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, 2001
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 33-1599
MONSTERDAATA, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 22-2732163
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
32 EAST 31ST STREET, 9TH FLOOR
NEW YORK, NY 10016
(Address of principal executive offices)
Registrant's telephone number: (212) 447-2000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. |X| Yes |_| No
As of August 9, 2001, 3,861,037 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, INC.
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED BALANCE SHEET -- As of June 30,
2001 (Unaudited) .........................................Page 1
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited) -- For the Six Months Ended
June 30, 2001 and June 30, 2000 ..........................Page 2
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) -- For the Six Months Ended
June 30, 2001 and June 30, 2000 ..........................Page 3
CONDENSED NOTES TO FINANCIAL STATEMENTS ....................Page 5
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition ..............Page 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ........................................Page 15
Item 2. Changes in Securities and Use of Proceeds ................Page 15
Item 3. Defaults Upon Senior Securities ..........................Page 15
Item 4. Submission of Matters to a Vote of Security Holders ......Page 15
Item 5. Other Information ........................................Page 16
Item 6. Exhibits and Reports on Form 8-K .........................Page 16
Signatures ........................................................Page 16
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MONSTERDAATA, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
ASSETS JUNE 30, 2001
CURRENT ASSETS
Cash and cash equivalents $1,181,992
Accounts receivable 244,776
Prepaid expenses and other current assets 256,837
------------------
TOTAL CURRENT ASSETS 1,683,605
PROPERTY AND EQUIPMENT, NET 846,587
OTHER ASSETS
Deposits 326,847
------------------
TOTAL ASSETS $2,857,039
==================
CURRENT LIABILITIES
Accounts payable and accrued expenses 196,600
Deferred revenue 470,867
Current maturities of capital lease obligation 366,232
Dividends payable 440,888
------------------
TOTAL CURRENT LIABILITIES 1,474,587
OTHER LIABILITIES
Capital lease obligations, less current maturities 687,539
------------------
TOTAL LIABILITIES 2,162,126
------------------
STOCKHOLDERS' EQUITY
Series A preferred stock - $1,000 stated value; 10,000,000
shares authorized; 418.05 issued and outstanding
(liquidating preference $1,000 per share) 418,050
Series B preferred stock - $1,000 stated value; 10,000,000
shares authorized; 25 issued and outstanding
(liquidating preference $1,000 per share) 25,000
Series C preferred stock - $10 stated value; 10,000,000
shares authorized; 1,072,800 issued and outstanding
(liquidating preference $20 per share) 10,728,000
Common stock - $0.01 par value; 100,000,000 shares
authorized; 3,270,778 outstanding 32,708
Additional paid in capital 5,042,537
Deferred consulting expense (190,951)
Notes receivable stockholder (111,354)
Accumulated deficit (15,249,077)
------------------
TOTAL STOCKHOLDERS' EQUITY 694,913
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,857,039
==================
See accompanying condensed notes to financial statements
1
MONSTERDAATA, INC
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE FOR THE
FOR THE SIX FOR THE SIX THREE THREE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 2001 JUNE 30, 2000 JUNE 30, 2001 JUNE 30, 2000
SALES $704,880 $947,086 $371,684 $554,700
COST OF SALES 204,074 230,079 100,110 110,552
-----------------------------------------------------------
GROSS PROFIT 500,806 717,007 271,574 444,148
OPERATING EXPENSES
Website and database
content development and 1,315,927 1,505,109 576,221 1,058,464
maintenance
Selling, general and 1,542,199 1,398,723 733,972 338,060
administrative expenses
-----------------------------------------------------------
TOTAL OPERATING EXPENSES 2,858,126 2,903,832 1,310,193 1,396,524
-----------------------------------------------------------
OPERATING LOSS (2,357,320) (2,186,825) (1,038,619) (952,376)
OTHER EXPENSE
Interest expense net (2,455) (91,269) (2,301) (70,367)
-----------------------------------------------------------
OTHER EXPENSE (2,455) (91,269) (2,301) (70,367)
LOSS BEFORE INCOME TAXES (2,359,775) (2,278,094) (1,040,920) (1,022,743)
INCOME TAXES 3,576
-----------------------------------------------------------
NET LOSS $(2,363,351) $(2,278,094) $(1,040,920) $(1,022,743)
-----------------------------------------------------------
Dividends on Preferred Stock (425,493) (175,540)
-----------------------------------------------------------
LOSS ATTRIBUTABLE TO COMMON $(2,788,844) $(2,278,094) $(1,216,460) $(1,022,743)
STOCKHOLDERS
===========================================================
