SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) September 22, 1999
------------------
HomeSeekers.com, Incorporated
-----------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 0-23835 87-0397464
------- ------- ----------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
6490 South McCarran Boulevard, Suite 28, Reno, NV 895093
--------------------------------------------------------
(Address of Principal Executive Offices, including Zip Code)
------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
(775) 827-6886
--------------
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
As previously reported in a Current Report on Form 8-K, filed on
October 5, 1999, HomeSeekers.com, Incorporated ("HomeSeekers") reported its
acquisition of Terradatum LLC ("Terradatum"). As previously reported in a
Current Report on Form 8-K, filed on October 15, 1999, HomeSeekers reported its
acquisition of Real Estate Information, Inc. ("IMCO"). The purpose of this
filing is to amend the above-reverenced Current Reports on Form 8-K by filing
certain financial information required by Regulation S-X and identified in item
7 below.
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits.
(a) Financial statements of Terradatum and IMCO for the periods
specified in Rule 3-05(b) of Regulation S-X are attached
hereto as Exhibits 99.1, 99.2, 99.3, and 99.4.
(b) Pro forma financial information required pursuant to Article
11 of Regulation S-X is attached hereto as Exhibit 99.5.
(c) Exhibits.
Exhibit No. Description
----------- -----------
99.1 Terradatum, LLC, Audited Financial
Statements, July 31, 1999 and December 31,
1998.
99.2 TDT, LLC (formerly Terradatum, LLC), Interim
Unaudited Financial Statements, September
30, 1999 and 1998.
99.3 Information Management Company, LLC, Audited
Financial Statements, October 31, 1998 and
1997.
99.4 Real Estate Information, Inc. (formerly
Information Management Company, LLC),
Interim Unaudited Financial Statements,
September 30, 1999 and 1998.
99.5 HomeSeekers.com, Incorporated and
subsidiaries, Pro Forma Condensed
Consolidated Financial Statements.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Dated: November 30, 1999
HomeSeekers.com, Incorporated
By: /s/ Gregory L. Costley
-----------------------------------------
Gregory L. Costley, Chairman of the Board,
Chief Executive Officer, and
Secretary/Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Terradatum, LLC, Audited Financial
Statements, July 31, 1999 and December 31,
1998.
99.2 TDT, LLC (formerly Terradatum, LLC), Interim
Unaudited Financial Statements, September
30, 1999 and 1998.
99.3 Information Management Company, LLC, Audited
Financial Statements, October 31, 1998 and
1997.
99.4 Real Estate Information, Inc. (formerly
Information Management Company, LLC),
Interim Unaudited Financial Statements,
September 30, 1999 and 1998.
99.5 HomeSeekers.com, Incorporated and
subsidiaries, Pro Forma Condensed
Consolidated Financial Statements.
TERRADATUM, LLC
AUDITED FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
<PAGE>
TERRADATUM, LLC
TABLE OF CONTENTS
Page
----
INDEPENDENT AUDITORS REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations and Members Equity 3
Statements of Cash Flows 4-5
Notes to Financial Statements 6-13
<PAGE>
Albright, Persing & Associates, Ltd.
CERTIFIED PUBLIC ACCOUNTANTS
1025 Ridgeview Dr., Suite 300
Reno, Nevada 89509
INDEPENDENT AUDITORS' REPORT
To the Members of
Terradatum, LLC
We have audited the accompanying balance sheets of Terradatum, LLC as
of July 31, 1999 and December 31, 1998, and the related statements of
operations, and members equity and cash flows for the seven months ended July
31, 1999 and the year ended December 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Terradatum, LLC as
of July 31, 1999 and December 31, 1998, and the results of its operations and
its cash flows for the periods then ended, in conformity with generally accepted
accounting principles.
September 30, 1999, except for Note 7, as to
which the date is November 5, 1999
<PAGE>
TERRADATUM, LLC
BALANCE SHEETS
JULY 31, 1999 AND DECEMBER 31, 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
-------- ---------
<S> <C> <C>
Current Assets:
Cash $ 55,363 $ 54,918
Accounts receivable 67,535 68,774
Costs in excess of billings 35,700 47,488
Prepaid expenses 8,843 1,496
----------- -----------
Total current assets 167,441 172,676
----------- -----------
Computer Software and Equipment:
Software 1,808,484 449,772
Equipment 23,022 11,920
Assets under capital leases 61,617 44,749
----------- -----------
1,893,123 506,441
Less: Accumulated depreciation and amortization (111,964) (50,376)
----------- -----------
1,781,159 456,065
----------- -----------
Other Assets:
Deposits 540 540
----------- -----------
Total Assets $ 1,949,140 $ 629,281
=========== ===========
LIABILITIES AND MEMBERS EQUITY
Current liabilities:
Accounts payable $ 25,516 $ 8,599
Accrued payroll and taxes 14 22,812
Billings in excess of costs 9,268 19,600
Current portion of capital lease obligations 19,904 12,610
Short-term note payable 1,369,577 --
----------- -----------
Total current liabilities 1,424,279 63,621
Capital Lease Obligations, net of current portion 28,246 25,992
----------- -----------
Total Liabilities 1,452,525 89,613
Members Equity 496,615 539,668
----------- -----------
Total Liabilities and Members Equity $ 1,949,140 $ 629,281
=========== ===========
</TABLE>
The accompanying notes are integral part of these financial statements.
2
<PAGE>
TERRADATUM, LLC
STATEMENTS OF OPERATIONS AND MEMBERS EQUITY
FOR THE SEVEN MONTHS ENDED JULY 31, 1999
AND THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Seven
Months Year
Ended Ended
July 31, December
1999 31, 1998
--------- --------
<S> <C> <C>
Net Revenue $ 837,355 $ 605,356
--------- ---------
Operating Expenses:
Research and development -- 222,880
Selling, general and administrative 872,342 287,086
--------- ---------
Total Operating Expenses 872,342 509,966
--------- ---------
Operating Income (Loss) (34,987) 95,390
--------- ---------
Other Expenses:
Interest expense (5,623) (4,315)
Interest income 150 --
--------- ---------
Total Other Expenses (5,473) (4,315)
--------- ---------
Net Comprehensive Income (Loss) (40,460) 91,075
Members equity beginning of period 539,668 --
Member contributions 2,000 448,593
Member distributions (4,593) --
--------- ---------
Members Equity End of Period $ 496,615 $ 539,668
========= =========
</TABLE>
The accompanying notes are integral part of these financial statements.
