SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
or
[_] 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 ____________
MONSTERDAATA.COM, INC.
(Exact name of small business issuer as specified in its charter)
(Formerly known as D-Vine, Ltd.)
DELAWARE 22-2732163
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
115 STEVENS AVENUE
VALHALLA, NEW YORK 10595
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 747-9100
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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. [X] Yes [_] No
As of June 30, 2000, 15,266,010 shares of the Registrant's common stock, par
value $.01 per share, were outstanding.
Documents incorporated by reference: None
Transitional Small Business Disclosure Format: [_] Yes [X] No
MONSTERDAATA.COM, INC.
TABLE OF CONTENTS
-----------------
Page
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PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
BALANCE SHEET -- As of June 30, 2000 (Unaudited) Page 3
STATEMENT OF OPERATIONS (Unaudited) --
For the Six Months Ended June 30, 1999
and June 30, 2000 Page 5
STATEMENT OF CASH FLOWS (Unaudited) --
For the Six Months Ended June 30, 1999
and June 30, 2000 Page 6
NOTES TO FINANCIAL STATEMENTS Page 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations Page 11
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings Page 13
Item 2. Changes in Securities Page 14
Item 3. Defaults upon Senior Securities Page 14
Item 4. Submission of Matters to a Vote of Security Holders Page 14
Item 5. Other Information - Risk Factors Page 14
Signatures Page 23
2
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
MONSTERDAATA.COM, INC
BALANCE SHEETS
(UNAUDITED)
ASSETS June 30, 2000
--------------
CURRENT ASSETS
- --------------
Cash and Cash Equivalents 41,549
Accounts Receivable Exclusive 183,167
Prepaid expenses and other current assets 10,000
-------------
TOTAL CURRENT ASSETS 234,716
PROPERTY AND EQUIPMENT, NET 737,800
SECURITY DEPOSITS 18,988
-------------
TOTAL ASSETS 991,504
=============
LIABILITIES
CURRENT LIABILITIES
- -------------------
Accounts payable and accrued expenses 1,228,622
Deferred revenue - current 352,457
Notes Payable - Stockholders less deferred
debt discount of $200,000 1,303,123
-------------
Current maturities of capital lease obligations 294,934
-------------
TOTAL CURRENT LIABILITIES 3,179,136
-------------
OTHER LIABILITIES
- -----------------
Capital lease obligations, less current maturities -
Deferred revenue - noncurrent 72,919
-------------
TOTAL OTHER LIABILITIES 72,919
TOTAL LIABILITIES 3,252,055
-------------
STOCKHOLDERS' DEFICIENCY
- ------------------------
Preferred Stock - $0.01 par value; 10,000,000 shares authorized:
Series A cumulative convertible preferred stock - $0.01 par value;
$1,000 stated value; 2,000 shares authorized, 1,567.32 shares
issued and outstanding 1,567,320
Series B cumulative convertible preferred stock - $0.01 par value;
$1,000 stated value; 2,000 shares authorized, 425 shares issued
and outstanding 425,000
Common stock - $0.01 par value; 50,000,000 shares authorized,
15,266,010 issued and outstanding 152,660
3
Additional paid in capital 3,169,749
Options and warrants 604,766
Notes Receivable Stockholder (98,850)
Deferred Consulting Expense (55,650)
Accumulated deficit (8,025,546)
--------------
TOTAL STOCKHOLDERS DEFICIENCY (2,260,551)
--------------
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY 991,504
==============
4
MONSTERDAATA.COM, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1999 JUNE 30, 2000
------------- --------------
SALES $ 1,324,508 $ 947,086
COST OF SALES 623,772 $ 230,079
----------- -----------
GROSS PROFIT 700,736 717,007
53% 76%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Product development costs - 1,505,109
Selling, general and administrative expenses 1,530,857 1,398,723
----------- -----------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,530,857 2,903,832
OPERATING INCOME/(LOSS) (830,121) (2,186,825)
----------- -----------
OTHER INCOME/(EXPENSE)
Interest (expense) net of income $ 3,391 $ (91,269)
Merger/Acquisition costs (215,000)
----------- -----------
OTHER INCOME (EXPENSE) (211,609) (51,269)
----------- -----------
NET INCOME/(LOSS) BEFORE INCOME TAXES
(1,041,730) (2,278,094)
INCOME TAXES - -
----------- -----------
NET (LOSS) $(1,041,730) $(2,278,094)
=========== ===========
Weighted Average Number of Shares Outstanding 6,519,177 8,596,705
=========== ===========
Net Loss Per Share, Basic and Diluted $ (0.160) $ (0.265)
=========== ===========
See accompanying notes to financial statements
5
MONSTERDAATA.COM, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
6/30/99 6/30/00
------------- ------------
Net loss (1,041,730) (2,278,094)
---------- ----------
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 52,208 26,634
Amortization of Deferred Debt Discount 40,000
Accrued interest on receivable - (2,900)
Stock based compensation 248,821 36,500
Loss on disposal of fixed asset - 11,825
Decrease in accounts receivable 72,186 114,349
(Increase)/Decrease in prepaid expenses and other (10,955) 25,134
current assets
Increase in accounts payable and accrued expenses 386,834 724,579
Decrease in deferred revenue (120,593) (95,685)
---------- ----------
TOTAL ADJUSTMENTS 628,501 880,436
---------- ----------
NET CASH FROM OPERATING ACTIVITIES (413,229) (1,397,658)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (52,439) (46,084)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock
Proceeds from issuance of stock warrants 1,000,075
Proceeds from contributed capital 223,000
Proceeds from notes payable Stockholder 634,000
Increase in private placement costs (24,173)
Net proceeds from issuance of series B preferred stock 301,331
Proceeds from exercise of options 5,000
Proceeds from exercise of warrants 75,000
Repayment of notes payable (62,236)
Repayment of notes payable, stockholders (21,833)
Principal repayments of capital lease obligations (33,674) (125,413)
---------- ----------
6
NET CASH FLOWS FROM FINANCING ACTIVITIES 1,105,332 865,745
---------- ----------
NET INCREASE (DECREASE) IN CASH 639,664 (577,997)
CASH - Beginning 55,592 619,546
---------- ----------
CASH - Ending 695,256 41,549
========== ==========
NON CASH ACTIVITIES
Conversion of Series A Cumulative Convertible Preferred Stock into Common Stock 24,440
Issuance of Series A Cumulative Convertible Preferred Stock 10,000
Issuance of warrants 445,145
Issuance of options 55,650
Conversion of Accounts Payable to note payable Stockholder 570,421
Exercise of warrants on a cashless basis 113,714
Exercise of options on a cashless basis 114,275
Purchase of equipment through capital leases 349,465
Issuance of stock - stock based compensation 131,350
Issuance of options 90,625
Issuance of warrants 83,531
7
MONSTERDAATA.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION
The Company
- -----------
MonsterDaata.com, Inc. was incorporated in Delaware on July 22, 1985 under the
corporate name "Trans West, Inc." For eight years prior to September 27, 1995,
we were an inactive corporation. On September 27, 1995, we revived our corporate
charter in Delaware and were reactivated, although we had no material assets or
capital, and no operations or income. On February 13, 1996, we changed our
corporate name to "D-Vine, Ltd."
