U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
{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: 0-23835
HOMESEEKERS.COM, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0397464
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
2241 Park Place, Suite E, Minden, NV 89423-8602
(Address of Principal executive offices)
Issuer's telephone number, including area code: (775) 782-2977
--------------
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 13,897,062 shares as of April
27, 1999.
<PAGE>
HOMESEEKERS.COM, INC.
Form 10-QSB for the quarter ended March 31, 1999
- --------------------------------------------------------------------------------
TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
Part I. Financial Information
Item 1. Financial Statements: Page
- --------------------------------------------------------------------------------
Consolidated, Condensed Balance Sheets as of
March 31, 1999 and June 30, 1998 3
Consolidated, Condensed Statements of Operations
for the three months and nine months ended
March 31, 1999 and 1998 5
Consolidated, Condensed Statements of Cash Flows for
the nine months ended March 31, 1999 and 1998 6
Notes to Consolidated, Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of
Operations 11
Part II Other Information
Item 1 Legal Proceedings 15
Item 2 Changes in Securities and Use of Proceeds 15
Item 3 Defaults upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6 Exhibits and Reports on Form 8-K 15
SIGNATURES 15
<PAGE>
HOMESEEKERS.COM, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, June 30,
1999 1998
----------- ------------
ASSETS
Current Assets
Cash ...................................... $ 8,831,948 $ 198,410
Accounts receivable, net of
allowance for uncollectible
accounts of $22,843 and $4,413 ........ 1,664,653 54,883
Accounts receivable, related parties ...... 94,712 193,289
Note receivable from employee ............. 50,000 -0-
Inventories ............................... -0- 16,712
Prepaid expenses .......................... 179,153 13,120
----------- -----------
Total Current Assets .................. 10,820,466 476,414
Investments, related party stock, net of
valuation allowance of $0 and $700,000 .... 300,000 -0-
Property and equipment, net .................... 879,587 490,575
Licensed technology deposit .................... 450,000 -0-
Goodwill, net of accumulated amortization
of $417,739 and $317,701 .................. 471,672 361,359
Other assets ................................... 489,450 570,145
----------- -----------
Total Assets .......................... $13,411,175 $ 1,898,493
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 269,749 $ 323,918
Accrued liabilities 118,219 292,970
Notes payable 5,000 29,698
Convertible debt 30,000 -0-
Notes payable - related parties -0- 31,595
Deferred revenue 2,695,454 1,147,654
---------- ----------
Total Current Liabilities 3,118,422 1,825,835
---------- ----------
See notes to consolidated, condensed financial statements.
(Continued)
3
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HOMESEEKERS.COM, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Continued)
March 31, June 30,
1999 1998
--------- --------
Long-Term Liabilities
Convertible Debt -0- 140,000
Stockholders' Equity (Deficit)
Class A, Series A convertible preferred
stock, $0.001 par value, 5,000,000
shares authorized; zero shares and
692,000 shares issued and outstanding -0- 692
Common stock; $.001 par value, 50,000,000
share authorized; 13,487,976 and 7,460,703
shares issued and outstanding 13,488 7,461
Additional paid in capital 23,638,622 11,112,776
Dividends on Series A convertible preferred stock (713,915) (118,725)
Accumulated deficit (12,645,442) (10,369,546)
Unrealized loss on securities -0- (700,000)
----------- ----------
Total Stockholders's Equity (Deficit) 10,292,753 (67,342)
----------- ----------
Total Liabilities and Stockholders'
Equity (Deficit) $ 13,411,175 $ 1,898,493
============ =============
See notes to consolidated, condensed financial statements.