3
<PAGE>
TERRADATUM, LLC
STATEMENTS OF CASH FLOWS
FOR THE SEVEN MONTHS ENDED JULY 31, 1999
AND THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Seven Year
Months Ended
Ended December
July 31, 1999 31, 1998
------------- --------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Comprehensive Income (Loss) $ (40,460) $ 91,075
--------- ---------
Adjustments to reconcile net comprehensive income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 61,588 50,376
Change in bad debt allowance 5,398 --
Noncash salaries for capital contributions -- 33,000
Noncash research and development costs for
capital contributions -- 176,000
Changes in assets and liabilities:
(Increase) in accounts receivable (13,603) (68,774)
(Increase) Decrease in costs in excess of billings 11,788 (47,488)
(Increase) in prepaid expenses (7,348) (1,495)
(Increase) in other assets -- (540)
Increase in accounts payable 34,760 8,599
Increase (Decrease) in accrued liabilities (22,798) 22,812
Increase (Decrease) in billings in excess
of costs (10,332) 19,600
--------- ---------
Net Adjustments 59,453 192,090
--------- ---------
Net Cash Provided by Operating Activities 18,993 283,165
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital contributions 2,000 8,593
Purchase of equipment (13,229) (11,920)
Capitalized software development costs -- (218,772)
--------- ---------
Net Cash Used by Investing Activities (11,229) (222,099)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Principal payments on capital lease obligations (7,319) (6,148)
--------- ---------
Net Cash Used by Financing Activities (7,319) (6,148)
--------- ---------
Net Increase in Cash 445 54,918
Cash, Beginning of Period 54,918 --
--------- ---------
Cash, End of Period $ 55,363 $ 54,918
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
TERRADATUM, LLC
STATEMENTS OF CASH FLOWS
FOR SEVEN MONTHS ENDED JULY 31, 1999
AND THE YEAR ENDED DECEMBER 31, 1998
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING TRANSACTIONS
<TABLE>
<CAPTION>
Seven
Months Year
Ended Ended
July 31, December
1999 31, 1998
---- --------
<S> <C> <C>
Equipment purchased by incurring capital lease obligations $ 16,868 $ 44,749
=========== ===========
Software development costs capitalized for capital contributions $ -- $ 231,000
=========== ===========
Acquisition of 50% interest in LLC:
Software $ 1,356,585 $ --
Related party receivable (9,444) --
Related party payable 17,843 --
Note payable to former 50% owner (1,369,577) --
----------- -----------
Capital account balance assumed $ (4,593) $ --
=========== ===========
SUPPLEMENTAL DISCLOSURE
Interest paid $ 5,623 $ 4,315
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
TERRADATUM, LLC
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
This summary of significant accounting policies of Terradatum, LLC (the
Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements
Description of Business
- -----------------------
Terradatum, LLC was formed under the Washington Limited Liability Company
statutes on November 7, 1997, and shall terminate on November 7, 2022. The
company had no material operations in 1997. The Company provides customized
computer software for multiple listing service (MLS) companies throughout the
United States. After the initial installation, the Company's continuing services
also include monthly services for software licensing and support. On September
20, 1999, Terradatum, LLC transferred all its assets and liabilities, except for
the short-term note payable of $1,369,577, into TDT, LLC, a Nevada limited
liability company. Immediately after the transfer, TDT, LLC entered into an
Agreement and Plan of Merger with HomeSeekers.com, Inc. and XMLS, LLC, a wholly
owned subsidiary of HomeSeekers.com, Inc., wherein TDT, LLC was merged into
XMLS, LLC, in exchange for stock and cash.
Equipment
- ---------
Equipment, including equipment under capital leases, are stated at cost.
Depreciation, which includes amortization of assets recorded under capital
leases, is calculated using the straight-line method over estimated useful lives
ranging from 3 to 7 years. Depreciation expense charged to operations in 1999
and 1998 was $8,929 and $5,399, respectively.
Income Taxes
- ------------
The Company as a Limited Liability Company is taxed under the provisions of
Subchapter K of the Internal Revenue Code. Under those provisions, the Company
does not pay federal income taxes on its income. Instead, the members are liable
for individual federal income taxes on their respective portions of the
Company's taxable income. No provision for income tax is recorded in the
accompanying financial statements.
6
<PAGE>
TERRADATUM, LLC
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES- Continued
- --------------------------------------------------------------------
Financial Statement Estimates
- -----------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Concentrations of Credit Risk
- -----------------------------
Financial instruments which potentially subject the Company to credit risk
consist primarily of cash in bank, and trade receivables. The Company maintains
its cash in bank deposit accounts which, at times, may exceed federally insured
limits. The Company extends credit to its customers in the ordinary course of
business. At July 31, 1999 and December 31, 1998, substantially all of the
accounts receivable are due from customers within the real estate and related
industries.
Concentrations of Operations
- ----------------------------
All of the Company's current product offerings are designed for use by persons
and or MLS companies operating in the national domestic real estate market. Any
recessionary pressures or other disturbances in the national real estate market
could have an adverse effect on the Company's operations.
Amortization
- ------------
The cost of capitalized software costs is being amortized on the straight line
basis over the remaining estimated economic life of the software of five years.
Amortization expense charged to operations in 1999 and 1998 was $52,473 and
$44,977, respectively.
Revenue Recognition
- -------------------
In accordance with Statement of Position (SOP) 97-2, Software Revenue
Recognition, since the Company's software requires significant modification and
customization, revenue is recognized on the percentage-of-completion method in
conformity with Accounting Research Bulletin No. 45, using the relevant guidance
in SOP 81-1.
7
<PAGE>
TERRADATUM, LLC
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES- Continued
- --------------------------------------------------------------------
Risks and Uncertainties
- -----------------------
The Company has a limited operating history under its current business model,
and its prospects are subject to the risks, expenses and uncertainties
frequently encountered by companies in the new and rapidly evolving markets for
Internet products and services. These risks include the failure to develop and
extend the Company's Internet-based software to a greater market, and the
rejection of the Company's software products by its limited market.
Software Development Costs
- --------------------------
The Company capitalizes certain software development costs in accordance with
Statement of Financial Accounting Standard (FASB) No. 86, Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed. Under the
provisions of FASB 86, the Company capitalized computer software development
costs from the point technological feasibility was established until the time
when the product is available for general release to the public. Research and
development costs, consisting of software development costs incurred until the
point of technological feasibility, are charged to operations when incurred. The
amounts charged in 1999 and 1998 were $-0- and $222,880, respectively.
Comprehensive Income
- --------------------
The Company adopted SFAS No. 130, Reporting Comprehensive Income, during 1999.
The Company is required to display comprehensive income (loss) and its
components as part of the financial statements. Other comprehensive income
(loss) includes certain changes in equity that are excluded from net income
(loss). The Company has no material components of other comprehensive income
(loss), and, accordingly, the comprehensive loss is the same as the net income
(loss) for all periods presented.
Asset Impairment
- ----------------
The Company reviews its intangibles and other long-lived assets
periodically in accordance with Statement of Financial Accounting Standard
"SFAS" No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, to determine potential impairment by
comparing the carrying value of the assets with estimated undiscounted future
cash flows expected to result from the use of the assets, including cash flows
from disposition. Based on this analysis, if the sum of the expected future
undiscounted net cash flow is less than its carrying value, the Company would
determine whether an impairment loss should be recognized. An impairment loss
would be measured by comparing the amount by which the carrying value exceeds
the fair value of the asset being evaluated for impairment. Management
determined that there was no impairment of the Company's intangible and
long-lived assets as of July 31, 1999 and December 31, 1998.
8
<PAGE>
TERRADATUM, LLC
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
NOTE 2 - ACCOUNTS RECEIVABLE
- ----------------------------
Accounts receivable consist of the following:
July 31, Dec. 31,
1999 1998
---- ----
Trade receivables $ 72,933 $ 68,076
Related party receivables - 698
----------- -----------
72,933 68,774
Less: allowance for bad debts (5,398) -
----------- -----------
$ 67,535 $ 68,774
=========== ===========
Accounts receivable as of the end of 1998 are deemed to be collectible therefore
no allowance for doubtful accounts have been recorded.
NOTE 3 - UNCOMPLETED CONTRACTS
- ------------------------------
Revenues, costs and billings on uncompleted contracts are summarized as follows:
July 31, Dec. 31,
1999 1998
---- ----
Percentage-of-completion revenues $ 660,142 $ 519,100
Billings to date 633,710 491,212
----------- -----------
$ 26,432 $ 27,888
=========== ===========
Included in the accompanying balance sheet
under the following captions:
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 35,700 $ 47,488
Billings in excess of costs and estimated
earnings on uncompleted contracts (9,268) (19,600)
---------- ----------
$ 26,432 $ 27,888
========== ==========
9
<PAGE>
TERRADATUM, LLC
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
NOTE 4 - CAPITAL LEASE OBLIGATIONS
- ----------------------------------
The Company is the lessee of computer equipment under capital leases expiring in
various years through 2003. The assets and liabilities under capital leases are
recorded at the lower of the present value of the minimum lease payments or the
fair value of the asset. The assets are depreciated over the lower of their
related lease terms or their estimated productive lives. Depreciation of assets
under capital leases charged to expense in 1999 and 1998 was $6,643 and $4,910,
respectively.