On April 2, 1999, we acquired 99.2% of the outstanding capital stock of Taconic
Data Corp. ("Taconic"), a provider of database development and management
services to the real estate industry. Taconic was incorporated in New York in
1992. In connection with this acquisition, Taconic became our majority-owned
subsidiary and Taconic directors and officers replaced all of our directors and
officers. The stockholders of Taconic were issued 6,000,000 of our shares of
common stock in exchange for their shares, or approximately 85% of our total
outstanding common shares after giving effect to the acquisition (and the
exercise of certain warrants referenced in Note 3 below). Accordingly, a change
in control of our company occurred in connection with the acquisition, and the
acquisition was deemed a "reverse acquisition" for accounting purposes.
Our accompanying unaudited financial statements represent a consolidation of our
business with that of Taconic, and the consolidation has been prepared assuming
that we owned 100% of Taconic after the acquisition. Subsequent to the
acquisition, we changed our fiscal year end from September 30 to December 31 to
correspond with the fiscal year end of Taconic. On April 5, 1999, we changed our
corporate name to "MonsterDaata.com, Inc."
Minority Interest
- -----------------
The minority interest referred to above is held by an entity which owns 0.8% of
Taconic. This entity's interest in the net assets of Taconic has been reduced to
zero on the Consolidated Balance Sheet portion of our accompanying unaudited
financial statements. Therefore, in accordance with Generally Accepted
Accounting Principles, the entity's minority interest in the losses for the six
month period ended June 30, 2000 and 1999 has not been recorded on our
accompanying unaudited financial statements. This minority interest in losses
will remain unrecognized in our future financial statements unless and until
they are fully offset, in the aggregate, by the entity's minority interest in
future profits of Taconic. We are pursuing legal action to recover this minority
interest.
Basis of Presentation
- ---------------------
Our accompanying unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
of the interim periods presented. All such adjustments are of a normal recurring
nature. The financial statements should be read in conjunction with the notes to
the financial statements and in conjunction with our audited financial
statements contained in our Form 10-KSB (filed on March 30, 2000).
8
NOTE 2 - STOCKHOLDERS' EQUITY
Series A Cumulative Convertible Preferred Stock
- -----------------------------------------------
On January 6, 2000, we issued 20.53 shares of our Series A Cumulative
Convertible Preferred Stock (the "Series A Preferred") to an investor, resulting
in cash proceeds of $20,000, which was received by us on December 9, 1999. In
connection therewith, we issued to the investor warrants for the purchase of
3,080 shares of our common stock, par value $.01 per share ("Common Stock"), at
an exercise price of $3.75 per share.
In February 2000, we issued 10 additional shares of our Series A Preferred to an
investor as a correction to the 123.33 shares issued to the investor on November
1, 1999.
On March 9, 2000 and March 23, 2000, we converted 11.11 shares and 13.33 shares,
respectively, of our Series A Preferred into 5,000 shares and 6,000 shares,
respectively, of our Common Stock.
On March 9, 2000, March 10, 2000, and March 23, 2000, warrants to purchase 3,333
shares, 5,167 shares and 68,334 shares, respectively, of Common Stock with an
adjusted exercise price of $2.00 per share were exercised, on a cashless basis,
when the market value was $6.00, $5.875, and $4.50 per share, respectively.
1,666, 3,848 and 63,087 shares, respectively, of the Common Stock were issued in
connection with the exercise of such warrants.
Series B Cumulative Convertible Preferred Stock
- -----------------------------------------------
On April 6, 2000, we issued 425 shares of our Series B Cumulative Convertible
Preferred Stock (the "Series B Preferred") to investors, resulting in aggregate
cash proceeds of $425,000 net of direct expense of $123,669. In connection with
this issuance, we authorized the designation of 2,000 shares of Series B
Preferred. Holders of the Series B Preferred are entitled to a quarterly
cumulative dividend equal to 1.5% of the then applicable liquidation preference
as defined.
Each share of Series B Preferred is convertible into 267 shares of Common Stock,
at the option of the holder, subject to certain adjustments and conditions. The
Series B Preferred will automatically convert into shares of Common Stock upon
the occurrence of certain defined events.
We also issued warrants to purchase 56,670 shares of our Common Stock at an
exercise price of $4.25 per share, subject to adjustment, to the Series B
Preferred holders for the April 6, 2000 issuance. These warrants, which expire
in April 2004, have an estimated fair value of $205,145 using the Black-Scholes
option-pricing model.
Exercise of Options
- -------------------
On March 9, 2000, options to purchase 24,000 and 20,000 shares of Common Stock
with exercise prices of $4.00 and $3.02, respectively, were exercised, on a
cashless basis, when the market value was $6.00 per share. 10,286 and 10,175
shares, respectively, of Common Stock were issued in connection with the
exercise of such options.
On March 9, 2000 options to purchase 5,000 shares of Common Stock were
exercised, resulting in cash proceeds of $5,000.