4
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HOMESEEKERS.COM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
Revenues: 1999 1998 1999 1998
---- ---- ---- ----
Web Sites and Web Pages ..... $ 323,052 $ 132,389 $ 751,281 $ 322,799
Prospect Revenues ........... 255,310 254,359 911,342 508,865
Advertising ................. 53,341 79,949 242,946 178,589
Programming, Support
and License Fees (1) ...... 490,557 24,650 625,380 48,086
Other ....................... 7,398 89,848 40,929 119,796
-------- --------- -------- -------
Total Revenues ....... 1,129,658 581,195 2,571,878 1,178,135
Cost of Sales ............... 127,679 109,228 344,254 213,657
--------- --------- --------- -------
Gross Profit ........... 1,001,979 471,967 2,227,624 964,478
Operating Expenses .......... 1,994,994 1,123,880 4,774,629 2,809,636
--------- --------- --------- ----------
Loss from Operations ........ (993,015) (651,913)(2,547,005) (1,845,158)
Other Income (Expense)
Interest expense ....... (6,785) (13,265) (28,197) (100,112)
Interest income ........ 74,307 79 74,571 250
Gain on sale of assets . 200,000 -0- 225,975 -0-
Other .................. 1,119 (11,208) -0- (11,085)
--------- --------- -------- ----------
Loss Before Provision
for Income Taxes .......... (724,374) (676,307) (2,274,656) (1,956,105)
Provision for Income Taxes .. 1,240 -0- 1,240 55
-------- -------- --------- ----------
Net Loss ............... (725,614) (676,307) (2,275,896) (1,956,160)
Unrealized Gain (Loss) on
Securities, Net of Tax 700,000 (369,225) 700,000 (369,225)
-------- -------- --------- ---------
Net Comprehensive Loss $ (25,614) $(1,045,532) $(1,575,896) (2,325,385)
=========== ============ =========== ==========
Basic and Diluted Net
Loss per Common Share $ (.11) $ (.12) $ (.32) $ (.37)
==== ==== ==== ======
Shares Used in Computing Basic
and Diluted Share Data 11,506,886 6,366,231 8,974,221 5,676,280
========== ========= ========= =========
(1) Programming, Support and License Fees Revenues include net revenues to
related parties of $425,600 and $18,900 for the three months ending March
31, 1999 and 1998, and $460,935 and $39,900 for the nine months ending
March 31, 1999 and 1998, respectively.
5
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HOMESEEKERS.COM, INC.
CONSOLIDATED, CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Loss .................................................................. $ (2,275,896) $ (1,956,160)
------------ ------------
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization ...................................... 278,890 217,651
(Gain) loss on sale of marketable
securities (Loss) on sale of fixed assets ........................ (200,000) 63,125
Forfeit purchase deposit ........................................... (53,544) (300)
Common stock issued for goods and services ......................... 100,000 --
Common stock issued for employee compensation ...................... 78,587 131,724
Increase in bad debt allowance ..................................... 27,407 46,779
Changes in assets and liabilities net of
effect from purchase of FOCUS .................................... 18,430 --
Accounts receivable
Inventories ........................................................ (1,529,623) (57,825)
16,712 (52,749)
Prepaid expenses ................................................... (166,033) (14,604)
Accounts payable ................................................... (54,169) (39,845)
Accrued liabilities ................................................ (124,751) (171,922)
Deferred revenue ................................................... 1,547,800 (284,234)
------------ ------------
Net adjustments ................................................. (60,294) (162,200)
------------ ------------
Net Cash Used in
Operating Activities ....................................... (2,336,190) (2,118,360)
------------ ------------
Cash Flows From Investing Activities
Purchase of property and equipment ........................................ (554,022) (131,846)
Technology license deposit ................................................ (450,000) --
Net cash received on purchase of FOCUS .................................... -- 2,134
Proceeds from securities sales ............................................ 600,000 744,875
Proceeds from fixed asset sales ........................................... 57,040 300
Deposit ................................................................... -- (100,000)
Issuance of note receivable ............................................... (50,000) --
Net change in other assets ................................................ (21,995) (3,108)
------------ ------------
Net Cash (Used) Provided in
Investing Activities ....................................... (418,977) 512,355
------------ ------------
Cash Flows From Financing Activities
Principal payments on capital lease obligations ........................... -- (16,799)
Proceeds from notes payable - related parties ............................. 685,000 118,000
Payments on notes payable - related parties ............................... (716,595) (188,028)
Proceeds from notes payable ............................................... 250,000 259,901
Payments on notes payable ................................................. (274,698) (285,000)
Common stock for cash ..................................................... 11,535,370 1,805,477
Offering costs paid ....................................................... (90,372) --
------------ ------------
Net Cash Provided by Financing Activities .................... 11,388,705 1,693,551
------------ ------------
Net Increase in Cash ........................................................... 8,633,538 87,546
Cash at Beginning of Period .................................................... 198,410 32,222
------------ ------------
Cash at End of Period .......................................................... $ 8,831,948 $ 119,768
============ ============
(Continued)
</TABLE>
6
<PAGE>
HOMESEEKERS.COM, INC.