Weighted Average Number of
Shares Outstanding 3,142,529 1,719,341 3,233,469 1,899,356
-----------------------------------------------------------
Net Loss Per Share, Basic $(0.89) $(1.32) $(0.38) $(0.54)
and Diluted ===========================================================
See accompanying condensed notes to financial statements
2
MONSTERDAATA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 2001 JUNE 30, 2000
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,363,351) $(2,278,094)
------------ ------------
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 363,471 26,634
Stock based compensation 105,950 36,500
Accrued interest (9,516) (2,900)
Amortization of deferred debt discount 40,000
Loss on disposal of fixed asset 11,825
Changes in operating assets and liabilities:
Deposits (1,159)
Accounts receivable (120,464) 114,349
Prepaid expenses and other current assets 235,277 25,134
Accounts payable and accrued expenses (367,237) 724,579
Deferred revenue 156,148 (95,685)
------------- --------------
TOTAL ADJUSTMENTS 362,470 880,436
------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (2,000,881) (1,397,658)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (3,543) (46,084)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of series C preferred 117,316
stock
Repayments of notes payable, stockholder (229,000)
Payments received on subscription receivable, 1,600,000
stockholder
Principal repayments of capital lease obligations (63,200) (125,413)
Payments of offering costs (13,477) (24,173)
Proceeds from notes payable stockholder 634,000
Net proceeds from issuance of series B preferred 301,331
stock
Proceeds from exercise of options 5,000
Proceeds from exercise of warrants 75,000
------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,411,639 865,745
------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (592,785) (577,997)
CASH AND CASH EQUIVALENTS- Beginning 1,774,777 619,546
------------- --------------
CASH AND CASH EQUIVALENTS- Ending $1,181,992 $41,549
============= ==============
CONTINUED
3
CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED
Cash paid during the periods for:
Interest $79,263 $32,883
============= ==============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of notes payable to series C cumulative $728,000
convertible preferred stock
Note payable stockholder paid from escrow 451,000
Conversion of series A cumulative convertible 843,710 $ 24,440
preferred stock into common stock
Conversion of series B cumulative convertible 400,000
preferred stock into common stock
Preferred stock dividend 425,493
Issuance of series A cumulative convertible 10,000
preferred stock
Issuance of warrants 445,145
Issuance of options 55,650
Conversion of accounts payable to note payable 570,421
stockholder
Purchase equipment through capital leases 349,465
See accompanying condensed notes to financial statements
4
MONSTERDAATA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2001
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION
The Company
MonsterDaata, Inc. (the "Company") was incorporated in Delaware in July
1985 under the corporate name "Trans West, Inc." For eight years prior to
September 1995, the Company was an inactive corporation. In September 1995,
the corporate charter was revived in Delaware, although the Company had no
material assets or capital and no operations or income. In February 1996,
the Company changed its corporate name to "D-Vine, Ltd."
In April 1999, the Company acquired 99.2% of the outstanding common 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 a
majority-owned subsidiary of the Company and Taconic directors and officers
replaced all of the Company's directors and officers. The stockholders of
Taconic were issued 6,000,000 shares of the Company's common stock, in
exchange for their shares, representing approximately 85% of the Company's
total outstanding common stock after giving effect to the acquisition (and
the exercise of certain warrants). Accordingly, a change in control of the
Company occurred in connection with the acquisition, and the acquisition
was deemed a "reverse acquisition" for accounting purposes. The reverse
acquisition was accounted for as a recapitalization and the stockholders'
deficiency was retroactively restated to January 1, 1998. The Company's
financial statements are those of Taconic prior to April 2, 1999.
The accompanying financial statements represent a consolidation of the
Company's business with Taconic, and the consolidation has been prepared
assuming that the Company owned 100% of Taconic after the acquisition. In
November 2000, the Company acquired the remaining 0.8% (31,250 shares) of
Taconic common stock. Subsequent to the acquisition, the Company changed
its fiscal year end from September 30 to December 31 to correspond with the
fiscal year end of Taconic. In April 1999, the Company changed its
corporate name to "MonsterDaata.com, Inc." In December 2000, the Company
changed its corporate name to "MonsterDaata, Inc."