Capital lease obligations consist of the following:
<TABLE>
<CAPTION>
July 31, Dec. 31,
1999 1998
---- ----
<S> <C> <C> <C>
Capital lease payable to InterWest Leasing, dated March, 1998, payable at
$620 per month, including interest imputed at 21% per annum, maturity
March, 2001, secured by certain computer equipment. $ 11,134 $ 13,271
Capital lease payable to InterWest Leasing, dated July, 1998, payable at
$876 per month, including interest imputed at 22% per annum, maturity
June, 2001, secured by certain computer equipment. 16,968 19,738
Capital lease payable to Dell Financial Services, dated November, 1998,
payable at $342 per month including interest imputed at 32% per annum,
maturity November, 2000, secured by certain computer equipment,
personally guaranteed by a member. 4,561 5,593
Capital lease payable to InterWest Leasing, dated February, 1999, payable
at $271 per month, including interest imputed at 17% per annum, maturity
January, 2003, secured by certain computer equipment. 8,174 --
10
<PAGE>
TERRADATUM, LLC
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
NOTE 4 - CAPITAL LEASE OBLIGATIONS - Continued
- ----------------------------------
Capital lease payable to FirstCorp Leasing, dated April, 1999, payable at
$112 per month, including interest imputed at 15% per annum, maturity
March, 2002, secured by certain computer equipment. 2,817 --
Capital lease payable to FirstCorp Leasing, dated April, 1999, payable at
$178 per month including interest imputed at 15% per annum, maturity
March, 2002, secured by certain computer equipment. 4,496 --
---------- -----------
48,150 38,602
Less Current Portion (19,904) (12,610)
---------- -----------
Long Term Capital Lease Obligation $ 28,246 $ 25,992
============ ===========
</TABLE>
Minimum future lease payments under capital leases as of July 31, 1999 for each
of the next five years and in aggregate are:
Year Ended July 31, Amount
------------------- ------
2000 $ 31,173
2001 27,163
2002 5,569
2003 2,074
--------
Total minimum lease payments 65,979
Less: taxes (4,774)
--------
Net minimum lease payments 61,205
Less: amount representing interest (13,055)
--------
Present value of minimum lease payments $ 48,150
========
Certain capital leases provide for purchase options. Generally, purchase options
are at prices representing the expected fair value of the property at the
expiration of the lease term.
11
<PAGE>
TERRADATUM, LLC
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
NOTE 5 - SHORT-TERM NOTE PAYABLE
- --------------------------------
On July 9, 1999, the Company's principal members, DataTech Services, Inc. and
Alpenglow, Inc., each of whom were owners of 50% membership interests in the
Company, entered into a Mutual Release and Settlement Agreement to settle a
lawsuit regarding the ownership of the Company. The agreement calls for
Terradatum, LLC to purchase the 50% interest of Alpenglow, Inc. for $1,500,000.
The Company recorded the transaction as a purchase transaction, revaluing, on a
pro rata basis, the Company's assets and liabilities due to the significant
change in ownership.
Short-term note payable consists of the following:
<TABLE>
<CAPTION>
July 31, Dec. 31,
1999 1998
---- ----
<S> <C> <C>
Note payable to Alpenglow, Inc., former 50% owner of the Company, dated
July 27, 1999, payable in ten installments of $10,000 per month through
July 1, 2000 and one lump sum payment of $1,400,000 payable on July 9,
2000, non-interest bearing unless default occurs, in which case interest
accrues on defaulted payment at 10% per annum, note discounted to
effective interest rate of 10% per annum, secured by security interest
in accounts receivable. $ 1,369,577 $ -
=========== ============
</TABLE>
NOTE 6 - COMMITMENTS
- --------------------
Operating Leases
- ----------------
The Company leases office equipment and computer equipment under operating
leases expiring in various years through 2000. None of the operating leases have
remaining terms in excess of one year.
12
<PAGE>
TERRADATUM, LLC
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 AND DECEMBER 31, 1998
NOTE 7 - SUBSEQUENT EVENTS
- --------------------------
Purchase of Company
- -------------------
On September 20, 1999, the Company transferred all its assets and liabilities,
except for the short-term note payable of $1,369,577, into TDT, LLC, a Nevada
limited liability company. Immediately after the transfer, TDT, LLC entered into
an Agreement and Plan of Merger with HomeSeekers.com, Incorporated, and XMLS,
LLC, a wholly owned subsidiary of HomeSeekers.com, Incorporated, wherein TDT,
LLC was merged into XMLS, LLC, in exchange for stock and $200,000 in cash.
New Borrowings
- --------------
In September, 1999, TDT, LLC borrowed $97,300 from HomeSeekers.com, Incorporated
No set repayment terms have been specified.
13
TDT, LLC (FORMERLY TERRADATUM, LLC)
INTERIM UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
<PAGE>
TDT, LLC (FORMERLY TERRADATUM, LLC)
TABLE OF CONTENTS
Page
----
ACCOUNTANTS' DISCLAIMER OF OPINION 1
FINANCIAL STATEMENTS
Unaudited Balance Sheets 2
Unaudited Statements of Operations and Members' Equity 3
Unaudited Statements of Cash Flows 4-5
Notes to Unaudited Financial Statements 6
<PAGE>
Albright, Persing & Associates, Ltd.
CERTIFIED PUBLIC ACCOUNTANTS
1025 Ridgeview Dr., Suite 300
Reno, Nevada 89509
ACCOUNTANTS' DISCLAIMER OF OPINION
----------------------------------
To the Stockholders of
TDT, LLC (formerly Terradatum, LLC)
The accompanying balance sheets of TDT, LLC (formerly Terradatum, LLC)
as of September 30, 1999 and 1998, and the related statements of operations and
members' equity and cash flows for the nine months ended September 30, 1999 and
1998 were not audited by us, and accordingly, we do not express an opinion on
them.
