<S> <C> <C>
Note payable to bank, interest at prime plus 2 1/2%, payable $ 73,800 $ -
in monthly installments of $1,400 plus interest, maturing
July 2004, partially guaranteed by the stockholder and is
collateralized by substantially all assets of the Company
Capital lease for leasehold improvements, due in monthly
installments of $900, including imputed interest of 19%, due
December 2001 $ 21,800 $ -
Notes payable to bank, paid in full during 1999 $ - 21,400
Other 3,000 $ -
98,600 21,400
Less current portion (26,800) (21,400)
$ 71,800 $ -
================ =============
</TABLE>
Maturities of long-term obligations for future years ending February
28 are as follows:
<TABLE>
Principal Capital Lease
Payments Obligation Total
-------- ---------- -----
<S> <C> <C> <C>
2000 $ 19,800 $ 10,800 $ 30,600
2001 16,700 10,800 27,500
2002 16,700 7,600 24,300
2003 16,700 - 16,700
2004 6,900 - 6,900
-------- ---------- --------
76,800 29,200 106,000
Less amount representing interest - (7,400) (7,400)
======== ========== ========
$ 76,800 $ 21,800 $ 98,600
======== ========== ========
</TABLE>
Note 7 - Trade Dollars Issued In Excess Of Earned
In accordance with the guidelines established by the International
Reciprocal Trade Association, Barter Business Exchange Inc. 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 units (money) in the exchange economy.
At February 28, 1999 and 1998, the Company had expended $1,980,500 and
$1,499,600 Trade Dollars respectively, in excess of the amount of
Trade Dollars earned by the Company.
Note 8 - Capital Stock
The Company has three classes of no-par value common stock: Common,
Class B, and Class C. The three classes of stock have an unlimited
number of shares authorized, Common has 200 shares outstanding, Class
B and Class C have zero shares outstanding. Class B shares have
preference in dividend, redemption, and liquidation over Common and
Class C. Class C has preference over Common. Class C and Class B have
no voting rights.
9
<PAGE>
Note 9 - Income Taxes
The following reconciliation of the difference between the actual
benefit for income taxes and the benefit computed by applying the
Canadian statutory rate to income before income taxes:
<TABLE>
1999 1998
----------------- --------------
<S> <C> <C>
Benefit at statutory rate $ 158,600 $ 145,500
Permanent differences (16,300) (15,900)
Provincial taxes 84,800 77,800
Change in valuation allowance (227,100) (207,400)
$ - $ -
</TABLE>
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
components of the net deferred income tax assets, including effects of
currency translations, are as follows at February 28:
<TABLE>
1999 1998
----------------- --------------
<S> <C> <C>
Deferred tax assets
Property and equipment $ 2,900 $ 3,100
Income recognition methods - 90,600
Net operating loss carryforwards 533,500 234,200
536,400 327,900
Valuation allowance (536,400) (327,900)
$ - $ -
</TABLE>
The Company has accumulated net operating loss carryforwards as of
February 28, 1999 and 1998 of approximately $1,212,200 and $531,800,
respectively, which can be offset against future income taxes payable.
These loss carryforwards expire at various dates beginning in 2000
through 2006.
Note 10 - Commitments
The Company leases office space under non-cancelable operating leases
expiring in May 2003. Future minimum lease payments under the lease
terms are as follows for the years ended February 28:
2000 $ 108,000
2001 91,400
2002 79,300
2003 75,500
2004 18,900
-------------
$ 373,100
=============
Rent expense amounted to $80,500 and $97,400 for the years ended
February 28, 1999 and 1998, respectively.
Exhibit 99.2
UBARTER.COM INC.
PRO FORMA COMBINED FINANCIAL INFORMATION
Overview
On March 2, 1999, Ubarter.com Inc. (Ubarter.com) entered into a share purchase
agreement to acquire 100% of the outstanding shares of Barter Business Exchange
Inc. (BBE). BBE operates a trade exchange, offering bartering services for
retail, professional, media and corporate clients primarily in the Canadian
provinces of Ontario and British Columbia. The acquisition is being accounted
for using the purchase method of accounting and, accordingly, the purchase price
has been allocated to the tangible and intangible assets acquired and
liabilities assumed on the basis of their respective fair values on the
acquisition date.
The total purchase price of approximately US $1,270,200 is comprised of cash in
the amount of CN $850,000 (US $563,300) and US $100,000; a promissory note in
the principal amount of CN $100,000 (US $66,200); Ubarter.com Trade dollars
(barter dollars) in the amount of CN $250,000 (US $165,700); the issuance of
150,000 shares of the Ubarter.com's common stock which have a value of US
$375,000 at the acquisition date. For purposes of this pro forma combined
financial information, the excess purchase price over net tangible assets
acquired is based on the historical financial position and is assumed to be
amortized over an estimated average useful life of 24 months.
