AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 2000
REGISTRATION NO. 333-93511
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MonsterDaata.com, Inc.
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(name of small business issuer in its charter)
DELAWARE 7374 22-2732163
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
115 Stevens Avenue
Valhalla, NY 10595
(914) 747-9100
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(Address and telephone number of principal
executive offices and principal place of business)
James Garfinkel
MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
(914) 747-9100
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(Name, address and telephone number of agent for service of process)
COPY TO:
Todd M. Roberts, Esq.
Roberts, Sheridan & Kotel,
a Professional Corporation
12 East 49th Street, 30th Floor
New York, NY 10017
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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Dollar Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered be Registered Per Security (1) Offering Price (1) Registration Fee
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Common Stock, $0.01 par value ........................ $9,500.00 $4.75 $9,500.00 $2.64
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Common Stock, $0.01 par value(2) ..................... $3,289,707.50 $4.75 $3,289,707.50 $914.54
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Common Stock, $0.01 par value(3) ..................... $1,659,056.25 $4.75 $1,659,056.25 $461.22
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Total(4) .................................... $4,958,263.75 $4.75 $4,958,263.75 $1,378.40
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
(2) Represents shares of Common Stock issued or issuable upon conversion of
shares of our Series A Cumulative Convertible Preferred Stock owned by
Selling Shareholders.
(3) Represents shares of Common Stock issued or issuable upon exercise of
certain warrants for the purchase of Common Stock at a price of $3.75 per
share, subject to adjustment, issued to Selling Shareholders that
purchased shares of Series A Cumulative Convertible Preferred Stock (the
"Common Stock Warrants").
(4) We are registering an indeterminate number of additional shares of Common
Stock issuable pursuant to antidilution rights of holders of Series A
Cumulative Convertible Preferred Stock and Common Stock Warrants.
We hereby amend this registration statement on such date or dates as may be
necessary to delay its effective date until we file a further amendment which
specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the registration statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 10, 2000
1,043,845 Shares
MONSTERDAATA.COM, INC.
Common Stock
We are registering 1,043,845 shares of our Common Stock, par value $0.01 per
share, on behalf of the selling shareholders identified under the heading
"Selling Shareholders" in this prospectus. We will not receive any portion of
the proceeds from the resale of the shares registered on behalf of the selling
shareholders. For information on the methods of sale of the shares we are
registering on behalf of the selling shareholders, refer to the discussion under
the heading "Plan of Distribution."
Our common stock trades on the OTC Bulletin Board under the symbol MDDC. On
January 7, 2000, the last sale price of our common stock on the OTC Bulletin
Board was $4.75.
Investing in our Common Stock involves risks. See "Risk Factors" beginning on
page 6.
Neither the Securities and Exchange Commission nor any state securities
commission approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is January 10, 2000
TABLE OF CONTENTS
PAGE
----
Prospectus Summary ........................................................ 3
Risk Factors .............................................................. 6
Use of Proceeds ........................................................... 15
Market for Our Common Stock ............................................... 15
Dividend Policy ........................................................... 15
Capitalization ............................................................ 15
Summary Financial Data .................................................... 17
Management's Discussion and Analysis of Financial
Condition and Results of
Operations ............................................................. 18
Description of Business ................................................... 21
Management ................................................................ 34
Compensation of Executive Officers ........................................ 36
Certain Relationships and Related Transactions ............................ 37
Principal Shareholders .................................................... 38
Selling Shareholders ...................................................... 40
Description of Securities ................................................. 40
Shares Eligible for Future Sale ........................................... 44
Plan of Distribution ...................................................... 45
Legal Proceedings ......................................................... 46
Legal Counsel ............................................................. 46
Changes in Accountants .................................................... 46
Experts ................................................................... 47
Available Information ..................................................... 47
Index to Financial Statements ............................................. F-1
You should rely only on the information contained in this prospectus. No dealer,
salesperson or other person is authorized to give information that is not
contained in this prospectus. This prospectus is not an offer to sell nor is it
seeking an offer to buy these securities in any jurisdiction where the offer or
sale is not permitted. The information contained in this prospectus is correct
only as of the date of this prospectus, regardless of the time of the delivery
of this prospectus or any sale of these securities.
The statements contained in this prospectus that are not historical facts are
forward-looking statements, as such term is defined in the Private Securities
Litigation Reform Act of 1995, that involve risks and uncertainties.
Forward-looking statements, such as statements regarding anticipated future
revenues, capital expenditures and other statements regarding matters that are
not historical facts, involve predictions. 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. Many important factors affect our
ability to achieve our objectives, including, among other things, technological
and other developments in the Internet field, intense and evolving competition,
the lack of an "established trading market" for our shares, and our ability to
obtain additional financing, as well as other risks detailed from time to time
in our public disclosure filings with the Securities and Exchange Commission
(the "SEC").
We have filed applications for the registration of the following trademarks:
DAATA SUPERSTORE, MAKE MY DAATA, NEIGHBORHOOD PLACE, PERSONAL PRIVATE EYE, and
RELOCATION PLACE. This Prospectus also includes product names, trademarks and
trade names of other companies not related to us.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This
summary does not contain all of the information that you should consider before
investing in shares of our common stock offered by the Selling Shareholders. You
should read the entire prospectus carefully, especially the risks of investing
in our common stock discussed under "Risk Factors" on page 6.
MonsterDaata.com, Inc.
Our Business
We provide comprehensive real estate transaction facilitation, due diligence and
research content over the Internet. We currently develop, license, co-brand,
reformat, integrate and enhance over 70 data sets for Web delivery for the real
estate market. Our proprietary compilation of community database sets provides
unique geographic precision and data matching capabilities that enable our
commercial customers to target end-users by offering highly interactive,
localized content, advertising and e-commerce services. Our data include school,
town and community, demographic, lifestyle characteristic, culture, crime,
environmental hazard, property ownership, tax and transaction information for
over 61,000 communities nationwide.
In addition to distributing our products and services through our own Web site
at www.MonsterDaata.com, we license portions of our content databases to
selected Internet portals and real estate destination Web sites, including
Cendant Corp.'s www.CompleteHome.com and Homestore.com's www.REALTOR.com, which
are two of the country's leading real estate listing Internet businesses.
The content we currently provide on our Web site includes (i) "Neighborhood
Place," which allows users to generate comparative analyses of several
neighborhoods with data of interest to potential home buyers, including crime
statistics, town and community profiles, census and demographic information,
neighborhood lifestyle characteristics and local school reports; (ii)
"Relocation Place," which provides a pre- and post-move resource center to help
users plan and estimate the cost of their relocation; (iii) public records
property data, which allows users to research properties for sale, foreclosures,
comparable sales and many other types of information; and (iv) risk hazard
assessment data, which allows users to obtain data regarding environmental
hazards and crime risk.
Our Business Objectives and Market
Our objective is to be the premier total solutions provider of real estate
transaction facilitation and due diligence information on the Internet. We
believe that we are well positioned to use our comprehensive content and
database development capabilities to support real estate professionals,
including brokers, lenders, insurers, title companies, appraisers, and
investors, and consumers in their sales, purchase, finance and insurance
transactions involving commercial and residential real estate on the Internet.
The emergence and acceptance of the Internet is fundamentally changing the way
that consumers and businesses communicate, obtain information, purchase goods
and services and transact business. We believe that the real estate industry,
because of its size, fragmented nature and reliance on the exchange of
information, is particularly well suited to benefit from the Internet. According
to the United States Department of Commerce, in 1998 the U.S. real estate
industry generated $1.5 trillion of commerce and accounted for 15% of the gross
domestic product. A recent study in 1999, by NPD Online Research showed that 64%
of Web users used the Internet to shop for real estate and related information.
We believe that our Internet Web site and related co-branded Web sites have the
potential to become key destination sites for low cost real estate due diligence
information, and that we can create and capture value for our business and
shareholders by linking real estate professionals - including brokers, lenders,
insurers, title companies, and appraisers - with consumers, businesses and
investors through our Web site. We plan to generate revenues from licensing our
content to other Internet sites, selling eReports and subscriptions on our Web
site, selling national and local advertising, collecting fees for eLeads (in
which we electronically match and link our users with selected providers of
services or products that we believe will be of interest to the users)
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and collecting fees for providing customized information services, primarily to
regional Multiple Listing Services ("MLSs,") Boards of Realtors, realty
franchise chains, and other Web portal sites.
Our Corporate History
We were incorporated on July 22, 1985, in Delaware, 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 ("TDC"), a corporation which was formed in New York on June 11, 1992.
In connection with this acquisition, all of our directors and officers were
replaced by Taconic Data directors and officers. The stockholders of Taconic
Data 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. Accordingly, a change in control of our company
occurred in connection with the Taconic Data acquisition, and the acquisition
was deemed a "reverse acquisition" for accounting purposes. The historical,
financial and other information contained in this prospectus relates to Taconic
Data's business for all periods prior to April 2, 1999.
On April 5, 1999, we changed our corporate name to "MonsterDaata.com, Inc."
Our principal executive offices are located at 115 Stevens Avenue, Valhalla, NY
10595. Our phone number is (914) 747-9100.
THE OFFERING
Common Stock Offered
by Selling Shareholders ............1,043,845(1)
Use of Proceeds .........................We will not receive any proceeds from
the sale of the shares of common stock.
Risk Factors ............................For a discussion of certain factors you
should consider before buying shares of
our common stock, see "Risk Factors."
Dividend Policy .........................We do not intend to pay dividends on
our common stock. We plan to retain any
earnings for use in the operations of
our business and to fund future growth.
OTC Bulletin Board Symbol ...............MDDC
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(1) Includes 692,570 shares of Common stock issued or issuable upon
conversion of outstanding shares of Series A Cumulative Convertible Preferred
Stock and 349,275 shares of Common stock issued or issuable upon the exercise of
warrants for the purchase of Common stock at a price of $3.75 per share, subject
to adjustment, issued to Selling Shareholders that purchased shares of Series A
Cumulative Convertible Preferred Stock.
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SUMMARY FINANCIAL DATA
The following table summarizes the historical consolidated financial data for
our business. Financial data for periods prior to April 2, 1999, relates almost
exclusively to the operations of Taconic Data, the company we acquired on April
2, 1999. The income statement data and balance sheet data set forth below for
the years ended December 31, 1997 and 1998 are derived from the audited
financial statements as of December 31, 1997 and 1998, and for the periods then
ended, included near the end of this prospectus. The income statement data and
balance sheet data set forth below for the nine months ended September 30, 1998
and 1999 are derived from our unaudited financial statements as of September 30,
1998 and 1999, and for the periods then ended, included at the end of this
prospectus.
Operating results for the nine-month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1999. Also, due to the significant changes in the nature of
our business during 1999, results of operations in 1997 and 1998 may not be
comparable to our current operations. You should read this financial data in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section included in this prospectus.
For the Year Ended For the Nine Months Ended
December 31, Sept. 30,
1997 1998 1998 1999
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(in thousands, except share and per share data)
Statement of Operations Data:
Sales........................................... $3,099 $1,967 $1,407 $1,807
Cost of sales................................... 1,611 1,182 851 561
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Gross profit ................................... 1,488 785 555 1,245
Operating expenses:
Product development costs ................... -- -- -- 743
Selling, general and
administrative expenses ..................... 1,110 2,353 1,694 2,079
Operating income (loss) ........................ 379 (1,568) (1,139) (1,576)
Other income (expense) ......................... (86) (78) (56) 8
Merger/acquisition costs ....................... (215)
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Income (loss) before income taxes .............. 293 (1,646) (1,195) (1,783)
Net income (loss) .............................. 291 (1,647) (1,195) (1,783)
=========================================================
Basic and diluted net income
(loss) per common share ....................... 6,024,773 6,024,773 6,024,773 6,762,826
Weighted average number of
common shares outstanding
(basic and diluted) ............................ $0.04 $(0.27) $(0.20) $(0.26)
Balance Sheet Data: December 31, 1997 December 31, 1998 September 30, 1999
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(in thousands)
Cash .......................... $ 34 $ 56 $ 122
Current assets ................ 351 715 557
Current liabilities ........... 836 2,045 1,895
Deferred revenues ............. 318 1,084 856
Working capital net of deferred
revenue ...................... (167) (246) (483)
Total assets .................. 529 855 855
Total stockholders' equity .... (1,269) (1,278) (1,059)
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5
RISK FACTORS
An investment in our stock involves a high degree of risk. 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, you 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.
Our shareholders could find that there is nobody willing to purchase their
shares when they want to sell, and it is possible that our shareholders could
lose their entire investment in our stock.
Our stock should only be purchased by speculators who understand the high level
of risk that a purchase of our stock entails and who are willing and able if
necessary to hold our stock for an extended period of time, or indefinitely, and
to risk the loss of their entire investment in our stock. If you are a suitable
investor for MonsterDaata.com, you should fully understand the following
material 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 Internet. We
began offering our services via the Internet in September 1998. During the nine
months ended September 30, 1999, 88% of our revenues were derived from our
traditional non-Internet services and products, and only 12% were from products
and services distributed via the Internet. During the three month period ended
September 30, 1999, our Internet revenues increased to 25% of total revenues. 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 the use of information
services and transaction support products on the Internet.
However, the business use of the Internet is still in its infancy, and it is
possible that 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 technology, delays in the development of new
standards and protocols required to handle increased Internet activity, and the
possibility of significant government regulation (locally, nationally and
internationally). Moreover, concerns over the security of Internet transactions
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 proprietary information, such as credit
card numbers, security breaches could expose us to a risk of loss or litigation
and possible liability. We cannot assure you that contractual provisions
attempting to limit our liability in such areas will be adequately implemented
or enforceable, or that other parties will accept such contractual provisions as
part of our agreements.
We have not fully resolved some other critical issues concerning our use of the
Internet, including reliability, cost, ease of deployment, administration and
quality of service. This may affect our ability to maintain our business, expand
product marketing, improve communications and increase business efficiencies.
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:
o rapid technological change;
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o frequent changes in user requirements and preferences;
o frequent new product and service introductions embodying new
processes and technologies; and
o 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. We cannot assure you that we will be successful in these
endeavors.
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 Web site, 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. 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 Web site could require
us to expand and adapt our network infrastructure. However, we cannot assure you
that we will be able to expand our network infrastructure on a timely basis to
meet any increased demands.
Intense competition may render our services and products uncompetitive or
obsolete, and we expect the competition to intensify even further.
The market for Internet data services is relatively new, intensely competitive
and rapidly evolving. Our Web services compete against a variety of firms that
provide information products through one or more media, including print,
broadcast, 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 provide a 'total solution' content program,
many of these competitors offer one or more Internet sites with information
products similar to individual items we provide over the Internet; and many of
these competitors may have significantly greater financial resources than we do.
These financial resources could be deployed to more aggressively compete on the
Internet or through more traditional media, to our disadvantage, at any time.
We expect competition to persist and intensify. Competitors using other media to
deliver information products 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, price, creative or other
advantages over those offered by us, and any competitor or group of competitors
could have a material adverse effect on our business.
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 will require
substantial effort and resources. Although we disclaim financial responsibility
for inaccuracies in the data on our Web site, such disclaimers may not be
effective to shield us from all possible liability. Further, our business is
based on
7
establishing our reputation as a trustworthy and dependable provider of
information and applications, and 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, but we cannot assure
you that our license agreements will continue to allow us to do so, nor can we
assure you that, in cases where these providers can no longer serve us,
alternative sources of comparable data will be available at comparable cost.
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 transitioning to our Internet
focused business plan in 1998. As of September 30, 1999, we had an accumulated
deficit of $4.7 million. We have incurred substantial costs to expand
distribution, develop new services and products, and create, introduce and
enhance our Web site. We expect operating losses and negative cash flows to
continue for the foreseeable future as we continue to incur significant
expenses. As a result, we will need future financings to fund our operations and
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, it could have a material adverse effect on our business.
We anticipate a need to raise additional funds in order to conduct our
operations and take advantage of acquisition and expansion opportunities. Our
liquidity and capital 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 financing,
strategic relationships or other arrangements, particularly if and when our
acquisition strategy matures. We cannot assure you that such additional funding,
if needed, will be available on terms acceptable to us, or at all.
Any additional equity financing may be on terms that dilute the value of our
company for 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
which limit our operating flexibility. Strategic arrangements, if necessary, may
require us to relinquish our rights to some of our intellectual property or some
business opportunities.
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. One of these agreements
terminates in March 2000, three expire on or before August 2000, three 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 Web site operators or other Internet related businesses, and the 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. There is no guarantee that we will be able to renew or extend
these agreements upon their expiration at all or on terms as favorable to us as
we currently enjoy. 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 costs over the Internet.
We are party to a licensing agreement with Homestore.com, under which our data
are currently made available on the REALTOR.com Web site, a Web site operated by
Homestore.com. The agreement is scheduled to terminate in July 2000, and will
automatically renew for a two-year period unless written notice of termination
is received in January 2000. Homestore.com recently acquired Homebuyer's Fair,
Inc., owners of Homefair.com, which is one of our direct competitors. There can
be no assurance that we will be able to renew or extend this agreement. On a
licensed basis that identifies MonsterDaata.com as the source of the data, we
provide data to the REALTOR.com
8
Web site that currently powers their popular "Find a Neighborhood" feature.
According to Homestore.com, approximately one-fourth of all visitors to the
REALTOR.com Web site click through to our licensed data in the "Find a
Neighborhood" section. The exposure to Internet users that we gain through our
relationships with key Web site operators like Homestore.com is important and
material to our Internet transition strategy.
We need to develop further strategic alliances with others.
Our business strategy is dependent on strategic alliances with other Internet
companies. We have signed agreements and are currently in negotiation for more
co-branding ventures and other strategic opportunities; however, we do not have
any present commitments or agreements with respect to any material strategic
alliances or related efforts. Any future strategic alliances or related efforts
will be accompanied by risks such as:
o the difficulty of identifying appropriate joint venture parties or
opportunities;
o the time our senior management must spend negotiating agreements and
monitoring joint venture activities;
o the possibility that some or all of our Internet joint venture
activities never become profitable;
o the possibility that our management may fail to capitalize on the
growth opportunities presented by some or all of our joint ventures;
and
o the possible future insolvency of Internet companies we select as
our Internet joint venturers.
No assurance can be given that we will be successful in overcoming these risks
or any other problems encountered with such strategic alliances or related
efforts. In addition, there can be no assurance that significant spending on
these relationships will increase our revenues substantially or at all, or that
online companies with which we may have a strategic alliance will be able to
deliver a sufficient number of customer visits or page views to make the
relationships profitable.
We need to retain and recruit key managers, employees and outsource vendors, and
to manage our growth effectively.
Our success depends heavily on the continued service of our executive officers
and our managers. Should one or more of these individuals leave before
acceptable replacements are found, that could have a material adverse effect on
our business. We do not presently have employment agreements or maintain key-man
life insurance on any of our key executives or employees, although we intend to
complete employment agreements with our executive officers during the first
quarter of 2000.
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. Our 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. There can be no assurance that our current personnel,
systems, procedures and controls will be adequate to support our future
operations, that management will be able to identify, hire, train, motivate or
manage required personnel or that management will be able to 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.
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.
9
Our intellectual property rights may be difficult to protect and we may find
that we infringe on the intellectual property rights of others.