9
Bridge Financing and Financial Advisory Agreement
- -------------------------------------------------
On May 2, 2000 we signed an engagement letter (the "Engagement Letter") with
Commonwealth Associates, L.P., a limited partnership organized under the laws of
the State of New York ("Commonwealth"), pursuant to which Commonwealth was
engaged by us as an advisor.
ComVest Capital Management LLC, a Delaware limited liability company and an
affiliate of Commonwealth ("ComVest"), agreed to provide a credit facility to us
in an aggregate principal amount of up to $1,500,000. ComVest has loaned us a
total of $634,000 through June 30, 2000, commencing with an initial loan on June
7, 2000, pursuant to a series of 8% Senior Secured Promissory Notes (the
"Notes"), a copy of the form of which is incorporated in the Form 8K we filed on
July 25, 2000. Subsequent to June 30, 2000, and prior to August 14, 2000,
ComVest was issued additional Notes in the amount of $594,000. The aggregate
principal amount of Notes issued through August 14, 2000 is $1,228,000.
ComVest Warrants
----------------
In connection with this loan, we issued to ComVest a warrant to purchase
7,500,000 shares of our Common Stock for an exercise price of $.01 per share
(the "ComVest Warrant"). The ComVest Warrant, which was issued on June 7, 2000,
was valued by an independent third party at $240,000. This amount was recorded
as a deferred debt discount and is being amortized over the life of the Notes.
We agreed that, as long as this loan remained outstanding, the Board of
Directors of the Company would consist of seven directors, of which five would
be nominated by the Company with the consent of ComVest, which consent would not
be unreasonably withheld.
Exercise of ComVest Warrant
---------------------------
On June 9, 2000 ComVest and Commonwealth exercised the ComVest Warrant,
purchasing 6,000,000 shares of our Common Stock in the case of ComVest and
1,500,000 shares of Common Stock in the case of Commonwealth. The purchase price
for these shares was $60,000 in the case of ComVest and $15,000 in the case of
Commonwealth. By virtue of this transaction, as of August 10, 2000, ComVest and
Commonwealth beneficially own approximately 39.3% and 9.8%, respectively, of our
Common Stock or 49.1% of the outstanding Common Stock together.
General Security Agreement
--------------------------
In connection with this loan, we executed a General Security Agreement in favor
of ComVest and our principal subsidiary, Taconic Data Corp., a New York
corporation ("Taconic") executed a guarantee of the Notes to be issued to
ComVest and a General Security Agreement in favor of ComVest (all of which are
incorporated in the Form 8K we filed on July 25, 2000).
Potential Note Conversion
-------------------------
We have also agreed that, if we complete a private placement of our securities
during the period that the Notes are outstanding, the holders of Notes will have
the option to convert all or a portion of their Notes into the securities sold
in any such transaction on the identical terms and conditions as the other
investors in any such transaction. Should ComVest and/or Commonwealth exercise
this option, their combined equity interest in us could increase, depending on
the amount of Notes converted and the terms and amount of any
10
such transaction.
NOTE 3 - LITIGATION
We are currently involved in litigation with our former law firm (which is also
a stockholder) concerning disputed legal fees in the sum of approximately
$650,000. This liability is recorded as due to stockholder in the amount of
$570,421 with the remainder recorded in accounts payable. We have sought a
declaratory judgment seeking to have certain promissory notes ruled invalid and
the former law firm has commenced a summary proceeding to foreclose on these
notes. This case is pending before the New York Supreme Court in Westchester
County. Settlement negotiations in this matter are ongoing.
NOTE 4 - GOING CONCERN UNCERTAINTY
As shown in the accompanying financial statements, we incurred a net loss of
$2,278,094 during the six months ended June 30, 2000, and, as of that date, our
current liabilities exceeded our current assets by $2,944,420 and our total
liabilities exceeded our total assets by $2,260,551. These factors, as well as
the uncertain conditions that we face relative to capital raising activities,
create an uncertainty as to our ability to continue as a going concern.
We are negotiating with Commonwealth concerning additional bridge financing.
The financial statements do not include any adjustments that might be necessary
should we be unable to continue as a going concern.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------------------------------------------------
OVERVIEW OF OPERATIONS
MonsterDaata.com is an Internet information utility company. We provide
proprietary web-enabling applications, distribution technology, programming
tools and digital content to our network affiliates. Our proprietary
applications and technology consist of our ability to integrate data from many
sources and formats, distribute and reformat this data in a highly customizable
manner and track the usage of such data, helping our partners to better target,
capture and retain customers.
Our current digital content includes text, visual, geographical and interactive
programming tools, including more than 3.5 billion records of information for
over 61,000 communities composed of more than 220,000 distinct geographically
bounded areas in the United States. Our data includes neighborhood, crime,
demographic, lifestyle, risk hazard and school information. We distribute our
data through syndication and co-branding to a broad network of affiliates
including Internet portals, consumer and professional transaction and
destination websites, and classified advertising networks. As of June 30, 2000,
we employed 34 full-time officers, data managers, web site developers,
salespeople and support personnel.
We believe that our proprietary compilation of applications, data, programming
and customization tools and distribution technology boosts the effectiveness of
our affiliates' websites by increasing the frequency, duration and revenue of
each site visit. These businesses seek content and applications that will make
their websites more useful and attractive without the high fixed expense of
developing and maintaining their own information infrastructure. Our
customizable, proprietary, high-speed content delivery system enables our
distribution partners to offer interactive and localized content, facilitating
e-commerce, lead generation and
11
advertising sales. We generate or plan to generate revenue through our partners'
websites from remote data distribution (pay-per-query), licensing of content,
subscriptions, advertising, lead generation, usage reports, customized
information delivery and planned product and service transaction fees. We are
developing co-branding relationships with high-traffic sites, such as real
estate portals that wish to display our content.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AS COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 1999
Our total revenues for the six month period ended June 30, 2000, were $947,086
compared to $1,324,508 for the six month period ended June 30, 1999. This 28%
decrease in revenue is largely attributable to the transition in our revenue
sources from our historical Multiple Listing Service (MLS) revenue, derived from
delivering data on a fixed-price basis to a limited number of members of MLSs,
to our current revenues derived from professional and consumer Internet-based
sources. We are developing our Internet-based revenue by attempting to achieve
wide distribution of our products and services through co-brands, partnerships,
professional subscriptions and portal distribution. We receive revenues from
licensing fees, and sales of reports, subscriptions, and services. We anticipate
that we will more than offset our MLS revenue loss through such Internet-related
sales over time.
