<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
--------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 6, 2000
ZEBRAMART.COM, INC.
(Exact name of Registrant as Specified in its Charter)
10 PIEDMONT CENTER, SUITE 900
ATLANTA, GEORGIA 30305
(Address of principal executive offices)
(404) 467-6955
(Registrant's telephone number)
--------
NEVADA 000-28713 88-0443120
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
--------
<PAGE> 2
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
ZEBRAMART.COM, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
<PAGE> 3
zebramart.com, inc.
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.................................................................................1
Balance Sheets...............................................................................................3
Statements of Operations.....................................................................................4
Statements of Stockholders' Equity...........................................................................5
Statements of Cash Flows.....................................................................................6
Notes to Financial Statements................................................................................7
</TABLE>
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To zebramart.com, inc.:
We have audited the accompanying balance sheet of zebramart.com, inc. (a
Georgia corporation) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity, and cash flows for the years
then ended and for the period from inception (January 15, 1998) to December 31,
1998 and for the period from inception (January 15, 1998) to December 31, 1999.
These financial statements are the responsibility of Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of zebramart.com, inc. as of
December 31, 1999 and 1998, and the results of its operations and its cash
flows for the year then ended and for the period from inception (January 15,
1998) to December 31, 1998 in conformity with generally accepted accounting
principles. Also in our opinion, the cumulative financial statements referred
to above present fairly in all material respects the results of operations and
of cash flows for the period from inception (January 15, 1998) to December 31,
1999.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As a result of recurring losses from
operations and its limited operating revenues and capital resources, there is
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note B. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
<PAGE> 5
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of operating expenses is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Tauber & Balser, P.C.
- ------------------------------
Atlanta, Georgia
February 17, 2000
<PAGE> 6
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,411,554 $ 12,017
Accounts receivable 5,540 --
Prepaid expenses 37,926 1,797
----------- ---------
TOTAL CURRENT ASSETS 3,455,020 13,814
PROPERTY AND EQUIPMENT, net 369,562 24,292
----------- ---------
TOTAL ASSETS $ 3,824,582 $ 38,106
=========== =========
LIABILITIES AND STOCKHOLDERS'/MEMBERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 251,449 $ 61,860
Related party loan -- 21,000
Current portion of capital leases 26,413 --
Zebrapoints redeemable 699 --
Deferred revenue 5,625 5,000
----------- ---------
TOTAL CURRENT LIABILITIES 284,186 87,860
----------- ---------
CAPITAL LEASES, NET OF CURRENT PORTION 23,196 --
----------- ---------
STOCKHOLDERS'/MEMBERS' EQUITY (DEFICIT)
Common stock, $.00001 par, 500,000,000 shares
authorized, 349,216,956 shares issued and outstanding 3,492 --
Additional paid-in capital 5,618,679 --
Members' contributions, net of repurchases -- 175,000
Deficit accumulated during the development stage (2,104,971) (224,754)
----------- ---------
TOTAL STOCKHOLDERS'/MEMBERS'
EQUITY (DEFICIT) 3,517,200 (49,754)
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'/
MEMBERS' EQUITY (DEFICIT) $ 3,824,582 $ 38,106
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 7
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM INCEPTION (JANUARY 15, 1998) TO DECEMBER 31, 1998 AND
FOR THE PERIOD FROM INCEPTION (JANUARY 15, 1998) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Cumulative
Since
Inception 1999 1998
------------ ------------- ---------
<S> <C> <C> <C>
REVENUES:
Consulting revenue $ 2,500 $ 2,500 $ --
Product revenue 6,374 6,374 --
COST OF GOODS SOLD 8,205 8,205 --
----------- ------------- ---------
Gross margin 669 669 --
----------- ------------- ---------
OPERATING EXPENSES 2,076,835 1,854,289 222,546
----------- ------------- ---------
OPERATING LOSS (2,076,166) (1,853,620) (222,546)
----------- ------------- ---------
OTHER INCOME (EXPENSES):
Interest expense (26,674) (26,674) --
Bank service charges (2,208) -- (2,208)
Interest income 77 77 --
----------- ------------- ---------