It is uncertain how intellectual property laws will apply to the Internet, and
we cannot assure you that existing laws will provide adequate protection for our
proprietary database offerings or our Internet domain names. Our success and
ability to compete partly depends 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, and 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. We cannot assure you, however, that these laws
will sufficiently protect us, that others will not develop technologies similar
or superior ours, or that others will not obtain or use our technologies without
our authorization. With respect to our databases, copyright protection is
available for the originality and creativity in the selection and arrangement of
the data included therein and 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.
In addition, we rely on certain technology licensed from others, and we may be
required to license additional technology, for use in managing our Web site 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. We
cannot assure you that these third party technology licenses will be available
to us on acceptable commercial terms, or at all. The inability to enter into and
maintain any of these technology licenses could have a material adverse effect
on our business.
We also cannot assure you that others will not 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 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 any of our trademarks, including our
name MonsterDaata.com. In view of the number of other users of the word
"monster" in their names or trademarks, including companies doing business on
the Internet, there can be no assurance that our attempt to register the mark
"MonsterDaata.com" will be successful or that our use of this mark will not 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.
We have a limited number of principal customers.
Our business could be materially and adversely affected if we lost a number of
our large 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 five
MLS customers accounted for more than 80% of our total revenues in 1998.
If we are unable to identify suitable acquisition targets or if we do not
successfully integrate acquired businesses with our business, it could have a
material adverse effect on our business.
We intend to explore the possible acquisition of businesses complementary to
ours in order to expand our services, diversify our business and participate in
the consolidation trend among Internet information products providers; however,
at this time we have not identified any material acquisition candidates that
have expressed an interest in a business combination with us beyond the
preliminary negotiations stage, and we do not have any present commitment or
agreement with respect to any material acquisitions. We cannot assure you that
we will be able to make any acquisitions in the future on favorable terms or
that such acquisitions will ultimately prove advantageous to us. We may
encounter substantial costs, delays or other problems as we integrate any
acquisitions. Such costs could include severance payments to employees of
acquired companies, systems integration costs, restructuring charges and other
expenses associated with a change of control,
10
as well as non-recurring acquisition costs including accounting, legal and
investment banking fees and transaction-related obligations.
Increased competition for the finite number of suitable acquisition candidates
may develop in 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. Moreover, it is possible that neither our
management nor management of any of the acquired companies will have the
necessary skills to manage a company with substantial internal growth
opportunities and plans for further growth through acquisitions or strategic
alliances. We may seek to recruit additional managers to supplement the
management of the acquired companies, but we may not have the ability to recruit
additional managers with the skills necessary to enhance the management of the
acquired companies.
Adoption of new laws and government regulations relating to the Internet or
Internet domain names could harm our business.
Due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet or other online services. These laws would cover
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
burdens on those companies conducting business online. The adoption of any
additional laws or regulations may decrease the growth of the Internet or other
online services, 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.
Moreover, the applicability to the Internet and other online services 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. In addition, as we begin to sell to numerous consumers
residing in such 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 and other online services could have a material
adverse effect on our business.
In addition, 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. For example, in the United States, the National Science
Foundation has appointed Network Solutions, Inc. as the current exclusive
registrar for the ".com," ".net" and ".org" generic top-level domains and our
arrangements for our important domain names with Network Solutions, are believed
to be satisfactory and secure. 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. As a result,
there can be no assurance that we will be able to acquire or maintain relevant
domain names in all countries in which we may wish to conduct our business.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. We,
therefore, may be unable to prevent third parties 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.
Shares eligible for future sale could reduce the market price of our stock.
As of December 31, 1999, 7,660,948 shares of our common stock were issued and
outstanding. Of these shares, 6,385,685 are "restricted securities" which under
certain circumstances may be sold in compliance with Rule 144 or other
exemptions under the Securities Act. Assuming that Rule 144 is available, we
believe that, subject to certain
11
volume limitations and "manner of sale" requirements, 6,000,000 of these
"restricted securities" would become eligible for resale in April 2000.
We also have 991,400 shares of common stock subject to options outstanding as of
October 31, 1999 under our option plan (exercisable at prices ranging from $1.00
to $3.02 per share). Of these options, 725,000 have been granted to directors
and executive officers, and 266,400 have been granted to other employees and
consultants. The common stock that is delivered when options are exercised by
directors and executive officers will be "restricted securities"; however, when
options are exercised by other employees or consultants, the common stock we
deliver upon exercise will be freely tradable. Most of the options we have
granted under our option plan are subject to vesting over a three year period,
and prior to vesting the options are not exercisable. Of the 150,000 outstanding
options that are currently exercisable, 145,000 are held by directors or
executive officers and 5,000 are held by other employees or consultants.
On March 31, 1999, in consideration for the modification of the exercise price
of a previously issued warrant, we issued to Ocean Strategic Holdings Limited a
warrant to purchase 500,000 shares of our common stock at an exercise price of
$3.00 per share. The warrant expires on March 31, 2004, and is not exercisable
until March 31, 2000. Shares of our common stock issuable upon the exercise of
this warrant will be "restricted securities."
No prediction can be made regarding the effect that the availability of these
"restricted securities" will have on the market prices of our shares from time
to time. The possibility that substantial amounts of our shares may be sold in
the public market may adversely effect the prevailing market prices for shares
and could impair our ability to raise capital in the future by selling new
shares.
In November, 1999, we issued 1,561.23 shares of preferred stock and related
warrants to purchase shares of our common stock at a warrant exercise price of
$3.75 per share, subject to adjustment. As of December 1, 1999, warrants to
purchase up to 193,894 shares of our common stock that were issued in connection
with the sale of our preferred stock were outstanding. Each share of our
outstanding preferred stock is generally convertible into 300 shares of common
stock; however, in certain circumstances the conversion increases to 450 shares
of common stock. In accordance with our obligations to the purchasers of these
shares, we undertook to file a registration statement with the SEC to make the
common shares issuable upon conversion of the preferred stock and upon exercise
of the warrants eligible for public resale.
An investment in our common stock may be very illiquid, and we have never paid
cash dividends.
Although our shares trade on the Over-The-Counter Bulletin Board (the "OTC
Bulletin Board") of the National Association of Securities Dealers ("NASD"),
there is currently no broadly followed "established trading market" for our
shares, and we cannot assure you that any such market will ever develop or be
maintained. The absence of an active trading market would reduce the liquidity
of an investment in our shares.
To the extent that brokerage firms act as market makers for our shares on the
OTC Bulletin Board, they may be a dominating influence in any market that might
develop, and the degree of participation by such firms may significantly affect
the price and liquidity of our shares. These firms may discontinue their market
making activities at any time. The prices at which our shares are traded in the
market will be determined by these firms and by the purchasers and sellers of
our shares, but such prices may not necessarily relate to our assets, book
value, results of operations or other established and quantifiable criteria of
value.
Any market price for our shares is likely to be very volatile, and numerous
factors beyond our control may have a significant adverse effect on prices.
We have never paid cash dividends on our capital stock and do not anticipate
paying any cash dividends for the foreseeable future.
12
The application of the "penny stock" rules could adversely affect the market for
our stock.
The Securities and Exchange Act of 1934 requires additional disclosure relating
to the market for "penny stocks." A penny stock is generally defined to be any
equity security not listed on NASDAQ or a national securities exchange that has
a market price of less than $5.00 per share, subject to certain exceptions.
Among these exceptions are shares issued by companies that have:
o net tangible assets of at least $2 million, if the issuer has been
in continuous operation for three years;
o net tangible assets of at least $5 million, if the issuer has been
in continuous operation for less than three years; or
o average annual revenue of at least $6 million for each of the last
three years.
We do not currently meet the requirements of these exceptions and, therefore,
our shares would be deemed penny stocks for purposes of the Exchange Act if and
at any time while our common stock trades below $5.00 per share. In such case,
trading in our shares would be regulated pursuant to Rules 15-g-1 through 15-g-6
and 15-g-9 of the Exchange Act. Under these rules, brokers or dealers
recommending our shares to prospective buyers would be required, unless an
exemption is available, to:
o deliver a lengthy disclosure statement in a form designated by the
SEC relating to the penny stock market to any potential buyers, and
obtain a written acknowledgement from each buyer that such
disclosure statement has been received by the buyer prior to any
transaction involving our shares;
o provide detailed written disclosure to buyers of current price
quotations for our shares, and of any sales commissions or other
compensation payable to any broker or dealer, or any other related
person, involved in the transaction;
o send monthly statements to buyers disclosing updated price
information for any penny stocks held in their accounts, and these
monthly statements must include specified information on the limited
market for penny stocks.
In addition, if we are subject to the penny stock rules, all brokers or dealers
involved in a transaction in which our shares are sold to any buyer, other than
an established customer or "accredited investor," must make a special written
determination that our shares would be a suitable investment for the buyer, and
the brokers or dealers must receive the buyer's written agreement to purchase
our shares, as well as the buyer's written acknowledgement that the suitability
determination made by the broker or dealer accurately reflects the buyer's
financial situation, investment experience and investment objectives, prior to
completing any transaction in our shares.
These Exchange Act rules may limit the ability or willingness of brokers and
other market participants to make a market in our shares and may limit the
ability of our shareholders to sell in the secondary market, through brokers,
dealers or otherwise. We also understand that many brokerage firms will
discourage their customers from trading in shares falling within the "penny
stock" definition due to the added regulatory and disclosure burdens imposed by
these Exchange Act rules.
The SEC from time to time may propose and implement even more stringent
regulatory or disclosure requirements on shares not listed on NASDAQ or on a
national securities exchange. The adoption of the proposed changes that may be
made in the future could have an adverse effect on the trading market for our
shares.
13
You may not be able to recover damages from our directors and officers for
actions taken by them not in your best interest.
Our certificate of incorporation includes provisions which eliminate the
personal liability of directors of our company to the extent permitted by
applicable law. As a result, stockholders may be unable to recover damages
against our directors for actions taken by them which constitute negligence or a
violation of certain of their fiduciary duties.
We are controlled by our principal stockholders, and there are other reasons
that we may be unattractive to potential acquirors. Our principal stockholders
could also approve a sale of our entire company to a potential acquiror on terms
that you believe to be unattractive.
As of December 31, 1999, Mitchell Deutsch, together with his children, owned
about 42.2% of our outstanding common stock, and James Garfinkel, together with
his child, owned about 17.4% of our outstanding common stock. As a result,
Mitchell Deutsch, James Garfinkel and their families together are able to elect
a majority of our board of directors and otherwise continue to influence our
policies and any other matter requiring shareholder approval (including mergers,
consolidations and the sale of all or substantially all of our assets). They can
also, together or with others, prevent or cause a change in control in our
company.
We have recently been engaged in discussions regarding a possible sale of the
company to a larger real estate related Web site operator, and we anticipate
from time to time in the future that similar inquiries could be received and
entertained by us or our principal stockholders; however, these inquiries or
discussions may never progress beyond preliminary stages (and have not done so
to date). On the other hand, our stockholders should recognize that it is
possible for the principal stockholders of the company to accept an offer for
the company at a price below the price the company or its other stockholders
would accept, and by reason of the large number of shares controlled by our
principal stockholders it is possible that the company (or at least a
controlling interest in the company) could be sold on terms that you may find to
be unattractive. As a general matter, as well, our principal stockholders could
sell their shares (and control of the company) without including our other
shareholders in such transaction (or giving them the opportunity to sell their
shares on the same terms).
Our certificate of incorporation authorizes the issuance of up to 10,000,000
shares of "blank check" preferred stock with designation, rights and preferences
as may be determined from time to time by our board of directors. Accordingly,
our board of directors is empowered, without stockholder approval, to issue a
new series of preferred stock with dividend, liquidation, conversion, voting or
other rights which could hamper the voting power of our common stockholders. The
issuance of a new series of preferred stock could be used in certain
circumstances as a method of discouraging, delaying or preventing a change in
control in our company. Although we do not presently intend to issue any
additional shares of preferred stock, we cannot assure you that we will not do
so in the future.
We are subject to Section 203 of the General Corporation Law of the State of
Delaware. Subject to certain exceptions, Section 203 prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder unless the proposed business combination was
approved by our board of directors before the stockholder became an interested
stockholder. In general, Section 203 defines an interested stockholder as any
shareholder directly or indirectly owning 15% or more of the outstanding voting
stock of a Delaware corporation. Section 203 could have the effect of
discouraging others from making tender offers for our shares, and also may have
the effect of preventing changes in our management.
The Year 2000 problem could cause our software products and those of our
suppliers to malfunction.
Many computer chips and computer software programs use two digits rather than
four to define the applicable year and, as a result, are incapable of properly
recognizing or processing information with dates beyond December 31, 1999. Upon
arrival of the year 2000, any computer programs that have date sensitive
software may:
o interpret the year 2000 as "00" and refuse to accept any date entry
for years past 1999;
o interpret "00" as connoting the year 1900; and/or
o erroneously assume that the year 2000 is not a leap year.
We have made an assessment of the year 2000 readiness of our information
technology systems, including the hardware and software that operate our Web
site, and our non-information technology systems. We are not currently aware of
any year 2000 compliance problems relating to our proprietary software,
information technology, or non-information technology systems that would have a
material adverse effect on our business. We cannot ensure that we will not
discover year 2000 compliance problems in our proprietary software that will
require substantial revisions. We have requested of all our key suppliers
information on their state of year 2000 readiness. We have received assurances
from substantially all our material suppliers that they are year 2000 compliant.
14
Notwithstanding the responses received from our suppliers, though, we cannot
ensure that third-party software, hardware or services incorporated into our
material information technology and non-information technology systems will not
need to be revised or replaced, all of which could be time consuming and
expensive. If efforts to address year 2000 risks are not successful, or if
suppliers or other third parties with whom we conduct business do not
successfully address such risks, it could have a material adverse effect on our
business.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of common stock.
MARKET FOR OUR COMMON STOCK
Prior to July 29, 1999, our common stock had been quoted under the symbol "DVNL"
on the OTC Bulletin Board, and the last reported activity in our common stock
prior to that date had occurred on February 16, 1995. No market existed for our
securities and, to the best of our knowledge, there was no other trading of our
shares during the two years prior to 1995, except as reported on our Form 8-K
filed with the SEC on September 25, 1996.
On July 29, 1999, and subsequent to our acquisition of TDC (which had taken
place on April 2, 1999), our common stock began to trade on the OTC Bulletin
Board under the symbol "MDDC." The range of high and low bid quotations for our
common stock since July 29, 1999 is shown below. Prices are inter-dealer
quotations as reported by the NASD and do not necessarily reflect retail
markups, mark downs or commissions.
Quarter ended: High Low
-------------- ------- ------
December 31, 1999 $5.625 $2.875
September 30, 1999 $8.00 $3.00
Prior to July 29, 1999 N/A N/A
The last reported sale price of our common stock on the OTC Bulletin Board on
January 7, 2000 was $4.75 per share. At December 31, 1999, there were 7,660,948
shares of common stock outstanding, which were held by approximately 490
stockholders of record.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock since our formation. The
payment of dividends, if any, in the future, is within the discretion of our
board of directors and will depend on our earnings, capital requirements,
financial condition and other relevant factors. Our board of directors does not
presently intend to declare any dividends on our common stock in the foreseeable
future. We anticipate that all of our earnings and other resources, if any, will
be retained by us for investment in our business. We are not subject to any
material contractual restrictions limiting, or that are likely to limit, our
ability to pay dividends on our common stock.
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999.
During the month of November, 1999, we issued 1,561.23 shares of Series A
Cumulative Convertible Preferred Stock and related warrants for the purchase of
common stock, and the pro forma information set forth below shows the effects of
such issuances, and the exercises of common stock purchase warrants through
December 31, 1999, as if they occurred prior to September 30, 1999.
15
September 30, 1999
----------------------------------
Actual Pro Forma
----------- -----------
Capital lease obligations, less current
maturities ................................................ $ 19,045 $ 19,045
Notes payable to stockholders 298,702 298,702
Stockholders' equity:
Convertible cumulative preferred stock,
$.01 par value par value; 10,000,000
shares authorized, no shares issued and
outstanding (1,561.23 shares issued and
outstanding on a pro forma basis) ...................... -0- 16
Common stock, $.01 par value;
50,000,000 shares authorized, 7,377,415
shares issued and outstanding
(7,629,948 shares issued and
outstanding on a pro forma basis) ...................... 73,775 76,300
Additional paid-in capital (1) ............................ 3,602,694 4,627,249
Options and warrants (2) .................................. 83,531 253,435
Note receivable ........................................... (118,000) (118,000)
Accumulated earnings (deficit) (4,701,116) (4,701,116)
Total stockholders' equity (deficiency) $(1,059,116) $ 137,884
(1) Net proceeds of $1,197,000 for the issuance of 1,561.23 shares of
preferred stock after a deduction of the estimated legal and
consulting expenses in the amount of $275,000 directly related to
such issuance.
(2) Warrants to purchase 473,670 shares of common stock are valued at
$1.48 per share and warrants to purchase 117,060 shares are valued
at $0.48 per share under the Black-Scholes option valuation method.
On December 1, 1999, warrants to purchase 396,836 shares of common
stock with an exercise price of $2.00 per share were exercised, on a
cashless basis, when the market value of the common stock was $5.50
per share. 252,533 shares of common stock were issued in connection
with the exercise of such warrants.
16
SUMMARY FINANCIAL DATA
The following table summarizes the historical consolidated financial data for
our business. Financial data for periods prior to April 2, 1999, relates almost
exclusively to the operations of Taconic Data, the company we acquired on April
2, 1999. The income statement data and balance sheet data set forth below for
the years ended December 31, 1997 and 1998 are derived from the audited
financial statements as of December 31, 1997 and 1998, and for the periods then
ended, included near the end of this prospectus. The income statement data and
balance sheet data set forth below for the nine months ended September 30, 1998
and 1999 are derived from our unaudited financial statements as of September 30,
1998 and 1999, and for the periods then ended, included at the end of this
prospectus.
Operating results for the nine-month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1999. Also, due to the significant changes in the nature of
our business during 1999, results of operations in 1997 and 1998 may not be
comparable to our current operations. You should read this financial data in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section included in this prospectus.
For the Year Ended For the Nine Months Ended
December 31, Sept. 30,
1997 1998 1998 1999
-------------------------------------------------------------------------------
(in thousands, except share and per share data)
Statement of Operations Data:
Sales..................................... $3,099 $1,967 $1,407 $1,807
Cost of sales............................. 1,611 1,182 851 561
-------------------------------------------------------------------------------
Gross profit.............................. 1,488 785 555 1,245
Operating expenses:
Product development costs.............. -- -- -- 743
Selling, general and administrative
expenses................................ 1,110 2,353 1,694 2,079
Operating income (loss)................... 379 (1,568) (1,139) (1,576)
Other income (expense).................... (86) (78) (56) 8
Merger/acquisition costs.................. (215)
-------------------------------------------------------------------------------
Income (loss) before income taxes......... 293 (1,646) (1,195) (1,783)
Net income (loss)......................... 291 (1,647) (1,195) (1,783)
===============================================================================
Basic and diluted net income (loss)
per common share........................ 6,024,773 6,024,773 6,024,773 6,762,826
Weighted average number of common
shares outstanding (basic and diluted).... $0.04 $(0.27) $(0.20) $(0.26)
Balance Sheet Data: December 31, 1997 December 31, 1998 September 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash..................................... $ 34 $ 56 $ 122
Current assets........................... 351 715 557
Current liabilities...................... 836 2,045 1,895
Deferred revenues........................ 318 1,084 856
Working capital net of deferred
revenue................................ (167) (246) (483)
Total assets............................. 529 855 855
Total stockholders' equity............... (1,269) (1,278) (1,059)
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements contained in this section that are not historical facts are
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 the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involve risks and
uncertainties. From time to time, we or our representatives have made or may
make forward-looking statements, orally or in writing. Such forward-looking
statements may be included in our various filings with the SEC, or press
releases or oral statements made by or with the approval of our authorized
executive officers.