November 20, 1999
<PAGE>
TDT, LLC (FORMERLY TERRADATUM, LLC)
BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
ASSETS
1999 1998
-------- --------
<S> <C> <C>
Current Assets:
Cash $ 27,194 $ 25,108
Accounts receivable 19,642 11,094
Costs in excess of billings 177,325 20,910
Prepaid expenses 7,210 1,495
----------- -----------
Total current assets 231,371 58,607
----------- -----------
Computer Software and Equipment:
Software 1,808,484 348,406
Equipment 23,022 3,185
Assets under capital leases 61,617 39,000
----------- -----------
1,893,123 390,591
Less: Accumulated depreciation and amortization (186,420) (20,271)
----------- -----------
1,706,703 370,320
----------- -----------
Other Assets:
Goodwill 6,465,553 --
Deposits 540 540
----------- -----------
6,466,093 540
----------- -----------
Total Assets $ 8,404,167 $ 429,467
=========== ===========
LIABILITIES AND MEMBERS EQUITY
Current liabilities:
Accounts payable $ 26,150 $ 43,256
Accrued payroll and taxes 22,042 --
Billings in excess of costs -- 23,830
Advances from parent 97,300 --
Current portion of capital lease obligations 20,636 9,829
----------- -----------
Total current liabilities 166,128 76,915
Capital Lease Obligations, net of current portion 24,747 25,443
----------- -----------
Total Liabilities 190,875 102,358
Members Equity 8,213,292 327,109
----------- -----------
Total Liabilities and Members Equity $ 8,404,167 $ 429,467
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
TDT, LLC (FORMERLY TERRADATUM, LLC)
STATEMENTS OF OPERATIONS AND MEMBERS EQUITY
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
1999 1998
--------- ----------
<S> <C> <C>
Net Revenue $ 1,064,437 $ 298,040
----------- -----------
Operating Expenses:
Research and development -- 201,158
Selling, general and administrative 1,216,789 160,697
----------- -----------
Total Operating Expenses 1,216,789 361,855
----------- -----------
Operating Loss (152,352) (63,815)
----------- -----------
Other Income (Expenses):
Interest expense (7,790) (2,171)
Interest income 228 --
----------- -----------
Total Other Expenses (7,562) (2,171)
----------- -----------
Net Comprehensive Loss (159,914) (65,986)
Members equity beginning of period 539,668 --
Fair market value of assets acquired over cost 6,465,553 --
Member contributions 1,372,578 393,095
Member distributions (4,593) --
----------- -----------
Members Equity End of Period $ 8,213,292 $ 327,109
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
TDT, LLC (FORMERLY TERRADATUM, LLC)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Comprehensive Loss $(159,914) $ (65,986)
--------- ---------
Adjustments to reconcile net comprehensive loss
to net cash provided (used) by operating activities:
Depreciation and amortization 136,044 20,271
Noncash salaries for capital contributions -- 24,750
Noncash research and development costs for
capital contributions -- 167,750
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 39,688 (11,094)
(Increase) in costs in excess of billings (129,837) (20,910)
(Increase) in prepaid expenses (5,715) (1,495)
(Increase) in other assets -- (540)
Increase in accounts payable 35,394 43,256
(Decrease) in accrued liabilities (770) --
Increase (decrease) in billings in excess of costs (19,600) 23,830
--------- ---------
Net Adjustments 55,204 245,818
--------- ---------
Net Cash Provided (Used) by Operating Activities (104,710) 179,832
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital contributions 3,001 8,095
Purchase of equipment (13,229) (3,185)
Capitalized software development costs -- (155,906)
--------- ---------
Net Cash Used by Investing Activities (10,228) (150,996)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Advances from parent 97,300 --
Principal payments on capital lease obligations (10,086) (3,728)
--------- ---------
Net Cash Provided (Used) by Financing Activities 87,214 (3,728)
--------- ---------
Net Increase (Decrease) in Cash (27,724) 25,108
Cash, Beginning of Period 54,918 --
--------- ---------
Cash, End of Period $ 27,194 $ 25,108
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
TDT, LLC (FORMERLY TERRADATUM, LLC)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Accountants' Disclaimer of Opinion)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING TRANSACTIONS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Equipment purchased by incurring capital lease obligations $ 16,868 $ 39,000
=========== ===========
Software development costs capitalized for capital contributions $ -- $ 192,500
=========== ===========
Acquisition of 50% interest in LLC:
Software $ 1,356,585 $ --
Related party receivable (9,444) --
Related party payable 17,843 --
Note payable to former 50% owner (1,369,577) --
----------- -----------
Capital account balance assumed $ (4,593) $ --
=========== ===========
Distribution of note payable to members $ 1,369,577 $ --
=========== ===========
Fair market value of assets purchased over
book value - allocated to goodwill $ 6,465,553 $ --
=========== ===========
SUPPLEMENTAL DISCLOSURE
Interest paid $ 7,790 $ 4,315
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
TDT, LLC (FORMERLY TERRADATUM, LLC)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 1 - DESCRIPTION OF BUSINESS
- --------------------------------
The accompanying financial statements are prepared in accordance with the
instructions for interim financial statements, are unaudited, and do not include
all the information and disclosures requried 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 such interim
periods are not necessarily indicative of results of operations for a full year.
Description of Business
- -----------------------
TDT, LLC (Formerly Terradatum LLC) was formed under the Washington Limited
Liability Company statutes on November 7, 1997, and shall terminate on November
7, 2022. The Company had no operations during 1997. The Company provides
customized computer software for multiple listing service (MLS) companies
throughout the United States. After the initial installation, the Company's
continuing services also include monthly services for software licensing and
support.
On September 20, 1999, Terradatum, LLC transferred all its assets and
liabilities, except for the short-term note payable of $1,369,577, into TDT,
LLC, a Nevada limited liability company. Immediately after the transfer, TDT,
LLC entered into an Agreement and Plan of Merger with HomeSeekers.com, Inc. and
XMLS, LLC, a wholly owned subsidiary of HomeSeekers.com, Inc., wherein TDT, LLC
was merged into XMLS, LLC, in exchange for stock and cash.
Acquisition of Business
- -----------------------
On September 30, 1999, all of the outstanding membership interests of the
Company was acquired by HomeSeekers.com, Incorporated ("HomeSeekers"), in
exchange for 640,000 shares of HomeSeeker's common stock, valued at $7,960,320
based on the approximate fair market value of the HomeSeekers common stock at
the date of acquisition, plus $200,000 in cash. The acquisition was accounted
for using the purchase method of accounting and resulted in the assumption of
net liabilities of $190,874. Recorded goodwill of $6,465,553 resulted from the
allocation of the excess of the purchase price over the book value of the net
assets.
NOTE 2 - ADVANCES FROM PARENT
- -----------------------------
In September, 1999, the Company was advanced $97,300 by its parent for cash flow
purposes. The advances from the parent contain no formal repayment terms, and
therefore are recorded as short-term liabilities.
6
INFORMATION MANAGEMENT COMPANY, LLC
AUDITED FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2-3
Statements of Income and Members Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-12
<PAGE>
Albright, Persing & Associates, Ltd.
CERTIFIED PUBLIC ACCOUNTANTS
1025 Ridgeview Dr., Suite 300
Reno, Nevada 89509
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Members of
Information Management Company, LLC
We have audited the accompanying balance sheets of Information
Management Company, LLC as of October 31, 1998 and 1997, and the related
statements of income, and Members equity and cash flows for the year ended
October 31, 1998 and the seven months ended October 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Information
Management Company, LLC as of October 31, 1998 and 1997, and the results of its
operations and its cash flows for the periods then ended, in conformity with
generally accepted accounting principles.
August 1, 1999, except for Note 9, as to
which the date is November 5, 1999
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
BALANCE SHEETS
OCTOBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
-------- ---------
<S> <C> <C>
Current Assets:
Cash $ 57,173 $ 35,613
Accounts receivable 177,671 170,698
Inventory 12,000 12,000
Prepaid expenses 10,868 --
-------- --------
Total current assets 257,712 218,311
-------- --------
Equipment, Net 46,954 56,961
-------- --------
Other Assets:
Non-compete covenant, net of
accumulated amortization of
$18,270 in 1998 and $6,419
in 1997 96,362 108,213
-------- --------
Total Assets $401,028 $383,485
======== ========
LIABILITIES AND MEMBERS EQUITY
Current Liabilities:
Credit line payable $ 40,000 $ --
Current portion of long-term debt 16,876 43,102
Accounts payable 70,168 69,814
Accrued salaries and wages 23,052 27,470
Accrued expenses -- 1,862
-------- --------
Total current liabilities 150,096 142,248
Long-term Debt, net of current portion 105,365 122,241
-------- --------
Total Liabilities 255,461 264,489
Members Equity 145,567 118,996
-------- --------
Total Liabilities and Members Equity $401,028 $383,485
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
STATEMENTS OF INCOME AND MEMBERS EQUITY
FOR THE YEAR ENDED OCTOBER 31, 1998
AND SEVEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
Seven
Year Months
Ended Ended
October 31, October 31,
1998 1997
------- -------
<S> <C> <C>
Net Sales $ 1,774,548 $ 1,147,166
Cost of Sales 1,302,170 909,496
----------- -----------
Gross Profit 472,378 237,670
----------- -----------
Selling, general and administrative expenses 373,090 162,920
----------- -----------
Income from operations 99,288 74,750
----------- -----------
Other Income (Expense)
Interest expense (11,727) (5,954)
Interest income 425 --
----------- -----------
(11,302) (5,954)
----------- -----------
Net Income 87,986 68,796
Members equity beginning of period 118,996 --
Member contributions -- 100,000
Member distributions (61,415) (49,800)
----------- -----------
Members Equity End of Period $ 145,567 $ 118,996
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 1998
AND SEVEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
Seven
Year Months
Ended Ended
October 31, October 31,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income (Loss) $ 87,986 $ 68,796
--------- ---------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 21,858 11,497
Changes in assets and liabilities net of effect
Of asset purchase:
(Increase) in accounts receivable (6,973) (70,698)
(Increase) in prepaid expenses (10,868) --
Increase in accounts payable 354 69,814
(Decrease) Increase in accrued salaries (4,418) 27,470
(Decrease) Increase in accrued expenses (1,862) 1,862
--------- ---------
Net adjustments (1,909) 39,945
--------- ---------
Net Cash Provided by Operating Activities 86,077 108,741
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment -- (12,501)
Member distributions (61,415) (49,800)
--------- ---------
Net Cash Used by Investing Activities (61,415) (62,301)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from credit line 40,000 --
Net principal payments on long-term debt (43,102) (10,827)
--------- ---------
Net Cash Used by Financing Activities (3,102) (10,827)
--------- ---------
Net increase in cash and cash equivalents 21,560 35,613
Cash, beginning of year 35,613 --
--------- ---------
Cash, end of year $ 57,173 $ 35,613
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 1998
AND SEVEN MONTHS ENDED OCTOBER 31, 1997
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING TRANSACTIONS
1997
----
Contribution of assets to startup Company:
Machinery and equipment $ 49,538
Accounts receivable 100,000
Inventory 12,000
Note assumed (22,753)
New note payable (38,785)
-----------
Initial capital contribution made by owners $ 100,000
===========
Two note payable obligations totaling $114,632 were incurred when the Company
entered into covenants not to compete with the former owner of the business.