Total other income (expenses) (28,805) (26,597) (2,208)
----------- ------------- ---------
NET LOSS $(2,104,971) $ (1,880,217) $(224,754)
=========== ============= =========
WEIGHTED AVERAGE COMMON SHARES
USED IN COMPUTING BASIC AND
DILUTED LOSS PER SHARE -- 280,600,231 --
----------- ------------- ---------
BASIC AND DILUTED LOSS PER
COMMON SHARE $ -- $ (0.0069) $ --
=========== ============= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 8
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 15, 1998) TO
DECEMBER 31, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common Stock Issued Additional During the Stockholders'/
-------------------------- Paid-in Development Members' Members'
Shares Amounts Capital Stage Equity Equity/(Deficit)
------------ ---------- ------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 15, 1998 -- $ -- $ -- $ -- $ -- $ --
Contributions -- -- -- -- 175,000 175,000
Net loss -- -- -- (224,754) -- (224,754)
------------ ---------- ------------- ------------ ------------- ------------
Balance, December 31,1998 -- -- -- (224,754) 175,000 (49,754)
Contributions -- -- -- -- 1,722,171 1,722,171
Issuance of member interest
for services -- -- -- -- 205,000 205,000
Repurchase of member interest -- -- -- -- (25,000) (25,000)
Conversion of LLC interest
to common stock 300,000,000 3,000 2,074,171 -- (2,077,171) --
Acquisition of assets of
Interactive 44,656,956 446 124,554 -- -- 125,000
Issuance of common stock, net
of issuance costs 4,560,000 46 3,419,954 -- -- 3,420,000
Net loss -- -- -- (1,880,217) -- (1,880,217)
------------ ---------- ------------- ------------ ------------- ------------
Balance, December 31, 1999 349,216,956 $ 3,492 $ 5,618,679 $ (2,104,971) $ -- $ 3,517,200
============ ========== ============= ============ ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 9
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM INCEPTION (JANUARY 15, 1998) TO DECEMBER 31, 1998 AND
FOR THE PERIOD FROM INCEPTION (JANUARY 15, 1998) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Cumulative Since
Inception 1999 1998
---------------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FORM OPERATING ACTIVITIES:
Net loss $(2,104,971) $(1,880,217) $(224,754)
----------- ----------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 39,740 34,128 5,612
Loss from disposal of fixed assets 12,955 12,955 --
Compensation expenses for equity issuances 274,000 205,000 69,000
Changes in operating assets and liabilities:
Accounts receivable (5,540) (5,540) --
Prepaid expenses (37,926) (36,129) (1,797)
Other assets (2,100) -- (2,100)
Accounts payable and accrued expenses 251,449 189,589 61,860
Zebrapoints redeemed 699 699 --
Deferred revenue 5,625 625 5,000
----------- ----------- ---------
Total adjustments 538,902 401,327 137,575
----------- ----------- ---------
Net cash used in operating activities (1,566,069) (1,478,890) (87,179)
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (370,548) (342,744) (27,804)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of related party 21,000 -- 21,000
Repayments of related party loan (21,000) (21,000) --
Proceeds from stockholder contributions, 5,373,171 5,267,171 106,000
Repurchase of stockholder interests (25,000) (25,000) --
----------- ----------- ---------
Net cash provided by financing activities 5,348,171 5,221,171 127,000
----------- ----------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 3,411,554 3,399,537 12,017
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD -- 12,017 --
----------- ----------- ---------
CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 3,411,554 $ 3,411,554 $ 12,017
=========== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 10
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM INCEPTION (JANUARY 15, 1998) TO DECEMBER 31, 1998 AND
FOR THE PERIOD FROM INCEPTION (JANUARY 15, 1998) TO DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
Cumulative Since
Inception 1999 1998
---------------- ------------- -------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOWS INFORMATION:
Interest paid $ 26,674 $ 26,674 $ --
============= ============= =============
Equipment acquired through capital lease
obligations $ 63,571 $ 63,571 $ --
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 11
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE A - FORMATION AND ORGANIZATION
zebramart.com, LLC (the "Company"), a Georgia limited liability company, was
formed January 15, 1998. The Operating Agreement (the "Agreement") provided for
the allocation of profits, losses, and cash distributions based on the capital
accounts of each member from January 15, 1998 to October 14, 1999. The Company
is a membership-based, value-oriented consumer web site offering its members a
wide selection of products including electronics, home furnishings, and
apparel. Through its zebrapoints program, the Company is able to offer its
members an incentive to shop with the Company.