Our cost of sales for the six month period ended June 30, 2000 was $230,079,
compared to $623,772 for the six month period ended June 30, 1999. This 63%
decrease is primarily the result of reassignment of many of our data collection
employees to Web site development functions as part of the transition of our
business to the Internet. We anticipate that our gross margins in future periods
could continue to improve, but at a more modest rate. This is based on our
belief that our total revenues will increase faster than our related costs of
sales. This should occur as we move the primary means of distributing our data
products to the Internet and we expand our revenue base to include new Internet
related sources of revenue. We believe that these revenues can be derived with
minimal incremental expense beyond the fixed Internet costs that we have already
invested or have budgeted for future periods. Our cost of goods sold includes
referral and revenue sharing payments that we are required to make to third
party Web site operators for certain types of Internet related revenues under
our agreements with such operators. To date, these payments have not been
significant, but we expect that as our Internet related revenues grow these
payments will also grow.
Product development costs increased to $1,505,109, in the six month period ended
June 30, 2000, from $0 for the six month period ended on June 30, 1999. This
increase is primarily due to a reclassification of web site development costs
from cost of goods sold to a line item expense that specifically reflects
amounts for technology and related expenses for the development of our web site.
Selling, general and administrative expenses decreased from $1,530,857 for the
six month period ended on June 30, 1999 to $1,398,723 for the six month period
ended June 30, 2000. This 9% decrease is attributed to reduced professional fees
relating to the reverse acquisition of D-Vine, Ltd. in the prior period.
Our operating loss increased from $830,121 for the six month period ended June
30, 1999 to $2,186,825 for the six month period ended June 30, 2000. This
decrease in profitability is directly related to the increase in product
developmental costs previously discussed.
We have recorded deferred debt discount in the amount of $240,000, $40,000 of
which has been expensed in the current period and the balance of which will be
amortized this fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, our cash balance was $41,549 and we had a working capital
deficit (excluding deferred revenue) of $2,591,963. For the six months ended
June 30, 2000, our net cash flow provided from operating activities was
$(1,397,658).
12
Total cash flows from financing activities decreased from $1,105,332 for the six
month period ended on June 30, 1999 to $865,745 for the six month period ended
June 30, 2000. On June 2, 2000, we entered into a financial advisory
relationship with Commonwealth Associates, L.P., a New York limited partnership
("Commonwealth") and received a loan commitment of $1,500,000 of which we drew
down $634,000 through June 30, 2000. Subsequent to June 30, 2000, and prior to
August 14, 2000, we drew down an additional $594,000. The aggregate total of
these draws through August 14, 2000 is $1,228,000. In connection with this loan
commitment, we issued warrants to purchase 7.5 million shares of our Common
Stock at a price of $.01 per share which were subsequently exercised on June 9,
2000 for $75,000.
We have approximately $2.5 million in outstanding accounts payable as of August
1, 2000, to various suppliers and creditors and have experienced difficulties in
meeting these obligations in a timely manner. Without a significant reduction of
these amounts outstanding, which we are in negotiations to settle, it is likely
that we will have to file for bankruptcy.
Our working capital requirements depend upon numerous factors, including,
without limitation, levels of resources that we devote to the further
development of our Web site and marketing capabilities, technological advances,
competitive advantages and establishing collaborative arrangements with other
organizations. We will be required to raise additional capital in order to meet
our business objectives in 2000. We may not be successful in raising this
capital or in achieving these objectives. We believe that our current cash
resources will not be sufficient to fund our current operations much beyond the
third calendar quarter of 2000 if our development spending is to continue at its
current pace and our trade payables are not reduced by negotiation.
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
From time to time, we are a party to litigation arising in the ordinary course
of our business. We are currently involved in litigation with our former law
firm over disputed legal fees in the sum of approximately $650,000. In this
regard, we commenced an action in New York Supreme Court seeking a declaratory
judgment to have a certain promissory note ruled invalid. Subsequently, they
commenced a summary proceeding in the same court to foreclose upon the
promissory note. By order dated August 11, 2000, the Court denied both their
motion for summary judgment on the promissory note and our motion for dismissal
or stay of the suit on the note. Settlement negotiations in this matter are
ongoing.
We are also a party to a litigation in which a former website developer is suing
us for collection of $163,000 in fees allegedly owed and a litigation in which a
former customer is suing us for a refund of a $175,000 advance for services to
be rendered. This advance is currently carried as deferred revenue. These cases
are pending.
A former consultant has sued us to collect $390,000 allegedly owed to it and we
are pursuing both litigation and arbitration against this entity seeking to
cancel a note issued for work allegedly performed and to recover amounts paid,
and equity in Taconic Data Corp. issued, to this entity, in addition to certain
other damages. This matter is pending.
Other than the forgoing, we are not currently a party to any litigation that, if
determined adversely to us, we believe would have a material adverse effect on
us.
13
ITEM 2. CHANGES IN SECURITIES
---------------------
We have sold additional shares to Commonwealth and ComVest Capital Management
LLC, a Delaware limited liability company and an affiliate of Commonwealth
("ComVest"), at a price that is materially lower than the purchase price paid by
the purchasers of our Series A Preferred and Series B Preferred. We are
presently considering the possibility of modifying the terms of the Series A
Preferred and the Series B Preferred in a way that could include, among other
things, an increase in the conversion rate. To date, no agreement has been
reached on this issue.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matter was submitted to a vote of security holders through the solicitation
of proxies or otherwise during the first quarter of the fiscal year covered by
this report.
ITEM 5. OTHER INFORMATION - RISK FACTORS
--------------------------------
This Report on Form 10-QSB contains, in addition to historical information,
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) that involve risks and uncertainties. Such
forward-looking statements may be identified by, among other things, the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or comparable terminology. Our actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements. We do not undertake any
obligation to publicly release any revisions to these forward-looking statements
or to reflect the occurrence of unanticipated events. Factors that may cause our
actual results to differ from our expectations include those discussed below.