These forward-looking statements, such as statements regarding anticipated
future revenues, capital expenditures and other statements regarding matters
that are not historical facts, involve predictions. 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. Many important factors
affect our ability to achieve its objectives, including, among other things,
technological and other developments in the Internet field, intense and evolving
competition, the lack of an "established trading market" for our shares, and our
ability to obtain additional financing, as well as other risks detailed from
time to time in our public disclosure filings with the SEC.
OVERVIEW
We provide integrated real estate transaction facilitation, due diligence and
research content over the Internet. We currently develop, license, co-brand,
reformat, integrate, and enhance over 70 proprietary databases that include real
estate related business-to-business and consumer information. Business
information includes real estate transaction due diligence, risk assessment and
valuation information. Consumer services consist of data products covering over
61,000 communities in the United States, and neighborhood profiles containing
school, town and community, crime, culture, affordability, environmental hazard,
property ownership, tax, demographic and lifestyle characteristic data. We
currently employ 35 full-time officers, data managers, Web site developers,
salespeople and support personnel.
We believe that our Internet Web site and related co-branded Web sites have the
potential to become key destination sites for low cost real estate due diligence
information, and that we can create and capture value for our business and
shareholders by linking real estate professionals - including brokers, lenders,
appraisers and insurers - with consumers, businesses and investors through our
Web site. We generate our revenues from licensing our content to other Internet
sites, and we expect to generate further revenues from selling eReports and
subscriptions on our Web site, selling national and local advertising,
collecting fees for eLeads (in which we electronically match and link our users
with selected providers of services or products that we believe will be of
interest to the users) and collecting fees for providing customized information
services (our customized information services are provided primarily to regional
real estate MLSs). We also provide licensed or co-branded content to other
popular Internet Web sites, many of which provide links back to our Web site
through their Web sites. If users on these licensed or co-branded sites desire
further information beyond the summary or snapshot data we license or co-brand,
they may obtain detailed customized reports from our Web site, again for a
nominal charge per report or on an annual subscription basis, and we share the
revenues we earn from the sales of these detailed eReports with the referring
Web site owner.
Through our Web site we provide summary reports consisting of selected real
estate information to customers free of charge, and more detailed reports are
available on our Web sites for a small charge per report or on an annual
subscription basis. In addition to distributing our products and services
through our own Web site at www.MonsterDaata.com, we license portions of our
content databases to selected Internet portals and real estate destination Web
sites, including www.REALTOR.com, the country's leading real estate listing Web
site with 1.3 million residential listings. Our "Neighborhood Place," a content
database of demographic, lifestyle characteristic, crime and local area
information, and a school report database, is currently licensed to REALTOR.com
and powers
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their popular "Find a Neighborhood" feature. Our information allows REALTOR.com
users to research and locate a neighborhood with desired characteristics
anywhere in the U.S. based on their specified search criteria.
We also provide licensed or co-branded content to other popular Internet Web
sites, many of which provide links back to our Web site through their Web sites.
If users on these licensed or co-branded sites desire further information beyond
the summary or snapshot data we license or co-brand, they may obtain detailed
customized reports from our Web site, again for a small charge per report or on
an annual subscription basis (and we share the revenues we earn from the sales
of these detailed eReports with the referring Web site owner).
The content we currently provide on our Web site includes (i) "Neighborhood
Place," which allows users to generate comparative data analyses of several
neighborhoods including crime statistics, town and community profiles, census
and demographic information, neighborhood lifestyle characteristics and school
reports; (ii) "Relocation Place," which provides a pre- and post-move resource
center to help users plan and estimate the cost of their relocation; (iii)
public records property data, which allows users to research properties for
sale, foreclosures, comparable sales and many other types of information; and
(iv) risk hazard assessment data, which allows users to obtain data regarding
environmental hazards and crime risk.
Our financial condition and results for periods prior to April 2, 1999 are
almost entirely attributable to the historical results of TDC, which was deemed
the acquiror for accounting purposes in our business combination with TDC that
was completed on April 2, 1999.
RESULTS OF OPERATIONS FOR NINE MONTHS PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
Our total revenues for the nine month period ended September 30, 1999, were
$1,806,574 compared to $1,406,647 for the nine month period ended September 30,
1998. This 28% increase in revenue is partially attributable to two new
licensing and co-brand agreements with real estate related Internet sites, but
the majority of the increase is attributable to non-recurring revenue received
in the second quarter of 1999 on existing agreements and to the recognition of
deferred revenue on a previously prepaid licensing agreement. We believe the
increase in total revenue, particularly to the extent attributable to the new
Internet-related agreements, reflects a trend that will continue in future
periods as we continue to transition our business revenue sources to the
Internet and the effects of our development of a national sales force are
realized. As part of this trend, we anticipate that within the next few
quarters, we will begin to receive material revenues from new sources, namely
Internet advertising, Web site subscriptions, sales of eReports and eLeads, as
well as from further licensing of our content to real estate related Internet
sites.
We expect, but can not guarantee, that for calendar year 2000, more than half
our revenue will be derived from these new Internet related sources, whereas for
the first nine months of calendar year 1999, these revenue sources provided only
12% of our total revenues to date. Our percentage of revenue from Internet
related sources has grown by a significant amount during each quarter of this
year, from 5.8% through March 31, to 9.8% for the April 1 through June 30 period
and 25% for the July 1 through September 30 period.
Our cost of sales for the nine month period ended September 30, 1999 was
$561,253, compared to $851,154 for the nine month period ended September 30,
1998. Our cost of sales fell in 1999 primarily as a result of the reassignment
of many of our data acquisition employees to Web site development functions as
part of the transition of our business to the Internet. Primarily as a result of
our cost of sales improvements, and our increased Internet related revenues, our
gross margin was 69% of total revenues during the nine month period ended
September 30, 1999, compared to 39% of total revenues during the nine month
period ended September 30, 1998. We anticipate that our gross margins in future
periods could continue to improve, but at a much more modest rate, based on our
belief that our total revenues will increase faster than our related costs of
sales as we move the primary means of distributing our data products to the
Internet and we expand our revenue sources to include the new Internet related
sources described above which can be derived by us with very little in the way
of incremental costs 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 will be 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
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have not been significant, but we expect that as our Internet related revenues
grow, these payments to third party Web site operators will grow as well.
Operating expenses increased from $1,694,083 for the nine month period ended on
September 30, 1998 to $2,821,669 for the nine month period ended September 30,
1999. This increase is largely attributable to our Web site development expenses
of approximately $743,117 incurred during the first nine months of 1999. Prior
to the commencement of the transition of our business to the Internet, we had no
Web site development expenses during the nine month period ended on September
30, 1998. Our $743,117 of Web site development expenses includes our payroll
expenses for all our new hires and internal transferees assigned to Web site
development activities. Our payroll expenses for other new hires not assigned to
Web site development activities also grew significantly in the 1999 nine month
period over the 1998 nine month period. We expect payroll expenses to increase
in future periods, as well, as we continue to build out our management team and
a national sales force.
Our net loss increased from $1,194,862 for the nine month period ended September
30, 1998 to $1,783,009 for the nine month period ended September 30, 1999. In
other income/expense, we recorded $215,000 of legal and accounting expenses
incurred in connection with our acquisition of Taconic in 1999. Due to these
non-recurring expenses arising out of our acquisition of Taconic in 1999, our
net loss of $1,783,009 during the nine month period ended September 30, 1999
represents an even greater increase from our net loss of $1,194,862 for the
corresponding period of 1998. During these periods for 1998 and 1999, our net
loss per share increased from $.20 to $.26.
RESULT OF OPERATIONS FOR FISCAL YEARS ENDED 1998 AND 1997
Our sales for the twelve month period ended December 31, 1998 were $1,966,713
compared to $3,099,139 for the twelve month period ended December 31, 1997. This
37% decrease in sales is attributable to our loss of two significant customers
and the refocusing of our business development and marketing efforts to the
Internet during 1998. Both former customers paid us a settlement amount
acceptable to us for terminating their contracts with us.
In 1997, our business model was dependent on revenues from a finite number of
regional MLSs that would enter into two to five year agreements for our data and
related custom information services. Under our Internet focused business model,
we provide low cost (or no cost) access to portions of our standardized data
sets via the Internet to a much broader group of consumers and businesses,
including MLSs, with the intention of driving Web site traffic and earning
revenues from Internet advertising and e-commerce activities. In the near term,
this strategy of providing broader, low cost access to our data sets has the
effect of "cannibalizing" our previous sources of MLS revenue while we complete
our transition to Internet revenue sources.
Our cost of sales for the twelve month period ended December 31, 1998 was
$1,182,158, compared to $1,610,853 for the twelve month period ended December
31, 1997, due primarily to the lower amounts of customized data work required to
service a smaller base of MLSs in 1998. Our gross profit was $784,555 during the
twelve month period ended December 31, 1998, compared to $1,488,286 for the
twelve month period ended December 31, 1997.
Selling, general and administrative expenses increased from $1,109,736 for the
twelve month period ended on December 31, 1997 to $2,352,893 for the twelve
month period ended on December 31, 1998. This increase was due in part to
expenses relating to our transition to an Internet delivery company.
We experienced an operating loss of $1,568,338 for the twelve month period ended
in December 31, 1998, and reported operating income of $378,550 for the twelve
month period ended in December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, our cash balance was $122,386 and we had a working
capital deficit (excluding deferred revenue) of $482,880. For the nine months
ended September 30, 1999, our net cash used in operating activities was
20
$949,593. Of this $949,593, we used $215,000 for non-recurring merger and
acquisition expenses relating to our purchase of Taconic.
Total cash flows from financing activities increased from $274,067 for the nine
month period ended on September 30, 1998 to $1,074,097 for the nine month period
ended September 30, 1999. As set forth in the next paragraph, we received
additional cash proceeds after September 30, 1999 from the sale of equity to
private investors.
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,
status of competitors and our ability to establish collaborative arrangements
with other organizations. Pursuant to transactions completed during the month of
November 1999, we received approximately $1.5 million from private investors
purchasing shares of our Series A Cumulative Convertible Preferred Stock and
associated Common Stock purchase warrants. We are seeking to raise up to $15
million of additional capital from private investors and institutional money
managers prior to February, 2000, and have retained a financial advisor to
assist us with these fundraising activities, but there can be no assurance that
we will be successful in doing so. Even if we are not successful in raising any
of this additional capital, our current cash resources should be sufficient to
fund our current operations into the second quarter of 2000 if our development
spending were to continue at its current pace. We intend to accelerate our
development and infrastructure spending in the coming calendar quarters if we
have sufficient capital resources available to do so.
DESCRIPTION OF OUR BUSINESS
We provide integrated real estate transaction facilitation, due diligence and
research content over the Internet. We currently develop, license, co-brand,
reformat, integrate, and enhance over 70 proprietary databases that include real
estate related business-to-business and consumer information. Our proprietary
compilation of community database sets provides unique geographic precision and
data matching capabilities that enable our commercial customers to target
end-users by offering highly interactive, localized content, advertising and
e-commerce services. Our data include school, town and community, demographic,
lifestyle characteristic, culture, crime, environmental hazard, property
ownership, tax and transaction information for over 61,000 communities
nationwide. We currently employ 35 full-time officers, data managers, Web site
developers, salespeople and support personnel.
We believe that our Internet Web site and related co-branded Web sites have the
potential to become key destination sites for low cost real estate due diligence
information, and that we can create and capture value for our business and
shareholders by linking real estate professionals - including brokers, lenders,
appraisers and insurers - with consumers, businesses and investors through our
Web site. We generate our revenues from licensing our content to other Internet
sites and MLSs, and we expect to generate further revenues from selling eReports
and subscriptions on our Web site, selling national and local advertising,
collecting fees for eLeads (in which we electronically match and link our users
with selected providers of services or products that we believe will be of
interest to the users) and collecting fees for providing customized information
services, which are provided primarily to regional real estate MLSs.
Through our Web site we provide summary reports consisting of selected real
estate information to customers free of charge, and more detailed reports are
available on our Web sites for a small charge per report or on an annual
subscription basis. In addition to distributing our products and services
through our Web site www.MonsterDaata.com, we license portions of our databases
to selected Internet portals and real estate destination Web sites, including
Cendant Corp.'s www.CompleteHome.com and Homestore.com's www.REALTOR.com, which
are two of the country's leading real estate listing Internet businesses.
We also provide licensed or co-branded content to other popular Internet Web
sites, many of which provide links back to our Web site through their Web sites
(see "Major Customers" below). If users on these licensed or co-branded sites
desire further information beyond the summary or snapshot data we license or
co-brand, they may obtain detailed customized reports from our Web site, again
for a small charge per report or on an annual
21
subscription basis, and we generally share the revenues we earn from the sales
of these detailed eReports with the referring Web site owner.
The content we currently provide on our Web site includes (i) "Neighborhood
Place," which allows users to generate comparative analyses of several
neighborhoods with data of interest to potential home buyers, including crime
statistics, town and community profiles, census and demographic information,
neighborhood lifestyle characteristics and local school reports; (ii)
"Relocation Place," which provides a pre- and post-move resource center to help
users plan and estimate the cost of their relocation; (iii) public records
property data, which allows users to research properties for sale, foreclosures,
comparable sales and many other types of information; and (iv) risk hazard
assessment data, which allows users to obtain data regarding environmental
hazards and crime risk.
Revenue Sources
We classify our five intended sources of revenues as follows:
o Licensing. We currently license our information to several real
estate destination Web sites and Internet portals (see "Major
Customers" below), and we plan to license selected data products to
additional real estate destination Web sites and Internet portals.
o eCommerce. We generate revenue through the sale of over 40 types of
premium reports delivered via the Internet, including comprehensive
town, community, school, comparable sales, property tax and
environmental hazard reports. Typically, real estate professionals,
investors and consumers visiting our Web site (or third party sites
that have licensed some or all of our database offerings),
regardless of whether or not they are subscribers, will receive free
snapshot, summary or profile data reports. Viewers are then
encouraged, with regard to the data sets they are most interested
in, to purchase full eReports and/or annual eSubscriptions from our
Web site.
o Advertising Placement. We have defined the data categories in our
national databases into discrete subsections based on finely focused
geographic areas. As a result, through our content categories, we
are able to offer advertisers a highly targeted audience focused on
goods and services typically needed in the period six months before
and six months after a real estate transaction. This means, for
example, that we can customize ad banners to offer local businesses
the ability to advertise directly to potential home buyers
researching nearby neighborhoods or ZIP codes, and we can offer
national advertisers the ability to advertise on the higher traffic
portions of our Web site (such as our home page), or to tailor their
ads to the demographic profile of the specific neighborhood being
viewed. Given the demographics of our Web site viewers (primarily
real estate investors, brokers, sales people and potential home
buyers) and our ability to advertise (in the manner of local
businesses) directly to potential home buyers researching specific
neighborhoods and our ability to customize our ads on a local ZIP
code and neighborhood basis, we expect to be able to sell ad space
on our Web site for a premium over the general market price per page
view for untargeted national advertisements on the Internet. Ad
sales will be coordinated by our national sales force, which we are
currently in the process of recruiting and developing.
o eLead Generation. By offering free access to some of our content and
reports, we can collect registration leads and generate revenues
through the sale of those leads, with the consent of the registered
users. In addition, we plan to develop and sell Web-based lead
generator content and products to real estate professionals and to
providers of ancillary goods and services. In connection with our
eLead generation sales efforts and ad placement sales to date, we
have identified over 40 types of businesses (by SIC code) that would
have an interest in being referred active prospects who are
researching localized real estate information on our Web site.
Examples of businesses we will be marketing eLeads to range from
real estate brokerage firms to moving companies to local retailers,
contractors, utilities, and other localized businesses and service
providers.
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o Custom Information Services. Finally, we provide customized
information and data-to-Web solutions, management and operation
services to real estate MLSs. Prior to the end of 1998, almost all
of TDC's total revenues were derived from MLSs under long-term (two
to five year) custom information services contracts. Through the use
of proprietary data standardization, clean up, and matching
procedures we developed, we have been able to decrease our costs and
increase our profit margins on this source of business revenues.
Some Significant Milestones
Since the completion of our acquisition of TDC in April 1999, we have
successfully completed a number of significant steps towards developing the
necessary infrastructure for the achievement of our goals, including the
following:
May 1999 o Opened our New York City sales office.
o Hired our first National Sales Executive.
o Launched 1.0 version of our Web site at the mid-year
convention of the the National Association of Realtors.
June 1999 o Signed a data licensing agreement with Stewart Title's
Internet data affiliate.
o Hired managers for Sales, Finance and Operations
divisions.
August 1999 o Signed a co-branding agreement with Virtual
Relocation.com, Inc., which promotes itself as the
"Internet's First Moving and Relocation
Mega-Site."
September 1999 o Signed a co-branding agreement with iOwn, Inc., a
leading mortgage and real estate portal.
o Retained Jefferies & Company, Inc. as financial advisor
for a planned private offering to institutional
investors.
November 1999 o Signed a co-branding agreement with Network
Communications, the largest publisher and provider of
printed and online real estate advertising in North
America.
o Completed a private bridge financing raising
approximately $1.5 million through the issuance of
1,561.23 shares of our Series A Cumulative Convertible
Preferred Stock and warrants to purchase shares of
common stock at a price of $3.75 per share, subject to
adjustment.
o Completed a deal to place our licensed data on Cendant
Corp.'s CompleteHome.com Web site.
o Signed a co-branding agreement with HomeInfoLink.com, a
leading comprehensive Internet Service Provider serving
real estate agents and business owners.
December 1999 o Signed a joint co-brand agreement with MortgageIT.com,
the online mortgage broker with the most extensive
lender network.
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Our material near term objectives for the further development of our business
are as follows (but there can be no assurance that any of these near term
objectives will be achieved):
o Launch 2.0 version of Web site;
o Strengthen our exposure and ties to licensed real estate brokers and
sales agents through targeted marketing and sponsoring affinity
programs;
o Continue to hire executives for professional licensing and
advertising sales positions;
o Raise additional capital to support operations, further Web site
development and marketing; and
o Begin to consider and search for opportunities to acquire existing
private companies in similar business lines to achieve synergies and
broaden our Internet product offerings and Web site audiences.
INDUSTRY OVERVIEW
The Real Estate Industry
According to the United States Department of Commerce, in 1998 the U.S. real
estate industry accounted for approximately 15% of the gross domestic product of
the United States, and was therefore one of the largest sectors of the economy.
The real estate industry is commonly divided into the residential and commercial
sectors. The residential sector includes the purchase, sale, rental, remodeling
and new construction of homes and represented approximately $1.5 trillion of
commerce in 1998. The commercial sector includes the lease, resale, and new
construction of property for businesses and represented approximately $300
billion in 1998.
