INTERNATIONAL MERCANTILE CORP
FILING TYPE: 10QSB
DESCRIPTION: QUARTERLY REPORT
FILING DATE:
PERIOD END: JUN 30, 2000
PRIMARY EXCHANGE: OTC BULLETIN BOARD
TICKER: IMTL
<PAGE>
TABLE OF CONTENTS
PART I.........................................................................2
Item 1.........................................................................2
Balance Sheet Assets...........................................................3
Balance Sheet Liabilities......................................................4
Income Statement...............................................................5
Table 4........................................................................7
Cash Flow Statement............................................................8
Table 6.......................................................................14
Table 7.......................................................................15
Table 8.......................................................................15
Table 9.......................................................................16
Table 10......................................................................16
Table 11......................................................................18
Table 12......................................................................18
Item 2........................................................................19
PART II.......................................................................22
Item 1........................................................................22
Item 2........................................................................22
Item 3........................................................................23
Item 4........................................................................23
Item 5........................................................................23
Item 6........................................................................23
Exhibit 27 Table..............................................................25
<PAGE>
U.S. Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ---- to ----
Commission File number 0-7693
INTERNATIONAL MERCANTILE CORPORATION
------------------------------------
(Exact name of small business issuer as
specified in its charter)
Missouri 43-0970243
-------- ----------
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1625 Knecht Avenue, Baltimore, Maryland 21227
---------------------------------------------
(Address of principal executive offices)
(410) 242-5000
--------------
(Issuer's telephone number)
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of June 30, 2000, there were outstanding 27,190,183 shares of Class A
Common Stock, $0.01 par value, and 2,000,000 shares of Class B Common Stock,
$0.01 par value.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
Form 10-QSB Index
June 30, 2000
Page
Part I: Financial Information ............................................ 3
Item 1. Financial Statements .......................................... 3
Balance Sheets as of December 31, 1999 and June 30,
2000 (unaudited).................................................. 6-7
Statement of Operations for the period September 2, 1999
(Date of Inception) through December 31, 1999 and the
Six Months Ended June 30, 2000..................................... 8
Statement of Changes in Stockholder's Equity for the
period September 2, 1999 (Date of Inception) through
December 31, 1999 and the Six Months Ended June 30, 2000 .......... 9
Statement of Cash Flows for the period September 2, 1999
(Date of Inception) through December 31, 1999 and the Six
Months Ended June 30, 2000 ....................................... 10
Notes to Financial Statements...................................... 11-20
Item 2. Management's Discussion and Analysis or Plan of
Operation ........................................................ 21
Part II: Other Information ............................................ 24
Item 1. Legal Proceedings ......................................... 24
Item 2. Changes in Securities ..................................... 24
Item 3. Defaults Upon Senior Securities ........................... 25
Item 4. Submission of Matters to a Vote of Security Holders ....... 25
Item 5. Other Information ......................................... 25
Item 6. Exhibits and Reports on Form 8-K .......................... 25
Signatures .............................................................. 27
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
3
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
Balance Sheets as of December 31, 1999 and June 30, 2000 (Unaudited)
Statements of Operations, Changes in Stockholders' Equity
and Cash Flows for the Period September 2, 1999 (Date of
Inception) Through December 31, 1999 and the Six Months Ended
June 30, 2000 (Unaudited)
4
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
TABLE OF CONTENTS
DECEMBER 31, 1999 AND JUNE 30, 2000 (Unaudited)
Page
----
Balance Sheets ............................................ F-1
Statements of Operations .................................. F-2
Statements of Changes in Stockholders' Equity ............. F-4
Statements of Cash Flows .................................. F-5
Notes to the Financial Statements ......................... F-7 - F-16
5
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
BALANCE SHEETS
AS OF DECEMBER 31, 1999 and JUNE 30, 2000
June 30,
December 31, 2000
1999 Unaudited
---- ---------
ASSETS
Current Assets
Cash and Cash Equivalents ........................ $ 37,699 $ 61,840
Marketable Securities ............................ 715,075 0
Accounts Receivable Net of Allowance
for Doubtful Accounts .......................... 849,471 1,306,594
Inventory ........................................ 475,626 565,151
Prepaids and Other Assets ........................ 14,298 21,418
---------- ----------
Total Current Assets .......................... 2,092,169 1,955,003
Investments
Investment in VLDC Technologies, Inc. Stock ...... 2,725,642 3,000,000
Fixed Assets
Fixed Assets, net of Accumulated Depreciation .... 200,008 221,574
Other Assets
Organization Costs, Net of Amortization .......... 196,832 191,415
Deposits ......................................... 18,330 36,042
---------- ----------
Total Other Assets ............................ 215,162 227,457
---------- ----------
Total Assets ............................. $5,232,981 $5,404,034
========== ==========
See Notes to Financial Statements
F-1
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
BALANCE SHEETS
AS OF DECEMBER 31, 1999 and JUNE 30, 2000
June 30,
December 31, 2000
1999 Unaudited
---- ---------
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses .......... $ 745,218 $ 1,011,136
Accrued Interest Payable ....................... 9,052 47,214
Due to Related Party ........................... 261,322 39,573
Warranty Reserve - Current Portion ............. 2,442 2,442
Note Payable - Related Parties,
Current Portion .............................. 596,609 596,609