SUPPLEMENTAL DISCLOSURE
1998 1997
------- ------
Interest paid $ 12,253 $ 5,429
======== ========
5
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------
This summary of significant accounting policies of Information Management
Company, LLC (the Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations of
the Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the
financial statements
Description of Business
- -----------------------
Information Management Company, LLC was formed under the Kentucky Limited
Liability Company statutes on April 15, 1997, and shall terminate on December
31, 2020. The Company provides computer processing services and publication
services for MLS boards in the greater Midwest area. Computer processing
services also include software licensing and support. On September 30, 1999,
Information Management Company, LLC transferred all its assets and liabilities
into Real Estate Information, Inc., a Nevada corporation. Immediately after the
transfer, Real Estate Management, Inc. entered into an Agreement and Plan of
Merger with HomeSeekers.com, Incorporated and YMLS, Inc., a wholly owned
subsidiary of HomeSeekers.com, Incorporated, wherein Real Estate Management,
Inc. was merged into YMLS, Inc. in exchange for stock.
Equipment
- ---------
Equipment is stated at cost. Depreciation is calculated using the straight-line
method over estimated useful lives ranging from 5 to 7 years. Depreciation
expense charged to operations in 1998 and 1997 was $10,007 and $5,078,
respectively.
Income Taxes
- ------------
The Company as a Limited Liability Company is taxed under the provisions of
Subchapter K of the Internal Revenue Code. Under those provisions, the Company
does not pay federal income taxes on its income. Instead, the members are liable
for individual federal income taxes on their respective portions of the
Company's taxable income. No provision for income taxes is recorded in the
accompanying financial statements.
Financial Statement Estimates
- -----------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
6
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES- Continued
- --------------------------------------------------------------------
Concentrations of Credit Risk
- -----------------------------
Financial instruments which potentially subject the Company to credit risk
consist primarily of cash in bank, and trade receivables. The Company maintains
its cash in bank deposit accounts which, at times, may exceed federally insured
limits. The Company extends credit to its customers in the ordinary course of
business. At October 31, 1998 and 1997, substantially all of the accounts
receivable are due from customers within the real estate and related industries.
Concentrations of Operations
- ----------------------------
All of the Company's current product offerings are designed for use by persons
and or MLS boards operating in the national domestic real estate market. Any
recessionary pressures or other disturbances in the national real estate market
could have an adverse effect on the Company's operations.
Inventory
- ---------
Inventory is recorded at the lower of cost or market.
Amortization
- ------------
The cost of non-compete agreements is being amortized on the straight line basis
over the life of the agreements of eight years.
Amortization expense charged to operations in 1998 and 1997 was $11,851 and
$6,419, respectively.
Revenue Recognition
- -------------------
Revenues related to publications are recognized when the product is shipped. The
Company is also engaged as a seller and licensor of software. Generally, revenue
on software sales is recognized upon delivery of the software. Revenues from
licensing and support is recognized ratably over the term of the arrangement.
7
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
NOTE 2 - ACCOUNTS RECEIVABLE
- ----------------------------
Accounts receivable consist of the following:
October 31,
-----------
1998 1997
--------- ---------
Trade receivables $ 177,671 $ 170,698
========= =========
Accounts receivable are deemed to be collectible therefore no allowance for
doubtful accounts have been recorded.
NOTE 3 - EQUIPMENT
- ------------------
Equipment consists of the following:
October 31,
-----------
1998 1997
-------- --------
Equipment $ 60,535 $ 60,535
Furniture and fixtures 1,504 1,504
-------- --------
62,039 62,039
Less: accumulated depreciation (15,085) (5,078)
-------- --------
$ 46,954 $ 56,961
======= =======
NOTE 4 - CREDIT LINE PAYABLE
- ----------------------------
The Company has an unsecured $75,000 revolving line of credit dated May 15, 1998
with Star Bank, NA with interest at 1% over the lender's prime rate (8% as of
October 31, 1998). In addition, the line is personally guaranteed by the members
of the Company. Interest only payable monthly until May, 15, 1999, at which time
all unpaid principal and accrued interest is due and payable. As of October 31,
1998, the line of credit had an unused balance of $35,000.
8
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
NOTE 5 - LONG-TERM DEBT
- -----------------------
<TABLE>
<CAPTION>
Long-term debt consists of the following:
October 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Note payable to William and Cindy Andrew dated April 15, 1997 and amended
December 15, 1998 retroactively to April 15, 1997. Payable in an
installment of $20,000 on January 1, 1998 and $500 monthly payments
starting 12/15/98 including interest at 5.695% per annum. Secured by
equipment, personally guaranteed
by the Company's members. $ 20,383 $ 38,785
Note payable to William and Cindy Andrew, covenant not to compete. Payable
in monthly installments of $1,414, including imputed interest at 9.5% per
annum, through April, 2005, unsecured, personally guaranteed by the
Company's members. 82,034 90,750
Note payable to William and Cindy Andrew, covenant not to compete. Note
renegotiated December 15, 1998, for monthly installments of $500 including
imputed interest at 9.5% maturity November, 2002, due to restatement of
original terms of business asset purchase, note balance was adjusted
retroactively to April 15, 1997, personally
guaranteed by the Company's members. 19,824 19,824
Note payable Star Bank, NA. Payable in monthly
installments of $1,334 including interest at 10.25%
per annum. Secured by equipment. - 15,984
--------- -----------
122,241 165,343
Less Current Portion (16,876) (43,102)
--------- -----------
Long Term Debt $ 105,365 $ 122,241
========= ===========
</TABLE>
The amount of interest cost incurred for the years ended October 31,
1998 and 1997 was $11,727 and $5,954, all of which was charged to operations.
9
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
NOTE 5 - LONG-TERM DEBT - Continued
- -----------------------
Following are maturities of long-term debt:
Year ended
October 31, Amount
----------- ------
1999 $ 16,876
2000 20,383
2001 22,195
2002 24,175
2003 14,983
Thereafter 23,629
------------
$ 122,241
============
NOTE 6 - PROFIT-SHARING
- -----------------------
The Company sponsors a qualified, 401(k) plan for its eligible employees.
Employees may contribute 1 to 15% of their salary. The Company matching and
additional contributions to the plan are voluntary and determined at the end of
the year. Company contributions for the years ended December 31, 1998 and 1997
were $1,673 and $1,269 respectively.
NOTE 7 - MEMBER DISTRIBUTIONS
- -----------------------------
As disclosed in Note 1, the Company is taxed as a Partnership under the
provisions of the Internal Revenue Code. Under those provisions, the members are
liable for individual federal and state income taxes on their respective shares
of the Company's taxable income. It is the policy of the Company to distribute
cash payments to members as a result of this pass-through of income.