CONSOLIDATED, CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
(Continued)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
1999 1998
---------- ---------
Cash paid for interest $ 11,464 $ 118,287
======== ==========
Cash paid for income taxes $ 1,240 $ --
======== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
1999
The Company reduced the valuation allowance on certain securities classified as
available-for-sale in the amount of $700,000.
The Company issued common stock in exchange for (1) $110,000 in convertible
debt, (2) payment of $595,190 in dividends on Preferred Class A stock, and (3)
conversion of all remaining Preferred Class A stock to common stock.
1998
The Company reduced the valuation allowance on certain securities classified as
available-for-sale in the amount of $330,775.
The Company issued stock to vendors in exchange for reductions of accounts
payable in the amount of $51,982.
The Company issued common stock in exchange for (1) $1,678,500 in convertible
debt, (2) payment of $118,725 in dividends on Preferred Class A stock, (3)
funding of its $450,000 investment in an LLC, and (4) conversion of certain
Preferred Class A stock.
The Company received common stock in a related entity in exchange for payment on
an account receivable of 700,000 shares at $1 apiece, or $700,000. Additionally,
the Company increased the valuation allowance on these securities classified as
available-for-sale in the amount of $700,000.
The Company purchased all the outstanding stock of FOCUS by issuing 20,000
shares of common stock in exchange for $8,086 in assets and $1,585 in
liabilities.
See notes to consolidated, condensed financial statements.
7
<PAGE>
HOMESEEKERS.COM, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. All adjustments that,
in the opinion of management, are necessary for a fair presentation of the
results of operations for the interim periods have been made and are of a
recurring nature unless otherwise disclosed herein. The results of operations
for the three and nine-month periods ended March 31, 1999, are not necessarily
indicative of the results that will be realized for a full year. For further
information, refer to the financial statements and notes thereto contained in
the Company's Annual Report on Form 10-KSB for the year ended June 30, 1998, as
well as the Company's Quarterly Reports on Form 10-QSB for the quarters ended
September 30, 1998 and December 31, 1998.
NOTE 2 - NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130,"Reporting Comprehensive Income," and SFAS No. 131, "Segment Information."
Both of these standards are effective for fiscal years beginning after December
15, 1997. SFAS No. 130 requires that all components of comprehensive income,
including net income, be reported in the financial statements in the period in
which they are recognized. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-owner sources. Net income and other comprehensive income, including foreign
currency translation adjustments, and unrealized gains and losses on
investments, shall be reported, net of their related tax effect, to arrive at
comprehensive income.
The Company adopted SFAS No. 130 "Reporting Comprehensive Income" on
July 1, 1998. The only difference between "net earnings" and "comprehensive
income" for the Company is the impact from unrealized gains and losses on
investments.
Operating segments, as defined by SFAS No. 131, are components of an
enterprise for which financial information is available and evaluated regularly
by the Company in deciding how to allocate resources and in assessing
performance. This financial information is required to be reported on the basis
that it is used internally for evaluating the segment performance. The Company
believes it operates in one business and operating segment and that adoption of
SFAS No. 131 will not have a material impact on the Company's financial
statements.
8
<PAGE>
HOMESEEKERS.COM, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 3 - CHANGE IN ESTIMATE
In January 1998, the Company licensed certain technology to WebQuest
International, Inc. ("WebQuest"), a related party, for $700,000. During the
fiscal year ended June 30, 1998 the Company accepted 700,000 shares of WebQuest
common stock as settlement of this $700,000 receivable. At March 31, 1998, a
write-down to the estimated fair market value of this stock investment was
recorded for the entire amount of $700,000. The related $700,000 in revenue was
capitalized into deferred revenue from April 1, 1998, until the quarter ending
March 31, 1999, where $400,000 of the $700,000 was recognized as revenue as
explained below.