Line of Credit ................................. 0 698,946
Loans Payable .................................. 750,124 247,500
Capitalized Lease Payable - Current Portion .... 10,221 10,221
----------- -----------
Total Current Liabilities ................... 2,374,988 2,653,641
Long Term Liabilities
Committments and Contingencies
Warranty Reserve Net of Current Portion ........ 4,884 11,884
Capitalized Lease Payable Net
of Current Portion ........................... 23,787 17,987
Note Payable - Related Party
Net of Current Portion ....................... 100,000 75,000
----------- -----------
Total Long Term Liabilities ............... 128,671 104,871
----------- -----------
Total Liabilities ......................... 2,503,659 2,758,512
Stockholders' Equity
Common stock-Class A - $.01 Par,
31,000,000 shares authorized,
5,102,441 shares outstanding @ 12/31/99
and 27,190,183 shares outstanding @ 6/30/00 ... 51,024 271,902
Common stock-Class B - $.01 Par,
2,000,000 shares authorized, 1,000,000
shares outstanding @ 12/31/99 and
2,000,000 shares outstanding @ 3/31/00 ....... 10,000 20,000
Preferred stock - Series 1 - $.10 Par,
10,000,000 shares authorized,
-0- shares outstanding ....................... 0 0
Preferred stock - Series 2 - $.10 Par,
2,000,000 shares authorized,
2,000,000 shares outstanding @6/30/00 ........ 0 200,000
Preferred stock - Series 3 - $.10 Par,
5,000,000 shares authorized,
-0- shares outstanding @6/30/00 .............. 0 0
Additional paid in capital ..................... 2,967,742 3,252,577
Unrealized gain/loss on investments ............ 0 274,358
Accumulated Deficit ............................ (299,444) (1,373,315)
----------- -----------
Total Stockholders' Equity .................. 2,729,322 2,645,522
----------- -----------
Total Liabilities & Stockholders' Equity .. $ 5,232,981 $ 5,404,034
=========== ===========
See Notes to Financial Statements
F-2
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
STATEMENTS OF OPERATIONS
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH DECEMBER 31, 1999 AND THE SIX MONTHS ENDED JUNE 30, 2000
June 30,
December 31, 2000
1999 Unaudited
---- ---------
Revenues
Sales ........................................ $1,465,294 $4,045,914
Cost of Merchandise Sold ..................... 1,262,396 3,697,212
---------- ----------
Gross Profit ............................. 202,898 348,702
Operating Expenses
Amortization ................................. 12,390 20,384
Auto and Truck Expense ....................... 0 15,993
Bad Debts .................................... 17,336 34,625
Bank Charges & Credit Card Fees .............. 4,718 18,470
Donations .................................... 0 1,817
Depreciation ................................. 10,480 22,494
Interest Expense ............................. 11,436 88,454
Marketing & Advertising Expense .............. 55,074 8,622
Office Supplies & Expense .................... 32,021 86,627
Professional Fees ............................ 18,476 145,034
Rent ......................................... 42,823 86,989
Repairs & Maintenance ........................ 5,168 8,594
Sales Expense ................................ 61,848 224,957
Salaries & Related Costs & Benefits .......... 188,706 515,114
Subcontract Labor & Temporary Help ........... 9,725 8,329
Telephone .................................... 16,559 46,584
Travel & Promotion ........................... 3,267 62,897
Utilities .................................... 4,989 19,588
Warranty Reserve ............................. 7,326 7,000
---------- ----------
Total Operating Expenses .................. 502,342 1,422,573
---------- ----------
Net (Loss) ................................... $ (299,444) $1,073,871)
========== ==========
Earnings (Loss) per share of Common
Stock - Basic (Note 1) ..................... $ (0.0513) $ (0.0368)
========== ==========
Weighted Average Shares - Basic .............. 5,835,166 9,190,183
========== ==========
Earnings (Loss) per share of Common
Stock - Diluted (Note 1) ................... $ (0.0308) $ (0.0368)
========== ==========
Weighted Average Shares - Diluted ............ 9,726,833 9,190,183
========== ==========
See Notes to Financial Statements
F-3
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED JUNE 30, 2000
June 30,
2000
Unaudited
---------
Revenues
Sales .................................................... $1,835,668
Cost of Merchandise Sold ................................. 1,728,064
----------
Gross Profit ................................................ 107,604
Operating Expenses
Amortization .................................................... 11,172
Auto and Truck Expense .......................................... 11,629
Bad Debts ....................................................... 30,000
Bank Charges & Credit Card Fees ................................. 11,194
Donations ....................................................... 0
Depreciation .................................................... 11,444
Interest Expense ................................................ 70,560
Marketing & Advertising Expense ................................. 8,622
Office Supplies & Expense ....................................... 48,070
Professional Fees ............................................... 110,797
Rent ............................................................ 42,980
Repairs & Maintenance ........................................... 4,041
Sales Expense ................................................... 106,539
Salaries & Related Costs & Benefits ............................. 263,034
Subcontract Labor & Temporary Help .............................. 855
Telephone ....................................................... 25,480
Travel & Promotion .............................................. 38,805
Utilities ....................................................... 8,877
Warranty Reserve ................................................ 3,000
----------
Total Operating Expenses ..................................... 807,099
----------
Net (Loss) ...................................................... $ (699,495)
==========
Earnings (Loss) per share of Common Stock - Basic (Note 1) ...... $ (0.0240)
==========
Weighted Average Shares - Basic ................................. 29,190,183
==========
Earnings (Loss) per share of Common Stock - Diluted (Note 1) .... $ (0.0240)
==========
Weighted Average Shares - Diluted ............................... 29,190,183
==========
See Notes to Financial Statements
F-4
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH DECEMBER 31, 1999 AND THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID IN
SHARES AMOUNT CAPITAL DEFICIT
------ ------ ------- -------
<S> <C> <C> <C> <C>
Balance, September 2, 1999
(Date of Inception) .......................... 1,000 $ 10 $ 490 $ 0
Reverse acquisition, September 6, 1999
Exchange of Micromatix.com, Inc., a
Delaware corp
Common Stock ................................. (1,000) (10) (490) 0
Authorization of Common Stock of
International Mercantile Corporation,
a Missouri corp, to owners of
Micromatix.com, Inc., a Delaware corporation