CERTAIN RISK FACTORS
The achievement of our business objectives is subject to a number of market and
other factors beyond our control, and our future prospects are speculative. If
we make any forward-looking statements or assumptions concerning our future
business activities, revenues, profits or financial condition, or if we make any
forward-looking statements concerning our industry, the economy, technological
changes or our competitors, potential investors should recognize that our
predictions and assumptions are subject to a great deal of uncertainty. Actual
results could differ materially from our predictions and assumptions,
particularly given the highly speculative nature of our business and that of
other Internet-related businesses in our industry. If our predictions prove to
be too optimistic, the value of our business could be adversely impacted and our
shareholders will probably lose money.
COMPANY RISK FACTORS
Our independent public accountants have qualified their opinion on our financial
statements.
- --------------------------------------------------------------------------------
We have generated limited revenue, have incurred substantial losses in recent
years, and currently are experiencing a substantial cash flow deficiency from
operations. We incurred net losses of approximately
14
$1.6 million during 1998,
and approximately $2.8 million during 1999. As of June 30, 2000, we had a
working capital deficit of approximately $2.6 million (excluding deferred
revenues), a stockholders' deficiency of approximately $2.3 million and an
accumulated deficit of approximately $8.0 million. The report by our independent
public accountants on our financial statements for the year ended December 31,
1999 states that our losses, cash flow deficits, and other factors raise
substantial doubt about our ability to continue as a going concern.
We have experienced significant net losses in the past, and will need to raise
additional funds in the future.
- ------------------------------------------------------------------------------
We have incurred significant net losses since our transition to an
Internet-focused business in 1998. We have incurred and continue to incur
substantial costs to expand distribution, develop new services and products, and
create, introduce and enhance our web site. We would have run out of cash
earlier this year without the bridge financing or another cash infusion. We
expect operating losses and negative cash flows to continue for the foreseeable
future. Our limited operating history as an Internet-focused business makes it
difficult for investors to evaluate our potential for future success. Our
ability to generate significant Internet-related revenue is uncertain, and we
may never achieve profitability. We will likely require significant additional
financing in order to satisfy our longer term cash requirements.
The failure to raise additional funds may prevent us from implementing our
business strategy. If revenues grow more slowly than anticipated, or if
operating expenses exceed expectations or cannot be adjusted in response to
slower revenue growth, our capital requirements could increase. Additional funds
may also be needed to take advantage of acquisition and expansion opportunities.
We cannot precisely predict the timing or amount of our capital requirements at
this time. Such requirements will depend on numerous factors, including the
success of our new product offerings, the growth of our Internet-related
revenues, and competing technological and market developments. We will be
required to raise additional funds through public or private debt or equity
financing. Such additional funding may not be available on terms acceptable to
us, or at all. Any additional equity financing may be on terms that dilute the
holdings of our existing shareholders. In addition, new shares that are issued
may have rights, preferences or privileges senior to those of existing
shareholders. Debt financing, if available, may involve restrictive covenants
that limit our operating flexibility.
Our Internet strategy is relatively new and we should be considered an
early-stage business.
- ----------------------------------------------------------------------
Potential investors should evaluate us in light of the expenses, delays,
uncertainties, and complications typically encountered by early-stage
businesses, many of which will be beyond our control. Our historical financial
data are of limited value in predicting our Internet-related results. These
risks include the following:
o lack of sufficient capital,
o unanticipated problems, delays, and expenses relating to product development
and implementation,
o lack of intellectual property,
o licensing and marketing difficulties,
o competition,
o technological changes, and
o uncertain market acceptance of our products and services.
Intense competition may render our services and products uncompetitive or
obsolete.
- -------------------------------------------------------------------------
The market for Internet data services is relatively new, intensely competitive
and rapidly evolving. Our
15
web services compete against a variety of firms that provide information
products through one or more media, including print, radio, television and the
Internet. Within our currently targeted niche of real estate information
products and the Internet, we compete with Homefair.com, recently acquired by
Homestore.com, SmartHomeBuy.com, eNeighborhoods.com, NearMyHome.com,
TheSchoolReport.com, Public Priority Systems (School Match), 2001Beyond.com, CAP
Index (Crime Check), Claritas, Inc., National Decision Systems,
AMSHomefinder.com, HomePriceCheck.com, CompleteHome.com, HomeGain.com,
RealEstate.com, Homes.com, Homestore.com, HomeSeekers.com, and numerous
specialized sites with limited coverage and local sites. We also compete with
Baca Landata, Experian, Acxiom, DataQuick, Vista Information Solutions and
TransAmerica Intellitech. While we believe that our information products are
more complete and comprehensive than those of our competitors, many of these
competitors offer one or more Internet sites with information products similar
to individual items we provide.
We expect competition to persist and intensify. Competitors using other media to
deliver information products, including some who supply data to us, could adapt
their businesses to include the Internet as a medium for delivering their
products. Competitors could develop or offer services that provide significant
performance, ease of use, price, creative or other advantages over those we
offer.
Although we believe that our products and services can compete favorably under
current market conditions, we may not be able to maintain our competitive
position. Many of our current and potential competitors have longer operating
histories, greater name recognition, larger installed bases, and significantly
greater financial, technical, marketing, and sales resources than we do. As a
result, competitors may be able to react more quickly to emerging technologies
and changes in customer requirements or to devote greater resources to the
promotion and sale of their products. In addition, certain of our current
competitors in particular segments of the information marketplace may broaden or
enhance their offerings to provide a more comprehensive data product line which
would compete more effectively with our products and services.
The accuracy, availability and integrity of our data are critical to our
business.