During the quarter ending March 31, 1999, the Company sold 400,000
shares of the WebQuest Common Stock, for $600,000 or $1.50 per share. The
Company recognized $400,000 of deferred revenue as Programming, Support and
License Fees revenue and a $200,000 Gain on the Sale of Assets. The current
estimate of fair market value for the remaining 300,000 shares of WebQuest
common stock is $300,000, therefore the valuation allowance related to the
WebQuest common stock has been reduced to zero and the gain in the valuation
allowance is shown as a component of "Net Comprehensive Income". As of March 31,
1999, the balance in deferred revenue related to WebQuest License Fees is
$300,000.
NOTE 4 - LICENSED TECHNOLOGY
During February 1999, the Company entered into discussions with a
mortgage company to develop a new loan center on the homeseekers.com Web Site.
The Company paid a $450,000 non-refundable deposit as collateral to the Mortgage
Company to develop and maintain the mortgage loan center. Once operational, this
technology will allow homebuyers to access a loan center while viewing homes at
the Company's Web site.
NOTE 5 - EQUITY TRANSACTIONS
During the three months ending March 31, 1999, the Company raised gross
proceeds of $12 million through the sale of common stock to accredited investors
pursuant to Rule 506 of Regulation D. As a condition to this equity transaction,
holders of 100% of the outstanding Class A, Series A Convertible Preferred Stock
converted their shares into common stock. Cumulative preferred stock dividends
were also paid in the form of common stock.
9
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HOMESEEKERS.COM, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 6 - YEAR 2000 CONTINGENCY
The Company has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the "Year 2000" Issue
and is developing an implementation plan to resolve the issue. The Year 2000 is
the result of computer programs being written using two digits (rather than
four) to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the Year 2000. This could result in a major system failure or
miscalculations. The Company presently believes that, with modifications to
existing software and converting to new software, the Year 2000 problem will not
pose significant operational problems for the Company's computer systems as so
modified and converted. However, if such modifications and conversions are not
completed timely, the Year 2000 may have a material impact on the operations of
the Company. Additionally, if the Company's customers or vendors are unable to
resolve such processing issues in a timely manner, it could result in material
financial risk.
NOTE 7 - SUBSEQUENT EVENTS
During April 1999, the Company raised $1.65 million through the sale of
250,000 shares of common stock at $6.60 per share. The purchasers were
considered to be accredited or otherwise qualified investors based on their
financial resources and knowledge of investments. In addition, each of the
investors were provided with information and had access to relevant information
concerning the Company. Accordingly, the issuance of the shares is exempt from
the registration requirements of the Securities Act pursuant to the exemption
set forth in Section 4 (2), Section 4 (6), and/or Rule 506 of Regulation D. The
proceeds from the sale of common stock will be used primarily for working
capital, for strategic business acquisitions and to fund increases in sales and
marketing operations.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the Company's level
of operation and financial condition. This discussion should be read with the
consolidated, condensed financial statements appearing in Part I, Item 1 of this
report.
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 1999 TO THE NINE MONTHS ENDED
MARCH 31, 1998.
Total revenues of $2,572,000 for the nine months ended March 31, 1999 increased
118% or $1,394,000 over the same period in fiscal 1998 due primarily to
increased sales of Web sites to real estate agents; increased Internet prospect
sales and recognition of a portion ($400,000) of a one-time software license fee
from a related entity.
Cost of sales increased $130,000, or 61% from $214,000 for the nine months ended
March 31, 1998 to $344,000 for the nine months ended March 31, 1999. This
increase was due primarily to increased Genstar Web Site third-party hosting
fees. The Company has developed its internal Web site software since the
acquisition of Genstar Media in August 1998. As a result, Genstar Web site gross
margins are expected to increase starting in April 1999.
Operating expenses of $4,775,000 for the nine months ended March 31, 1999
represent an increase of $1,965,000, or 70% over the same period in fiscal 1998
due to increases in sales and marketing expenses ($889,000 increase),
administration costs ($621,000 increase) and software programming expenses
($455,000 increase). Beginning in January 1998 the Company expanded the channels
through which it sells Web Sites and, during February and March 1999, has
invested in the infrastructure to improve its R2000 software product and
homeseekers.com Internet site.
Interest expense of $28,000 during the nine months ending March 31, 1999
reflects a decrease of $72,000, or 71% from the same period during fiscal 1998.
This decrease resulted primarily from the conversion of convertible debt into
common stock.