Reverse Common Stock Split
On February 16, 2001, the Company's Board of Directors approved an
amendment to the Certificate of Incorporation to effect a one-for-five
reverse stock split of the Company's issued and outstanding common stock,
which amendment became effective on March 26, 2001. This amendment was
approved in a written consent executed by the holders of more than a
majority of the outstanding shares of common stock and series C preferred
stock of the Company, voting as a single class. Accordingly, in the
accompanying financial statements all common stock and per share amounts
have been retroactively restated to show the effect of the one-for-five
reverse stock split.
In addition, on February 16, 2001, the Board also approved an amendment to
the Certificate of Incorporation to reduce the number of shares of common
stock authorized from 200,000,000 to 100,000,000 shares. This authorized
amendment was approved in a written consent executed by the holders of more
than a majority of the outstanding shares of common stock and series C
preferred stock of the Company, voting as a single class.
5
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION, continued
Going Concern Uncertainty
The Company incurred a net loss of $2,363,351 for the six months ended June
30, 2001. Net cash flows used to fund operations were $2,000,881.
Management of the Company is implementing a plan to increase revenues
through the expansion of product lines. As part of management's plan, the
Company launched a new website in January 2001, which offers new products
and new technology for product distribution to current and potential
customers. Under this plan, management is seeking to increase revenues,
generate profits and generate positive cash flows from operations. If the
Company is unable to generate positive cash flows from operations, the
Company will need to raise additional cash from outside sources to fund
operations through June 30, 2002.
The Company may not be successful in its attempts to generate positive cash
flows or raise sufficient capital essential to its survival. To the extent
that the Company is unable to generate or raise the necessary operating
capital, it will become necessary to curtail operations. Even if the
Company does raise operating capital, the net proceeds may not be
sufficient to enable it to develop its business to a level where it will
generate profits and positive cash flows.
These matters raise substantial doubt about the Company's ability to
continue as a going concern. However, the accompanying financial statements
have been prepared on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal course
of business. The financial statements do not include any adjustments
relating to the recovery of the recorded assets or the classification of
the liabilities that might be necessary should the Company be unable to
continue as a going concern.
Derivative Instruments and Hedging Activities
During the period ended June 30, 2001, the Company adopted SFAS No. 133.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (commonly referred to as derivatives), and for hedging
activities. This statement requires that an entity recognize all
derivatives as either assets or liabilities in its balance sheet and
measure those instruments at fair value. The accounting for changes in the
fair value of a derivative instrument depends on its intended use and the
resulting designation. Implementation of SFAS 133 did not have any material
impact on the financial statements of the Company.
Business Combinations, Goodwill and Other Intangible Assets
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business
Combinations"("SFAS No. 141"), and Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
The Company intends to adopt SFAS No. 141, which requires purchase
accounting to be applied to business combinations initiated after June
30,2001. The Company intends to adopt SFAS No. 142 as of January 1, 2002,
as required, and as of July 1, 2001 for goodwill and intangible assets
acquired after June 30, 2001 (for the non-amortization and amortization
provisions of the statement). While implementation of SFAS 141 and 142 will
not have a significant impact on the Company's historical financial
statements, as a result of the July 31, 2001 merger with
NeighborhoodFind.com LLC (See Note 6) SFAS 141 and 142 will have an impact
on the Company's financial statements in the future. The Company is
presently determining the nature of this financial impact.
6
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION, continued
Basis of Presentation
The accompanying unaudited condensed 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 results of operations for
the three and six months ended June 30, 2001 are not necessarily indicative
of the results that may be expected for any other interim period of the
full year. The financial statements should be read in conjunction with the
notes to the condensed financial statements and in conjunction with the
Company's audited financial statements contained in its Annual Report on
Form 10-KSB for the year ended December 31, 2000. The accounting policies
used to prepare the condensed financial statements are consistent with
those described in the December 31, 2000 financial statements.