Class B Common Stock, issued and outstanding 0 0 0 0
Outstanding Common Stock of International
Mercantile Corporation, a Missouri corp.,
9/2/99 to 12/31/99
Class A Common Stock ...................... 5,102,441 51,024 2,967,742 0
Class B Common Stock ...................... 1,000,000 10,000 0 0
Net (Loss) Accumulated During the
Development Stage ............................ 0 0 0 (299,444)
----------- ----------- ----------- -----------
Balance, December 31, 1999 .................... 6,102,441 61,024 2,967,742 (299,444)
Issuance of Common Stock of International
Mercantile Corporation, a Missouri corp,
to owners of Micromatix.com, Inc., a
Delaware corporation
Class A Common Stock ....................... 1,500,000 15,000 0 0
Class B Common Stock ....................... 1,000,000 10,000 0 0
Issuance of Common Stock of International
Mercantile Corporation, a Missouri corp.,
1/1/00 to 6/30/00
Class A Common Stock ...................... 20,587,742 205,878 284,835 0
Class B Common Stock ...................... 0 0 0 0
Net (Loss) ..................................... 0 0 0 (1,073,871)
----------- ----------- ----------- -----------
Balance, June 30, 2000 (Unaudited ) ........... 29,190,183 $ 291,902 $ 3,252,577 (1,373,315)
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH DECEMBER 31, 1999 AND THE SIX MONTHS ENDED JUNE 30, 2000
June 30,
December 31, 2000
1999 Unaudited
---- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ......................................... $ (299,444) $(1,073,871)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Bad Debts ...................................... 17,336 34,625
Depreciation & Amortization .................... 22,870 42,878
(Increase) Decrease In
Marketable Securities ....................... (715,075) 715,075
Accounts Receivable ......................... (866,807) (491,748)
Investment in VLDC Technologies, Inc. ....... (2,725,642) 0
Inventory ................................... (475,626) (89,525)
Prepaids & Other Assets ..................... (14,298) (7,120)
Deposits .................................... (18,330) (17,712)
Organization Costs .......................... (209,222) (14,967)
Increase (Decrease)
Accounts Payable & Accrued Expenses ........ 745,218 265,918
Due to Related Party ........................ 261,322 (221,749)
Accrued Interest ............................ 9,052 38,162
Warranty Reserve ............................ 7,326 7,000
----------- -----------
NET CASH (USED) IN OPERATING ACTIVITIES .......... (4,261,320) (813,034)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Fixed Assets .................... (210,488) (44,060)
----------- -----------
NET CASH (USED) IN INVESTING ACTIVITIES .......... (210,488) (44,060)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Capitalized Leases ............... 34,008 0
Proceeds from Loans and Line of Credit ......... 775,124 1,105,000
Payments on Loans .............................. (25,000) (933,678)
Payments on Capital Lease ...................... 0 (5,800)
Capital Contributions .......................... 2,967,742 284,835
Issuance of Capital Stock ...................... 61,024 430,878
Proceeds from Note Payable - related parties ... 696,609 0
----------- -----------
NET CASH PROVIDED BY IN FINANCING ACTIVITIES ..... 4,509,507 881,235
----------- -----------
NET INCREASE (DECREASE) IN CASH .................. 37,699 24,141
CASH - BEGINNING ................................. 0 37,699
----------- -----------
CASH - ENDING .................................... $ 37,699 $ 61,840
=========== ===========
See Notes to Financial Statements
F-6
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
ORGANIZATION
International Mercantile Corporation (The Company) is a profit corporation
organized under the laws of the State of Missouri on March 10, 1971 as
International Mercantile Corporation (IMTL). On July 31, 1999, the Company
liquidated its' majority interest holdings in its' subsidiary, University
Mortgage, Inc., which represented the Company's operations, through a new
issuance of University Mortgage, Inc. stock to a related third party investor in
consideration of their capital investment in University Mortgage, Inc. The
result of this action left an OTC Bulletin Board publicly traded company with no
substantial assets or liabilities. On September 6, 1999, the Company merged with
Micromatix.com, Inc. (the predecessor company), a newly formed Delaware
corporation which maintained an Internet based personal computer manufacturing
business that sells build-to- order unbranded or "white box" PC systems and PC
related hardware throughout the United States to value added retailers and other
marketers of micro computer systems. Shareholders of the Predecessor Company
received 2,500 shares of the Company's stock for each share of the Predecessor
Company; a total of 2,500,000 shares issued, in exchange for 100% of the
outstanding stock of the Predecessor Company. The merger is being accounted for
as a capital transaction with no recognition of goodwill or other intangible
assets. The Company, however, has not completed the requisite articles of merger
and related documents, which are required to be filed with the applicable state
authorities. Subsequent to the transaction, the owners of the predecessor
company assumed the management of the Company doing business as Micromatix.net
and owned approximately 26.92% of the outstanding stock of the Company
representing 48.32% of the voting rights. Since this transaction is, in
substance, a recapitalization of Micromatix.com, Inc. (the Predecessor Company)
and not a business combination, pro forma information is not presented.
Accordingly, the historical data contained in the financial statements is that
of the Predecessor Company.
REVENUE RECOGNITION
Revenues are derived primarily from sales of build-to-order personal computers
and related PC hardware via the Company's business to business e:commerce.
Revenues related to these sales are recognized when a computer product is
shipped and invoiced.
INVENTORY
Inventory consists of component parts and work in process at period-end as all
finished products were shipped prior to June 30, 2000. The Company maintains a
perpetual inventory system and determines quantities by the average cost method.
Inventory is valued at the lower of actual cost or market, net of inventory
allowance.
F-7
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
ADVERTISING EXPENSE
The Company recognizes advertising expenses in accordance with Statement of
Position ("SOP") 93-7 "Reporting on Advertising Costs." As such, the Company
expenses the costs of producing advertisements at the time production occurs,
and expenses the cost of communicating advertising in the period in which the
advertising space or airtime is used.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of the assets, which
range from three to five years. Costs for routine repairs and maintenance are
expensed as incurred and gains and losses on the disposal of assets are
recognized in the period such disposals occur.