The Residential Real Estate Market
Buying a home is generally regarded as the largest financial decision and one of
the most difficult and complex processes most consumers will ever undertake. An
enormous network of support services and products exists to assist consumers in
finding or building a property, renting or buying a property, moving, owning a
property and selling a property.
Home buyers require an extensive amount of information and several decision
tools to help bolster confidence during the home buying process. To make an
informed decision, consumers need access to comprehensive information and rely
upon a series of professionals, including real estate agents, and ancillary
service providers, such as mortgage brokers, title agents, escrow agents,
attorneys, inspectors and appraisers. These professionals and ancillary service
providers offer products and services, such as mortgages, title insurance,
credit reports, appraisals, neighborhood and community profiles, and inspections
that generated in excess of $49 billion in transaction fees in 1998. In
addition, real estate transactions often lead to lifestyle changes for
consumers, including changing neighborhoods, schools, shopping malls, banks,
grocers, cleaners and other retail relationships.
Growth of the Internet
International Data Corporation estimates that the number of Internet users
worldwide exceeded 95 million in 1998, and will exceed 170 million by the end of
2000 and 319 million by the end of 2002. International Data Corporation also
estimates that commerce over the Internet will increase to more than $400
billion by 2002. Growth in Internet usage has been fueled by a number of
factors, including:
o A large and growing base of personal computers in the workplace and
home;
o Advances in the performance of personal computers and modems;
o Improvements in network systems and infrastructure;
24
o More readily available and lower cost access to the Internet;
o Increased awareness of the Internet among businesses and consumers;
o Increased volume of information and services offered on the
Internet; and
o Reduced security risks involved in conducting transactions on the
Internet.
Growth in Internet usage is expected to continue as new technologies, such as
multimedia capabilities, are developed and adopted, as Internet access and
bandwidth increases, and as Internet content improves and becomes more
interactive.
Business to eCommerce Services
According to a recent report published by Jefferies & Company in December 1999
entitled "b-eCommerce Services Business Services For The New Economy," the
business to eCommerce services sector should experience growth rates of 50% to
60% annually for the next three years, dramatic revenue growth, and gross profit
margins in the 35% to 40% range. The report also states that 'Click and Mortar'
companies, those with traditional business expertise or facilities which are
leveraged with significant investments in the Internet, are particularly well
positioned to profit in this emerging sector.
The Internet and Real Estate
The emergence and acceptance of the Internet is fundamentally changing the way
that consumers and businesses communicate, obtain information, purchase goods
and services and transact business. We believe that the real estate information
industry is particularly well suited to benefit from the Internet because of its
size, fragmented nature and reliance on the exchange of information. The
Internet offers a compelling means for consumers, real estate professionals and
ancillary service providers to come together to improve the dissemination of
information and enhance communication.
Recognizing the commercial potential of the Internet, a number of residential
real estate-related Web businesses have been established, including Web sites
that aggregate data from real estate MLSs, real estate chains, and brokers of
different regions. Aggregators include Homestore.com, Microsoft's HomeAdvisor
and Yahoo. These real estate destination sites enable users to quickly access a
wide range of real estate listings to search for a home using specific criteria,
including location, size, price and neighborhood. As a result, these sites are
increasingly becoming an important part of the home buying process for many
consumers. Based on a 1999 study by the U.C. Berkeley Fisher Center for Real
Estate and Urban Economics, a significant portion of existing homes listed for
sale in the United States are listed online and the number of home buyers using
the Internet to shop for a home is increasing. A recent survey by the California
Association of Realtors showed that nearly 40% of home buyers used the Internet
as part of the home buying process.
The MonsterDaata Solution
An important part of our business currently acts as a "B2B2C" (business to
business to consumer) provider of tools that enhance our customers' Web sites.
We are able to work with a vast range of real estate and related Web sites who
view our content as essential to creating "stickiness" (repeat usage) in their
sites. We provide comprehensive real estate transaction facilitation, due
diligence and research content in one convenient location. With our products and
services, we allow our clients and users to bypass traditional expensive,
fragmented real estate information sources and intermediaries. We allow real
estate professionals, consumers and investors immediate centralized access to a
broad range of critical real estate information from their own homes or offices.
In addition, our services and products assist real estate agents, brokers and
other professionals to better market their services, become more productive and
compete more effectively during the real estate transaction process. We believe
that we are also well positioned to provide services to ancillary service
providers and consumers buying or selling a home.
We have six primary data product and service categories that, according to our
research and experience over the past seven years, have shown to be critical
tools and services sought by professionals, and now, to a growing extent,
25
by consumers directly. These product and service categories are due diligence,
valuation, risk assessment, target marketing, data enhancement and ancillary
products and services. The information underlying these data products are
developed in-house or licensed and reformatted, then integrated and enhanced for
over 70 data sets and for over 61,000 communities nationwide. Such information
includes crime, school, life style characteristics, culture, town and community,
affordability, demographic, ownership information for more than 90 million
residences, over 30 million sales transactions, environmental hazards and new
construction and permit data. This information is packaged and provided to real
estate professionals and consumers via our Web site and via Internet destination
sites, including:
o iOwn, Inc. - a leading mortgage and real estate listing portal;
o HomeInfoLink.com - a leading comprehensive Internet Service Provider
serving real estate agents and business owners;
o Cendant Corp.'s CompleteHome.com - a new real estate portal that
will carry listings from Cendant's franchise systems, which include
three (Century 21, Coldwell Banker and ERA) of the nation's five
largest national real estate brokerage franchise systems, as
measured by number of offices;
o VirtualRelocation.com - which promotes itself as the "Internet's
First Moving & Relocation Mega-Site;"
o Homestore.com's REALTOR.com - currently the country's largest real
estate listings portal, with approximately 1.3 million listings;
o Network Communications (ncinfo.net) - the largest publisher and
provider of printed and online real estate advertising in North
America;
o Landata.com - a Stewart Information Services site which is
affiliated with Stewart Title, a leading national title insurer;
o Signonsandiego.com - a San Diego Tribune site offering San Diego's
most comprehensive online community with seven million monthly page
views;
o CityNews.com - a City News, Inc. company offering free online
classifieds generating over seven million monthly page views; and
o MortgageIT.com - the online mortgage broker with the most extensive
lender network.
In addition, consumers require a variety of products and services throughout the
home and real estate purchase and sale cycle. The real estate transaction offers
service providers and retailers the opportunity to target consumers at a time
when they are shifting their buying patterns. Providers and retailers of
products or services that can be marketed to people who are buying property and
relocating to a new neighborhood need an effective mechanism to reach consumers
who are motivated prospects for their offerings. Ideally, these providers of
products and services would have a centralized location where they could
advertise their offerings to a target group of consumers who are engaged in a
real estate buying and relocation process. We believe that our Web site presents
such service providers and retailers with an effective medium to reach these
consumers through highly-customizable directed advertisements and through our
eLead generation business to consumer matching programs.
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Our Products and Services
Our six primary data product and service categories currently include:
1. Neighborhood Place. This popular category allows consumers to see
comparative data analyses of several neighborhoods simultaneously
including crime statistics, town and community profiles, census and
demographics, neighborhood lifestyle characteristics and school reports.
Real estate professionals also use this service to prepare customized
presentation packages for their clients. The presentation packages can be
personalized with the broker's name and contact information, which
provides the broker with a useful marketing tool and a potential
competitive advantage over brokers not using our Web site offerings under
this data category.
2. Evaluate Properties (Public Records Data). This information tool is used
to research a property, discover sales prices of comparable properties,
identify potential "good buys" through listed foreclosures, or investigate
a wide variety of publicly recorded data about a person, property, or
legal situation. Records provided, which vary by jurisdiction, include:
(i) property tax assessments; (ii) property data; (iii) deed and mortgage
recordings (property sales and financings); (iv) comparable sales; (v) tax
parcel maps (also known as assessor plat maps); (vi) foreclosures and bank
real estate offerings; (vii) Personal Private-Eye(TM), which covers liens,
judgments and court documents; and (viii) copies of original deeds and
mortgage recordings.
3. Risk Hazards Assessment. We provide a complete resource risk library with
a compendium of data designed to help the user minimize risk and reduce or
eliminate liability in a real estate or financial transaction. Depending
upon the jurisdiction, data provided includes: (i) Environmental and
Health Hazards; (ii) Crime Risk; (iii) Flood Reports; and (iv) Earthquake
Epicenter, Disclosure and Pollution Reports.
4. My Best Customers (Target Marketing). We plan to offer a national center
for customer prospecting, marketing and list fulfillment services on our
Web site that is directed primarily at real estate professionals and
ancillary service providers. This information can be used to identify
marketing prospects within a given geographic area and to provide
residential and business addresses and phone numbers of prospects. Data
and services will include the following: (i) eLead Generation Program;
(ii) Reverse Telephone Directory; (iii) Mailing List and Label Services;
and (iv) Mail House and List Fulfillment Services.
5. Make My Daata (Data Enhancement). We plan to offer value-added tools to
help business users build and enhance, correct, standardize, and clean
their own prospect lists and other databases. These tools are designed,
among other things, to transform lists such as for-sale inventory, public
record data, and internal mailing lists, into useful marketing databases.
Our data enhancement services will include: (i) Geocoding, (ii) Electronic
Street Mapping; (iii) List Clean Up, Standardization, and Postal Coding;
(iv) National Change of Address Cleansing; (v) Phone Append; (vi) Property
and Real Estate Listing Data Clean-up and Standardization; and (vii)
Postal Discounts.
6. Did You Know Daily, Other Professional Resources. We will offer a wide
variety of ancillary products and services of interest directed to real
estate professionals, including Virtual Realtor(R) Store, an online
catalogue of the principal goods and services routinely used by Realtors
in the course of their business, and daily top 10 lists, and real estate
facts and entertainment.
In addition, we currently provide the consumer and professional user with a
number of useful and entertaining features to attract and keep viewers on our
Web sites:
o Compare Neighborhoods Snapshot. Users can see a comparative snapshot
analysis of up to five neighborhoods at once containing: school
profiles, crime statistics, town and community profiles, census and
demographics, and neighborhood lifestyle characteristics.
27
o Evaluate Properties. Users can identify and find a specific property
and obtain a detailed description from building and other public
records data, then find up to 15 comparable sales, review the last
recorded sales price, and obtain property valuation reports for the
property.
o Pre- and Post-Move Resource Center. This feature provides a
budgeting calculator function and moving resources, including
information about homes and apartments for sale or rent, new homes,
classified job listings, and mortgage comparison information.
o Links. The links feature permits users to link to other sites in
order to conduct checks on nannies, pre-school facilities, sex
offenders and other items of interest to people considering a new
neighborhood.
o Professional Services. We plan to add a professional services
feature to assist buyers and sellers in finding real estate
transaction-related services such as Realtors, mortgage companies,
home inspectors, title companies, insurance companies and attorneys.
o Identify Best Prospects. We plan to develop this feature for real
estate professionals in order to help them discover the best target
marketing tools available, generate qualified prospecting leads on a
daily basis, and continually purge and enhance their own prospect
databases.
o Top Ten Lists. We plan to offer new nationwide top ten lists every
two days, including information categories such as best schools,
places to live, quality of life, most expensive, least expensive,
worst and best crime areas, lifestyle characteristics, and fastest
growing communities.
Marketing and Sales Strategy
Our primary marketing objective is to grow our user base and brand, and thereby
expand our Web site traffic and our Internet related revenue sources.
Historically, our marketing activities have been generally limited to making
sales calls on MLS prospects for the customized information services we provide.
During the past several quarters, as we have refocused our business on Internet
based revenue sources, we have been recruiting and developing a proactive,
centralized marketing group responsible for positioning and repurposing our
expanded service offerings and ensuring that each of our Internet services is
competitive and appealing to these same professionals as well as to a mass
audience. If we have sufficient financial resources available to us, we intend
to commit significant additional capital to expanding our distribution through
portal and related business-to-business Internet companies, and to initiate an
advertising campaign targeted primarily at selected vertical business segments.
We plan to enhance our brand identity through a variety of marketing methods,
including: (i) brand development; (ii) publication of our domain name; (iii)
enhancement of the look, tone and attitude of our Web site; (iv) establishment
of a brand personality that appeals to our target market; (v) development of a
dialogue with customers and real estate professionals through special promotions
and affinity programs; (vi) frequent emails; (vii) customer care programs;
(viii) development of strategic alliances; (ix) direct mail and (x)
participation in trade shows.
Additional planned marketing and sales strategies include:
o Licensing and Strategic Alliances. Licensing our technology and
content solutions to potential strategic partners including popular
portals and real estate related destination Web sites.
o Advertising and Sponsorship Opportunities. Distinguishing ourselves
from our competition through the creation of unique advertising and
sponsorship opportunities that are designed to build brand loyalty
for our corporate sponsors as well as for ourselves. We plan to
offer an assortment of advertising options to our clients, allowing
them to select the means by which they present themselves to our Web
site users.
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o Expanded Sales and Marketing Force. Subject to our financial
resource limitations, we are seeking to continue with an aggressive
expansion of our sales force for our specific revenue streams. Our
Chief Executive Officer currently takes a direct role in servicing
our key national accounts, and we recently hired two national
accounts managers who operate out of our New York City sales office,
one from a Virginia sales office, and one from a Los Angeles sales
office. Several additional junior salespeople and lead generation
researchers are being hired. Sales groups will be broken into sales
specialist teams, focusing on specific industry and consumer sites
where we believe that we have the strongest sales opportunities. We
are seeking to fill positions in advertising sales, lead and list
sales, national account sales, professional sales, sales and
marketing management
o Public Relations. We plan to launch an aggressive public relations
campaign geared at real estate business and technology writers and
consumer publications specializing in real estate and personal
finance. Press releases and promotional programs will be issued and
press conferences will be held in order to expand coverage of our
activities. In addition, management will seek opportunities to
participate in Internet and real estate industry forums.
o Viral Marketing. We expect that many of our Web site users may
themselves be part of one of the 40 major business groups we have
identified with an interest in reaching consumers during the period
six months before or after a real estate transaction. We will enable
those users to purchase local and regional advertising sponsorships
online, without leaving our Web site, on a fully automated basis,
and will encourage those users to provide a link to our Web site on
any Web sites they may maintain, again on a fully automated basis.
o Foster MonsterDaata Community Affinity. We plan to develop an
affinity program with strategic partners to provide free and/or
discounted products and services for our users.
Major Customers
We provide licensed, custom applications or co-branded content to the following
customers:
o iOwn, Inc., a leading Internet mortgage company that helps consumers
find both a home and low-cost mortgages online;
o HomeInfoLink.com, a leading comprehensive Internet Service Provider
serving real estate agents and business owners;
o Cendant Corp.'s CompleteHome.com, a new real estate portal that will
carry listings from Cendant's franchise systems, which include three
(Century 21, Coldwell Banker and ERA) of the nation's five largest
national real estate brokerage franchise systems, as measured by
number of offices;
o VirtualRelocation.com, which promotes itself as the "Internet's
First Moving & Relocation Mega-Site" containing over 150,000 links
to relocation services and related informational pages;
o Homestore.com's REALTOR.com, currently the country's leading real
estate listing Web site with 1.3 million residential listings;
o Network Communications, (ncinfo.net), the largest publisher and
provider of printed and online real estate advertising in North
America;
o Landata.com, the data integration Web site affiliated with Stewart
Title, a leading national title insurer;
o Signonsandiego.com, a San Diego Union Tribune company, offering San
Diego's most comprehensive online community with seven million
monthly page views;
29
o CityNews.com, a City News, Inc. company offering free online
classifieds generating over seven million monthly page views;
o MortgageIT.com, the online mortgage broker with the most extensive
lender network; and
o six regional real estate MLSs, including the MLS of Long Island, NY
serving over 12,000 customers, the Greater New Jersey MLS, serving
5,000 members, and Metro Listing Service in Atlanta, serving over
11,000 users.
Our customer base is diverse enough that we would expect the loss of any one of
our major client relationships to not by itself have a material adverse effect
on our business.
Our Proprietary Databases
With over 61,000 communities under coverage, we believe that we are the nation's
largest and most sophisticated online, total solution, information system
covering real estate property and transaction due diligence information. Our
proprietary database of key ownership, sales and neighborhood information is the
product of over seven years of our research and development efforts. In
combination with other databases which we have developed or licensed the right
to use, we cover over 90% of U.S. households with approximately 30 million real
estate transactions and nearly 90 million property ownership records, as well as
neighborhood, crime, demographic, lifestyle, risk hazard, and school information
for the entire Unites States.
We have developed a robust data collection and proprietary confirmation system
supported by our trained research staff and our proven computer and
communications hardware and software systems. Many of our researchers have prior
experience in the residential real estate, fact checking, and data analysis
industries. We currently provide selected data coverage for all major property
types, including residential, commercial, office, industrial, retail, specialty,
multi-family, hotel/motel and land. These property types are further categorized
by nearly 150 specific use codes. Our software allows users to search the
database efficiently and quickly and to view specific detailed and comprehensive
data coverage of property information in all covered markets.
We also have developed expertise in the transcription and standardization of
data from microfilms of non-standardized deeds, ownership records, assessment
files, and other public records from thousands of jurisdictions nationally. We
can collect disparate data carried in multiple source hard copy and electronic
formats and convert them into a single, standardized format, and much of the
data conversion work we do follows rules and procedures we have developed for
our proprietary use. Further, we have developed our own in-house capabilities to
display data sets geographically, as points or areas on a map.
Competition
The market for Internet real estate data services is relatively new, intensely
competitive and rapidly changing. In the on-line real estate industry, the
principal competitive factors we have identified are:
o Quality and depth of the underlying databases;
o Proprietary methodologies, databases and technical resources;
o The usefulness of the data and reports that can be generated;
o Effectiveness of the provider's marketing and sales efforts;
o Customer service and support;
o Compatibility with key customer's existing information systems;
o Reputation for reliability;
o Price;
o Timeliness; and
o Brand loyalty.
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We compete directly and indirectly for customers and content providers with the
following categories of companies:
o Online services or Web sites targeted to real estate brokers, buyers
and sellers of real estate properties, insurance companies, mortgage
brokers and lenders, such as eNeighborhoods.com, Homefair.com
(recently purchased by Homestore.com), SmartHomeBuy.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.
o Public record providers such as Experian, Acxiom DataQuick, Factual
Data Corp., Baca Landata, Vista Information Solutions and
TransAmerica Intellitech.
We believe that our national comprehensive coverage, the broad range of our
integrated real estate data products, and the structure of our database-to-Web
content delivery system provide us with a competitive advantage in the
marketplace. However, many of our existing competitors, focusing on niche areas
such as school, public risk hazards and other specific subjects, as well as a
number of potential new competitors, have longer operating histories in the
Internet market, greater name recognition, larger customer bases, greater user
traffic and significantly greater financial, technical and marketing resources.
In order to gain market acceptance, we may elect to provide products at reduced
prices or at no cost. The competitors may be able to undertake more extensive
marketing campaigns, adopt more aggressive pricing policies, make more
attractive offers to potential employees, subscribers, distribution partners and
content providers and may be able to respond more quickly to new or emerging
technologies and changes in Internet user requirements.