The unaudited pro forma balance sheet has been prepared to reflect the
acquisition as if it occurred on December 31, 1998. Ubarter.com's fiscal year
end is March 31. BBE's fiscal year end is February 28. The unaudited pro forma
statements of operations combine the operations of Ubarter.com for the fiscal
year ended March 31, 1998 and nine months ended December 31, 1998 with the
operations of BBE for the year ended February 28, 1998 and nine months ended
November 30, 1998 as if the acquisition occurred on March 1, 1997.
The unaudited pro forma financial statements are presented for illustrative
purposes only and are not necessarily indicative of the combined financial
position or results of operations in future periods or the results that actually
would have been realized had Ubarter.com and BBE been a combined company during
the specified periods.
The unaudited pro forma financial statements, including the notes thereto, are
qualified in their entirety by reference to, and should be read in conjunction
with, the historical financial statements of Ubarter.com, included in its Annual
Report on Form 10-KSB for the year ended March 31, 1998 and quarterly report on
Form 10-QSB for the nine months ended December 31, 1998 and the financial
statements of BBE which are included elsewhere in this report.
1
<PAGE>
- --------------------------------------------------------------------------------
UBARTER.COM INC.
PRO FORMA COMBINED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
ASSETS
Historical
------------------------------------
Barter Business
Ubarter.com Inc. Exchange Inc.
December 31, November 30,
1998 1998 Adjustments Pro Forma
----------------- ----------------- ------------- -----------------
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 1,141,300 $ 96,200 $(335,000) (A) $ 902,500
Accounts receivable, net 63,400 262,200 325,600
Inventory - 289,500 289,500
Notes receivable, current portion 2,400 - 2,400
Trade dollars earned in excess of issued 18,100 - 18,100
Other current assets 1,200 10,300 11,500
----------------- ----------------- -----------------
Total current assets 1,226,400 658,200 1,549,600
----------------- ----------------- -----------------
EQUIPMENT AND LEASEHOLDS, net 59,600 290,400 350,000
----------------- ----------------- -----------------
OTHER ASSETS
Investment - 26,300 26,300
Intangible assets - 64,600 2,215,000 (B) 2,279,600
Notes receivable, net of current portion 26,600 - 26,600
Prepaid advertising and scrip inventory 157,900 - 157,900
Note receivable 328,300 - (328,300) (A) -
Other assets 1,200 - 1,200
----------------- ----------------- -----------------
514,000 90,900 2,491,600
----------------- ----------------- -----------------
Total Assets $ 1,800,000 $ 1,039,500 $ 4,391,200
================= ================= =================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 20,500 $ 37,900 $ 58,400
Accrued liabilities - 80,200 80,200
Unearned revenue - 184,500 184,500
Trade dollars issued in excess of earned - 1,571,700 $ 165,700 (A) 1,737,400
Current portion of long-term obligations 11,400 23,000 34,400
Other current liabilities 4,000 - 4,000
----------------- ----------------- -----------------
Total current liabilities 35,900 1,897,300 2,098,900
----------------- ----------------- -----------------
LONG-TERM OBLIGATIONS, net of current portion 9,300 87,000 66,200 (A) 162,500
----------------- ----------------- -----------------
COMMITMENTS
STOCKHOLDERS' DEFICIT
Common stock 5,800 - 200 (A) 6,000
Additional paid-in capital 2,081,900 - 374,800 (A) 2,456,700
Treasury stock (13,000) - (13,000)
Subscribed shares 1,200 - 1,200
Accumulated deficit (321,100) (1,025,800) 1,025,800 (B) (321,100)
Accumulated other comprehensive income, net
of tax - 81,000 (81,000) (B) -
----------------- ----------------- -----------------
1,754,800 (944,800) 2,129,800
----------------- ----------------- -----------------
Total Liabilities and Stockholders' Deficit $ 1,800,000 $ 1,039,500 $ 4,391,200
================= ================= =================
</TABLE>
See accompanying notes to unaudited pro forma
combined financial statements. 2
<PAGE>
- --------------------------------------------------------------------------------
UBARTER.COM INC.
PRO FORMA COMBINED BALANCE SHEET
(Unaudited)
YEAR ENDED MARCH 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
Historical
-------------------------------------
Barter Business
Ubarter.com Inc. Exchange Inc.