- ------------------------------------------------------------------------
A substantial portion of the raw data from which we develop our databases is
obtained from third parties, including public records offices and other
governmental sources. We use a variety of proprietary techniques to enhance the
content, applications and utility of the data. Our ability to attract and retain
customers and to generate revenues is highly dependent on customer confidence in
the comprehensiveness, accuracy and timeliness of our database. Establishing and
maintaining such comprehensiveness, accuracy and timeliness requires substantial
effort and resources. Although we disclaim financial responsibility for
inaccuracies in the data on our website, such disclaimers may not be effective
to shield us from all possible liability. Our business is based on establishing
our reputation as a trustworthy and dependable provider of information and
applications. Allegations of unreliable or outdated data, even if unfounded,
could have a material adverse effect on our business. We also license and use
data from third-party providers. If our license agreements are not renewed, we
may not be able to obtain alternative sources of comparable data at reasonable
cost, if at all.
Strategic and licensing agreements with other companies are important to our
business strategy and are subject to risks of termination and non-renewal.
- ----------------------------------------------------------------------------
We have entered into strategic agreements such as co-branding agreements with
other Internet companies in order to increase our revenues, provide wider
exposure to our name and products and deliver a sufficient number of customer
visits or page views to make the relationships profitable. We continue to seek
16
additional such agreements. Any future strategic alliances or related efforts
will be subject to the risk that we expend considerable time and money on an
agreement or joint venture that does not provide commensurate benefits.
Many of our licensing and other agreements are short-term and expose us to
termination and non-renewal risks. We are dependent on our relationships with
many of these contracting parties. We are currently a party to a limited number
of revenue-producing licensing agreements or comparable agreements with third
parties. Three of these agreements expire on or before March 2001, two expire on
or before March 2002, and two expire on or before June 2003. About half of these
agreements are currently with MLSs, rather than website operators or other
Internet-related businesses. Agreements with MLSs currently account for a
significant majority of our revenues. In general, the expiring contracts will
automatically renew for successive terms if we do not give or receive a notice
of non-renewal within a specified period ranging from 30 days to six months
before the scheduled termination date. While we believe that such relatively
short-term agreements are typical in our industry, our ability to maintain and
grow our business depends significantly upon our ability to enter into and
maintain licensing and comparable relationships. We may not be able to renew or
extend these agreements when they expire on terms as favorable to us as those
that we currently enjoy, if we can renew or extend them at all. In fact, we
expect our recurring revenues from existing agreements with MLSs to decline as
these agreements expire and we make our data available to more users, including
MLSs and their clients, at substantially lower cost over the Internet.
Our intellectual property rights may be difficult to protect and we may find
that we infringe on the intellectual property rights of others.
- ----------------------------------------------------------------------------
Existing intellectual property laws may not provide adequate protection for our
proprietary database offerings or our Internet domain names. Our success and
ability to compete partly depend on the protection of our proprietary database
offerings on the Internet and on the goodwill associated with our trademarks,
trade names, and Internet domain names. We rely on copyright laws to protect the
original content that we develop for the Internet. We rely on contract
restrictions and copyright laws to protect the proprietary technologies that we
have developed to manage and improve our web site and database offerings. These
laws and contract restrictions may not sufficiently protect us. Employees who
are subject to noncompetition and confidentiality agreements may nevertheless
utilize or disclose our proprietary information or trade secrets in violation of
such agreements following their employment. Others may develop technologies
similar or superior to ours or obtain or use our technologies without our
authorization. Copyright protection is available for the originality and
creativity in the selection and arrangement of the data included in our
databases. We have obtained copyright registrations from the United States
Copyright Office for some of our databases. Copyright protection does not,
however, extend to the facts included in any of the databases.
Others may bring claims of copyright or trademark infringement against us, or
claim that our use of certain technologies or data violates the intellectual
property rights of others. Any claims of infringement, even if without merit,
could be time consuming to defend, result in costly litigation, divert
management attention, require us to enter into costly royalty or licensing
arrangements or prevent us from using important technologies or data. Any of
these could have a material adverse effect on our business. If we cease to use
certain intellectual property as a result of third party claims, we may not be
able to develop or acquire alternative technologies or obtain such licenses on
commercially acceptable terms.
We have not yet obtained registrations for most of our trademarks and
servicemarks, including our corporate name. In view of the number of other users
of the word "monster" in their names or trademarks, including companies doing
business on the Internet, our attempt to register the mark "monsterdaata.com"
may not be successful or our use of this mark may be challenged by another user.
Although we believe that we have a reasonable position in favor of our right to
use and register the mark, defending such rights may be costly and an adverse
determination or settlement could require that we change our name.
17
We depend upon licensed technology from third parties.
- -----------------------------------------------------
We do not have any patents or copyrights for the technology we utilize. We
license some of the technology integral to our business from third parties. We
also may be required to license additional technology for use in managing our
website and providing related services to users and advertising customers. Our
ability to generate revenues from Internet commerce may also depend on data
encryption and authentication technologies that we may be required to license
from others. These third party technology licenses may not be available to us on
acceptable commercial terms, or at all. If appropriate licenses are not
available on commercially reasonable terms, we may be required to develop or
find alternatives or be forced to alter our products or services. The inability
to enter into and maintain any of these technology licenses could have a
material adverse effect on our business.
Our commercial success will depend in part on our not breaching technology
licenses that cover technology we use in our business. We also expect to require
new licenses in the future as our business grows and technology evolves.
We have a limited number of key customers and vendors and depend upon their
contractual relationships.
- ---------------------------------------------------------------------------
Our business would be materially and adversely affected if we lost any of our
large Multiple Listing Service ("MLS") customers, or failed to connect them to
our web services before we more fully complete the transition of our business to
the Internet. Our top six MLS customers accounted for more than 80% of our total
revenues in 1999 and 66% of our total revenues during the six months ended June
30, 2000.
We have important contractual relationships with the Multiple Listing Services
of New Jersey, Greater New Jersey, Long Island (New York) and Middlesex (New
Jersey). If any of these relationships are terminated, expire, or are breached,
or if any of these companies ceases operations or stops offering the product or
service, our operations would likely be materially impacted. Further, any
changes to the offerings provided by these companies under these agreements may
require us to change or re-engineer our own services, and will likely cause a
material disruption of our business. In any of such cases, we may not be able to
timely modify our services or to replace any of the services on favorable terms
or at all.