We have identified the following potential competitive advantages of our product
offerings and Web site from which both real estate professionals and consumers
can possibly benefit:
o more precision in searching data for specific neighborhoods (rather
than simply for ZIP codes or metropolitan areas) creating a more
satisfactory and relevant user experience;
o full national or more expansive coverage of many of our available
datasets;
o timely data for the current year, as well as projections for many
datasets indicating future trends;
o visual presentations and neighborhood mapping; and
o property valuation data.
Our Content Providers and Suppliers
Besides content which we develop ourselves, our principal supply of raw data
which we then process and integrate come from a variety of content partners,
public record databases and deed and mortgage recordings. As we have expanded
our business over the Internet, our content supply sources have diversified to
include national demographic, culture, community, crime and school data. Other
important suppliers include:
o Applied Geographic Systems, Inc., one of the leading providers of
demographic, crime and neighborhood profile data;
o International Data Management, a value-added reseller of Lexis-Nexis
real property data with facilities in the Philippines; and
o 2001 Beyond, Inc., a leading provider of public, private, parochial,
charter and magnet school data.
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Protection of Our Intellectual Property
We rely on a combination of copyrights, trademarks, trade secret laws and
contractual arrangements to protect our intellectual property rights. We do not
own or license any patents.
With respect to our databases, copyright protection is available for the
originality and creativity we use in the selection and arrangement of the data
included therein and 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.
The proprietary applications we use in connection with the compilation of our
databases are also protected by copyrights we own. Copyrights in our software
protect the source code and "look and feel" of the program from plagiarism.
Nevertheless, other programs which could perform the same functions can exist
without violating our copyrights.
We obtain some of the raw data used to compile our databases through license
agreements with third parties such as private commercial data providers and
governmental or quasi-governmental agencies. These license agreements typically
permit us to resell or re-license the information as part of a larger database.
To the extent any of these agreements impose restrictions upon resale, we will,
in turn, impose such restrictions upon our customers through contracts and the
terms of our Web site User Agreement.
We believe that our proprietary know-how in the cleanup, integration, and
display of disparate non-standardized data sets, and the technical and creative
skills of our personnel and principals, are critical factors in establishing and
maintaining our business. Therefore, we enter into confidentiality agreements
with our key employees and consultants, and seek to control access to and
distribution of our proprietary information. There can be no assurance that
these precautions will prevent misappropriation, infringement or other
violations of our intellectual property. It is also possible that third parties
who are not bound to any agreements with us will copy or otherwise use the
content on our Web sites without authorization.
We use and have registered with Network Solutions, Inc., the following names as
Web site addresses:
o MonsterDaata.com
o Big-Decisions-Made-Easy.com
o One-Stop-Daata-Shop.com
o Make-My-Daata.com
o Neighborhood-Place.com
o Relocation-Place.com
o Personal-Private-Eye.com
At present, all our Web site addresses automatically direct the user to our main
Web site at MonsterDaata.com. In the future, we may decide to use our other Web
site addresses for specialized Web sites, powered by our servers.
Applications have been filed in the U.S. Patent and Trademark Office to register
our rights in certain trademarks, namely, DAATA SUPERSTORE, MAKE MY DAATA,
NEIGHBORHOOD PLACE, PERSONAL PRIVATE EYE, and RELOCATION PLACE. We are preparing
to file for registration of the trademark MONSTERDAATA.COM in a distinctive logo
form. No assurance can be given regarding the registration of the trademarks
that are the subject of the applications we have filed (or are intending to
file), and even if we are successful in obtaining trademark registrations from
all these filings there can be no assurance that our rights to these trademarks
will be free from challenges in the future.
32
Properties
We lease office space at 115 Stevens Avenue Valhalla, NY 10595, under a five
year noncancelable lease expiring December 31, 2000. We pay property taxes,
insurance, and other related expenses to the leased properties. Our rent expense
was $87,575 and $68,054 for the years ended December 31, 1998 and 1997,
respectively. Additionally, we signed a lease for our New York City office this
year which houses our sales, marketing, and Web development and Web site
management operations. The New York City lease expires June 30, 2004, and
provides for an annual aggregate rent of $37,178.
Governmental Regulations Affecting our Business
Our operations are not currently subject to direct regulation by any
governmental agency in the United States beyond the typical regulations
applicable to businesses generally. A number of legislative and regulatory
proposals under consideration by federal, state, local and foreign governmental
organizations may lead to laws or regulations concerning various aspects of the
Internet, including:
o on-line content;
o user privacy;
o taxation;
o access charges; and
o jurisdiction.
The adoption of new laws or the unfavorable application of existing laws may
decrease the use of the Internet, which would stifle our growth and decrease
anticipated demand for our services. New laws or changes in the application of
existing laws could also increase our cost of doing business or otherwise have
an adverse effect on our business and growth strategy. Such laws may address one
or more of the following:
o On-line Content and User Privacy. The growth in on-line commerce
could result in more stringent consumer protection laws and
regulations covering such topics as permissible on-line content and
user privacy, including the collection, use, retention and
transmission of personal information provided by on-line users. Such
consumer protection laws could result in substantial compliance
costs and could interfere with the conduct and growth of our
business.
o Taxation. The tax treatment of the Internet and electronic commerce
is currently unsettled. A number of proposals have been made that
could impose taxes on the sale of goods and services and certain
other Internet activities. Previously, the Internet Tax Information
Act was signed into law placing a three-year moratorium on new state
and local taxes on Internet commerce. This moratorium is expected to
end on October 21, 2001. Nonetheless, we cannot assure you that
future laws imposing taxes or other regulations would not
substantially impair the growth of our business and our financial
condition.
o Access Charges. The Federal Communications Commission recently
characterized dial-up Internet traffic bound for Internet service
providers as jurisdictionally mixed but largely interstate in
nature. However, the Federal Communications Commission has made it
clear that its position does not affect its long-standing rule that
Internet and other information services are exempt from interstate
access charges, and it does not change the manner in which consumers
obtain and pay for access to the Internet, nor does it transform the
nature of traffic routed through 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 Federal Communications Commission to impose access fees on
Internet service providers, but not consumers. If these access fees
are imposed on the Internet service providers, the cost of
communicating on the Internet could increase, which could decrease
demand for our developing Internet services.
33
o Jurisdiction. Our on-line services are available over the Internet
throughout the country, and as a result, we expect to sell to
numerous consumers resident in multiple states and even potentially
outside the United States. Such jurisdictions may claim in the
future that we are required to qualify to do business as a foreign
corporation in their states or obtain other qualifications in each
such states or countries. Our failure in the future to qualify as a
foreign corporation in a jurisdiction where we may be required to do
so could subject us to taxes and penalties for the failure to so
qualify, and could limit our ability to conduct litigation to
enforce our rights and protect our intellectual property in such
states. Our Internet operations could also provide a jurisdictional
basis for lawsuits against us in distant or inconvenient forums, and
it could be difficult or costly for us to defend ourselves in any
such lawsuits.
Our collection of data from primary sources is often subject to Federal Freedom
of Information Act laws and regulations and local, county and state
interpretations of that Act. A change in these laws, regulations or
interpretations, or additional laws and regulations, could have an adverse
effect on our business by limiting our ability to collect certain of our data
sets.
MANAGEMENT
Our Directors and Executive Officers
The following table sets forth certain information regarding the members of our
board of directors and our executive officers:
NAME AGE POSITION
---- --- --------
Mitchell Deutsch................ 43 Chief Executive Officer and President,
Chairman of the Board
John Evans...................... 39 Chief Financial Officer and Executive
Vice-President - Corporate Development
James Garfinkel................. 42 Secretary, Treasurer, Vice President,
Director
Thomas Ingegneri................ 55 Director
MITCHELL DEUTSCH has been a member of our board of directors and our Chief
Executive Officer and President since April 2, 1999. He assumed these positions
in connection with our acquisition of TDC. Mr. Deutsch is also the Chairman of
the Board of Directors and the President and Chief Executive Officer of TDC,
positions which he held since 1992. Mr. Deutsch has developed and marketed
information products and services to the real estate industry since 1987, when
he was a partner in Real Estate Resources Corp. and responsible for new business
development, sales and marketing. In this position Mr. Deutsch sold database
products and services to the commercial and residential real estate markets. Mr.
Deutsch's background in technology and information began in 1980 at Sony Corp.
where as Advertising Director for the Consumer Audio Division, he introduced the
Sony Walkman and over 100 other consumer audio products to the U.S. market. In
1983 Mr. Deutsch wrote "Doing Business With the Japanese" published by New
American Library in five languages. Between 1983 and 1987, Mr. Deutsch
co-developed Warner Audio Publishing, a large books on tape company which was
subsequently sold to Warner Communications. Mr. Deutsch is a graduate of Rutgers
College, with a Bachelor of Arts degree in Communications.
JOHN EVANS was promoted November 30, 1999, to Chief Financial Officer and
Executive Vice President - Corporate Development. He previously served as our
Senior Vice President - Corporate Development, Finance and Mergers and
Acquisitions since April 1999. Prior to joining us, Mr. Evans was President of
Asia Media Inc., a management consulting firm founded in 1993 that supported
Asian and U.S. new media, broadcasting and cable communications companies with
their expansion needs in areas that included mergers, acquisitions, direct
investments, financial planning, joint ventures, licensing and royalty
agreements, and strategic alliances. Clients
34
included NBC, China Online, and Landmark Communications. Prior to 1993, Mr.
Evans served as a Vice President for The Bank of New York. Mr. Evans is a
graduate of The University of Michigan with a bachelor of arts degree in
International Relations and English Literature. Mr. Evans is also a Strauss
Fellow and earned a masters degree in international banking, business and
finance from Columbia University's School of International and Public Affairs.
JAMES GARFINKEL has been a member of our board of directors and our Secretary,
Treasurer and a Vice-President since April 2, 1999. He assumed these positions
in connection with our acquisition of TDC. Mr. Garfinkel is also a Director and
the Secretary, Treasurer and Vice President of Product Development at TDC,
positions which he has held since 1992. From 1987 to 1990, Mr. Garfinkel was a
manager in Real Estate Resources Corp. Mr. Garfinkel began his business career
as a commodity futures trading desk manager at PaineWebber and Merrill Lynch in
New York. Mr. Garfinkel is a graduate of Hamilton College, with a bachelor of
arts degree in Economics.
THOMAS INGEGNERI has been a member of our board of directors since April 2,
1999. He assumed this position in connection with our acquisition of TDC. Mr.
Ingegneri is also a Director of TDC, a position which he held since 1995. Since
1990, Mr. Ingegneri has been the senior partner at Thomas & Associates,
providing consulting services to publishing and information companies. Mr.
Ingegneri has previously served in a number of senior management positions in
publishing and information companies, including H.W. Wilson, Springer-Verlag,
and McGraw-Hill. Mr. Ingegneri is a graduate of Franklin & Marshall College,
with a bachelor of arts degree in Business.
Our Board of Directors
Our board of directors is elected at each annual meeting of our stockholders.
Each director holds office until his or her successor is duly elected and
qualified or until his or her earlier resignation or removal, with or without
cause, at any duly noticed special meeting of our stockholders by the
affirmative vote of the holders of a majority of the shares of our common stock
present in person or represented by proxy and entitled to vote at an election of
directors.
Compensation of Directors
Our directors do not currently receive any fees or other compensation in
connection with their services as directors.
Board of Directors Committees
We currently have no separate committees of directors, and all directors
participate in matters customarily delegated to Audit Committees, Compensation
Committees and Executive Committees.
Limitations on Directors' Liabilities and Indemnification
Our Amended and Restated Certificate of Incorporation limits the liability of
our directors and officers for monetary damages for any breach of fiduciary duty
to the maximum extent permitted by Delaware law. As such, we believe that our
directors and officers would not be personally liable for monetary damages for
breach of their fiduciary duties as a director or officer, except for liability
(1) for breach of their duty of loyalty to the corporation or its stockholders;
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (3) for unlawful payments of dividends
or unlawful stock repurchases or redemptions as provided in Section 174 of the
General Corporation Law of the State of Delaware; or (4) for any transaction
from which the director or officer derives an improper personal benefit. In
addition, our Amended and Restated Certificate of Incorporation provides for the
mandatory indemnification of our current and former directors and officers. We
indemnify them against all expenses, including amounts paid upon judgment,
counsel fees and amounts paid and in settlement, in connection with the defense
or settlement of any claim, action, suit or proceeding brought against them
because they are or were our director or officer. Our indemnification does not
extend, however, to circumstances where a current or former director or officer
is adjudged to be liable for his or her own willful misconduct in the
performance of his or her duties. Our bylaws require that we provide advances to
our directors
35
and officers to cover their expenses, as they are incurred, if we receive an
undertaking from them that they will repay these advances if it is later
determined that they were not entitled to be indemnified by us in such
circumstances. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors and officers pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Compensation of Executive Officers
The following table sets forth information about the compensation earned by,
awarded or paid to our executive officers during our fiscal years ended December
31, 1998, 1997 and 1996:
Annual Compensation
-------------------
All Other
Name and Principal Position Year Salary Bonus Compensation
- ------------------------------------------------------------------------------------------------------------
Mitchell F. Deutsch(1)................... 1998 $ 64,487 $0 $ 371,163
President, Chief Executive Officer 1997 $ 237,500 $0 $0
and Chairman of the Board 1996 $ 130,000 $0 $0
Edward J. Tobin(2)....................... 1998 $0 $0 $0
Former Chief Executive Officer, 1997 $0 $0 $0
President and Director 1996 $0 $0 $0
James Garfinkel(1)....................... 1998 $ 57,645 $0 $ 25,455
Secretary, Treasurer and Vice- 1997 $ 35,000 $0 $0
President 1996 $ 66,667 $0 $0
================================================================================
(1) The salary information relates to their employment with Taconic
Data.
(2) Mr. Tobin resigned as an executive officer and director on April 2,
1999 in connection with our acquisition of Taconic Data.
Employment Agreements
We currently have no written employment agreements with any of our key officers
or directors, although we intend to complete employment agreements with our
executive officers during the first quarter of 2000.
STOCK OPTIONS
Option Grants In Last Fiscal Year
There were no options granted, exercised or outstanding during our fiscal year
ended December 31, 1998.
36
Stock Option Plan
A total of 1,750,000 shares of Common Stock have been reserved for issuance
under our 1999 Stock Option Plan (the "Plan"). Our Plan was adopted by the Board
of Directors in June 1999 and approved by our stockholders in July 1999. The
Plan will continue in effect until the earlier of its termination by the Board
or the date on which all of the shares of Common Stock available for issuance
under the Plan have been issued and all restrictions on such shares under the
terms of the Plan and agreements evidencing options granted under the Plan have
lapsed. However, all options shall be granted, if at all, within 10 years from
the date the Plan was adopted by the Board or the date the Plan is duly approved
by our shareholders. Employees, directors and consultants are eligible to
receive options under the Plan.
The Plan provides for the grant of "incentive stock options," within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended, and the grant
of nonstatutory stock options. Incentive stock options may be granted only to
employees. The Plan is administered by our Compensation Committee or other duly
appointed committee of our board of directors, if appointed, which determines
the terms of the options granted, including the exercise price, the number of
shares subject to the option, and the schedule on which the option becomes
exercisable.
The Plan requires that the exercise price for each Option shall be established
in the sole discretion of the Compensation Committee; provided, however, that
the exercise price per share for an incentive option shall be not less than the
fair market value of a Share on the effective date of grant of the option, the
exercise price per share for a nonstatutory option shall be not less than 85% of
the fair market value of a share on the effective date of grant of the option,
and no option granted to an officer, director or greater than 10% shareholder
shall have an exercise price per share less than 110% of the Fair Market Value
of a Share on the effective date of grant of the Option.. The maximum term of
options granted under the Plan is 10 years.
Generally, any vested option held by a recipient who ceases to be employed or
retained by us may be exercised by such recipient within thirty days after such
recipient ceases to be employed or retained by us, or within one year after an
individual recipient ceases to be employed or retained in the case of death or
disability, respectively.
Pursuant to the Plan, as of October 31, 1999, options to purchase 991,400 shares
of Common Stock were outstanding, with exercise prices between $1.00 and $3.02
per share, and 150,000 of the options were vested and exercisable at that time.
Options issued under our 1999 Stock Option Plan do not confer upon recipients
thereof any voting or any other rights of stockholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth herein briefly describes transactions and proposed
transactions over the past 2 years in which we were or are to be a party, in
which one of our directors, officers or 5% stockholders, or an immediate family
member of one of those parties, had or is to have a material interest.
On July 21, 1999, we provided to Mr. John Evans, Chief Financial Officer and
Executive Vice President - Corporate Development, a $118,000 secured loan at 6%
interest. The full amount of the loan was used to exercise options for 118,000
shares of MonsterDaata's stock with an exercise price of $1.00 per share, which
shares secure the loan. The entire principal amount of the loan and any accrued
interest is fully payable upon demand by MonsterDaata.
On December 31, 1997 our notes payable to related parties were to Mitchell
Deutsch and James Garfinkel, totaling $472,459 (including accrued interest of
$22,459). On June 8, 1998 the notes were converted to equity.
37
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, both as of the date of this
prospectus and as of immediately after this offering, regarding the beneficial
ownership of our common stock, both as of the date of this prospectus and as of
immediately after this offering. The table includes:
o each person or entity known by us to be the beneficial owner of more
than 5% of our common stock;
o each of our directors who beneficially owns any shares of our common
stock;
o each of our named executive officers set forth in the Summary
Compensation Table above who beneficially owns any shares of our
common stock; and
o all of our directors and named executive officers as a group.
For purposes of this table, information as to the shares of common stock is
calculated based on 7,660,948 shares of common stock outstanding on December 31,
1999.
38
Name Amount(1) Percent
- ---- --------- -------
Directors
- ---------
Mitchell Deutsch(2) 3,262,174 42.2%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
John Evans 139,300 1.8%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
James Garfinkel(3) 1,335,781 17.4%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
Thomas Ingegneri(4) 99,764 1.3%
54 South Main St.
Cranbury, NJ 08512
Directors and named executive
officers as a group 4,806,219 62.7%
5% Shareholders
- ---------------
Marc Siden(5) 488,229 6.3%
200 Mercer St., #2D
New York, NY 10003
Barry Garfinkel(6) 390,922 5.1%
919 Third Ave.
New York, NY 10022
- ----------------------------
(1) For purposes of this table, "beneficial ownership" is determined in
accordance with the Instructions to Item 403 of Regulation S-B under the
Securities Act of 1933, pursuant to which a person or group of persons is deemed
to have "beneficial ownership" of any shares of common stock that such person
has the right to acquire within 60 days after the date of this prospectus. For
purposes of computing the percentage of outstanding shares of common stock held
by each person or group of persons named above, any shares which such person or
persons have the right to acquire within 60 days after the date of this
prospectus are deemed to be outstanding and beneficially owned by such person or
persons but are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
(2) Includes 103,104 shares owned by Mitchell Deutch's dependent children and
98,000 shares issuable under options exercisable within 60 days. Also includes
23,100 shares issuable within 60 days upon the conversion of 51.33 shares of
Series A Cumulative Convertible Preferred Stock jointly owned with his wife Eve
Silverman, as well as 7,700 shares issuable upon exercise within 60 days of
outstanding warrants. These 30,800 shares are registered for sale pursuant to
this prospectus. Does not include 154,000 shares issuable upon conversion within
60 days of Series A Cumulative Convertible Preferred Stock or upon exercise of
outstanding warrants owned by pension accounts managed for the benefit of Eve
Silverman. The 154,000 shares in these pension accounts are included in the
shares registered for sale pursuant to this prospectus.