SOFTWARE DEVELOPMENT COSTS
Internal and external costs incurred to develop internal-use software are
capitalized during the application development stage and are being amortized
over three years.
INTANGIBLE ASSETS
Costs incurred to organize the Company are capitalized and reported on the
balance sheet as other assets. The costs are being amortized over a period of 5
years using the straight-line method.
MARKETABLE SECURITIES
The Company's marketable securities are comprised of equity and debt securities
and are classified as trading securities. Trading securities are recorded at
fair value, with the change in fair value during the period included in net
earnings. In the first quarter of the year 2000 the Company liquidated its
entire marketable trading securities portfolio.
WARRANTY RESERVE
The Company maintains a depot warranty on components sold and manufactured
systems for three years; the equivalent period of time that substantially all
components from supplier manufacturers are warranted. As the Company has not
established a history of warranty service, a warranty reserve of 1/2 of 1% of
sales has been recorded at June 30, 2000.
F-8
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
The Company files its tax return with the Internal Revenue Service as a C
Corporation. Applying statutory tax rates to future year's differences between
the tax bases and financial reporting amounts of assets and liabilities
recognizes deferred income taxes. No deferred tax asset/valuation allowance has
been recognized for the losses incurred to date, as it is not determinable that
the Company will realize any tax benefit from such losses. Loss carryforwards,
if any, expire fifteen years following the tax year-end in which they occur.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management 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 respective reporting
period. Actual results could vary from these estimates and assumptions.
CONCENTRATIONS OF RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash, cash equivalents and marketable
securities. The Company maintains its cash and cash equivalents in bank deposit
accounts, the balances of which, at times, may exceed federally insured limits.
Additionally, the Company assumes that computer chip and memory availability
will remain constant. This assumption subjects the Company to concentrations of
risk should the availability of these items become uncertain in the future.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. The Company does not anticipate
the impact of this pronouncement will be material. Further, the Company does not
believe that any recently issued, but not yet effective accounting standards
will have a material effect on the Company's financial position, results of
operations or cash flows.
F-9
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
EARNINGS PER SHARE
As per Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 128 (SFAS 128), Earnings Per Share, standards for computing and
presenting earnings per share (EPS) applies to publicly held common stock or
potential common stock. It requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. In computing EPS as a
result of the reverse acquisition, the number of shares outstanding for the
period from September 2, 1999 until the date of the reverse acquisition,
September 6, 1999, is the number of shares issued by the Company to the
shareholders of the predecessor company. For the period September 6, 1999 to
December 31, 1999 the number of shares considered to be outstanding is computed
as actual number of shares of the Company outstanding during that period. The
average number of shares outstanding for the period September 2, 1999 to
December 31, 1999 has been computed by averaging these two amounts. Other
appropriate adjustments have been made to deal with changes in numbers of shares
issued during the period. Diluted EPS were computed as a result of the Company's
complex capital structure: 6,000,000 shares of Class A Common stock and
1,000,000 shares of Class B Common stock were authorized and unissued as of
December 31, 1999. The average number of shares outstanding for the quarter
ended June 30, 2000 has been computed using actual numbers of shares of the
Company outstanding during that period.
2. Allowance for Doubtful Accounts
In accordance with Generally Accepted Accounting Principles the Company records
anticipated uncollectible amounts by creating an allowance account. Bad Debt
Expense is recognized using the Percentage of Sales method. The Company
recognized a Bad Debt Expense of $17,336 for the period ended December 31, 1999
and an additional $34,625 for the six months ended June 30, 2000. In 1999 and
during the six months ended June 30, 2000 no actual receivables were directly
written off. As a result, the allowance account included on the balance sheet as
net of accounts receivables is $17,336 and $51,961 respectively at December 31,
1999 and June 30, 2000.
F-10
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
3. Related Party Transactions
The Company's financing during its development stage and during the six months
ended June 30, 2000 had been provided by interest bearing loans, non-interest
bearing loans and capital contributions to the Company by its shareholders and
unrelated third party investors. At December 31, 1999 and June 30, 2000 the
Company had liabilities to a major shareholder of $125,000 and $100,000
respectively in the form of an unsecured note payable bearing interest at 8% per
annum. The note calls for six annual principal installments of $25,000 plus
accrued interest. In December, 1999 and January, 2000 the Company paid the first
two annual principal installments of $25,000. The note was issued for the
purchase of machinery, office equipment and furniture from the shareholder.
Accrued interest on this note through December 31, 1999 and June 30, 2000 was
$3,775 and $4,228 respectively.
A B securities, a shareholder of IMTL, acquired authorized, but unissued, shares
of University Mortgage, Inc. (UMI) diluting the voting and equity interest of
IMTL in UMI to less than 5%. The shares of UMI remaining after the dilution were
then exchanged in a stock for stock transaction for registered shares of VLDC
Technologies, Inc., a publicly traded company, trading under the symbol PCLO.
The investment is recorded at cost. On December 31, 1999 IMTL acquired 3,000,000
authorized but unissued shares of VLDC Technologies, Inc.'s restricted common
stock in exchange for 3,000,000 shares of IMTL restricted Class A common stock.
The investment is recorded at the fair market value of VLDC Technologies, Inc.
stock as of the date of the exchange.
At December 31, 1999 and June 30, 2000 the Company had outstanding a $571,609
note payable to a major stockholder due in one lump sum payment of principal and
interest on or before November 23, 2000. The note bears interest at a rate of 8%
per annum, and is unsecured.
In addition, shareholders' contribution amounts totaling $3,028,766 and
$3,744,479 as of December 31, 1999 and June 30, 2000 respectively are recorded
as par value class A and class B common stock, par value preferred series 2
stock and as additional paid in capital.
The Company owed $261,322 to an officer/director for monies advanced as of
December 31, 1999. As of June 30, 2000 the liability has been reduced to
$39,573. The advance includes interest at 14% per annum and is due on demand.