The Company started generating interest income during the nine months ending
March 31, 1999 from the cash raised in the January and February 1999 $12 million
equity offering. The $75,000 of interest income was generated during February
and March 1999.
The $226,000 gain on the sale of assets for the nine months ending March 31,
1999 resulted from the sale of WebQuest common stock ($200,000) and from the
spin off of the FOCUS Publications business unit during November 1998 ($26,000).
The net loss for the nine months ending March 31, 1999 of $2,276,000 or $(.32)
per share increased $320,000 from the net loss of $1,956,000 or $(.37) per share
for the corresponding nine months in fiscal 1998. The increase in net loss was
due primarily to increases in operating expenses exceeding increases in
revenues. The decrease in the loss per common share is the result of a greater
number of common shares outstanding during the nine months ending March 31, 1999
than the corresponding prior year period.
11
<PAGE>
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999 TO THE THREE MONTHS ENDED
MARCH 31, 1998.
Total revenues of $1,130,000 for the three months ended March 31, 1999 increased
95% or $549,000 over the same period in fiscal 1998 due primarily to increased
sales of Web sites to real estate agents (an increase of $191,000) and due to
recognition of a portion ($400,000) of a one-time software license fee from a
related entity.
Operating expenses of $1,995,000 for the three months ended March 31, 1999
represent an increase of $871,000, or 78% over the same period in fiscal 1998.
During February and March 1999, to increase revenues, the Company started
investing in infrastructure to improve its R2000 software product and the
homeseekers.com Internet site. The Company also hired several new salesmen to
increase Web site revenues.
The Company started generating interest income during the three months ending
March 31, 1999 from the cash raised in the January and February 1999 $12 million
equity offering. The $74,000 of interest income was generated during February
and March 1999.
The $200,000 gain on the sale of assets for the three months ending March 31,
1999 resulted from the sale of WebQuest common stock.
The net loss for the three months ending March 31, 1999 of $726,000 or $(.11)
per share increased by $50,000 from the net loss of $676,000 or $(.12) per share
for the corresponding three months in fiscal 1998. The increase in net loss was
due to a higher rate of increase in operating expenses, as discussed above, than
the increase in revenues.
LIQUIDITY AND CAPITAL RESOURCES
As reflected in the consolidated statements of cash flows for the nine months
ending
12
<PAGE>
March 31, 1999 and 1998, the Company's operations have not generated
sufficient cash flows to meet the on-going cash needs of the Company. The
Company has generated the additional cash required to fund its operations
primarily through the proceeds from private placement offerings to accredited
investors and through the exercise of stock warrants and options.
During January and February 1999 the Company raised $12 million through the sale
of common stock to accredited investors pursuant to Rule 506 of Regulation D.
This sale netted the Company approximately $10.6 million in cash, after
deducting commissions of approximately $1.2 million and other offering expenses.
Net cash used in operations during the nine months ending March 31, 1999 of
$2,336,000 was financed primarily from the sale of common stock to accredited
investors. This compares to net cash used in operations during the nine months
ending March 31, 1998 of $2,118,000. This cash deficit was financed primarily
from the sale of common stock to accredited investors.
In October 1998 the Company entered into a technology alliance with an unrelated
entity which calls for the Company to receive payments totaling $2,000,000
through January 2000. As of March 31, 1999 the Company had earned, and received
$500,000 of the $2 million and included this amount in revenue; the $1,500,000
balance has been included in accounts receivable and deferred revenue as of
March 31, 1999.
Cash outflows from investing activities during the nine months ending March 31,
1999 included the purchase of $472,000 of tangible assets comprised primarily of
computer equipment and computer software, $450,000 for a deposit payment on the
purchase of a technology license to develop a loan center on the Company's
homeseekers.com Internet site and $82,000 in leasehold improvements for the
Company's new operations center located in Brea, California. Cash inflows
included $600,000 from the sale of WebQuest International, Inc. common stock in
March 1999.
Cash inflows from investing activities during the nine months ended March 31,
1998 included $745,000 received for the sale of 202,000 shares of Finet
Holdings, Inc. common stock that was received as payment for services rendered.
IMPACT OF THE YEAR 2000 ON COMPUTER SYSTEMS
STATE OF READINESS: The Company recognizes the need to ensure its operations
will not be adversely impacted by the inability of the Company's systems to
process data having dates on or after January 1, 2000 (the "Year 2000" issue).