(3) Includes 23,040 shares owned by James Garfinkel's dependent child and 42,000
shares issuable under options exercisable within 60 days.
(4) These shares are held in the name of Thomas Associates.
(5) These shares are held in the name of What About Me, Inc., an entity owned by
Marc Siden. Marc Siden has been working with us since April 1999 as a sales
consultant with the title "Senior Vice-President - Business Development." In
1998, Mr. Siden served as President of New Beginnings Venture Group, a venture
capital firm that provided bridge funding to TDC. In 1993, Mr. Siden was
employed as a Managing Director of Biltmore Securities, a small regional
brokerage firm. In August 1997, Mr. Siden consented to the entry of an order by
the SEC in connection with his prior association with Biltmore Securities,
without admitting or denying the facts or findings contained in such order,
which suspended him from associating with any broker, dealer, municipal
securities dealer, investment company or investment advisor for a period of 12
months and ordered him to cease and desist from engaging in specified violations
of U.S. federal securities laws.
(6) Includes 30,800 shares of common stock issuable within 60 days upon the
conversion of 102.67 shares of Series A Cumulative Convertible Preferred Stock
held by Barry Garfinkel, as well as 15,400 shares issuable upon exercise within
60 days of outstanding warrants. These 46,200 shares are registered for sale
pursuant to this prospectus. Barry Garfinkel is James Garfinkel's father.
39
SELLING SHAREHOLDERS
The following table sets forth as of December 21, 1999, (i) the name of
each Selling Shareholder, (ii) the amount of shares of Common Stock which may be
offered by each Selling Shareholder, (iii) the amount of shares of Common Stock
to be offered by each Selling Shareholder, and (iv) the amount and percentage of
shares of Common Stock to be owned by each such holder following the completion
of the offering. The amounts of Common Stock set forth below, under the caption
"Amount to be Offered," represent the aggregate number of shares of (A) Common
Stock owned by each Selling Stockholder, (B) Common Stock issuable upon
conversion of the Series A Cumulative Convertible Preferred Stock owned by each
Selling Shareholder, assuming the maximum conversion rate of 450 shares of
common stock per share of Series A Cumulative Convertible Preferred Stock is
applicable, and (C) Common Stock issuable upon the exercise of warrants issued
to purchasers of Series A Cumulative Convertible Preferred Stock.
Shares Amount to Shares Owned Percentage Owned
Selling Shareholder Owned be Offered after Offering after Offering
- ------------------- ------ ---------- -------------- --------------
Allegra Films Pension, LP(1) 39,632.0 39,632.0 0 *
Bet Torah 100.0 100.0 0 *
Ron Deutsch 98,640.0 98,640.0 0 *
Barry Garfinkel 61,600.0 61,600.0 0 *
David Garfinkel 61,600.0 61,600.0 0 *
Pala Mgmt. Corp. Ret. Tr. 15,400.0 15,400.0 0 *
Gregory Hotaling(2) 1,665.0 1,665.0 0 *
Huneke Family Trust 100,000.0 100,000.0 0 *
Ice Hockey in Harlem, Inc. 500.0 500.0 0 *
David Jacquin 41,667.5 41,667.0 .5 *
Ira Kotel(2) 8,332.5 8,332.0 .5 *
Gustavo Larramendi 30,800.0 30,800.0 0 *
The Meaningful Life Center 800.0 800.0 0 *
Nicholas O'Keefe(2) 8,332.5 8,332.0 .5 *
George Regan 20,835.0 20,835.0 0 *
Roberts, Sheridan & Kotel, a
Professional Corporation 229,167.5 229,167.0 .5 *
Todd Roberts(2) 170,835.0 170,835.0 0 *
Troy Roberts 8,332.5 8,332.0 0 *
Holly Schepisi(2) 2,920.0 2,920.0 0 *
Student Advocacy Inc. 100.0 100.0 0 *
The Torah Program, Inc. 500.0 500.0 0 *
Eve Silverman Def'd Contr. Plan(1) 114,368.0 114,368.0 0 *
Ziona Silverman 12,320.0 12,320.0 0 *
Leslie VanDermeer 15,400.0 15,400.0 0 *
* Represents less than 1.0%. of the outstanding shares of common stock.
(1) Pension account managed for the benefit of Eve Silverman, the wife of
Mitchell Deutsch who is the Chief Executive Officer and President and a
director of MonsterDaata.com, Inc.
(2) These selling shareholders are employees of Roberts, Sheridan & Kotel, a
Professional Corporation. As set forth in the "Legal Counsel" section
below, this law firm is providing certain legal services in connection
with this offering, and it has previously provided legal services to us in
connection with a number of other legal matters.
DESCRIPTION OF OUR SECURITIES
The following summary of certain provisions of our capital stock describes all
material provisions, but does not purport to be complete and is subject to, and
qualified in its entirety by, our Certificate of Incorporation and By-laws that
are included as exhibits to the Registration Statement of which this prospectus
is a part and by the provisions of applicable law.
We have filed our Certificate of Incorporation to (i) authorize 50,000,000
shares of common stock and 10,000,000 shares of preferred stock, each $.01 par
value per share, and (ii) set forth the rights and privileges of the common
stock and the preferred stock as described below. The discussion herein
describes our capital stock, the Certificate
40
of Incorporation and the By-laws in effect upon effectiveness of the
Registration Statement of which this prospectus is a part.
Common Stock
As of December 31, 1999, 7,660,948 shares of our common stock were issued and
outstanding. Holders of common stock have the right to cast only one vote for
each share of common stock held in all matters as to which the vote or consent
of our stockholders is required or taken. There are no cumulative voting rights.
Accordingly, the holders of a majority of the shares of common stock voting for
the election of directors can elect all the directors if they choose to do so,
subject to any voting rights of holders of preferred stock to elect directors.
There are no pre-emptive rights for our common stock.
Stockholders holding a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of our stockholders.
Holders of our common stock are entitled to receive such dividends as and if
declared by our board subject to the rights of holders of any outstanding
preferred stock. In the event of the liquidation, distribution or sale of
assets, dissolution or winding up of our affairs, all of our tangible and
intangible assets remaining after the payment of all debts, any preferential
amounts to be distributed to holders of our Preferred Stock, and other
liabilities, shall be distributed, pro rata, among the holders of our common
stock.
Preferred Stock
General
As of December 31, 1999, 1,561.23 shares of our preferred stock were issued and
outstanding. We may issue shares of preferred stock from time to time in one or
more series as determined by our board of directors. Our board is authorized to
establish the designation, powers, preferences, voting rights and other rights
of each series of preferred stock including (a) the rate of distribution, (b)
the price at and the terms and conditions on which shares shall be redeemed, (c)
the amount payable upon shares for distributions of any kind, (d) the terms and
conditions on which shares may be converted if the shares of any series are
issued with the privilege of conversion and (e) voting rights except as limited
by law. Our board of directors could, without shareholder approval, issue
preferred stock with voting and other rights that could adversely affect the
voting power of the holders of common stock and which could have certain
antitakeover effects. The number of authorized shares of any series of preferred
stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by resolution adopted by our board of directors.
Although we currently do not have any fixed plans to designate any series of
preferred stock other than the Series A Preferred Stock or to issue additional
shares of preferred stock other than the shares of Series A Preferred Stock,
there can be no assurance that we will not do so in the future. As a result, we
could authorize the issuance of a series of preferred stock which would grant to
holders preferred rights to our assets upon liquidation, the right to receive
dividend coupons before dividends would be declared to holders of common stock,
and the right to the redemption of such shares, together with a premium, prior
to the redemption of common stock. In addition, our Board of Directors could
issue large blocks of voting stock to fend off unwanted tender offers or hostile
takeovers without further stockholder approval. Our current stockholders have no
redemption rights.
Series A Cumulative Convertible Preferred Stock
Our Board of Directors has authorized the issuance of up to 2000 shares, of
which 1,561.23 were outstanding as of December 31, 1999, of Series A Cumulative
Convertible Preferred Stock, par value $.01 per share, the rights, preferences
and characteristics of which are as follows:
41
Dividends
The holders of Series A Cumulative Convertible Preferred Stock are entitled to
receive, out of assets legally available for that purpose, a quarterly
cumulative dividend equal to 1.5% of the then applicable liquidation preference
(i.e., 6% per annum, compounded quarterly), subject to the prior and superior
rights of the holders of any shares of any series or class of capital stock
ranking prior and superior to the shares of Series A Cumulative Convertible
Preferred Stock. We do not intend to pay cash dividends on the Series A
Cumulative Convertible Preferred Stock or the underlying common stock for the
foreseeable future.
Conversion
Each share of Series A Cumulative Convertible Preferred Stock is convertible, at
any time at the option of the holder thereof, into validly issued, fully paid
and nonassessable shares of common stock. Each share of Series A Cumulative
Convertible Preferred Stock shall be convertible into shares of common stock at
a conversion ratio of 300 shares of common stock for each share of Series A
Cumulative Convertible Preferred Stock; provided, however, that if a "Conversion
Adjustment Condition" has not been satisfied on or prior to February 28, 2000,
the conversion ratio shall be 450 shares of common stock for each outstanding
share of Series A Cumulative Convertible Preferred Stock from and after such
February 28, 2000 date. The Conversion Adjustment Condition, as defined in the
Certificate of Designations for our Series A Cumulative Convertible Preferred
Stock, is satisfied if we receive net proceeds of at least $5,000,000 from the
private or public sale of common stock (or sale of preferred stock junior to the
Series A Cumulative Convertible Preferred Stock) issued on terms which fairly
value our common stock at more than $3.50 per share.
Series A Preferred Stock holders are entitled to an adjustment in the conversion
ratio upon specified events, including a subdivision or combination of our
outstanding common stock, certain dividends and distributions, reclassifications
or recapitalization.
Automatic Conversion
The Series A Preferred Stock will be automatically converted into shares of
common stock upon the occurrence of any of the following events:
o our consolidation or merger with or into any other unrelated entity
in which we are not the surviving entity, or any other corporate
reorganization or transaction in which in excess of 75% of our
voting power is transferred to an unrelated entity;
o a sale or other disposition of substantially all of our assets; or
o our receipt of a written notice from the holders of more than 90% of
the holders of our Series A Preferred Stock electing to convert
their shares.
Liquidation
Upon our liquidation, dissolution or winding up, whether voluntary or
involuntary (a "Liquidation Event"), after payment or provision for payment of
our debts and other liabilities, the holders of the Series A Cumulative
Convertible Preferred Stock then outstanding will first be entitled to be paid
out of our assets available for distribution to our shareholders, before any
payment or declaration and setting apart for payment of any amount shall be made
in respect of junior stock, $1,000 per share of Series A Preferred Stock
(subject to appropriate adjustment to reflect any stock split, combination,
reclassification or reorganization of the Series A Preferred Stock), plus an
amount equal to all declared and unpaid dividends. If upon any Liquidation
Event, whether voluntary or involuntary, the assets to be distributed to the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such shareholders of the full preferential amounts aforesaid, then
all of our assets to be distributed shall be so distributed ratably to the
holders of the Series A Preferred Stock on the basis of the number of shares of
Series A Preferred Stock held. All shares of Series A Preferred Stock shall rank
as to
42
payment, upon the occurrence of a Liquidation Event, senior to the common stock
as provided herein and, unless the terms of such series shall provide otherwise,
senior to all other series of our preferred stock.
Redemption
At any time after the first anniversary of the date of original issuance of the
Series A Cumulative Convertible Preferred Stock, we may, at our option, redeem
the shares in whole, but not in part, at a redemption price of $1,100 per share
plus all accrued and unpaid dividends; provided, however, that we shall not
redeem Series A Cumulative Convertible Preferred Stock or give notice of any
redemption unless we have sufficient and lawful funds to redeem all of the then
outstanding Series A Cumulative Convertible Preferred Stock. There are no
sinking fund provisions applicable to the Series A Cumulative Convertible
Preferred Stock.
Voting Rights
The holders of Series A Cumulative Convertible Preferred Stock do not have
voting rights on any matters, except regarding any amendment to our Certificate
of Incorporation that adversely affects the conversion terms or other economic
rights or preferences of the Series A Preferred Stock.
Warrants
The Ocean Strategic Holdings Limited Warrant
On March 31, 1999, in consideration for the modification of the exercise price
of a previously issued warrant (from $0.01 per share to $1.00 per share), we
issued to Ocean Strategic Holdings Limited a warrant to purchase 500,000 shares
of our common stock at an exercise price of $3.00 per share. The warrant expires
on March 31, 2004, and is not exercisable until March 31, 2000. The warrant was
issued pursuant to the provisions of Regulation S.
The warrant holder is entitled to an adjustment in the kind and number of shares
of stock receivable upon exercise of the warrant upon specified events,
including reclassification of our common stock, capital reorganization, stock
dividend or other change in outstanding shares of our common stock,
consolidations or mergers with or into another corporation other than a
consolidation or merger in which we are the continuing corporation and which
does not result in any reclassification, capital reorganization, stock dividend
or other change of outstanding shares or common stock and sales of our property
to another entity as an entirety.
The warrant holder may not exercise any portion of the warrant which would give
him a beneficial ownership of 5.0% or more of the outstanding shares of common
stock at the time of such exercise. The warrant holder my waive this limitation
with written notice to us made at least 61 days after a prior notice to us.
The warrant may only be transferred (i) if the transfer gives the transferee or
transferor the right to purchase at least 5,000 shares of our common stock and
(ii) in compliance with applicable federal and state securities laws by the
transferor and transferee.
Common Stock Warrants
In November 1999, in connection with the consummation of stock purchase
agreements with various parties for the purchase of our Series A Cumulative
Convertible Preferred Stock, we issued 590,730 warrants to purchase shares of
our common stock at a purchase price of $3.75 per share, subject to adjustment.
193,894 of these warrants were outstanding as of December 1, 1999, of which
76,834 expire in November 2000 and the balance in November 2004. The warrants
were issued pursuant to the provisions of Regulation D.
The warrant holders are entitled to an adjustment in the kind and number of
shares of stock receivable upon exercise of the warrant upon specified events,
including reclassification of our common stock, capital reorganization, stock
dividend or other change in outstanding shares of our common stock,
consolidations or mergers to which we are a party other than a merger or
consolidation in which we are the continuing corporation or
43
in the case of any sale or conveyance to another entity of the our property as
an entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation.
The warrants may only be transferred in compliance with applicable federal and
state securities laws by the transferor and transferee. The warrants may be
exercised by paying the exercise price in cash or by tendering warrants with a
cash value equal to the exercise price, as determined from the closing price of
our common stock on the day of exercise as reported on the OTC Bulletin Board or
other national market system.
Section 203 of the Delaware General Corporation Law
We are subject to a statute under the Delaware Act regulating "business
combinations," defined to include a broad range of transactions, between
Delaware corporations and "interested stockholders," defined as persons who have
acquired at least 15% of a corporation's stock. Under the statute, a corporation
may not engage in any business combination with any interested stockholder for a
period of three years from the date such person became an interested stockholder
unless certain conditions are satisfied. We have not sought to "elect out" of
the statute and, therefore the restrictions imposed by such statute apply to us.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is Corporate Stock
Transfer.
SHARES ELIGIBLE FOR FUTURE SALE
As of December 31, 1999, 7,660,948 shares of our common stock were issued and
outstanding. Of that amount, 1,275,263 shares were freely tradable without
restriction or further registration under the Securities Act, unless purchased
or held by our "affiliates," as defined in Rule 144 of the Securities Act. The
remaining 6,385,685 shares are "restricted securities," which under certain
circumstances may be sold in compliance with Rule 144 or other exemptions under
the Securities Act, and in particular the 6,000,000 restricted shares issued in
connection with our acquisition of Taconic Data could become eligible for resale
under Rule 144 in April 2000.
In general, under Rule 144, a person, including an affiliate, who has
beneficially owned shares of our common stock for at least one year (including
the prior holding period of any prior owner other than an affiliate) may resell,
within any three-month period, up to the following amount of shares, whichever
is greater:
o one percent of the then outstanding shares of our common stock; or
o the average weekly trading volume in the common stock during the
four calendar weeks preceding each such sale.
A person who is not our affiliate for at least three months, and who has
beneficially owned his shares for at least two years (including the holding
period of any prior owner other than an affiliate) may sell such shares under
Rule 144 without regard to the limitations described above.
Rule 144 defines "affiliate" of a company as a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such company. Affiliates of a company generally
include its directors, executive officers and principal shareholders.
Of the 6,385,685 restricted shares described above, we have registered 2,000
shares for public resale by Selling Shareholders as set forth in this
prospectus. An additional number of shares, up to 1,041,845, that may be issued
upon conversion of our Series A Cumulative Convertible Preferred Stock and the
exercise of the related common stock warrants are registered for resale as set
forth in this prospectus.
44
Additionally, as more fully described elsewhere in this prospectus, we have
991,400 shares of common stock issuable upon the exercise of options outstanding
as of October 31, 1999 under our 1999 Stock Option Plan exercisable at prices
ranging from $1.00 to $3.02 per share, and 500,000 shares of common stock
issuable upon the exercise of a warrant issued to Ocean Strategic Holdings
Limited, exercisable at a price of $3.00 per share. The warrant expires on March
31, 2004, and is not exercisable until March 31, 2000. Shares issued upon the
exercise of this warrant will be "restricted securities."
As of December 31, 1999, there were approximately 490 current holders of record
of our common stock.
Sales of substantial amounts of shares of common stock in the public market, the
perception that such sales could occur, or the issuance of other securities,
could adversely affect the market price of the common stock and could impair our
future ability to raise capital through an offering of our equity securities.
PLAN OF DISTRIBUTION
We are registering 1,043,845 shares of common stock covered by this prospectus
on behalf of the Selling Shareholders. We will pay the costs and fees of
registering the common stock, but the Selling Shareholders will pay any
brokerage commissions, discounts or other expenses relating to the sale of the
common stock.
The Selling Shareholders may, from time to time, sell all or portion of the
shares of common stock on any market upon which the common stock may be quoted,
in privately negotiated transactions or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale, at prices related to
the prevailing market prices, or at negotiated prices. The shares of common
stock could be sold by the Selling Shareholders by one or more of the following
methods:
o block trades in which the broker or dealer so engaged will attempt
to sell the shares of the common stock as agent, but may position
and resell a portion of the block as principal, in order to
facilitate the transaction;
o purchases by a broker or dealer as principal and the resale by the
broker or dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o privately negotiated transactions;
o market sales, both long and short to the extent permitted under the
federal securities laws; and
o a combination of any of these methods of sale.
When selling the common stock, the Selling Shareholders may enter into hedging
or other types of transactions with third parties. For example, the Selling
Shareholders may:
o enter into transactions involving short sales of the common stock by
broker-dealers;
o sell common stock short themselves and redeliver such shares to
close out their short positions;
o enter into options or other types of transactions that require the
selling shareholder to deliver common stock to a broker-dealer, who
will then resell or transfer the common stock under this prospectus;
or
o loan or pledge the common stock to a broker-dealer, who may sell the
loaned shares or, in the event of default, sell the pledged shares.