4. Commitments
The Company leases its corporate offices and manufacturing facilities in
Baltimore, Maryland under a six-year lease agreement, which began on October 1,
1999. The lease encompasses commercial facilities of approximately 40,000 square
feet. Rent for the first year is $14,274 per month plus applicable sales tax,
utilities, maintenance and property tax reimbursement and will increase
approximately 5% in each of the succeeding five years. An additional security
deposit of $14,274 was paid to the landlord on February 21, 2000. The Company
leases sales offices in New York, NY under a one-year lease agreement, beginning
March 1, 2000. The lease encompasses office facilities of 1,000 square feet.
Rent is $1,774 per month.
F-11
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Commitments cont'd
Future minimum requirements as of December 31, 1999 are:
Baltimore New York Total
---------- -------- ----------
FYE 12/31/00 ....... $ 174,205 $ 17,744 $ 191,949
FYE 12/31/01 ....... 182,371 3,549 185,920
FYE 12/31/02 ....... 187,040 -0- 187,040
FYE 12/31/03 ....... 189,957 -0- 189,957
FYE 12/31/04 ....... 195,790 -0- 195,790
Thereafter ......... 130,257 -0- 130,257
---------- -------- ----------
$1,059,890 $ 21,293 $1,081,183
========== ======== ==========
Future minimum requirements as of June 30, 2000 (Unaudited) are:
Baltimore New York Total
---------- -------- ----------
FYE 12/31/00 ....... $ 88,561 $ 10,648 $ 99,209
FYE 12/31/01 ....... 182,371 3,549 185,920
FYE 12/31/02 ....... 187,040 -0- 187,040
FYE 12/31/03 ....... 189,957 -0- 189,957
FYE 12/31/04 ....... 195,790 -0- 195,790
Thereafter ......... 130,257 -0- 130,257
---------- -------- ----------
$ 973,976 $ 14,197 $ 988,173
========== ======== ==========
5. Capital Lease Obligations
The Company leases its operational and accounting software under a capital
lease, which expires in December, 2002. The lease requires monthly payments of
principal and interest of $1,235 plus applicable sales tax. Interest is imputed
at 13.25% per annum. The lease agreement concludes with a $1 buy option at the
end of the lease term. Approximate future lease payments under the capital lease
are as follows:
Unaudited
12/31/99 6/30/00
-------- --------
FYE 12/31/00 ........................ $ 14,821 $ 7,411
FYE 12/31/01 ........................ 14,821 14,821
FYE 12/31/02 ........................ 13,586 13,586
-------- --------
43,228 35,818
Less Amount representing interest ........ 9,220 7,610
-------- --------
34,008 28,208
Less current maturities .................. 10,221 10,221
-------- --------
Long-term debt, less current maturities .. $ 23,787 $ 17,987
======== ========
F-12
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
6. Officers' Compensation
Prior to the reverse acquisition, the Company's day to day activities were
managed by certain officer/shareholders, who contributed their time on the
Company's behalf without compensation in either cash or stock. No value for
these services has been determined or recorded on the accompanying financial
statements. The officers and all other employees are currently employed by the
Company at their administrative and operating facilities in Baltimore, Maryland,
and sales office in New York, New York.
7. Fixed Assets
Fixed assets for the Company consisted of the following at December 31, 1999:
Accumulated
Fixed Asset Depreciation Balance
----------- ------------ ---------
Website Development ........... $ 3,017 $ 176 $ 2,841
Furniture & Fixtures .......... 32,000 1,333 30,667
Manufacturing/Warehouse Equip . 33,000 1,375 31,625
Computer Hardware ............. 61,163 3,231 57,932
Transportation Equip .......... 7,000 408 6,592
Office Equipment .............. 30,959 1,806 29,153
Software Systems .............. 39,349 2,151 37,198
Leasehold Improvements ........ 4,000 -- 4,000
--------- --------- ---------
$ 210,488 $ 10,480 $ 200,008
========= ========= =========
Fixed assets for the Company consisted of the following at June 30, 2000
(Unaudited):
Accumulated
Fixed Asset Depreciation Balance
----------- ------------ ---------
Website Development ........... $ 8,226 $ 738 $ 7,488
Furniture & Fixtures .......... 33,117 3,699 29,418
Manufacturing/Warehouse Equip . 38,026 4,008 34,018
Computer Hardware ............. 75,986 9,452 66,534
Transportation Equip .......... 7,000 1,108 5,892
Office Equipment .............. 36,724 5,297 31,427
Software Systems .............. 51,470 6,673 44,797
Leasehold Improvements ........ 4,000 2,000 2,000
--------- --------- ---------
$ 254,549 $ 32,975 $ 221,574
========= ========= =========
F-13
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
8. Employee Stock Option Plan
The Company's Board of Directors has authorized officers of the Company to offer
certain employees benefits under an unqualified Employee Stock Option Plan
which, as of the date of these financial statements, has not been consummated.
The terms of such options are contracted between each eligible employee and the
Company on a case by case basis. As of the date of these financial statements, 7
such plans are either active, pending the start of employment or under
negotiation; none are vested.
9. Notes Payable
Notes Payable Related Party
consists of the following: Unaudited
December 31, June 30,
1999 2000
---- ----
Note Payable - related party
dated September 1999 ....................... $ 125,000 $ 100,000
Note Payable - related party
dated November 1999 ........................ 571,609 571,609
--------- ---------
696,609 671,609
Less Current Portion .................... 596,609 596,609
--------- ---------
Long Term Portion ....................... $ 100,000 $ 75,000
========= =========
Loans Payable consist of the following:
Loan Payable - Dated November, 1999 .......... $ 7,500 $ 7,500
Loan Payable - Dated March, 2000 ............. -- 50,000
Loan Payable - Dated April, 2000 ............. 0 150,000
Loan Payable - Dated May, 2000 ............... 0 40,000
--------- ---------
7,500 247,500
Less Current Portion .................... (7,500) (247,500)
--------- ---------
Long Term Portion ....................... $ -- $ --
========= =========
Based on the borrowing rates currently available to the Company for loans with
similar terms and average maturities, the fair value of the Company's long term
debt approximates the carrying amount. Interest expense on the above notes for
the periods ended December 31, 1999 and the six months ended June 30, 2000
amounted to $9,052 and $88,454 respectively.