NOTE 2 - STOCKHOLDERS' EQUITY
Series C Preferred Stock
On January 5, 2001, the Company issued 87,800 shares of its series C
preferred stock, of which 72,800 shares were issued to an existing
stockholder in connection with the conversion of a note payable in the
amount of $728,000 and 15,000 shares were issued to other investors,
resulting in cash proceeds of $150,000 less offering expense of $32,684. In
connection therewith, the Company issued to the investors warrants for the
purchase of 291,200 and 60,000 shares, of the Company's common stock,
respectively, at an exercise price of $1.25 per share, in each case,
subject to adjustment. These warrants expire on January 5, 2003.
In addition, on January 5, 2001, the Company issued a warrant to the
placement agent to purchase 1,931,040 shares of common stock at an exercise
price of $1.25 per share, subject to adjustment. This warrant expires on
January 5, 2008.
Warrant
On January 11, 2001, the Company issued a warrant to purchase 40,000 shares
of common stock at an exercise price of $1.85 per share to a consultant for
services rendered. The warrant is valued at $38,964 under the Black-Scholes
pricing model. This warrant expires on October 10, 2002.
Common Stock
On February 13, 2001, the Company issued 8,400 shares of common stock
(at a price of $1.0156 per share) to a consultant as a fee for investor
relations services rendered during the months of February, March and April
2001. In connection with this issuance the Company recorded a charge to
operations of $8,531 during the six months ended June 30, 2001.
Series A Preferred Stock
During the six months ended June 30, 2001, 843.71 shares of series A
preferred stock were converted into 75,935 shares of common stock. An
additional 44,522 shares of common stock were issued in lieu of accrued
preferred stock dividends thereon through December 31, 2000.
Series B Preferred Stock
During the six months ended June 30, 2001, 400 shares of series B preferred
stock were converted into 26,720 shares of common stock. An additional
14,360 shares of common stock were issued in lieu of accrued preferred
stock dividends thereon through December 31, 2000.
7
NOTE 3 - LITIGATION
Former Law Firm
The Company was involved in litigation with the Company's former law firm
(which is also a stockholder) concerning disputed legal fees in the sum of
approximately $650,000 (plus interest). In July 2000, the Company commenced
an action in New York Supreme Court seeking a declaratory judgment to have
a promissory note ruled invalid. Subsequently, the former law firm
commenced a summary proceeding in the same Court to foreclose upon the
promissory note. By order dated August 11, 2000, the Court denied both
motions for summary judgment on the promissory note and the Company's
motion for dismissal or stay of the suit on the note. However, the Court
granted a conditional preliminary injunction and directed the Company to
deposit revenues from specified client contracts into an escrow account up
to an amount of $560,000.
On March 1, 2001, the Company entered into a settlement agreement with the
law firm regarding the litigation. In connection with this agreement, the
Company agreed to pay $680,000 in settlement of all lawsuits with the law
firm. The settlement amount was recorded at December 31, 2000 and paid on
March 2, 2001.
Customer
The Company was also a party to litigation involving a customer which was
seeking a refund of a $175,000 down payment for work the customer alleged
the Company did not perform properly. The Company recorded deferred revenue
upon receipt of the $175,000. On February 1, 2001, the Company entered into
an agreement settling this litigation. The agreement provided for a
settlement payment of $75,000 and the execution of a two year Internet
Content Licensing Agreement in which the Company granted licensee a credit
("Licensee Credit") of $140,000 to be applied to the agreed upon monthly
fee (which will be based on actual usage), as well as any additional
service fees mutually agreed upon by the parties. Once the Licensee Credit
has been reduced to a zero balance, the licensee will be obligated to pay a
monthly fee in accordance with the payment terms set forth in the
agreement. On December 31, 2000, the Company accrued the cash settlement
liability and, on February 1, 2001, the Company paid the full cash
settlement amount.
Consultant
The Company is a party to litigation involving a former website developer
for collection of $163,000 in fees allegedly owed by the Company. This
action is pending.
Other than the lawsuits described above, the Company is not a party to any
litigation, which it believes, if determined adversely to it, would
materially affect its business or operations.
NOTE 4 - STOCK OPTION PLANS
2000 Stock Option Plan
On January 8, 2001, the Company's Board of Directors agreed to grant the
Chairman of the Board of Directors an option to purchase up to 1,200,000
shares of the Company's common stock at an exercise price of $1.25 per
share.
On January 25, 2001, the Company granted the Vice-Chairman (pursuant to his
consulting agreement) an option to purchase up to 200,000 shares of the
Company's common stock at an exercise price of $1.25 per share.