45
In effecting sales, brokers and dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Broker-dealers may receive
commissions, discounts or concessions for their services from the Selling
Shareholders or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser, in amounts to be negotiated. These commissions
or discounts are not expected to exceed those customary in the types of
transactions involved. Broker-dealers may agree with the Selling Shareholders to
sell a specified number of shares of common stock at a stipulated price per
share, and, to the extent such broker-dealer is unable to do so acting as agent
for the selling shareholder, to purchase as principal any unsold shares of
common stock at the price required to fulfill the broker-dealer commitment to
the Selling Shareholders.
The Selling Shareholders and any broker-dealer or agent involved in the sale or
resale of the common stock may qualify as "underwriters" within the meaning of
Section 2(a)(11) of the Securities Act and a portion of any proceeds of sale and
the broker-dealers' or agents' commissions, discounts, or concessions may be
deemed to be underwriters' compensation under the Securities Act.
In addition to selling their common stock under this prospectus, the Selling
Shareholders may:
o agree to indemnify any broker-dealer or agent against certain
liabilities related to the selling of the common stock, including
liabilities arising under the Securities Act;
o transfer their common stock in other ways not involving market
makers or established trading markets, including directly by gift,
distribution, or other transfer; or
o sell their common stock under Rule 144 of the Securities Act rather
than under this prospectus, if the transaction meets the
requirements of Rule 144.
We have informed the Selling Shareholders that the anti-manipulation provisions
of Regulation M promulgated under the Securities Exchange Act may apply to the
sales of their shares offered hereby, and we have also advised the Selling
Shareholders of the requirement for delivery of this prospectus in connection
with any sale of the common stock offered hereby.
LEGAL PROCEEDINGS
We are involved in litigation through the normal course of business. We believe
that the resolution of these matters will not have a material adverse effect on
our financial position.
In addition, there is a note payable in the amount of $298,702 to a stockholder
which is in default. We are currently involved in a litigation with this
stockholder. The outcome of this suit can not be determined at this time.
However we believe that no additional material liabilities will result from this
suit. Accordingly, we have classified the note as currently due.
LEGAL COUNSEL
The validity of the common stock offered hereby will be passed upon for us by
Roberts Sheridan & Kotel, a Professional Corporation, New York, New York. The
firm, together with certain of its employees, beneficially own an aggregate of
421,252 shares of Common Stock, assuming the conversion of all shares of Series
A Cumulative Convertible Preferred Stock beneficially owned by Roberts, Sheridan
& Kotel, a Professional Corporation, and its employees, at the adjusted
conversion rate of 450 shares of common stock per share of Series A Cumulative
Convertible Preferred Stock. The 421,252 shares of common stock also includes
shares issued or issuable upon the exercise of outstanding warrants. All of such
shares of Common Stock are included in this offering.
CHANGES IN ACCOUNTANTS
Effective June 15, 1999, Thomas P. Monahan, our independent auditor for the
fiscal year ended September 30, 1998, was dismissed by Registrant as part of
our transition activities following the completion of our
46
acquisition of TDC. Effective June 15, 1999, our board of directors appointed
Marcum & Kliegman LLP, the independent auditors for TDC, as our new independent
auditors.
EXPERTS
Our financial statements as of December 31, 1997 and December 31, 1998 and for
each of the years in the period then ended included in this prospectus have been
so included in reliance on the report of Marcum & Kliegman LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
AVAILABLE INFORMATION
We filed a registration statement with the SEC on Form SB-2 relating to the
shares offered in this prospectus. This prospectus does not contain all of the
information included in the registration statement. For further information
about us and the shares we are offering in this prospectus, refer to the
registration statement and its exhibits. The statements we make in this
prospectus regarding the content of any contract or other document are
necessarily not complete, and you may examine the copy of the contract or other
document that we filed as an exhibit to the registration statement. All our
statements about those contracts or other documents are qualified in their
entirety by referring you to the exhibits to the registration statement.
After the effective date of this offering, we intend to furnish to our
stockholders annual reports containing audited financial statements and interim
reports. We currently file annual and quarterly reports and other information
with the SEC. Such reports and other information can be inspected and copied at
the public reference facility of the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048, and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained by mail from the Public Reference Section of the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Our common stock is traded in the over-the-counter market
and is quoted on the OTC Bulletin Board(R) and such reports, proxy statements
and other information concerning us may be inspected and copied at the offices
of the National Association of Securities Dealers, Inc., 9801 Washingtonian
Boulevard, Gaithersburg, Maryland 20878. In addition, we are required to file
electronic versions of these documents with the SEC through the SEC's Electronic
Data Gathering, Analysis and Retrieval ("EDGAR") system. The SEC maintains a Web
site at http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the SEC.
47
MONSTERDAATA.COM, INC.
CONTENTS
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Page
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FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Balance Sheets as of December 31, 1998 and
September 30, 1999 (Unaudited) F-2 - F3
Statements of Operations for the Years Ended
December 31, 1998 and 1997; and for the Nine
Months Ended September 31, 1999 and 1998 (Unaudited) F-4
Statement of Changes in Stockholders' Deficiency for
Years Ended December 31, 1998 and 1997; and for the
Nine Months Ended September 30, 1999 (Unaudited) F-5 -F-6
Statements of Cash Flows for the Years Ended December 31,
1998 and 1997; and for the Nine Months Ended September 31,
1999 and 1998 (Unaudited) F-7 - F-8
Notes To Financial Statements F-9 - F22
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
MonsterDaata.com, Inc.
We have audited the accompanying balance sheet of MonsterDaata.com, Inc. as of
December 31, 1998 and the related statements of operations, changes in
stockholders' deficiency and cash flows for the years ended December 31, 1998
and 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MonsterDaata.com, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
years ended December 31, 1998 and 1997 in conformity with generally accepted
accounting principles.
S/ Marcum & Kliegman LLP
May 28, 1999
New York, New York
F-1
MONSTERDAATA.COM, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
ASSETS
September
December 30,1999
31, 1998 (Unaudited)
----------------------------
CURRENT ASSETS
Cash $ 55,592 $122,386
Accounts receivable 658,940 350,522
Prepaid expense and other current assets -- 83,942
-------- --------
Total Current Assets 714,532 556,850
-------- --------
PROPERTY AND EQUIPMENT, Net 132,362 163,694
-------- --------
OTHER ASSETS
Purchase database -- 118,500
Security deposits 8,333 16,288
-------- --------
Total Other Assets 8,333 134,788
-------- --------
TOTAL ASSETS $855,227 $855,332
======== ========
See notes to financial statements.
F-2
MONSTERDAATA.COM, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
December September
31, 1998 30,1999
(Unaudited)
--------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 603,901 $ 713,229
Deferred revenue 1,083,711 855,672
Current maturities of notes payable, stockholders 298,702 298,702
Current maturities of capital lease obligations 58,234 27,800
----------- ----------
Total Current Liabilities 2,044,548 1,895,403
----------- ----------
OTHER LIABILITIES
Capital lease obligations, less current maturities 4,937 19,045
Note payable 62,236 --
Notes payable, stockholders 21,833 --
----------- ----------
Total Other Liabilities 89,006 19,045
----------- ----------
TOTAL LIABILITIES 2,133,554 1,914,448
----------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred stock - $0.01 par value; 10,000,000
shares authorized; none issued and outstanding -- --
Common stock - $0.01 par value; 50,000,000 shares
authorized, and 6,024,773 and 7,377,415 shares
issued and outstanding, respectively 60,248 73,775
Additional paid in capital 1,579,532 3,602,694
Options and warrants -- 83,531
Notes receivable, stockholder -- (118,000)
Accumulated deficit (2,918,107) (4,701,116)
----------- ----------
TOTAL STOCKHOLDERS' DEFICIENCY (1,278,327) (1,059,116)
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 855,227 $ 855,332
=========== ===========
See notes to financial statements.
F-3
MONSTERDAATA.COM, INC.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Nine For the Nine
For the Year For the Months Ended Months Ended
Ended Year Ended September September
December 31, December 30, 1999 30, 1998
1998 31, 1997 (Unaudited) (Unaudited)
----------------------------------------------------------
SALES $ 1,966,713 $ 3,099,139 $ 1,806,574 $ 1,406,647
COST OF SALES 1,182,158 1,610,853 561,253 851,154
----------- ----------- ----------- -----------
GROSS PROFIT 784,555 1,488,286 1,245,321 555,493
----------- ----------- ----------- -----------
OPERATING EXPENSES
Product development costs -- -- 743,117 --
Selling, general, and
administrative expenses 2,352,893 1,109,736 2,078,552 1,694,083
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 2,352,893 1,109,736 2,821,669 1,694,083
----------- ----------- ----------- -----------
OPERATING (LOSS)
INCOME (1,568,338) 378,550 (1,576,348) (1,138,590)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense, net of interest
income (78,156) (104,205) 8,339 (56,272)
Gain on sale of investment -- 4,083 -- --
Merger and acquisition costs -- -- (215,000) --
Other income 24 14,527 -- --
----------- ----------- ----------- -----------
TOTAL OTHER EXPENSE (78,132) (85,595) (206,661) (56,272)
----------- ----------- ----------- -----------
NET (LOSS) INCOME BEFORE
INCOME TAXES (1,646,470) 292,955 (1,783,009) (1,194,862)
INCOME TAXES 325 2,000 -- --
----------- ----------- ----------- -----------
NET (LOSS) INCOME $(1,646,795) $ 290,955 $(1,783,009) $(1,194,862)
----------- ----------- ----------- -----------
Weighted average number of shares
outstanding 6,024,773 6,024,773 6,762,826 6,024,773
----------- ----------- ----------- -----------
Net (Loss) Income per Share
- - Basic $(0.27) $0.05 $(0.26) $(0.20)
------ ----- ------ ------
- - Diluted $(0.27) $0.04 $(0.26) $(0.20)
------ ----- ------ ------
See notes to financial statements.
F-4
MONSTERDAATA.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
- --------------------------------------------------------------------------------
Par Additional Options
Value Paid in and Notes Accumulated
Shares $0.01 Capital Warrants Receivable Deficit Total
-----------------------------------------------------------------------------------------------
BALANCE - January 1, 1997 2,803,750 $28,038 $ (26,038) $ -- $ -- $ (1,562,267) $(1,560,267)
Stock transaction among
stockholders -- -- 140,330 -- -- -- 140,330
Issued shares for services 213,193 2,132 296,338 -- -- -- 298,470
Debt to equity conversion 758,158 7,582 962,836 -- -- -- 970,418
Capital contribution -- -- 228,562 -- -- -- 228,562
Reorganization 2,249,672 22,496 (22,496) -- -- -- --
Net Income -- -- -- -- -- 290,955 290,955
--------- ------- ---------- ---------- ---------- ------------- -----------
BALANCE - December 31,
1997 6,024,773 60,248 1,579,532 -- -- (1,271,312) 368,468
Net Loss -- -- -- -- -- (1,646,795) (1,646,795)
--------- ------- ---------- ---------- ---------- ------------- -----------
BALANCE - December 31,
1998 (Forward) 6,024,773 $60,248 $1,579,532 $ -- $ -- $ (2,918,107) $(1,278,327)
--------- ------- ---------- ---------- ---------- ------------- -----------
See notes to financial statements.
F-5
MONSTERDAATA.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY, Continued
- --------------------------------------------------------------------------------
Par Additional Options
Value Paid in and Notes Accumulated
Shares $0.01 Capital Warrants Receivable Deficit Total
-----------------------------------------------------------------------------------------------
BALANCE - December 31,
1998 (Forward) 6,024,773 $60,248 $1,579,532 $ -- $ -- $(2,918,107) $(1,278,327)
Issuance of options for service
rendered -- -- -- 48,625 -- -- 48,625
Issuance of warrants -- -- -- 83,531 -- -- 83,531
Issuance of common stock 1,352,642 13,527 2,023,162 (48,625) (118,000) -- 1,870,064
Net Loss -- -- -- -- -- (1,783,009) (1,783,009)
--------- ------- ---------- ---------- ---------- ------------ -----------
Balance - September 30, 1999
(unaudited) 7,377,415 $73,775 $3,602,694 $ 83,531 $(118,000) $(4,701,116) $(1,059,116)
========= ======= ========== ========== ========= =========== ===========
See notes to financial statements.
F-6
MONSTERDAATA.COM, INC.
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
For the Nine For the Nine
For the For the Months Ended Months Ended
Year Ended Year Ended September 30, September 30,
December December 1999 1998
31, 1998 31, 1997 (Unaudited) (Unaudited)
------------------------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net (loss) income $(1,646,795) $ 290,955 $(1,783,009) $(1,194,862)
----------- ----------- ----------- -----------
Adjustments to reconcile net (loss)
income to Net cash used in operating
activities:
Depreciation 124,184 127,861 78,312 86,584
Stock based compensation 211,800 -- -- 211,800
Stock issued for services -- -- 248,821
Accrued interest 49,980 -- -- 49,480
Equity in (earnings) loss of Assetrac -- (4,083) -- --
(Increase) decrease in accounts
receivable (341,275) 26,236 308,419 (377,008)
Decrease (increase) in prepaid expense
and other current assets 45 444 (8,942) 45
Increase in database cost -- -- (118,500) --
Increase in security deposits -- -- (7,955) --
Increase (decrease) in accounts
payable and Accrued expenses 714,601 (465,033) 561,300 672,318
Increase (decrease) in deferred
revenue 766,205 (346,369) (228,039) 323,815
----------- ----------- ----------- -----------
TOTAL ADJUSTMENTS 1,525,540 (660,944) 833,416 967,034
----------- ----------- ----------- -----------
NET CASH USED IN
OPERATING ACTIVITIES (121,255) (369,989) (949,593) (227,828)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (55,761) (18,867) (57,710) (41,147)
Investment in Assetrac -- (331,522) -- --
Proceeds from sale of Assetrac -- 350,000 -- --
----------- ----------- ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (55,761) (389) (57,710) (41,147)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net proceeds from issuance of common
stock -- -- 1,003,423 --
Proceeds from contributed capital -- -- 223,000 --
(Repayments) proceeds of note payable,
bank -- (250,000) -- --
----------- ----------- ----------- -----------
(Forward) $ -- $ (250,000) $ 1,226,423 $ --
----------- ----------- ----------- -----------
See notes to financial statements.
F-7
MONSTERDAATA.COM, INC.
STATEMENTS OF CASH FLOWS, Continued
- --------------------------------------------------------------------------------
For the Nine For the Nine
For the For the Months Ended Months Ended
Year Ended Year Ended September 30, September 30,
December December 1999 1998
31,1998 31, 1997 (Unaudited) (Unaudited)
-------------------------------------------------------------
(Forward) $ $ (250,000) $ 1,226,423 $ --
Proceeds from notes payable 350,000 62,236 -- --
Proceeds from notes payable, related
parties -- 472,459 -- 350,000
Proceeds from notes payable,
stockholders 20,000 216,958 -- 20,000
Principal repayments of note payable,
stockholders (59,104) -- (21,833) (29,195)
Principal repayments of note payable -- -- (62,232)
Principal repayments of capital lease
obligations (111,858) (102,438) (68,261) (66,738)
----------- ----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 199,038 399,215 1,074,097 274,067
----------- ----------- ----------- -----------
NET INCREASE IN CASH 22,022 28,837 66,794 5,092
CASH - Beginning 33,570 4,733 55,592 33,570
----------- ----------- ----------- -----------
CASH - Ending $ 55,592 $ 33,570 $ 122,386 $ 38,662
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the periods for:
Interest $ 21,081 $ 72,267 $ -- $ --
Noncash investing and financing activities:
Conversion of trade accounts payable to
notes 296,666 172,666 -- --
Conversion of trade accounts payable to
equity 227,000 -- 20,000 --
Conversion of notes payable to equity 477,498 -- -- 477,498
Conversion of notes payable, related
parties to equity 490,920 -- -- 490,920
Forgiveness of debt recorded as
contributed capital 228,562 -- -- 228,562
Purchase of equipment through capital
leases 31,802 -- 51,935 31,802
Issuance of stock for officers' bonuses -- -- 131,350 --
Issuance of stock for service rendered -- -- 90,625 --
Issuance of warrants -- -- 83,531 --
Issuance of stock for website
development costs -- -- 230,000 --
Exercise of options for a note -- -- 193,000 --
See notes to financial statements.
F-8
NOTE 1 - Summary of Significant Accounting Policies
Business Combination
D-Vine, Ltd. ("D-Vine") was originally incorporated on July 22, 1985 as an
inactive company and reactived its corporate charter on September 27, 1995 in
the state of Delaware. On April 2, 1999, D-Vine, a public shell, acquired 99.2%
of Taconic Data Corp.'s ("Taconic") common stock in exchange for 6,000,000
shares of D-Vine's common stock (the "Acquisition"). This Acquisition, which has
been treated as a capital transaction in substance, rather than a business
combination, was deemed a "reverse acquisition" for accounting purpose.
Accordingly, Taconic was the accounting acquirer and the historical financial
statements prior to April 2, 1999 were those of Taconic. In the accompanying
financial statements, the capital structure and earnings (losses) per share of
Taconic have been retroactively restated to reflect the Acquisition as if it
occurred at the beginning of the periods. On April 5, 1999, D-Vine changed its
name to MonsterDaata.com, Inc. (the "Company").
Nature of Business
The Company is a professional business information company with a specialty in
real estate and public records data. It develops and manages complex real estate
and marketing information databases via the Internet licensing agreements and
under long-term service contracts to multiple listing services, realtor
associations, and other information companies located primarily in the eastern
United States.
Minority Interest
The minority interest 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.
Therefore, in accordance with generally accepted accounting principles, the
minority interest in Taconic's net losses has not been recorded in the
accompanying financial statements.
Basis of Presentation
The accompanying unaudited financial statements as of September 30, 1999 and for
the nine months ended September 30, 1999 and 1998 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 Company has incurred significant net losses since transitioning to the
Internet focused business plan. As of September 30 1999, the Company had an
accumulated deficit of $4,701,116. The Company has incurred substantial costs to
expand distribution, develop new services and products, and create, introduce
and enhance the Web site. As a result, the Company will need future financings
to fund its operations and the failure to raise additional funds may prevent it
from implementing its 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, it could have a material adverse effect on
its business.
F-9
NOTE 1 - Summary of Significant Accounting Policies
Change of Year End
Subsequent to the Acquisition the Company changed its fiscal year end from
September 30th to December 31st.
Revenue Recognition
Licensing Fees
The Company recognizes licensing fees on a straight-line basis over the term of
the respective agreements, which range from one (1) to three (3) years.
Long Term Data Base Contracts
The Company utilizes long-term contracts and recognizes revenue for financial
statement purposes under the percentage of completion method and, therefore,
takes into account the costs, estimated earnings and revenue-to-date on
contracts not yet completed.
The amount of revenue recognized at the financial statement date is the portion
of the total contract price that the costs expended to date bears to the
anticipated total costs, based on current estimates of costs to complete.
Contract costs include all direct labor and benefits, materials unique to or
installed in the project, subcontract costs and allocated indirect costs.
Revisions in estimates of costs and earnings during the life of the contracts
are reflected in the accounting period in which such revisions become known.
At the time a loss on a contract becomes known, the entire amount of the
estimated loss is recognized in the financial statements.