10. Line of Credit
On March 22, 2000 the Company entered into a factoring arrangement with an
unrelated third party to fund the purchase of inventory to fulfill purchase
orders under an agreement to manufacture approximately 2,000 white-box computer
units per month for a national satellite distributed program network marketing
group. The factoring arrangement is in the form of a one-year revolving line of
credit, which allows for the drawing of funds by the Company in an amount equal
to 75% of the purchase orders received from the marketing group. The line of
credit is capped at $750,000 representing up to $1,000,000
F-14
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Line of Credit cont'd
of purchase orders. The financing calls for the payment of 3 points per month on
open invoices and is secured by an assignment of the underlying receivable,
acquired inventory related to the contract, and 1,500,000 shares of the
Company's Class A common stock. The Company issued 650,000 shares to the lender
as a fee for securing the financing. For the period ended June 30, 2000 the
Company has accrued or paid $54,605 in financing costs related to the line of
credit.
11. Contingencies
The Company's management has confirmed that as of the date of the financial
statements the Company is not involved in any lawsuits nor is there any pending
litigation.
An unwind provision exists as part of the merger agreement, whereby the merger
agreement could be rendered void. Management, however, believes that the
provision will not be exercised as all other provisions of the merger agreement
have been fulfilled.
12. Segment Information
The Company operates primarily in two industry segments: (1) whitebox system
sales and (2) computer component sales. The accounting policies of the segments
and the products and services provided by the operating segments are described
in Note 1. The table below presents information about reported segments at
December 31, 1999:
System Component
Sales Sales Other Total
----- ----- ----- -----
Sales ...................... $547,955 $917,339 $ -- $1,465,294
Gross Profit ............... 74,464 128,434 -- 202,898
Operating Income (Loss) .... 18,160 47,272 (364,876) (299,444)
Assets ..................... 510,410 844,207 3,878,364 5,232,981
Capital Expenditures ....... 14,956 25,044 170,788 210,488
Depreciation Expense ....... 667 1,116 8,697 10,480
F-15
<PAGE>
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Segment Information cont'd
The table below presents information about reported segments at June 30, 2000
(Unaudited):
System Component
Sales Sales Other Total
----- ----- ----- -----
Sales .................... $2,791,753 $1,240,028 $ 14,132 $ 4,045,913
Gross Profit ............. 230,853 103,716 14,132 348,701
Operating Income (Loss) .. 82,381 27,230 (1,183,483) (1,073,872)
Assets ................... 1,633,742 544,581 3,303,066 5,404,034
Capital Expenditures ..... 5,209 1,125 37,726 44,060
Depreciation Expense ..... 1,562 2,633 18,299 22,494
13. Subsequent Events
The Company has issued 2,200,000 shares of Class A Common Stock, which the
Company is holding in escrow in anticipation of the consummation of future
capital contributions by certain prospective investors.
The company has entered into a $3,000,000 funding arrangement with H. A. A., an
unrelated entity, to provide operating capital for future growth. The agreement
calls for initial funding of $500,000 with monthly payments of $250,000 every
month thereafter. Payments will begin upon ratification by the board and the
filing of the SB-2 registration. H. A. A. will be issued approximately 2,400,000
shares of class A common stock and has an option to purchase additional shares
at 120% of the initial purchase price for $3,000,000 additional funding.
F-16
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
This Quarterly Report on Form 10-QSB contains forward-looking statements.
For this purpose, any statements contained in it that are not statements of
historical fact should be regarded as forward-looking statements. For example,
the words "believes," "anticipates," "plans," and "expects" are intended to
identify forward-looking statements. There are a number of important factors
that could cause the Company's actual results to differ materially from those
indicated by such forward-looking statements. These factors include those shown
at the end of this section under the caption "Certain Factors That May Affect
Future Results."
The following discussion for the Company's results of operations and
financial condition should be read in conjunction with the Company's Financial
Statements listed in Part I, Item 1 and the Notes thereto appearing elsewhere in
this Form 10-QSB, and the Company's Audited Financial Statements and the Notes
thereto appearing in the Company's 1999 Annual Report on Form 10-KSB.
(a.) Results of Operations
For the period of operations since inception on 9/2/99 and ending 12/31/99,
our Company posted total sales of $1,465,294. Total sales for the six months
ended 6/30/00 were $4,045,913. While sales for the first quarter were strong,
sales for the second quarter were subject to a flattening due to market
conditions that were reflected throughout the technology industry as a whole.
Average monthly sales for the six months ended 6/30/00 increased 38% over the
average monthly sales for the fourth quarter of 1999. We were able to realize
this degree of growth due to the groundwork we established during the first
quarter of our operations. Our management recruited top sales personnel, with
significant customer bases, which reflect our goals in both our target markets
and reseller qualifications. As a result of hiring these salespersons, we
obtained an immediate clientele with existing purchasing power, and increased
sales began to materialize. Since our manufacturing, warehouse facility,
administration, technical support and purchasing departments are fully staffed
with quality personnel, we were able to respond and fulfill the needs of our
customers. As a result of our proactive outlook, our SG&A for the quarter ended
12/31/99 is higher than would occur under normal business conditions given the
level of sales generated. The SG&A of $502,065, as a percentage of sales for the
period since inception on 9/2/99 and ending 12/31/99 was 35%. This is a
reflection of the quality of the personnel and our Company's positioning to
allow it to handle the higher sales volume once it is realized. For the six
months ended June 30, 2000, SG&A is $1,422,573, or again, 35% of sales.