8
NOTE 4 - STOCK OPTION PLANS, continued
On February 12, 2001, the Company's Board of Directors approved an
amendment to the Company's 2000 Stock Option Plan to increase the number of
shares of common stock for which options may be granted from 1,600,000 to
5,000,000 shares.
On February 13, 2001, the Company granted the President and CEO (pursuant
to his employment agreement) an option to purchase up to 883,600 shares of
the Company's common stock at an exercise price of $1.25 per share.
On March 19, 2001, the Company granted five advisory board members
(pursuant to their advisory letters) each an option to purchase up to
80,000 shares (400,000 in aggregate) of the Company's common stock at an
exercise price of $0.65 per share. These options are valued at $249,406
using the Black-Scholes pricing model. As of June 30, 2001, the Company has
recorded $58,455 in consulting expense for the 93,750 shares vested as of
that date. The remaining 306,250 shares vest in equal quarterly
installments, with all options vested on March 27, 2003. Accordingly, the
Company has recorded the balance of $190,951 as a deferred consulting
expense, which will be expensed as the options become vested.
NOTE 5 - MAJOR CUSTOMERS
During the six months ended June 30, 2001, the Company sold a substantial
portion (greater than 10% of sales) of its products to three major
customers. Sales to these customers were $211,078 (30%), $150,276 (21%) and
$87,500 (12%). The total amount due from these customers included in
accounts receivable at June 30, 2001 was $158,362.
During the six months ended June 30, 2000, the Company sold a substantial
portion (greater than 10% of sales) of its products to four major
customers. Sales to these customers were $182,724 (19%), $178,750 (19%),
$150,276 (16%) and $131,545 (14%). The total amount due from these
customers included in accounts receivable at June 30, 2000 was $115,449.
NOTE 6 - SUBSEQUENT EVENTS
On July 31, 2001, pursuant to an Agreement and Plan of Merger ("Merger
Agreement"), NeighborhoodFind.com, LLC ("NHF") was merged with and into the
Company. The Company issued in exchange for 100% membership interest of NHF
(1) 590,259 shares of common stock, (2) 297,262 shares of its newly created
series D 7% cumulative, convertible preferred stock with a stated value of
$10 per share and a liquidating preference of $20 per share ("Series D
Preferred") (3) 2 year warrants to purchase 2,425,034 shares of common
stock with an exercise price of $1.25. The Company also agreed to reserve
stock options to purchase up to 1,283,576 shares of common stock to be
granted to the former officers, managers and employees of NHF as a
replacement for similar NHF equity rights. The transaction will be
accounted for as a purchase.
Each share of Series D Preferred is convertible into 8 shares (2,378,096 in
aggregate) of common stock, at the option of the holder, subject to certain
adjustments and conditions.
9
NOTE 6 - SUBSEQUENT EVENTS, continued
The Series D Preferred will automatically convert into shares of common
stock upon the occurrence of certain defined events. Holders of the Series
D Preferred are entitled to an annual cumulative dividend equal to 7% of
the then applicable liquidation preference as defined. In the event the
Company issues any shares of common stock, preferred stock, stock options,
warrants or other convertible securities at a price of less than $1.25 per
share, the conversion price will be automatically adjusted to such lower
price.
The Company also agreed to issue additional shares of common stock and
Series D Preferred to the former holders of membership interests in NHF
(the "Members") if, as of July 31, 2003, the current market value of the
common stock is not equal to or greater than $.75 per share, calculated to
be the product of the difference between $.75 and the current market value
of the common stock as of such date and the number of shares of common
stock or Series D Preferred stock, as applicable, issuable to the Members,
but in no event, in the aggregate, more than 500,000 shares of common stock
and 500,000 shares of Series D Preferred.
The consideration for the merger was based upon negotiations among the
parties. The Company is in the process of determining the fair value of the
equity issued and the assets and liabilities acquired. The transactions
contemplated by the Merger Agreement are anticipated to result in the
Members owning approximately 22% of the fully diluted share capital of the
Company.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW OF OPERATIONS
MonsterDaata derives revenue from licensing its property, school and
demographic information to clients. We repackage the look and feel of our
warehoused data and supply it to our clients using proprietary web-enabling
applications, distribution technology and programming tools. Our proprietary
applications and technology allow us to integrate data from many different
sources and formats, reformat this data in a highly customizable manner and
track the usage of such data, helping our clients to better target, capture and
retain customers. Product delivery can take many different forms including
legacy multiple listing service system deliveries, bulk content deliveries,
mapping product hosting, channel product hosting and co-branded site hosting.