March 31, 1998 February 28, 1998 Adjustments Pro Forma
---------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
REVENUE $ 684,100 $ 2,535,800 $ 3,219,900
COST OF REVENUE 143,500 597,700 741,200
---------------- ------------------- -------------------
Gross profit 540,600 1,938,100 2,478,700
---------------- ------------------- -------------------
OPERATING EXPENSES
Selling, general and administrative 500,100 2,335,400 $ 1,107,500 (C) 3,857,200
(85,800) (D)
Depreciation and amortization 10,700 83,000 93,700
---------------- ------------------- -------------------
510,800 2,418,400 3,950,900
---------------- ------------------- -------------------
Income (loss) from operations 29,800 (480,300) (1,472,200)
---------------- ------------------- -------------------
OTHER EXPENSE
Interest expense (4,900) (21,400) (26,300)
Interest income 8,800 - 8,800
---------------- ------------------- -------------------
3,900 (21,400) (17,500)
---------------- ------------------- -------------------
LOSS BEFORE INCOME TAXES 33,700 (501,700) (1,489,700)
INCOME TAX BENEFIT (PROVISION) (1,200) - (1,200)
---------------- ------------------- -------------------
NET INCOME (LOSS) $ 32,500 $ (501,700) $ (1,490,900)
================ =================== ===================
NET INCOME (LOSS) PER COMMON SHARE
Basic $ 0.02 (E) $ (1.02)
================ ===================
Diluted $ 0.02 (E) $ (0.92)
================ ===================
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 1,316,212 (E) 1,466,212
================ ===================
Diluted 1,474,970 (E) 1,624,970
================ ===================
</TABLE>
See accompanying notes to unaudited pro forma
combined financial statements. 3
<PAGE>
- --------------------------------------------------------------------------------
UBARTER.COM INC.
PRO FORMA COMBINED BALANCE SHEET
(Unaudited)
NINE MONTHS ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
Historical
-------------------------------------
Barter Business
Ubarter.com Inc. Exchange Inc.
March 31, 1998 February 28, 1998 Adjustments Pro Forma
---------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C>
REVENUE $ 476,400 $ 1,928,000 $ 2,404,400
COST OF REVENUE 68,200 413,000 481,200
---------------- ------------------- -------------------
Gross profit 408,200 1,515,000 1,923,200
---------------- ------------------- -------------------
OPERATING EXPENSES
Selling, general and administrative 637,300 1,550,800 $ 830,600 (C) 2,958,100
(85,800) (D)
Depreciation and amortization 9,800 51,200 61,000
---------------- ------------------- -------------------
647,100 1,602,000 3,019,100
---------------- ------------------- -------------------
Income (loss) from operations (238,900) (87,000) (1,095,900)
---------------- ------------------- -------------------
OTHER EXPENSE
Interest expense (2,800) (16,000) (18,800)
Interest income 29,200 - 29,200
Other - (77,900) (77,900)
---------------- ------------------- -------------------
26,400 (93,900) (67,500)
---------------- ------------------- -------------------
LOSS BEFORE INCOME TAXES (212,500) (180,900) (1,163,400)
INCOME TAX BENEFIT (PROVISION) 600 - 600
---------------- ------------------- -------------------
NET LOSS $ (211,900) $ (180,900) $ (1,162,800)
================ =================== ===================
NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted $ 0.04 (E) $ (0.21)
================ ===================
Weighted average shares outstanding used
in per share calculation 5,421,400 5,571,400
================ ===================
</TABLE>
See accompanying notes to unaudited pro forma
combined financial statements. 4
<PAGE>
UBARTER.COM INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
Basis of Presentation
The acquisition is being accounted for using the purchase method of accounting
and, accordingly, the purchase price has been allocated to the tangible and
intangible assets acquired and liabilities assumed on the basis of their
respective fair values on the acquisition date.
Pro Forma Adjustments
The following adjustments were applied to the Ubarter.com Inc.'s (Ubarter.com)
historical financial statements and those of Barter Business Exchange Inc. (BBE)
to arrive at the pro forma combined financial information.
(A) To record consideration to consummate the acquisition totaling $1,270,200
(including $375,000 in Common Stock, $165,700 in barter dollars, promissory
note with a principal amount of $66,200 and $663,300 in cash) and eliminate
stockholders' deficit.
(B) To record excess of purchase price over the fair value of assets and
liabilities of $2,215,000. The book value of tangible assets acquired and
liabilities assumed are assumed to approximate fair value.
Total purchase price $ 1,270,200
Fair value of tangible assets acquired (1,039,500)
Fair value of tangible liabilities assumed 1,984,300
--------------
Purchase price allocated to goodwill $ 2,215,000
==============
(C) To record amortization of the goodwill over the estimated useful life of 24
months.
(D) To eliminate compensation expense paid to a former BBE officer whose
employment was terminated.
(E) Pro forma basic net loss per share for the year ended March 31, 1999 and
for the nine months ended December 31, 1998 is computed using the weighted
average number Ubarter.com common shares outstanding during the period plus
shares of Common Stock assumed to be issued as part of the acquisition.