We also depend on outsource vendors, including the services of a data entry and
data conversion facility in the Philippines, a CD-ROM software company, and
Internet site development and hosting companies. Should the services of those
facilities become unavailable or unreasonably priced, we may experience an
interruption in some of our business activities until we identify other suitable
outsource vendors.
We need to retain and recruit key managers and employees, and to manage our
growth effectively.
- ---------------------------------------------------------------------------
Our success depends heavily upon the skills of our senior management team and
current key employees and upon our ability to identify, hire, and retain
additional sales, marketing, technical and financial personnel. Should one or
more members of senior management leave before acceptable replacements are
found, that could have a material adverse effect on our business. We currently
have employment agreements with the following executives: Mitchell Deutsch,
Chairman of the Board, Chief Executive Officer, President and founder of the
Company; John Evans, Executive Vice President - Corporate Development; Mark
Nathan, Chief Technical Officer; Sarah Ferguson, Chief Sales Officer; Mark
Siden, Executive Vice President - Strategy; James Garfinkel, Vice President and
Corporate Secretary; and Jon Bednarsh, Vice President - Business Development.
These agreements generally provide provisions for non-competition or
confidentiality. We do not presently maintain key-person life insurance on any
of our key executives or employees.
We believe that further expansion of our operations will be required in order
for us to address potential market opportunities and produce meaningful profits.
Such expansion may place a significant strain on our management, operations and
financial resources. An increase in the number of our employees, our market
penetration and our product and service development activities would result in
increased responsibility for our management. Management will be required to
successfully maintain relationships with various data and advertising customers,
other Internet sites and services, Internet service providers and other third
parties and to maintain control over our strategic direction in a rapidly
changing environment. Our current personnel, systems, procedures and controls
may not be adequate to support our future operations. Our management may not be
able to identify, hire, train, motivate or manage required personnel or
successfully identify and exploit existing and potential market opportunities.
Our failure to effectively manage growth and address these growth-related issues
could have a material adverse effect on our business.
18
If we are unable to identify suitable acquisition targets or if we do not
successfully integrate acquired businesses into our own business, our results
could suffer.
- -----------------------------------------------------------------------------
We intend to explore the possible acquisition of complementary businesses in
order to expand our services, diversify our business and participate in the
consolidation trend among Internet information products providers. We are not
currently in negotiations with any acquisition candidates. We do not have any
present commitment or agreement with respect to any future acquisitions. We may
not be able to make any acquisitions in the future on favorable terms. We may
encounter substantial costs, delays or other problems in integrating any
acquisitions that we do make. Such costs could include severance payments to
employees of acquired companies, increased working capital requirements, systems
integration costs, restructuring charges and other expenses associated with a
change of control, as well as non-recurring acquisition costs including
accounting, legal and investment banking fees and transaction-related
obligations. Acquisitions could disrupt current operations, divert management
attention or dilute existing shareholder interests. Increased competition for
the limited number of suitable acquisition candidates may develop in interests
our targeted industries, in which case there may be fewer acquisition
opportunities available to us and higher acquisition costs for the opportunities
that are available. Neither our management nor management of any of the acquired
companies may have the necessary skills to manage the resulting business. We may
seek to recruit additional managers to supplement the management of any acquired
companies, but we may be unable to recruit additional managers with the
necessary skills.
Certain investors and management control us and can approve or block significant
transactions.
- --------------------------------------------------------------------------------
Our principal stockholders are the Commonwealth, ComVest and certain members of
management. Commonwealth and ComVest beneficially own about 49.1% of our
outstanding common stock, par value $.01 per share ("Common Stock"), Mitchell
Deutsch, together with his children, owns about 19.5% of our Common Stock, and
James Garfinkel, together with his child, owns about 7.7% of our Common Stock.
As a result, Commonwealth, ComVest, Mitchell Deutsch, James Garfinkel and their
families, if they choose to act together, will be able to elect a majority of
our board of directors and significantly influence our management and affairs
including all significant corporate transactions requiring shareholder approval.
Our principal stockholders could accept, or force us to accept, an offer for us
at a price below the price that we or our other stockholders would approve.
Should this happen, MonsterDaata.com, Inc., a Delaware corporation (the
"Company"), (or at least a controlling interest in the Company) could be sold on
terms that other investors may find unattractive. Similarly, the principal
stockholders could reject, or cause the Company to reject, an offer that the
other stockholders might find very attractive. These principal stockholders
could also sell their shares (and control of the Company) without including our
other shareholders in the transaction (or giving them the opportunity to sell
their shares on the same terms). In addition, this concentration of ownership
could have the effect of delaying or preventing a change in control of the
Company, even when such change of control is in the best interests of
shareholders, and might adversely affect the market price of the Common Stock.
19
INTERNET RISK FACTORS
If the Internet proves not to be a viable commercial marketplace, it could have
a material adverse effect on our business.
- -------------------------------------------------------------------------------
We expect a substantial portion of our future revenue to come from the continued
development of our products and services to be distributed over the Internet. We
began offering our services via the Internet in September 1998. During the year
ended December 31, 1999, approximately 86% of our revenues were derived from our
traditional non-Internet services and products, and only approximately 14% were
from products and services distributed via the Internet. During the six-month
period ended June 30, 2000, our Internet revenues increased to 40% of total
revenues, which partially resulted from the loss of one large MLS customer. We
intend to further increase our reliance on the Internet for delivery of our
services and products. As a result, future cash flows and future results of
operations will continue to rely increasingly upon customer use of information
services and transaction support products on the Internet.
Business use of the Internet is relatively new. The Internet may not prove to be
a viable commercial marketplace. Known issues in this regard include inadequate
development of Internet infrastructure to date, competing communications
technologies, delays in the development of new standards and protocols required
to handle increased Internet activity, and the possibility of significant
government regulation and/or taxation (locally, nationally and internationally).
Moreover, concerns over the security of Internet transmissions and the privacy
of users may inhibit the growth of the Internet, particularly as a means of
conducting commercial transactions. To the extent that our activities involve
the storage and transmission of confidential information, such as credit card
numbers, security breaches could expose us to a risk of loss or litigation and
possible liability. Contractual provisions attempting to limit our liability in
such areas may not be adequately implemented or enforceable or other parties may
not accept such contractual provisions as part of our agreements. Well
publicized security breaches involving the Internet generally could deter our
customers from conducting electronic transactions that transmit confidential
information. We could incur significant costs to protect against security
breaches or to alleviate problems caused by such breaches. Internet issues such
as reliability, cost, ease of deployment, administration and quality of service
may affect our ability to succeed.