10
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
NOTE 8 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
Operating Leases
- ----------------
The Company conducts its Kentucky operations from facilities leased under a
noncancellable operating lease expiring in April 23, 1999. The operating lease
provides for two additional two year renewal options. Rent expense is
predetermined as described in the rent agreement for the first four years. The
company has exercised the first two year option. Rental expense for the building
was $32,789 and $19,032 for 1998 and 1997, respectively.
The company also has an operating lease of computer equipment from BankVest
Capital Corp. The term of the lease is three years ending March 2001 at which
time the company can buy the equipment at fair market value. Rental expense for
the equipment was $1,944 in 1998.
The future minimum rental payments on leases classified by the Company as
operating leases, are as follows:
Year Ended
October 31, Building Equipment Totals
1999 $ 33,336 $ 3,788 $ 37,124
2000 33,807 3,788 37,595
2001 14,145 1,894 16,039
------- -------- ---------
$ 81,288 $ 9,470 $ 90,758
======== ======== =======
Contingent Payments
- -------------------
On December 15, 1998, the Company entered into an agreement to amend and restate
the original purchase agreement covering the purchase of the assets to startup
the Company and a covenant not to compete agreement. The agreement amended (1)
the original purchase price of the assets to a lower amount, (2) restructured
the seller's promissory note incurred in the original purchase, and (3)
restructured the payments on a covenant not to compete agreement from a variable
payment based on 2% of net sales to a fixed payment for a 48 month term.
As consideration for the restructuring, the agreement requires that if total
gross revenue (defined as total sales of the Company and any new affiliates
within one year of the amendment less any returns and rebates) exceeds
$1,250,000 in the aggregate, for any three months (the threshold level), the
Company shall pay to the seller an additional amount of $500 per month without
interest until an amount equal to $50,000 in the aggregate has been paid.
However, in the event the total gross revenue is less than the threshold level
at any time, the $500 per month payment payable shall be suspended until such
time as the total gross revenue exceeds the threshold level.
11
<PAGE>
INFORMATION MANAGEMENT COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
NOTE 8 - COMMITMENTS AND CONTINGENCIES - Continued
- --------------------------------------
Consulting Agreement
- --------------------
The Company is obligated under the terms of a consulting agreement, dated April
15, 1997, to pay a consultant to the Company $565.47 per month through April,
2005. Minimum future payments under the consulting arrangement are as follows:
Year ended
October 31, Amount
----------- ------
1999 $ 6,786
2000 6,786
2001 6,786
2002 6,786
2003 6,786
Thereafter 9,613
-------
$43,543
=======
The members of the Company have personally guaranteed the payments under both
the contingency agreements and the consulting agreement.
NOTE 9 - SUBSEQUENT EVENTS
- --------------------------
Purchase of Company
- -------------------
On September 29, 1999, the Company transferred all its assets and
liabilities into Real Estate Information, Inc., a newly formed Kentucky
corporation. Immediately after the transfer, Real Estate Information, Inc.
entered into an Agreement and Plan of Merger with HomeSeekers.com, Inc., YMLS,
Inc., a wholly owned subsidiary of HomeSeekers.com, Inc., and Real Estate
Information, Inc. wherein Real Estate Information, Inc. was merged into YMLS,
Inc. in a stock-for-stock exchange accounted for as a purchase.
Payment of Line of Credit
- -------------------------
In October, 1999, HomeSeekers advanced Real Estate Information, Inc.
$40,000 to payoff the outstanding line of credit with Star Bank.
12
REAL ESTATE INFORMATION, INC.
(FORMERLY INFORMATION MANAGEMENT COMPANY, LLC)
INTERIM UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
<PAGE>
REAL ESTATE INFORMATION, INC.
(FORMERLY INFORMATION MANAGEMENT COMPANY, LLC)
TABLE OF CONTENTS
Page
ACCOUNTANTS' DISCLAIMER OF OPINION 1
FINANCIAL STATEMENTS
Unaudited Balance Sheets 2
Unaudited Statements of Operations and Members' Equity 3
Unaudited Statements of Cash Flows 4-5
Notes to Unaudited Financial Statements 6
<PAGE>
Albright, Persing & Associates, Ltd.
CERTIFIED PUBLIC ACCOUNTANTS
1025 Ridgeview Dr., Suite 300
Reno, Nevada 89509
ACCOUNTANTS' DISCLAIMER OF OPINION
----------------------------------
To the Stockholders of
Real Estate Information, Inc.
(Formerly Information Management Company, LLC)
The accompanying balance sheets of Real Estate Information, Inc.
(Formerly Information Management Company, LLC) as of September 30, 1999 and
1998, and the related statements of operations and members' equity and cash
flows for the nine months ended September 30, 1999 and 1998 were not audited by
us, and accordingly, we do not express an opinion on them.
November 21, 1999
<PAGE>
REAL ESTATE INFORMATION, INC.
(FORMERLY INFORMATION MANAGEMENT COMPANY, LLC)
BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
ASSETS
1999 1998
-------- ---------
<S> <C> <C>
Current Assets:
Cash $ 492 $ 72,098
Accounts receivable 146,182 182,405
Inventory 12,000 12,000
Prepaid expenses 11,452 9,209
----------- -----------
Total current assets 170,126 275,712
----------- -----------
Property and Equipment:
Software 918,105 --
Equipment 72,956 60,535
Furniture and fixtures 1,504 1,504
----------- -----------
992,565 62,039
Less: Accumulated depreciation and amortization (24,867) (14,273)
----------- -----------
967,698 47,766
----------- -----------
Other Assets:
Non-compete covenant, net of accumulated
amortization of $31,947 in 1999 and $17,283
in 1998 82,685 97,349
----------- -----------
Total Assets $ 1,220,509 $ 420,827
=========== ===========
LIABILITIES AND MEMBERS EQUITY
Current liabilities:
Accounts payable $ 62,706 $ 95,711
Accrued payroll and taxes 10,816 18,343
Credit line payable 40,000 41,310
Current portion of long-term debt 20,239 16,012
----------- -----------
Total current liabilities 133,761 171,376
Long-term Debt, net of current portion 86,748 106,987
----------- -----------
Total Liabilities 220,509 278,363
Members Equity 1,000,000 142,464
----------- -----------
Total Liabilities and Members Equity $ 1,220,509 $ 420,827
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
REAL ESTATE INFORMATION, INC.
(FORMERLY INFORMATION MANAGEMENT COMPANY, LLC)
STATEMENTS OF OPERATIONS AND MEMBERS EQUITY
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Net Sales $ 1,762,267 $ 1,627,958
Cost of Sales 1,026,038 1,213,379
----------- -----------
Gross Profit 736,229 414,579
Selling, general and administrative 326,549 343,499
----------- -----------
Operating Income 409,680 71,080
----------- -----------
Other Income (Expenses):
Interest expense (13,585) (11,090)
Interest income 3,565 2,468
----------- -----------
Total Other Expenses (10,020) (8,622)
----------- -----------
Net Comprehensive Income 399,660 62,458
Members' Equity beginning of period 145,567 118,996
Fair market value of assets acquired over cost 918,105 --
Members' Distributions (463,332) (38,990)
----------- -----------
Members' Equity End of Period $ 1,000,000 $ 142,464
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
REAL ESTATE INFORMATION, INC.
(FORMERLY INFORMATION MANAGEMENT COMPANY, LLC)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Accountants' Disclaimer of Opinion)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Comprehensive Income $ 399,660 $ 62,458
--------- ---------
Adjustments to reconcile net comprehensive income
to net cash provided by operating activities:
Depreciation and amortization 23,459 20,059
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 31,489 (11,707)
(Increase) in prepaid expenses (584) (9,209)
Increase (decrease) in accounts payable (7,462) 25,897
(Decrease) in accrued liabilities (12,236) (10,989)
--------- ---------
Net Adjustments 34,666 14,051
--------- ---------
Net Cash Provided by Operating Activities 434,326 76,509
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Member distributions (463,332) (38,990)
Purchase of equipment (12,421) --
--------- ---------
Net Cash Used by Investing Activities (475,753) (38,990)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Advances from line of credit -- 41,310
Principal payments on long-term debt (15,254) (42,344)
--------- ---------
Net Cash Used by Financing Activities (15,254) (1,034)
--------- ---------
Net Increase (Decrease) in Cash (56,681) 36,485
Cash, Beginning of Period 57,173 35,613
--------- ---------
Cash, End of Period $ 492 $ 72,098
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
REAL ESTATE INFORMATION, INC.