Effective October 14, 1999 the Company changed its structure from a limited
liability corporation to a C corporation named zebramart.com, inc. In
connection with this change, the Company issued 10,000,000 shares of common
stock to its members in proportion to their original investment percentage in
the Company. The articles of incorporation authorized 50,000,000 shares with
par value of $.01.
On December 15, 1999, Interactive Music, Inc., a Nevada corporation, combined
with the Company. This pooling of interests transaction was accounted for as a
reverse merger with zebramart.com. On that same date the Company changed its
name from Interactive Music, Inc. to zebramart.com, inc.
As of December 31, 1999, the Company was still to be considered in the
development stage since its activities for the year were primarily
developmental in nature, with no significant revenues to date.
8
<PAGE> 12
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE B - CURRENT OPERATIONS AND CAPITALIZATION ISSUES
The Company started Internet operations on December 1, 1999 and membership and
product sales have been insignificant. The Company's minimal operating history
makes it difficult to predict future operating results. The Company's expense
levels are based, in part, on its expectations as to future revenues. If
revenue levels are below expectations, or if the Company is unable or unwilling
to reduce expenses proportionately, operating results will be adversely
affected. There is no assurance that the Company will be profitable. The
Company's prospects must be considered in light of the risks, expenses, and
difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving e-commerce
markets. If the Company is unable to develop and introduce new services,
products, or product enhancements in a timely manner or if a new release of its
services and products does not achieve market acceptance, the Company's
business, operating results, and financial condition will be materially
adversely affected.
The Company's success will depend upon management's ability to obtain contracts
with customers; establish independent associates; continue product development;
respond to competitive developments; create and expand its sales, marketing,
and implementation forces; enter into sales agency agreements; and attract,
train, and retain management and marketing personnel on a timely basis. The
Company's growth will also require the Company to implement financial and
management controls and reporting systems and procedures. The failure to do so
could have a material adverse effect on the Company's business, operating
results, and financial condition.
The Company raised approximately $5,000,000, net of issuance costs, in a
private placement stock offering for operating capital for the coming year.
There is no assurance that the proceeds of this offering, together with
revenues from operations will be sufficient to fund the Company's operations.
9
<PAGE> 13
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The Company endeavors to adhere to the most conservative generally accepted
accounting principles and Security Exchange Commission guidelines as are
practicable. As a general rule, the Company believes that Internet companies
engaging in transactions that are similar to transactions entered into by
traditional companies should follow the already established accounting models
for those transactions.
Revenue Recognition
Product sales over the Internet are equivalent to sales of products at retail
stores and are accounted for as sales when the products are delivered. The
Company follows the Gross Sales concept versus the commission concept because
the Company is the owner of the merchandise sold to customers and not merely an
agent for another business. Membership revenues generated over the Internet are
equivalent to fees received in advance for future services. The related revenue
is recognized over the entire term of the membership plan.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks, and short-term
investments with original maturities of 90 days or less to be cash equivalents.
Short-term investments include $2,750,000 in short-term FHLB notes.
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 assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
10
<PAGE> 14
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Revenue
The Company recorded $5,000 of deferred revenue at December 31, 1998 for a
marketing agreement to provide services to an equity member based on the value
of the marketing agreement to the total member contribution. This agreement was
canceled in 1999 and refunded to the member as part of the repurchase of
membership interests.
At December 31, 1999 the deferred revenue of $5,625 represents an advance
payment from a customer for future consulting work and the unearned portion of
membership revenue.
Property and Equipment
The Company depreciates its property and equipment using the straight-line
method over the estimated useful lives of five years. Leased equipment is
depreciated over the life of the lease.
Property and equipment balances as of December 31, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Furniture and fixtures $ 21,826 $ 1,082
Computer equipment 268,285 4,811
Software 110,538 21,911
--------- --------
400,649 27,804
Accumulated depreciation (31,087) (3,512)
--------- --------
Property and equipment, net $ 369,562 $ 24,292
========= ========
</TABLE>
Costs of Developing the Web Site
The Company expenses all costs except for the cost of external off-the-shelf
software.