We depend upon growth in our markets and acceptance of our products.
- -------------------------------------------------------------------
We offer proprietary web enabling software applications, electronic distribution
technology and digital content to our customers. The market for digital
information and associated applications is in an early stage of development. It
is difficult to predict the rate at which this market will grow, if at all.
Because most of the factual information we provide is available from other
sources, we rely upon our ability to customize the presentation and distribution
of data to market our services. Our products and services may not be accepted by
the marketplace. New or increased competition may result in market saturation,
more competitive pricing, or lower margins. Our business, operating results, and
financial condition would be materially and adversely affected if the market for
our products and services fails to grow, grows more slowly than anticipated, or
becomes more competitive or if our products and services are not preferred by
targeted customers even if a substantial market develops.
20
Adoption of new laws and government regulations relating to the Internet or
Internet domain names could harm our business.
- ---------------------------------------------------------------------------
New laws or regulations may be adopted relating to Internet issues such as user
privacy, freedom of expression, content, copyrights, distribution, quality and
pricing of products and services, taxation, advertising, intellectual property
rights, information security and the convergence of traditional communication
services with Internet communications. Furthermore, the growth and development
of the market for online commerce may prompt more stringent consumer protection
laws that may impose additional costs and administrative burdens on those
companies conducting business online. New regulations relating to user privacy,
including the collection, use, retention and transmission of personal
information provided by on-line users, could adversely affect our business. The
adoption of any additional laws or regulations may decrease the growth of the
Internet, which could, in turn, decrease the demand for our products and
services and increase our cost of doing business, or otherwise have an adverse
effect on our business.
The applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes and personal
privacy is uncertain and may take years to resolve. The Internet Tax Freedom Act
was signed into law in 1998, placing a three-year moratorium on new state and
local taxes on Internet commerce. This moratorium is expected to end on October
21, 2001. If this moratorium is not extended, the taxation of our business may
change significantly. If we sell to consumers residing in many states and
foreign countries, such jurisdictions may claim that we are required to qualify
to do business as a foreign corporation in each such state and foreign country.
Our failure to qualify as a foreign corporation in a jurisdiction where we are
required to do so could subject us to taxes and penalties for the failure to
qualify. Any such new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to our
business, or the application of existing laws and regulations to the Internet,
could have a material adverse effect on our business.
Following a U.S. Court of Appeals ruling vacating an order of the Federal
Communications Commission (the "FCC") characterizing dial-up Internet traffic
bound for Internet service providers as jurisdictionally mixed but largely
interstate in nature, in June 2000 the FCC invited public comment on the
jurisdictional nature of Internet traffic. The debate about the jurisdictional
nature of Internet traffic will impact, among other things, whether the large
incumbent telephone companies will have to compensate competing telephone
companies for delivering traffic to Internet service providers. Certain local
telephone carriers claim that the increasing popularity of the Internet has
burdened the existing telecommunications infrastructure and that many areas with
high Internet use are experiencing interruptions in telephone service. These
carriers have petitioned the FCC to impose access fees on Internet service
providers, but not consumers. If access fees are imposed on Internet service
providers, the cost of communicating on the Internet could increase, which could
decrease demand for our developing Internet services.
We currently hold various web domain names, including www.monsterdaata.com,
relating to our brand and sites. The acquisition and maintenance of domain names
generally is regulated by governmental agencies and their designees. We have
registered our important domain names with Network Solutions, Inc. However, the
regulation of domain names in the United States and in foreign countries is
subject to change. Governing bodies may establish additional top-level domains,
appoint additional domain name registrars or modify the requirements for holding
domain names. Different jurisdictions may register domain names differently in
the future. As a result, we may be unable to acquire or maintain relevant domain
names in all countries in which we may wish to conduct our business.
Furthermore, depending on the country, we may be unable to prevent third parties
21
from acquiring domain names that are similar to, or infringe upon or otherwise
decrease the value of our trademarks and other proprietary rights. Any such
inability could have a material adverse effect on our business.
If we do not successfully develop new and enhanced Internet services and
products, our revenues could be adversely impacted.
- ------------------------------------------------------------------------
Business on the Internet is characterized by rapid technological change,
frequent changes in user requirements and preferences, frequent new product and
service introductions embodying new processes and technologies and evolving
industry standards and practices that could render our information delivery
practices obsolete. Our success will depend partly on our ability to improve our
existing services, develop new product offerings, including imaging and virtual
tours, use web technology to enhance our existing product offerings, extend our
market reach, and respond to technological advances, emerging industry standards
and competitive offerings. As a result, we will be required to expend
substantial funds for and commit significant resources to the conduct of
continuing product development. We may not be successful in all these endeavors.
Service interruptions could damage our business.
- ------------------------------------------------
Evolving Internet technology and standards increase the risk that system
interruptions will occur. Our Internet operations are also vulnerable to
interruption by fire, power loss, telecommunications failure and other events
beyond our control. System interruptions that result in the unavailability of
our website, or slower response times for users, could reduce the number of
advertisements delivered, revenues earned from advertisers, as well as the
eReport and eLead fees we collect from consumers and businesses using our
database information products over the Internet or cause customers to seek
alternate sources of data. We have experienced periodic system interruptions in
the past and such interruptions could continue to occur from time to time in the
future. Additionally, any substantial increase in traffic on our website could
require us to expand and adapt our network infrastructure. We may not be able to
expand our network infrastructure on a timely basis to meet any increased
demands.
22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MONSTERDAATA.COM, INC.
(Registrant)
Date: August 21, 2000 /s/ Mitchell Deutsch
--------------------
Mitchell Deutsch
President and Chief Executive
Officer
Date: August 21, 2000 /s/ James Garfinkel
-------------------
James Garfinkel
Treasurer, Secretary and Vice
President
(Principal Financial and Accounting
Officer)
23