(FORMERLY INFORMATION MANAGEMENT COMPANY, LLC)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Accountants' Disclaimer of Opinion)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING TRANSACTIONS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Fair market value of assets purchased over book value
(allocated to software) $ 918,105 $ -
========= ==========
SUPPLEMENTAL DISCLOSURE
Interest paid $ 13,585 $ 11,090
========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
REAL ESTATE INFORMATION, INC.
(FORMERLY INFORMATION MANAGEMENT COMPANY, LLC)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
NOTE 1 - DESCRIPTION OF BUSINESS
- --------------------------------
The accompanying financial statements are prepared in accordance with the
instructions for interim financial statements, are unaudited, and do not include
all the information and disclosures 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 such interim
periods are not necessarily indicative of results of operations for a full year.
Description of Business
- -----------------------
Real Estate Information, Inc. (Formerly Information Management Company, LLC) was
formed under the Kentucky Limited Liability Company statutes on April 15, 1997,
and shall terminate on December 31, 2020. The Company provides computer
processing services and publication services for MLS boards in the greater
Midwest area. Computer processing services also include software licensing and
support.
On September 30, 1999, Information Management Company, LLC transferred all its
assets and liabilities into Real Estate Information, Inc., a Nevada corporation.
Immediately after the transfer, Real Estate Management, Inc. entered into an
Agreement and Plan of Merger with HomeSeekers.com, Inc. and YMLS, Inc., a wholly
owned subsidiary of HomeSeekers.com, Incorporated, wherein Real Estate
Management, Inc. was merged into YMLS, Inc. in exchange for stock.
Acquisition of Business
- -----------------------
On September 30, 1999, all of the outstanding common stock of the Company was
acquired by HomeSeekers.com, Incorporated ("HomeSeekers"), in exchange for
81,090 shares of HomeSeeker's common stock, valued at $1,000,000 based on the
approximate fair market value of the HomeSeekers common stock at the date of
acquisition. The acquisition was accounted for using the purchase method of
accounting and resulted in the assumption of net liabilities of $220,509. The
excess of the purchase price over the book value of the net assets of $918,105
was allocated to the Company's developed software product.
NOTE 2 - ADVANCES FROM PARENT
- -----------------------------
In October, 1999, the Company was advanced $40,000 by its parent to payoff the
outstanding balance of the credit line. The advances from the parent contain no
formal repayment terms.
6
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Condensed Consolidated Financial Statements 2-5
Pro Forma Condensed Consolidated Statement of Income
for the Three Months Ended September 30, 1999 6
Pro Forma Condensed Consolidated Statement of Income
for the Year Ended June 30, 1999 7
Notes to Pro Forma Condensed Consolidated
Financial Statements 8-11
<PAGE>
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On September 30, 1999, HomeSeekers.com, Incorporated ("Company") acquired all
the outstanding membership interests in TDT, LLC ("Terradatum"), a non-public
Nevada limited liability company in the business of development, marketing and
licensing of Internet based multiple listing service systems in the United
States, in exchange for 640,000 shares of the Company's stock, valued at
$7,960,320 based on the approximate fair market value of the common stock on the
date of acquisition, plus $200,000 in cash.
In connection with the acquisition, the Company entered into employment
contracts with the three principal members of Terradatum, which include (1) base
salaries ranging from $120,000 to $130,000, (2) commissions on direct up front
sales of MLS systems, (3) certain provisions for incentive bonuses if certain
performance standards are met, and (4) stock options ranging from 50,000 to
80,000 shares of the Company's common stock, vesting over three years.
Subsequent to the purchase, the Company advanced Terradatum $97,300 for future
cash flow purposes.
In addition, the Company is obligated to pay the former members of
Terradatum additional cash if (1) the average closing price of the Company's
common stock for the five consecutive trading days which precede the third
trading day immediately prior to the first anniversary of the date of the
agreement is less than $7 per share, and (2) the average closing price of a
share of the Company's common stock for the ten consecutive trading days which
precede the first anniversary of the date of the agreement multiplied by 600,000
shares does not exceed $10,000,000.
The acquisition was accounted for using the purchase method of
accounting and resulted in the assumption of net liabilities of approximately
$191,000. The purchase price was allocated substantially to goodwill and
computer software acquired in the acquisition.
The accompanying condensed consolidated financial statements illustrate
the effect of the acquisition ("Pro Forma") on the Company's results of
operations. The condensed consolidated statements of income for the quarter
ended September 30, 1999 and the year ended June 30, 1999 are based on the
historical statements of income of the Company and Terradatum for those periods.
The pro forma condensed consolidated statements of income assume the acquisition
took place on July 1, 1998. No pro forma condensed consolidated balance sheet as
of September 30, 1999 has been presented because the accounting for the
acquisition was reflected in the condensed consolidated balance sheet as of
September 30, 1999 included in the Company's first quarter Form 10QSB.
2
<PAGE>
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Terradatum reported on a calendar year. To prepare the pro forma
condensed consolidated financial statements, the financial information of
Terradatum had to be presented on the June 30 year end of the Company.
The pro forma condensed consolidated financial statements may not be
indicative of the actual results of the acquisition. In particular, the pro
forma condensed consolidated financial statements are based on management's
current estimate of the allocation of the purchase price, the actual allocation
of which may differ.
The accompanying pro forma condensed consolidated financial statements
should be read in connection with the historical financial statements of the
Company and Terradatum.
3
<PAGE>
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On September 30, 1999, HomeSeekers.com, Incorporated ("Company") acquired all
the outstanding common stock of Real Estate Information, Inc., formerly
Information Management Company, LLC (herein referred to as "IMCO"), a non-public
Kentucky corporation in the business of providing electronic publishing and
software development for the real estate listing management industry, in
exchange for 81,090 shares of the Company's stock, valued at $1,000,000 based on
the approximate fair market value of the common stock on the date of
acquisition.
In connection with the acquisition, the Company entered into an
employment contract with the key employee of IMCO, which includes (1) a base
salary of $110,000, (2) commissions on direct up front sales of MLS systems, (3)
certain provisions for incentive bonuses if certain performance standards are
met, and (4) stock options for 50,000 shares of the Company's common stock,
vesting over three years. Subsequent to the purchase, the Company advanced IMCO
$40,000 to payoff certain debt.
In addition, the Company is obligated to pay the former stockholders of
IMCO additional common shares if (1) any shares issued in consideration of the
purchase price are sold by the corresponding shareholder for an actual sale
price of less than the average closing sale price on or before the earlier of
the first anniversary date of the date of the agreement, or the 180th day after
the date on which that share becomes the subject of an effective registration
statement, and (2) the average closing price of a share of the Company's common
stock for the ten consecutive trading days which precede the first and second
anniversary of the date of the agreement does not exceed certain levels.
The acquisition was accounted for using the purchase method of
accounting and resulted in the assumption of net liabilities of approximately
$220,000. The purchase price was allocated substantially to computer software
acquired in the acquisition.
The accompanying condensed consolidated financial statements illustrate
the effect of the acquisition ("Pro Forma") on the Company's results of
operations. The condensed consolidated statements of income for the quarter
ended September 30, 1999 and year ended June 30, 1999 are based on the
historical statements of income of the Company and IMCO for those periods. The
pro forma condensed consolidated statements of income assume the acquisition
took place on July 1, 1998. No pro forma condensed consolidated balance sheet as
of September 30, 1999 has been presented because the accounting for the
acquisition was reflected in the condensed consolidated balance sheet as of
September 30, 1999 included in the Company's first quarter Form 10QSB.