Estimated Redemption Costs
The Company offers discount coupons in the form of zebrapoints, which are
generally valid for the life of the membership. Since the Company has no
history on redemption percentages it has elected to record the entire liability
for un-expired and unused zebrapoints until there is sufficient history to do
otherwise.
11
<PAGE> 15
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising Expense
Many Internet companies enter into advertising barter transactions with each
other, in which they exchange rights to place advertisements on each other's
web sites. There is diversity in practice in accounting for these transactions.
The Company accounts for all related expenses as a cost of doing business with
the value of the transaction being the actual cash liability for the service.
The Company records the exchange rights also based on cash received as an
offset to the related operating cost.
Shipping and Handling Costs
Shipping and handling costs are netted against the related customer charges and
the net result is shown as a period operating cost.
Introductory Offers
The Company records only net revenue and only when the service is rendered.
Costs associated with introductory offers are expensed as incurred.
Independent Contractors
The Company has been developing its operations through the use of independent
contractors who are not employees of the Company. The Company does not pay or
withhold Federal or state employment taxes with respect to these independent
contractors. The Company believes that all independent contractors meet
applicable requirements established by the Internal Revenue Service (the
"IRS"); however, if the independent contractor status was denied by the IRS,
the Company could become responsible for the taxes required to be withheld and
could incur additional costs associated with employee benefits and other
employee costs. As of January 31, 2000 there were no independent contractors.
12
<PAGE> 16
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
No provisions for income taxes have been made in the accounts of the Company
when it was an LLC, since all of the members report their respective shares of
taxable income and loss in their individual tax returns for the period the
Company was an LLC. From October 14, 1999 through December 31, 1999 the Company
incurred losses of $745,820 which will be available to offset future income
taxes for Federal and state income taxes through 2019. The Company does not
have any certainty of this future offset and accordingly has made no provision
on its books. The Company has recorded a valuation allowance to reflect the
uncertainty of the ultimate utilization of the deferred tax asset as follows:
<TABLE>
<S> <C>
Deferred tax asset $ 745,820
Less valuation allowance 745,820
---------
Net deferred tax asset $ --
=========
</TABLE>
Members' Equity
In accordance with the Agreement, the net loss to October 14, 1999, the date of
conversion from an LLC to a corporation, has been allocated to all members on a
pro rata basis in proportion to their respective ownership interests in the
Company. No member shall be allocated losses greater than their capital account
balance until losses have been reallocated to all positive capital account
balances.
Net Loss Per Share
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128
(SFAS No. 128), Earnings Per Share, which established new standards for
computing and presenting earnings per share. SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earning per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of stock options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share.
13
<PAGE> 17
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
All loss per share amounts have been presented to conform to the SFAS No. 128
presentation. Stock options and warrants have not been included in the
computation of diluted loss per share as the computation would not be dilutive.
Because the Company was an LLC during 1998, net loss per share is not presented
for 1998.
NOTE D - RELATED PARTY LOAN
On August 19, 1998, the Company entered into a loan agreement with a minority
member to borrow $21,000. The loan bears interest at 29% and is payable upon
demand. The loan was repaid in full in September 1999.
NOTE E - LEASE OBLIGATIONS
The Company conducts its operations in facilities under operating lease
agreements which extend through July 31, 2004. The following is a schedule of
the future minimum obligations under the operating leases that have initial or
remaining noncancelable lease terms in excess of one year at December 31, 1999:
<TABLE>
<S> <C>
2000 $ 225,862
2001 262,413
2002 264,640
2003 266,373
2004 155,384
----------
Total $1,176,672
==========
</TABLE>
Rent expense under the operating lease was approximately $23,361 for the period
from inception (January 15, 1998) to December 31, 1998. For 1999 rent expense
was $43,522.
In 1999, the Company entered into two leases for computer equipment. Both
leases are classified as capital leases and are payable over three years or
less. The total cost and accumulated depreciation of equipment under capital
leases was $63,571 and $3,492, respectively, at December 31, 1999.
14
<PAGE> 18
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE E - LEASE OBLIGATIONS (Continued)
Future minimum lease payments under the leases are as follows:
<TABLE>
<S> <C>
2000 $ 26,413
2001 28,373
2002 1,619
Less amount representing interest 6,796
--------
Present value of minimum capital lease payments 49,609
Less current portion 26,413
--------
Long-term portion $ 23,196
========
</TABLE>
NOTE F - EQUITY TRANSACTIONS
The Company recorded $69,000 and $205,000 of compensation expense and equity
during 1998 and 1999, respectively, based on the estimated value of services
rendered.