Our revenue streams consist of long-term database contracts, licensing fees and
sale of on-line reports (e-commerce revenue) and revenues are recognized as
follows:
Long-Term Data Base and Maintenance Contracts
We utilize long-term and maintenance contracts in the sale of certain
database contracts. Typical contracts extend from one to five years and
require the delivery of the database and subsequent database maintenance.
Revenue on these contracts is recognized as follows:
Upon delivery of the original database, we recognize revenue based upon
the estimated fair value of services performed to deliver the initial
database. Historically, the portion of revenue recognized upon delivery of
the database approximated ten percent (10%) of the total contract value.
Upon the delivery of the initial database, we will make monthly content
updates to the database. The estimated fair value of these updates is
fairly consistent over the remaining life of the contract. Therefore, we
recognize revenues on a straight-line basis over the remaining contract
period. When a contract is completed, a customer may continue receiving
monthly updates. In these instances, we recognize revenue when the
services are performed.
Licensing Fees
We recognize licensing fees on a straight-line basis over the term of the
respective agreements, which range from one (1) to three (3) years.
E-Commerce
We recognize revenue from sales of real estate related reports on our
website which are recorded at the point of sale.
During the second quarter of 2001 new products were released that utilized
our new technology platform. New products released included "MapTracker", an
interactive mapping product and "Channel Reports", a pre-formatted series of
popular data sets that can be readily customized and distributed. Both new
products resulted in second quarter sales totaling approximately $62,000.
Our customers and network affiliates seek content that will make their
websites more useful and attractive without the high fixed expense of developing
and maintaining their own information infrastructure. By providing very specific
property, school and demographic
11
information, flexibly packaged and kept current with our regular updates, and
with the capability to deliver data in a variety of ways on the Internet (using
XML and HTML protocols) or to handheld computer devices and cellular phones, we
believe that more businesses will desire our data services. Our customizable,
proprietary, high-speed content delivery system enables our distribution
partners to offer interactive and localized content, facilitating e-commerce,
lead generation and advertising sales. To date, our focus has been to aggregate,
transform and customize information relating to real estate transactions. We
believe our technology is applicable to a broader marketplace in other high
volume, information-intensive markets.
Our current digital content includes text, visual, geographic and
interactive programming tools, including more than 3.5 billion records of
information pertaining to 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 have very specific information geo-coded down to the census
block/neighborhood level. This information is valuable to people establishing
new businesses, moving into new neighborhoods and/or setting a valuation for
property that is being sold. We distribute our data through licensing,
syndication and co-branding to a broad network of affiliates including Internet
portals, consumer and professional transaction and destination websites, and
classified advertising networks.
RECENT GROWTH
Our second quarter landmark was the release of two new products that
utilize our database technology platform. 95% of our revenues received in the
second quarter are recurring monthly revenues. Our contract terms range from
one to three years. During the month of April 2001, one new contract was signed.
In May 2001, eight new contracts were signed, while six were signed in June
2001.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AS COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 2000 AND RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED JUNE 30, 2001 AS COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2000.
Our total revenues for the six months ended June 30, 2001 were $704,880
compared to $947,086 for the six months ended June 30, 2000. Total revenues for
the three months ended June 30, 2001 were $371,684 compared to $554,700 for the
three months ended June 30, 2000. These decreases in revenue of 25.6% and 33%,
respectively, were largely attributable to the loss of long-term database and
maintenance contracts, lost licensing fee revenues and lost co-branding set up
fees, which totaled approximately $353,000. New licensing fees generated from
our new products, MapTracker and Channel Reports, which totaled approximately
$62,000 partially offset these lost revenues. Our revenues for the six months
ended June 30, 2001 consisted of long-term database and maintenance contracts
$432,154 (61.3%), licensing fees $235,974 (33.5%), and e-commerce and other
revenues $36,751 (5.2%). Our revenues for the three months ended June 30, 2001
consisted of long term database and maintenance contracts $224,640 (60.5%),
licensing fees $140,438 (37.9%), and e-commerce and other revenues $5,989
(1.6%).