4
<PAGE>
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
IMCO, reported on a fiscal year ended October 31. To prepare the pro
forma condensed consolidated financial statements, the financial information of
IMCO had to be presented on the June 30 year end of the Company.
The pro forma condensed consolidated financial statements may not be
indicative of the actual results of the acquisition. In particular, the pro
forma condensed consolidated financial statements are based on management's
current estimate of the allocation of the purchase price, the actual allocation
of which may differ.
The accompanying pro forma condensed consolidated financial statements
should be read in connection with the historical financial statements of the
Company and IMCO.
5
<TABLE>
<CAPTION>
<PAGE>
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
HomeSeekers.com
Incorporated Terradatum IMCO Adjustments Pro Forma
---- ---------- ---- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 1,442,684 $ 363,958 $ 489,026 $ -- $ 2,295,668
Cost of Revenues 368,537 -- 295,855 -- 664,392
---------- ---------- -------- ---------- -----------
Gross Profit 1,074,147 363,958 193,171 -- 1,631,276
---------- ---------- -------- ---------- -----------
Operating expenses 3,824,767 448,253 85,128 A 323,278
B 76,509 4,757,935
---------- ---------- -------- ---------- -----------
3,824,767 448,253 85,128 399,787 4,757,935
---------- ---------- -------- ---------- -----------
Income (loss) from operations (2,750,620) (84,295) 108,043 (399,787) (3,126,659)
Other income (expense) 112,962 (3,080) (3,338) -- 106,544
---------- ---------- -------- ---------- -----------
Income (loss) before provision
for income taxes (2,637,658) (87,375) 104,705 (399,787) (3,020,115)
Provision for income taxes -- -- -- -- --
---------- ---------- -------- ---------- -----------
Net income (loss) $ (2,637,658) $ (87,375) $ 104,705 $ (399,787) $ (3,020,115)
============ ============ ============ ========== ============
Basic and diluted loss per share $ (0.17) C $ (.02) $ (0.19)
============ ========== ===========
Weighted average number of shares
outstanding 15,136,676 D 721,090 15,857,766
========== ======= ==========
</TABLE>
See notes to pro forma condensed consolidated financial statements
6
<PAGE>
<TABLE>
<CAPTION>
.
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED JUNE 30, 1999
HomeSeekers.com
Incorporated Terradatum IMCO Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Revenues $ 3,419,796 $ 1,150,041 $ 1,944,840 $ -- $ 6,514,677
Cost of Revenues 567,215 -- 1,218,344 -- 1,785,559
------------ ------------ ------------ ------------ ------------
Gross Profit 2,852,581 1,150,041 726,496 -- 4,729,118
------------ ------------ ------------ ------------ ------------
Operating expenses 8,009,337 1,015,385 370,737 A 1,293,111 --
B 306,035 10,994,605
------------ ------------ ------------ ------------ ------------
8,009,337 1,015,385 370,737 1,599,146 10,994,605
------------ ------------ ------------ ------------ ------------
Income (loss) from operations (5,156,756) 134,656 355,759 (1,599,146) (6,265,487)
Other income (expense) 316,861 (8,091) (8,143) -- 300,627
------------ ------------ ------------ ------------ ------------
Income (loss) before
provision for income taxes (4,839,895) 126,565 347,616 (1,599,146) (5,964,860)
Provision for income taxes (2,106) -- -- -- (2,106)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (4,842,001) $ 126,565 $ 347,616 $ (1,599,146) $ (5,966,966)
============ ============ ============ ============ ============
Basic and diluted loss per share $ (.53) C $ (.07) $ (.60)
============ ============ ============
Weighted average number of shares
outstanding 10,235,286 721,090 10,956,376
============ D ============ ============
</TABLE>
See notes to pro forma condensed consolidated financial
statements.
7
<PAGE>
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - ACQUISITION OF TERRADATUM, LLC
- ---------------------------------------
To record the acquisition of Terradatum, LLC and the allocation of the purchase
price on the basis of the fair values of the assets acquired and liabilities
assumed. The components of the purchase price are as follows:
Purchase Price:
Common stock (640,000 shares) $ 7,960,320
Cash 200,000
Acquisition expenses 52,971
---------
8,213,291
Liabilities assumed 190,875
Assets acquired (1,938,613)
----------
Costs in excess of net assets acquired
(allocated to goodwill) $ 6,465,553
===========
To record the acquisition of IMCO and the allocation of the purchase price on
the basis of the fair values of the assets acquired and liabilities assumed. The
components of the purchase price are as follows:
Purchase Price:
Common stock (81,090 shares) $ 1,000,000
Acquisition expenses 63,672
Note receivable (63,672)
--------
1,000,000
Liabilities assumed 220,509
Assets acquired (substantially all
computer software) (1,220,509)
----------
Costs in excess of net assets acquired $ --
=======
8
<PAGE>
<TABLE>
<CAPTION>
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 - ADJUSTMENTS TO THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
- -----------------------------------------------------------------------
Terradatum reported on a fiscal year ending in December. IMCO, and its
predecessor, IMCo, LLC, reported on a fiscal year ending in October. To properly
consolidate the two entities, both Terradatum and IMCO's financial statements
were restated to an interim period ending in September and a fiscal year ending
in June. Interim income statements were added and subtracted to arrive at the
three month and twelve month fiscal periods. The following is a summary of
amounts included and excluded to arrive at the restated statements.
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
- ----------------------------------------
Net
Gross Gross Income
Revenues Profit (Loss)
-------- ------ ------
Terradatum
<S> <C> <C> <C>
Nine months ended 9/30/99 $ 1,064,437 $ 1,064,437 $ (159,914)
Less:
Six months ended 6/30/99 (700,479) (700,479) (72,539)
-------- -------- -------
Three months ended 9/30/99 $ 363,958 $ 363,958 $ (87,375)
=========== =========== ===========
IMCO/IMCo, LLC
- --------------
Eleven months ended 9/30/99 $ 1,762,267 $ 736,229 $ 399,660
Less:
Eight months ended 6/30/99 (1,273,241) (543,058) 294,955
-------- -------- -------
Three months ended 9/30/99 $ 489,026 $ 193,171 $ 104,705
=========== =========== ===========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 - ADJUSTMENTS TO THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME -
- -------------------------------------------------------------------------
Continued
- -----------
FOR THE YEAR ENDED JUNE 30, 1999
- --------------------------------
Net
Gross Gross Income
Revenues Profit (Loss)
-------- ------ ------
Terradatum
<S> <C> <C> <C>
Year ended 12/31/98 $ 605,356 $ 605,356 $ 91,075
Less:
Six months ended 6/30/98 (155,794) (155,794) 108,029
Add:
Six months ended 6/30/99 700,479 700,479 (72,539)
------- ------- -------
Year ended 6/30/99 $ 1,150,041 $ 1,150,041 $ 126,565
=========== =========== ===========
IMCO/IMCo, LLC
Year ended 10/31/98 $ 1,774,548 $ 472,378 $ 87,986
Less:
Eight months ended 6/30/98 (1,102,949) (288,940) (35,325)
Add:
Eight months ended 6/30/99 1,273,241 543,058 294,955
---------- -------- --------
Year ended 6/30/99 $ 1,944,840 $ 726,496 $ 347,616
=========== =========== ===========
</TABLE>
10
<PAGE>
HOMESEEKERS.COM, INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 - ADJUSTMENTS TO THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME -
- -------------------------------------------------------------------------
Continued
Adustments to operating expenses:
<TABLE>
<CAPTION>
Quarter Year
Ended Ended
9-30-99 6-30-99
------- -------
<S> <C> <C>
A) Amortization of Terradatum
Goodwill over 5 years $ 323,278 $ 1,293,111
============ ============
B) Amortization of IMCO software
purchase over 3 years $ 76,509 $ 306,035
============ ============
C) To adjust loss per share to account for changes in net loss and
additional common shares issued.
D) To adjust weighted average number of shares outstanding for additional
shares issued in the acquisition.
</TABLE>
11