In the second quarter of 2000, management began taking measures to reduce
the SG&A as a pro-active correction should the market conditions continue for
any length of time.
The industry trends which effected the company's sales also effects our
customer's ability to pay their balances to us in a timely manner. While the
majority of our customers are current and paying timely, our largest customer
has slowed its payment commitments to us, which affects our ability to provide
inventory to support current sales volumes. Management is actively working with
this customer to bring them more in line with the terms of our arrangement with
them, and believes that the account will be rectified shortly.
(b) Plan of Operation
Our primary emphasis through December 31, 1999 was placed upon our
capitalization, the establishment of our website, our internal infrastructure,
our production lines and the development of our marketing team. During the six
months ended June 30, 2000, this emphasis, while continuing to be of importance
to the growth of the company, shifted more to sales and production, which we
expect to continue to be our emphasis throughout the remainder of the year 2000
so that we can increase sales by capturing a larger percentage of the growth in
the white box market. Based upon our current SG&A rate, we believe that sales
revenue of $2.0 million per month, at a gross margin of 10%, is our Company's
break even level.
F-17
<PAGE>
Management believes that this sales revenue is achievable. Our growth is
projected to result from an increase in sales equal to or greater than 50% each
quarter, which would annualize to approximately $18 million in sales.
Potentially, should all of the contracts that we are currently negotiating
materialize, annual sales could exceed $40 million for the calendar year 2000.
Coinciding with this anticipated growth is the anticipated need for additional
financing. The company currently has utilized a majority of a $750,000 line of
credit to the Company in the form of a factoring arrangement, secured by (i) an
assignment of the underlying receivable, (ii) acquired inventory related to the
receivable, and (iii) 1,500,000 shares of the Company's Class "A" common stock.
For the quarter ended June 30, 2000, sales and production were in line with our
capital limitations. With our projected increase in capital described below, the
company believes that it will attain the goals established.
The company has also entered into a funding arrangement which would provide
$3,000,000 in operating capital over the course of the next year in exchange for
class A common stock as outlined in the financial statements. This arrangement
is subject to an SB-2 registration, which should be completed prior to August
15, 2000.
In addition, future growth strategies may include strategic acquisitions
should opportunities arise which would not jeopardize current operations. This
anticipated growth, along with the growth already experienced, has and will
strain our financial and operational resources. Additional funding is necessary
to achieve the results projected. Multiple funding avenues are currently being
explored to provide the resources needed to fund the growth while allowing our
Company to maintain debt at a manageable level for our cash flow.
Marketing
We currently have a sales force consisting of six account executives, with
varying degrees of experience, but all with knowledge of computers essential to
assisting customers in configuring their orders optimally. In addition, we have
an account executive specializing in government sales and marketing, along with
the management of our strategic corporate accounts (Fortune 500). Our website
allows our customers and potential customers to view our specials and to apply
for active account status. In the year 2000, we have plans to upgrade our
website to allow our customers to custom configure their orders online, with
real-time interaction with our inventory software to allow them to ascertain
availability of product, and an order tracking function which will allow the
customer to monitor their orders progress through production. We anticipate that
this upgrade will cost approximately $125,000. Our sales department is currently
faxing to all current customers and potential customers in our extensive
database our specials on a weekly basis. Additionally, we have tele-marketers
calling and updating our database of prospective customers on a daily basis. We
expect that we will need to hire a minimum of 5 additional sales persons in
order for us to attain our projected sales goals.
Production
Our production department is designed for flexibility and staffed with
skilled assemblers and system integration technicians. Small to medium quantity
orders can be easily produced on our existing custom configuration line. In
addition, we have the capability, at very short notice, of activating an
assembly line of skilled workers for large production builds. As these contracts
increase in consistency and quantity, these additional workers will be utilized
on a permanent basis. Our production facility has the capacity to add additional
assembly lines on an as needed basis. We have completed the required independent
audit for ISO 9002 certification and we were certified on April 26, 2000. The
ISO 9002 certification is an internationally accredited standard, which
guarantees that our product is processed to the highest quality
F-18
<PAGE>
standards. In addition, it allows our Company to participate in and be awarded
state and federal government contracts.
Inventory
We manage the quantity and quality of our component inventory through our
experienced purchasing personnel and warehousing policy and procedures. We
strive to maximize our responsiveness to customer requirements while optimizing
inventory turns. Inventory management is critical to the success of our
business. Our strategy is to focus on products with high turnover ratios to
reduce exposure to product obsolescence, changing consumer demands and declines
in market prices, while still fulfilling the needs of our customers. Our
software program facilitates the control of purchasing, inventory, and accounts
payable. Each sales representative has available real-time data with respect to
our inventory levels. We believe that we are able to take advantage of synergies
and efficiencies arising out of the combination of system assembly and inventory
warehousing in a single facility.
Vendor Relations
Our Company has accounts with numerous suppliers that provide us with the
components required to custom configure systems for our customers. Pricing and
availability primarily govern our purchasing decisions. We currently do not have
any guarantees to purchase from specified vendors for any parts. Conversely, we
also do not have any contracts that require any vendor to segregate and maintain
inventory for our consumption. As a result, we are at the mercy of market
conditions to obtain products at reasonable prices that allow us to operate
profitably. Should market conditions experience any shortages or price hikes, we
would be subject to such conditions and would be unable to compete with other
companies with supplier contracts.
In the second quarter we were extended additional credit by many of our
vendors, or have made arrangements to repay debts in installments until such
time as the company can complete it's arrangements for additional funding.
Certain Factors That May Affect Future Results
The white box PC industry is highly competitive. Competition is largely
based on price, quality, range of service offered, shipping capabilities,
customer service, and product availability. Many of our competitors are larger,
more established, and have greater name recognition and financial and marketing
resources than our Company. As a result, we could potentially experience
downward pricing pressure and increased competition, which would drive down our
revenues by either forcing a cut in our sales or in our prices. There is always
the risk of general market down turn, which could adversely impact our revenues
and our growth.