Processing errors due to software failure arising from calculations using the
Year 2000 date are a recognized risk.
13
<PAGE>
The Company is currently addressing the risk, with respect to the availability
and integrity of its financial systems and the reliability of its operating
systems, and is in the process of communicating with suppliers, customers,
financial institutions and others with whom it conducts business transactions to
assess whether they are Year 2000 compliant. At this time, the Company has not
found any material deficiencies in significant vendor's or customer's computer
operations. The Company's Realty 2000 product has been upgraded to be year 2000
compliant. Additionally, it has been determined that the multiple listing
services real estate listings that the Company aggregates on its homeseekers.com
Internet site will not be materially affected by the Year 2000 dating problem.
COSTS ASSOCIATED WITH THE YEAR 2000 ISSUE: Though a thorough budget has not been
prepared, the Company believes that the costs for evaluating and addressing Year
2000 issues relating to its internal and commercial software and hardware to be
less than $100,000. This statement is forward-looking and subject to risks and
uncertainties. No assurances can be given that, if an effective readiness plan
can be designed and implemented or that costs can be held to this level. Costs
to address Year 2000 issues with third parties have not been estimated, though
the Company expects that a substantial portion of such costs would be borne by
the respective third parties.
RISKS OF YEAR 2000 ISSUES: The Company is not aware of any specific issues which
would have a material effect on its operations, liquidity or financial
condition, but can make projections of reasonably likely, "worst case" scenarios
which could have such an effect. An interruption of Internet or
telecommunications services for an extended period of time would prevent the
Company from providing service to a substantial portion of its customers,
resulting in a material loss of revenue. A protracted "crash" of the Company's
internal networking and operating software would also result in a material loss
of revenue as well as an interruption of research and development activities.
This scenario could also result in the Company's financial systems to not
operate properly, which could hinder its ability to collect revenue and comply
with financial reporting requirements. However, at this time, the Company does
not anticipate that the financial impact of the Year 2000 issues will have a
material adverse effect on our business, financial condition, or results of
operations.
CONTINGENCY PLANS: At the present time the Company does not have a formal
contingency plan in the event it does not complete all phases of its Year 2000
efforts. The Company plans to evaluate the status of its progress and determine
if such a plan is necessary.
14
<PAGE>
PART II OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities and Use of Proceeds
During January and February 1999, the Company raised $12 million through the
sale of common stock to accredited investors pursuant to Rule 506 of Regulation
D. This sale netted the company approximately $10.6 million after deducting
commissions of approximately $1.2 million and other offering expenses. The
securities were sold through Sunrise Securities Corporation and Boenning &
Scattergood, Inc., as placement agents. The Company used $1.5 million of these
proceeds to retire debt, accounts payable and accrued liabilities during the
three months ending March 31, 1999. The balance of the proceeds will be used
primarily for working capital, for strategic business acquisitions and to fund
increases in sales and marketing operations.
Item 3 Defaults upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned as duly authorized.
HomeSeekers.com, Inc.
(Registrant)
/s/ Greg Johnson /s/ Scott Berry
- ----------------------------- --------------------------
Greg Johnson Scott Berry
Chief Executive Officer Chief Financial Officer
Dated: May 3, 1999
15
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 8,831,948
<SECURITIES> 0
<RECEIVABLES> 1,664,653
<ALLOWANCES> 22,843
<INVENTORY> 0
<CURRENT-ASSETS> 10,820,446
<PP&E> 1,561,399
<DEPRECIATION> 681,812
<TOTAL-ASSETS> 13,411,175
<CURRENT-LIABILITIES> 3,118,422
<BONDS> 0
0
0
<COMMON> 13,488
<OTHER-SE> 10,279,265
<TOTAL-LIABILITY-AND-EQUITY> 13,411,175
<SALES> 1,129,658
<TOTAL-REVENUES> 1,129,658
<CGS> 127,679
<TOTAL-COSTS> 1,994,994
<OTHER-EXPENSES> (275,426)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,785
<INCOME-PRETAX> (724,374)
<INCOME-TAX> 1,240
<INCOME-CONTINUING> (725,614)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (725,614)
<EPS-PRIMARY> (0.11)
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