In 1998, the Company issued an option to a member to purchase an additional 5%
of the Company for $5,000. The Company recorded $20,000 of compensation expense
related to this option. The option was exercised in 1999.
In 1999, the Company raised approximately $5,267,000 of equity capital, net of
fund raising fees.
In 1999, the Company repurchased membership interests from three equity members
for $25,000 based on the fair value of their membership interests on the date
of the repurchases.
The Company has entered into agreements with selected employees and independent
contractors that call for a percent of their earnings to be paid in stock
options at the fair market value of the common stock when services were
rendered. As of December 31, 1999, options for approximately 9,875,000
("reserve pool") shares are reserved for issuance in connection with those
services.
15
<PAGE> 19
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE F - EQUITY TRANSACTIONS (Continued)
On December 15, 1999, Interactive Music, Inc., a Nevada corporation, acquired
all of the outstanding common stock of zebramart.com, inc. On that same date,
Interactive Music, Inc. changed its name to zebramart.com, inc. For accounting
purposes, the acquisition has been treated as an acquisition of Interactive
Music, Inc. by zebramart.com, inc. and as a recapitalization of zebramart.com,
inc. The stockholders' equity of zebramart.com, inc. was retroactively restated
for the equivalent number of shares received in the merger. Operations prior to
the merger are those of the accounting acquirer, zebramart.com, inc. The merger
resulted in an increase in the authorized and issued shares to 500,000,000 and
349,216,956, respectively. This change was equal to a 26.3 to 1 forward split
for the shareholders of zebramart.com, inc. prior to the merger.
NOTE G - LITIGATION
The Company is a defendant in a lawsuit filed by one of its former employees
for breach of an alleged employment agreement. The Company intends to contest
the case vigorously, and management does not believe that the pending lawsuit
will have a material adverse effect on its business or financial condition.
NOTE H - SUBSEQUENT EVENTS
In January 2000, the Board formally approved the issuance of an option to a
former employee for 1,578,000 of the Company's common stock shares at the
applicable fair market value and related to the reserve pool at December 31,
1999.
On January 19, 2000 the Board of Directors approved an increase in the number
of authorized shares to 700,000,000, approved a Long-Term Incentive Plan,
reserved 70,000,000 shares for issuance under that Plan, approved employment
agreements for two key executives, approved stock option grants for 3,419,225
related to the reserve pool at December 31, 1999, approved new stock options
for 38,980,000 shares, approved performance based options of 16,670,000 that
are based on achieving certain financial objectives over a three year period,
approved a non-qualified stock option of 140,000 shares to a non-employee, and
approved the grant of 159,675 shares to a non-employee for services rendered at
fair market value. All option grants and share grants were at the weighted
average fair market value at the time of services rendered or the fair market
value on the date of grant.
16
<PAGE> 20
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE H - SUBSEQUENT EVENTS (Continued)
On February 9, 2000 the Company loaned a non-employee shareholder $300,000 for
the purpose of investing in a business venture. The loan is secured by 800,000
shares of zebramart.com, Inc. common stock. The loan calls for the non-employee
to repay the loan in six months or for the Company to convert the loan to a 25%
interest in the related business venture and retain the underlying security.
On February 14, 2000 the Board approved a stock option to a non-employee for
572,025 shares for services rendered at fair market value. The shares were
related to the reserve pool at December 31, 1999.
On February 17, 2000 the Board approved the plan to acquire Royal Acquisition
Inc. for $200,000 in cash and 2,000,000 restricted shares of the Company's
common stock.