We are considered a start-up company and have no significant operating
history as Micromatix.net. We have not generated significant revenue to date to
support operations on an ongoing basis. We cannot assure that we will achieve
sufficient revenues to offset our anticipated operating costs. Our viability,
profitability and growth depend upon our meeting our sales goals and our
attaining sufficient financing to purchase inventory at competitive prices. We
cannot assure that we will be able to generate revenues or ever achieve
profitable operations.
We have no significant capital. We have required significant capital to
develop our business and to date all of our costs have been funded via sales of
common stock and loans. We will continue
F-19
<PAGE>
to require significant funds as we grow. We are currently generating limited
revenue from our operations. Other than as discussed elsewhere herein, we have
no current arrangements in place with respect to sources of additional
financing. If we have to arrange for financing to further the development of our
business, we cannot assure that such financing will be available on acceptable
terms or at all. Our inability to obtain additional financing, when needed,
would have a material adverse effect on us, including possibly requiring us to
curtail or cease our operations.
Demand and market acceptance for white box PC systems are subject to a high
level of uncertainty. We cannot assure that widespread acceptance of white box
PC systems, or our products in particular, will occur. We will rely on VAR's who
utilize white box PC systems to purchase our products. In order for us to be
successful, these VAR's must perceive us as their partner, not their competitor.
Further, issues concerning the reliability, cost and quality of white box PC
systems may affect our market. We cannot assure that VAR's will view us as
"partners" and utilize our products. If our products do not achieve market
acceptance, our business, results of operations and financial condition could be
materially adversely affected.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Change in Securities
During April 2000, we sold 135,400 shares of our common stock at various
prices ranging from $0.30 to $0.50 per share (depending upon OTCBB price
quotations for our common stock at the time of sale), $67,200 in the aggregate,
pursuant to a private placement transaction. The exemptions we relied upon were
Sections 4(2), 4(6) and Regulation D of the Securities Act of 1933, as amended.
The stock was sold to 22 individuals and/or entities, all of whom were
"accredited" investors as that term is defined in Regulation D. The net proceeds
to our Company for the sale of the 135,400 shares were approximately $37,789
after offering expenses and commissions of approximately $29,411. No
underwriting discounts were paid by our Company in connection with the
abovementioned transactions.
During May 2000, we sold 161,500 shares of our common stock at various
prices ranging from $0.30 to $.50 per share (depending upon OTCBB price
quotations for our common stock at the
F-20
<PAGE>
time of sale), $80,000 in the aggregate, pursuant to a private placement
transaction. The exemptions we relied upon were Sections 4(2), 4(6) and
Regulation D of the Securities Act of 1933, as amended. The stock was sold to13
individuals and/or entities, all of whom were "accredited" investors as that
term is defined in Regulation D. The net proceeds to our Company for the sale of
the 161,500 shares were approximately $53,287 after offering expenses and
commissions of approximately $26,713. No underwriting discounts were paid by our
Company in connection with the abovementioned transactions.
During June 2000, we sold 187,500 shares of our common stock at various
prices ranging from $0.25 to $0.35 per share (depending upon OTCBB price
quotations for our common stock at the time of sale), $45,000 in the aggregate,
pursuant to a private placement transaction. The exemptions we relied upon were
Sections 4(2), 4(6) and Regulation D of the Securities Act of 1933, as amended.
The stock was sold to 12 individuals and/or entities, all of whom were
"accredited" investors as that term is defined in Regulation D. The net proceeds
to our Company for the sale of the 421,268 shares were approximately $29,877
after offering expenses and commissions of approximately $15,123. No
underwriting discounts were paid by our Company in connection with the
abovementioned transactions.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(3)(i)(a) Articles of Incorporation (incorporated by reference to our Report
on Form 10-K for the year ended December 31, 1981).
(b) Articles of Amendment (incorporated by reference to our Report on
Form 10-K for the year ended December 31, 1981).
(c) Articles of Amendment (incorporated by reference to our Report on
Form 10-K for the year ended December 31, 1998).
(d) Articles of Amendment (incorporated by reference to our Report on
Form 10-K for the year ended December 31, 1998).
(3)(ii) Bylaws (incorporated by reference to the Company's Report on Form
10-K for the year ended December 31, 1987).
(4) Instruments defining the rights of holders (incorporated by
reference to Exhibit (3) herein).
F-21
<PAGE>
(10)
(1) Our Acquisition Agreement with Red River Trading Company, Inc.
and Micromatix.com, Inc. and Addendum thereto (incorporated by
reference to our Report on Form 10-K for the year ended December
31, 1999).
(2) Our compensation plan agreement with Frederic Richardson
(incorporated by reference to our Report on Form 10-K for the
year ended December 31, 1999).
(3) Our Lease Agreement (incorporated by reference to our Report on
Form 10-K for the year ended December 31, 1999).
(4) Our Note Payable to Sarah Saul Simon Trust (incorporated by
reference to our Report on Form 10-K for the year ended December
31, 1999).
(5) Our Note Payable to Red River Trading (incorporated by reference
to our Report on Form 10-K for the year ended December 31, 1999).
(11) Earnings per share (See Financial Statements).
(27) Financial Data Schedule.
F-22
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERNATIONAL MERCANTILE CORPORATION
By: /s/ C. Timothy Jewell
--------------------------
C. Timothy Jewell,
Chief Exec. Officer
President, Director
Date: August 4, 2000
By: /s/ C. Timothy Jewell
--------------------------
C. Timothy Jewell,
Chief Exec. Officer
President, Director
By: /s/ Frederic S. Richardson
--------------------------
Frederic S. Richardson,
Director
By: /s/ Max W. Apple
--------------------------
Max W. Apple,
Director
Date: August 4, 2000
F-23