Our cost of sales decreased 11% from $230,079 for the six months ended
June 30, 2000 to $204,074 for the six months ended June 30, 2001. This decrease
was attributed primarily to the decrease in the amount of work performed and the
content purchased for the long-term
12
database and maintenance contracts. Our cost of sales decreased 9% from $110,552
for the three months ended June 30, 2000 to $100,110 for the three months ended
June 30, 2001. These reductions in the cost of sales were attributable to a
license fee for code software being charged to product development and a
reduction in data purchases relating to our long-term database and maintenance
contracts. Our gross profit margin declined from 76% for the six months ended
June 30, 2000 to 71% for the six months ended June 30, 2001, and from 80% for
the three months ended June 30, 2000 to 73% for the three months ended June 30,
2001.
Total operating expenses decreased from $2,903,832 for the six months
ended June 30, 2000 to $2,858,126 for the six months ended June 30, 2001. Total
operating expenses decreased from $1,396,524 for the three months ended June 30,
2000 to $1,310,193 for the three months ended June 30, 2001. This decrease in
operating expense of 1% and 6%, respectively, is comprised of a reduction in
website and database content development and maintenance costs of $189,182 for
the six months ended June 30, 2001, $482,343 for the three months ended June 30,
2001 and increased selling, general, and administrative expense of $143,475 for
the six months ended June 30, 2001, $395,912 for the three months ended June 30,
2001. The decrease in website and database content development and maintenance
costs for the six month period and the three month period ended June 30, 2001
was attributable to the termination of our outside website developer which
resulted in a savings of $81,400. We incurred additional consulting expenses
relating to a needs assessment analysis and the design of NeighborhoodPlace.com
during the six months ended June 30, 2000 costing $260,000 offset by
approximately $150,000 in salary expense, which also contributed to the
decrease. The selling, general and administrative expenses increase for the six
month period and the three month period ended June 30, 2001 was primarily
attributable to a reduction in legal fees of approximately $171,000 and an
increase in depreciation expense of approximately $340,000.
With the launch of our new website, which offers new products and
technology for distribution to current and potential customers, we believe
future near term expenses will be lower and future revenues from new accounts
will increase. Each month from January through June of 2001 has shown lower
overall operating expenses. Our new Channel Report and MapTracker products
represent a primarily fixed cost product. Channel Reports are designed to be
resold without significant additional costs. Monsterdaata's content and
infrastructure costs are largely fixed. Accordingly, as revenues grow, profit
margins should increase. However, there can be no assurance that sales will grow
or that profit margins will increase.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2001, our cash balance was $1,181,992 and our working
capital (excluding deferred revenue of $470,867) was $679,885. Our net cash used
in operating activities increased from $1,397,658 for the six months ended June
30, 2000 to $2,000,881 for the six months ended June 30, 2001. This increase was
attributable to a change in accounts payable of approximately $1,000,000 offset
primarily by the reduction in operating expenses of approximately $380,000 (net
of depreciation expense relating to computer hardware and software). Total cash
flows from financing activities increased from $865,745 for the six months ended
June 30, 2000 to $1,411,639 for the six months ended June 30, 2001. This
increase was attributable to the collection of $1,600,000 from a stockholder
relating to a December 7, 2000 subscription agreement offset by various payments
of notes payable and payment of capital lease obligations.
Our working capital requirements depend upon numerous factors including
levels of
13
resources that we devote to the further development of our website and marketing
capabilities, technological advances, status of competitors and our ability to
establish collaborative arrangements with other strategic alliances. We
currently anticipate that our existing cash and cash equivalents and any cash
generated from operations including receipts from new monthly subscription and
licensing sales of $525,000 and reductions in cash expenses of $15,000 resulting
from staff and other expense reductions on a monthly basis, will be sufficient
to fund our operating activities, capital expenditures and other obligations
through at least December 31, 2001. However, if receipts from new business are
less than expected, we will need to implement cost cutting measures. If we are
not successful in generating sufficient cash flow from operations, we may need
to raise additional capital through public or private financing, strategic
relationships or other arrangements. This additional funding, if needed, might
not be available on terms acceptable to us, or at all. Our failure to raise
sufficient capital when needed could have a material adverse effect on our
business, results of operations and financial condition. If additional funds
were raised through the issuance of equity securities, the percentage of our
stock owned by our then-current stockholders would be reduced. Furthermore,
these equity securities might have rights, preferences or privileges senior to
those of our common and preferred stock.