17
<PAGE> 21
ZEBRAMART.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
SCHEDULE OF OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM INCEPTION (JANUARY 15, 1998) TO DECEMBER 31, 1998 AND
FOR THE PERIOD FROM INCEPTION (JANUARY 15, 1998) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Cumulative
Since
Inception 1999 1998
----------- ----------- ---------
<S> <C> <C> <C>
Advertising and marketing expenses $ 175,943 $ 175,943 $ --
Audit and tax services 8,000 8,000 --
Bank fees 9,956 9,956 --
Compensation expense related to equity issuances 274,000 205,000 69,000
Consulting expense 49,666 -- 49,666
Contributions 1,550 1,550 --
Credit card fees 976 976 --
Depreciation 33,187 27,575 5,612
Dues and subscriptions 1,935 514 1,421
Equipment rental 5,856 5,856 --
Legal 85,440 80,094 5,346
Licenses and fees 1,633 1,633 --
Meals 6,813 6,813 --
Miscellaneous expenses 4,945 4,945 --
Non computer related 12,628 12,628 --
Payroll expense 1,125,196 1,104,622 20,574
Postage 7,186 7,186 --
Professional fees 27,286 26,486 800
Rent expense 76,883 43,522 23,361
Repairs 9,015 9,015 --
Supplies 8,988 4,497 4,491
Telephone 37,919 37,919 --
Travel and entertainment 8,828 6,565 2,263
Utilities 1,040 1,040 --
Web-site development expenses 111,966 71,954 40,012
----------- ----------- ---------
$ 2,076,835 $ 1,854,289 $ 222,546
=========== =========== =========
</TABLE>
See independent auditors' report.
18
<PAGE> 22
(b) Pro forma financial information.
ZEBRAMART.COM, INC.
PROFORMA FINANCIAL INFORMATION
Introduction
The following unaudited pro forma condensed consolidated financial
statements give effect to the merger with Royal Acquisitions, Inc. which was
effective as of March 1, 2000.
The unaudited pro forma condensed consolidated balance sheet presents
the financial position of zebramart.com at December 31, 1999 giving effect to
the merger as if it had occurred on such date. The unaudited pro forma
condensed consolidated statement of operations for the year ended December 31,
1999 gives effect to the acquisition as if it had occurred at the beginning of
the period.
The unaudited pro forma financial information is presented for
information purposes only and is it is not necessarily indicative of the
financial position and results of operations that would have been achieved had
the merger been completed as of the dates indicated and is not necessarily
indicative of zebramart.com's future financial position or results of
operations.
The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the historical consolidated financial
statements of zebramart.com, including the related notes thereto.
December 31, 1999
Balance Sheet
<TABLE>
<CAPTION>
zebramart
-----------
<S> <C>
Cash and Equivalents $ 3,211,554
Other Current Assets 43,466
Property & Equipment 369,562
Total Assets $ 3,624,582
===========
Liabilities $ 307,382
Stockholders' Equity 5,622,191
Accumulated Deficit (2,304,991)
Total Liabilities & Equity $ 3,624,582
===========
</TABLE>
<PAGE> 23
Statement of Operations
<TABLE>
<CAPTION>
zebramart
----------
<S> <C>
Reorganization Expense $ 200,020
Loss from Operations 1,853,620
Other Expenses 26,597
Net Loss $2,080,237
==========
</TABLE>
Pro Forma Notes
Note 1. The unaudited pro forma condensed consolidated balance sheet has been
prepared to reflect the merger of Royal Acquisitions, Inc. with and into
zebramart.com as if it had occurred on December 31, 1999.
Note 2. The unaudited pro forma condensed consolidated statement of operations
for the year ended December 31, 1999 gives effect to the merger as if it had
occurred at the beginning of the period.
Note 3. On March 1, 2000 zebramart acquired 100% of Royal Acquisitions, Inc.
for consideration of $200,000 and 2,000,000 restricted shares of zebramart
common stock.
<PAGE> 24
(c) Exhibits.
23.1 Consent of Tauber & Balser, P.C.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
zebramart.com, inc.
Date: May 10, 2000 By: /s/ Roger E. Haggerty
---------------------------------------
Roger E. Haggerty
Chief Financial Officer
(Principal Financial and Accounting
Officer)
<PAGE> 1
EXHIBIT 23.1
TAUBER & BALSER, P.C.
Certified Public Accountants
3340 Peachtree Road, N.E.
Suite 250
Atlanta, GA 30326
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Current Report on Form 8-K of our report
dated February 17, 2000, relating to the financial statements of zebramart.com,
Inc.
/s/ Tauber & Balser, P.C.
- -------------------------
Tauber & Balser, P.C.
Atlanta, Georgia
May 8, 2000