As referenced in Note 6 of the condensed financial statements, on July 31,
2001, we acquired NeighborhoodFind.com LLC ("NHF"). NHF provides a website that
serves as a community resource, neighborhood communications tool and relocation
solution. With approximately 19,000 cities online, the site includes thousands
of U.S. neighborhoods and serves as a one-stop resource for community
information. The site offers neighborhood details, photographs and communication
tools. NHF reported revenues of approximately $1,200,000 and an operating loss
of approximately $1,400,000 for the six months ended June 30, 2001 (unaudited).
Management believes an increase in revenues from subscription renewals in the
fourth quarter and cost reductions, as planned, will result in positive cash
flows from operations for NHF beginning in January 2002. Management believes
that NHF customers will renew their subscription agreements, in part because of
enhancements to these subscription products leveraging our database. The
forecasted level of NHF subscription renewals may not occur.
In addition, pursuant to the Merger Agreement, we agreed to assume an
aggregate of $1,180,000 in principal payments as the successor by merger to NHF,
under a loan agreement, dated as of June 13, 2000, as amended (the "Loan
Agreement"), between NHF and Commerce Capital, L.P., a Tennessee limited
partnership ("Commerce Capital"). In connection with the merger, the Loan
Agreement was amended to reduce the then current interest rate under the
Commerce Capital Notes from 13% per annum to 8% per annum. The $800,000 and
$380,000 notes are payable in full on June 1, 2005 and January 1, 2006,
respectively.
Our ability to generate sufficient cash resources is dependent upon the
success of our revenue model and our ability to generate revenues, profits and
positive cash flows from it in order to survive. Our net losses, net cash flows
used to fund operations and recent launch of a new database technology platform,
as well as uncertain conditions that we face relative to the implementation of
our new products, create substantial doubt as to our ability to continue as a
going concern. For more information, see Note 1 of our Condensed Notes to
Condensed Financial Statements.
14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We have recently settled most of our material legal proceedings. In
November 2000, we settled litigation with a former consultant, which had sued us
in New York Supreme Court to collect $390,000 allegedly owed by us. This action
was settled for a total of $240,000, which included our legal fees and other
related costs and the return to us of the remaining 0.8% stock interest in
Taconic. In February 2001, we settled a litigation involving a former customer
that was seeking a refund of a $175,000 down payment for work the customer
alleged we did not perform properly. This matter was settled for a payment of
$75,000 and a two-year license agreement pursuant to which we granted a $140,000
credit to be applied to monthly fees under the license agreement. In March 2001,
we also settled litigation with our former law firm over disputed legal fees
with a payment to the law firm of $680,000.
We are still a party to litigation involving a former website developer
for collection of $163,000 in fees allegedly owed by us. This action is pending.
Other than this lawsuit, we do not believe that we are a party to any litigation
that, if determined adversely to us, would materially affect our business or
operations.
ITEM 2. CHANGES IN SECURITIES, AND USE OF PROCEEDS
During the six months ended June 30, 2001, 843.71 shares of series A
preferred stock were converted into 75,935 shares of common stock. In addition,
44,522 shares of common stock were issued in lieu of accrued preferred stock
dividends thereon through December 31, 2000.
During the six months ended June 30, 2001, 400 shares of series B
preferred stock were converted into 26,720 shares of common stock. In addition,
14,360 shares of common stock were issued in lieu of accrued preferred stock
dividends thereon through December 31, 2000.
On July 31, 2001, pursuant to an Agreement and Plan of Merger, NHF was
merged with and into us. We issued in exchange for 100% of the membership
interests in NHF, (1) 590,259 shares of our common stock, (2) 297,262 shares of
newly created series D convertible preferred stock and (3) two-year warrants to
purchase 2,425,034 shares of common stock to the former members of NHF. See
"Note 6 Subsequent events" above.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
15
ITEM 5. OTHER INFORMATION
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 herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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, INC.
(Registrant)
Date: August 14, 2001 /s/ Samuel B. Petteway, Jr
--------------------------
Samuel B. Petteway, Jr.
President and Chief Executive
Officer