Deferred Revenue
The deferred revenue represents billings in excess of costs and estimated
earnings on uncompleted contracts in the amount of $518,961 and unamortized
licensing fees in the amount of $564,750 at December 31, 1998.
Property and Equipment and Depreciation
Property and equipment is stated at cost and is depreciated using accelerated
methods over the estimated useful lives of the respective assets. Routine
maintenance, repairs and replacement costs are expensed as incurred and
improvements that extend the useful life of the assets are capitalized. When
property and equipment is sold or otherwise disposed of, the cost and related
accumulated depreciation are eliminated from the accounts and any resulting gain
or loss is recognized in income.
F-10
NOTE 1 - Summary of Significant Accounting Policies, continued
Income Taxes
The Company with the consent of their stockholders, had elected under the
Internal Revenue Code to be an "S" corporation. In lieu of corporate income
taxes, the stockholders of an "S" corporation are taxed on their proportionate
share of the corporation's taxable income. Accordingly, no provision for federal
and state income taxes has been included in the accompanying financial
statements. Effective June 8, 1998, the Company became a "C" corporation under
the Internal Revenue Code (see Note 8).
Advertising Costs and Website Development Costs
Advertising costs and website development costs are expensed as incurred.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and disclosure of
contingent asset and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Net Income (Loss) Per Share
The Company adopted the provision of SFAS No. 128, "Earnings per Share". SFAS
No. 128 eliminates the presentation of primary and fully dilutive earnings per
share ("EPS") and requires presentation of basic and diluted EPS. Basic EPS is
computed by dividing income (loss) available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
is based on the weighted-average number of shares of common stock and common
stock equivalents outstanding at year-end. All prior periods' EPS have been
restated.
Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using the existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations with pro forma disclosure of what net income and
earnings per share would have been had the Company adopted the new fair value
method. The Company intends to continue to account for its stock based
compensation plans in accordance with the provisions of APB 25.
F-11
NOTE 1 - Summary of Significant Accounting Policies, continued
Fair Value of Financial Instruments
The financial instruments of the Company are reported in the statement of
financial condition at market or fair values, or at carrying amounts that
approximate fair values because of the short maturity of the instruments.
Impairment of Long-Lived Assets
Equipment is reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. If the sum of the
expected undiscounted cash flows is less than the carrying value of the related
asset or group of assets, a loss is recognized for the difference between the
fair value and carrying value of the asset or group of assets.
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
effective for fiscal years beginning after December 15, 1997, with
reclassification of earlier periods required for comparative purposes. SFAS No.
130 establishes standards for the reporting and presentation of comprehensive
income and its components in the financial statements. The Company adopted this
standard in 1998 and the implementation of this standard did not have any impact
on its financial statements.
Reporting of Segments
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," effective for fiscal years beginning after
December 15, 1997, with reclassification of earlier periods required for
comparative purposes. SFAS No. 131 establishes the criteria for determining an
operating segment and establishes the disclosure requirements for reporting
information about operating segments. Because the Company has not historically
reported segment information, the adoption of this standard has no impact on the
Company's results of operations or financial condition. In addition, the Company
has determined that under SFAS No. 131, it operates in one segment of service
and its customers and operations are within the United States.
Pensions and Other Benefit Plans
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," effective for fiscal years
beginning after December 15, 1997, with restatement of disclosures for earlier
periods required for comparative purposes. SFAS No. 132 revises certain
employers' disclosures about pension and other post-retirement benefit plans.
The Company adopted this standard in 1998 and the implementation of this
standard did not have any impact on its financial statements.
F-12
NOTE 1 - Summary of Significant Accounting Policies, continued
Accounting Developments
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("ASEC of AICPA") issued Statement of
Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," effective for fiscal years beginning
after December 15, 1998. SOP No. 98-1 requires that certain costs of computer
software developed or obtained for internal use be continued capitalized and
amortized over the useful life of the related software. The Company does not
expect that the adoption of this standard will have a material impact on its
financial statements.
In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the Costs of
Start-up Activities," and effective for fiscal years beginning after December
15, 1998. SOP 98-5 requires the costs of start-up activities and organization
costs to be expensed as incurred. The Company does not expect that the adoption
of this standard will have a material impact on its financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 1999, which has been deferred to June 30, 2000 by publishing of SFAS
No. 137. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. This Statement requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial condition 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. The Company does not expect that the adoption of this standard will
have a material impact on its financial statements.
NOTE 2 - Property and Equipment
Property and equipment at December 31, 1998 consist of the following:
Estimated
Useful
Amount Lives
----------------------------
Furniture and fixtures $ 74,233 5-7 years
Computer equipment 639,741 3-5 years
---------
713,974
Less: accumulated depreciation (581,612)
---------
Property and Equipment, Net $ 132,362
=========
NOTE 2 - Property and Equipment, continued
Depreciation expense for the years ended December 31, 1998 and 1997 was $124,184
and $127,861, respectively.
F-13
NOTE 3 - Capitalized Lease Obligations
The Company is the lessee of equipment under certain capital leases expiring
through the year 2000. The assets and liabilities are recorded at fair-market
value. The assets are being depreciated over their estimated useful lives.
Depreciation of assets under capital leases charged to expense for the years
ended December 31, 1998 and 1997 was $77,720 and $80,955, respectively. The
following is a summary of property held under capital leases included in
equipment:
Equipment $ 407,985
Less: accumulated depreciation (313,621)
---------
$ 94,364
=========
Minimum future lease payments under capital leases as of December 31, 1998 for
each of the next two years, and in the aggregate, are as follows:
For the Year Ending
December 31, Amount
----------------------------------------------------
1999 $ 61,007
2000 4,964
--------
Total minimum lease payments 65,971
Less amount representing interest (2,800)
--------
Present value of net minimum
lease payments $ 63,171
--------
Current portion $ 58,234
Long-term portion 4,937
--------
Total $ 63,171
========
Interest rates on capitalized leases vary from 5.43% to 17.43% and are imputed
based on the lessors' implicit rate of return.
NOTE 4 - Investment in Assetrac
In 1996 the Company entered into a joint venture with an unrelated party to form
Assetrac Data Corporation ("Assetrac") to compile information regarding the real
estate industry into various database products. The Company accounted for the
investment in Assetrac under the equity method of accounting. On November 11,
1997, the assets and liabilities of Assetrac were sold to an unrelated third
party for a price of $415,288. As a result of this transaction, the Company has
recorded a gain on investment of $4,083 at December 31, 1997.
F-14
NOTE 5 - Note Payable
The Company has a note payable with interest at 11% and principal is due on July
24, 1999. Interest in the amount of $6,600 was paid during the year ended
December 31, 1998. On March 22, 1999, the Company exercised its option to repay
this note in the amount of $62,236. In accordance with the loan agreement, the
Company issued a warrant to purchase 7,500 shares of common stock at a price of
$0.01 per share which was immediately exercised by the note holder.
NOTE 6 - Notes Payable, Stockholders
Notes payable, stockholders at December 31, 1998 consists of the following:
Note payable, stockholder (RSI, Inc.), payable
in 36 monthly installments of $12,902 including
interest of 9.71% per annum (1) $298,702
Note payable, stockholder (D. Garfinkel) with
interest at 10% and principal due on February
13, 2000 (including accrued interest of $1,833) 21,833
--------
Notes Payable, Stockholders 320,535
Less: Current Maturities 298,702
--------
Notes Payable, Stockholders, Less Current
Maturities $ 21,833
========
(1) The Company is in default of the remaining balance of this note whereby
the entire balance is due and interest is accruing at the annual rate of
18% since the default date (see Note 9).
F-15
NOTE 7 - Stockholders' Equity
Stock Transaction Among Stockholders
On January 2, 1998, a stockholder transferred 584,710 shares, valued at $0.24
per share of common stock to an officer/stockholder for no consideration. The
transferred shares have been recalculated to give retroactive effect of the
stock split (see below). By transferring the shares the stockholder intended to
enhance the value of his investment and improve the performance of the
officer/stockholder who received the shares, which is both beneficial to the
stockholder and the Company. Therefore, the Company recorded compensation
expense of $140,330 in connection with this transaction.
Conversion of Accounts Payable
On June 3, 1998, the Company converted certain trade accounts payables in the
amount of $227,000 to common stock. Each $1.40 of trade accounts payable was
converted into one (1) share of common stock, par value $.01. The total shares
issued for this conversion was 162,143.
Conversion of Debt
On June 8, 1998, the Company converted certain notes payable to common stock.
The aggregate notes payable including accrued interest was $1,061,421. This debt
was converted into common stock ($1.40 per share) which amounted to 758,158
shares.
Contributed Capital
On June 8, 1998, notes payable, stockholders including accrued interest of
$228,562 were forgiven and treated as contributed capital.
Stock Split
On June 12, 1998, the Board of Directors authorized a 14,018.75 for 1 stock
split, thereby increasing the number of issued and outstanding shares to
2,803,750, and increasing par value to $.01 per share. In addition, the Board of
Directors amended the certificate of incorporation to increase the number of
common shares authorized to 6,000,000, par value $.01. All prior period
financial statements are restated to give retroactive effect of this stock
split.
Stock Based Compensation
On June 12, 1998, the Company issued 51,050 shares ($1.40 per share) of common
stock to two officer/stockholders for services performed which amounted to
$71,470.
F-16
NOTE 8 - Income Taxes
As discussed in Note 1 effective June 8, 1998 the Company has become a "C"
Corporation under the Internal Revenue Code. For the year ended December 31,
1997 and for the period January 1, 1998 through June 7, 1998 the Company was
taxed as an "S" corporation. The provision for income taxes for the years ended
December 31, 1998 and 1997 consists of the following:
1998 1997
---------------------------
State and Local
Current $ 325 $2,000
Deferred -- --
------ ------
325 2,000
------ ------
Total $ 325 $2,000
====== ======
Reconciliation from Federal statutory rate:
1998 1997
---------------------------
Federal tax at 34% $ (559,910) $ 98,925
State and local taxes, net of federal benefit 325 1,320
S corporation - pass through to stockholders 192,438 31,115
Deferred revenue 314,144 (142,011)
Expenses not deductible for tax purpose 20,678 12,651
Reserve for net operating loss 32,650 --
--------- ------------
Total $ 325 $ 2,000
=========== =========
The components of deferred tax assets and liabilities at December 31, 1998
consists of the following:
Deferred tax assets (liabilities)
Deferred Revenue $ 299,000
Depreciation and amortization (1,000)
Net operating loss carryforwards 50,000
---------
348,000
Less: Valuation Allowance (348,000)
---------
Total Deferred Tax Assets $ --
==========
F-17
NOTE 8 - Income Taxes, continued
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets for financial reporting purposes and the
amounts used for income tax purposes. A valuation allowance is required if,
based on the weight of available evidence, it is more likely than not that some
portion of all of the deferred tax assets will not be realized. Management
concluded a valuation allowance was appropriate at December 31, 1998 due to
operating losses incurred.
NOTE 9 - Commitments and Contingencies
Lease Arrangement
The Company leases office space under a five (5) year noncancelable lease
expiring December 31, 2000. The Company pays property taxes, insurance, and
other related expenses to the leased properties. Rent expense was $87,575 and
$68,054 for the years ended December 31, 1998 and 1997, respectively.
Future minimum rental payments required under the above non-cancelable operating
lease at December 31, 1998 are as follows:
For the Year Ending
December 31, Amount
-----------------------------------------
1999 $ 76,500
2000 76,500
--------
Total $153,000
========
License Agreement
The Company is obligated to pay a license fee for the use of software and the
maintenance of the software through October 2001. The future commitment for the
year ending December 31, 1998 is as follows:
For the Year Ending
December 31, Amount
-----------------------------------------
1999 $29,627
2000 29,627
2001 24,689
-------
Total $83,943
========
F-18
NOTE 9 - Commitments and Contingencies, continued
Litigation
The Company is involved in litigation through the normal course of business. The
Company believes that the resolution of these matters will not have a material
adverse effect on the financial position of the Company.
In addition, as discussed in Note 6, note payable in the amount of $298,702 to a
stockholder is in default. The Company is currently involved in a litigation
with this stockholder. The outcome of this suit can not be determined at this
time. However management believes that no additional material liabilities will
result from this suit. Accordingly, the Company has classified the note as
currently due.
NOTE 10 - Major Customers
The Company sells a substantial portion (greater than 10% of sales) of its
product to four major customers. During the years ended December 31, 1998 and
1997, sales to these customers totaled $1,408,647 (73%) and $2,358,982 (76%),
respectively. As of December 31, 1998 and 1997, the amounts due from these
customers included in accounts receivable were $161,588 and $245,670,
respectively.
NOTE 12 - Subsequent Events (Unaudited)
Warrant
On April 2, 1999, an existing warrant issued by D-Vine in August 1997 to
purchase 1,000,000 shares of common stock was exercised, in connection with the
Acquisition, with an increase in exercise price from $0.01 per share to $1.00
per share. In consideration of such increase, the Company issued to the holder
an additional warrant to purchase 500,000 shares of its common stock at $3.00
per share. The newly issued warrant is not exercisable until March 31, 2000, and
it expires on March 31, 2004. An aggregate of 500,000 shares of common stock
have been reserved for issuance under this warrant.
Stock Option Plan
On June 15, 1999, the Company adopted a stock option plan (the "Plan"). The Plan
provides that options may be granted to employees, officers, directors and
consultants to purchase shares of its common stock. All incentive stock options
granted under the Plan will have an exercise price of not less than the fair
market value of the underlying common stock at the time of grant, and all
non-incentive stock options granted under the Plan will have an exercise price
of not less than 85% of the fair market value of the common stock at the time of
grant. The board of directors (or any duly appointed committee thereof)
determines the vesting period of the options upon the granting of the options.
The total
F-19
NOTE 12 - Subsequent Events (Unaudited), continued
Stock Option Plan, continued
number of shares of common stock for which options may be granted under the Plan
is 1,750,000. No stock option may be granted under the Plan after June 15, 2009.
During the nine months ended September 30, 1999, the Company granted 1,004,400
and 137,500 options to its employees and consultants, respectively, with
exercise prices ranging from $1.00 to $1.10. As of September 30, 1999, 851,400
options are outstanding with exercise prices ranging from $1.00 to $1.10 per
share, of which 150,000 options ware exercisable.
On July 26, 1999, an employee exercised his option to purchase 123,000 shares of
common stock at the exercise price of $1.00 per share. The option was paid with
$5,000 cash and a promissory note issued to the Company by the employee for
$118,000 bearing interest of 6% per annum. Principal is due on demand and is
secured by the underlying stock. In addition, 147,500 options were exercised at
$1.00 per share by certain employees and consultants during the period ended
September 30, 1999.
Activities under the Plan are as follows:
Weighted Weighted
Number Average Average
Of Exercise Remaining
Options Price Life
---------------------------------------------
Balance - December 31, 1998 --
Option granted 1,141,900 $ 1.08 2.9 years
Option Cancelled (20,000) 1.00
Option exercised (270,500) 1.00
---------
Balance - September 30, 1999 851,400
=========
Pro forma information regarding net income and earnings per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of SFAS 123. The fair market
value for these options was estimated at the date of grant using a Black-Scholes
option-pricing model with the following weighted-average assumptions for the
nine months ended September 30, 1999.
F-20
NOTE 12 - Subsequent Events (Unaudited), continued
Stock Option Plan, continued
Assumptions
- --------------------------------------------------------------------------------
Risk-free rate 5.65%
Dividend yield --%
Volatility factor of the expected market price
of the Company's common stock 10
Average life 3.5 years
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period of the options. The Company's
pro forma information for the nine months ended September 30, 1999 is as
follows:
Pro forma net loss $ (1,822,360)
=============
Pro forma net loss per share
- basic $(0.27)
======
- diluted $(0.27)
======
Database Agreement
In August of 1999, the Company entered into a database development and
acquisition agreement with a leading provider of national public and private
school information. Costs incurred in obtaining such database was capitalized
and will be amortized over its useful life.
Series A Preferred Stock
On November 1, 1999, November 5, 1999 and November 30, 1999, the Company issued
781.12 shares, 240.66 shares and 539.45 shares, respectively, of its Series A
Preferred Stock to investors, resulting in cash proceeds in the aggregate of
$1,197,000, net of direct expenses of $275,000. In connection with the issuance,
the Company authorized the designation of 2,000 shares of Series A Preferred
Stock. Holders of the Series A Preferred Stock are entitled to a quarterly
cumulative dividend equal to 1.5% of the then applicable liquidation preference,
as defined.
F-21
NOTE 12 - Subsequent Events (Unaudited), continued
Series A Preferred Stock, continued
Each share of the Series A Preferred Stock is convertible into 300 shares of
common stock, at the option of the holder, subject to certain adjustments and
conditions. The Series A Preferred Stock will automatically convert into shares
of common stock upon occurrence of the special events, as defined.
The Company also issued warrants to purchase 473,670 shares, 36,108 shares and
80,952 shares of its common stock at exercise price of $3.75 per share, subject
to adjustment, to the Series A Preferred Stock holders for the November 1, 1999,
November 5, 1999 and November 30, 1999 issuances, respectively. Of these
warrants to purchase a total of 590,730 shares of common stock, warrants to
purchase 473,670 shares expire in November 2000, with the remaining warrants to
purchase 117,060 shares expiring in November 2004. On December 1, 1999, warrants
to purchase 396,836 shares of common stock with an adjusted exercise price of
$2.00 per share were exercised, on a cashless basis, when the market price of
the common stock was $5.50 per share. 252,533 shares of common stock were issued
in connection with the exercise of such warrants.
F-22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Section 145 of the General Corporation Law of the State of
Delaware, we have elected to provide our directors and officers with protections
and indemnities to the fullest extent permitted by Delaware law, even in cases
where the claims are brought by us or on our behalf. These protections and
indemnifications do not eliminate the directors' fiduciary duties, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware law. We have also
applied to purchase directors' and officers' liability insurance coverage for
such claims, to the extent we can obtain insurance on commercially reasonable
terms to provide coverage against claims for monetary damages for breach of
fiduciary duty.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by us in
connection with the sale of the common stock being registered hereby. All
amounts shown are estimates, except the SEC registration fee.
SEC Registration Fee.............................................. $ 1,378.40
Legal Fees and Expenses........................................... $20,000.00
Accounting Fees and Expenses...................................... $35,000.00
Miscellaneous..................................................... $ 5,000.00
==========
Total............................................................. $61,378.40
* To be filed by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding securities sold by us in the last three
years that were not registered under the Securities Act. None of these sales of
securities involved the use of an underwriter and no commissions were paid in
connection with the sale of any of these securities.
In the last three years, none of these securities were registered under the
Securities Act:
o On August 1, 1997, we issued to Ocean Strategic Holdings, Ltd.
("OSHL") a warrant for the purchase of 1,000,000 shares of our
common stock for cash consideration of $50,000 (the "1997 Warrant").
The 1997 Warrant was issued pursuant to the provisions of Regulation
S of the Securities Act. The exercise price of the 1997 Warrant,
which was originally $0.01 per share, was increased to $1.00 per
share in connection with the issuance of the 1999 Warrant to OHSL
(described below).
o On March 31, 1999, in consideration for the modification of the
exercise price (from $0.01 per share to $1.00 per share) of the 1997
Warrant, we issued to OSHL a new warrant to purchase 500,000 shares
of our common stock at an exercise price of $3.00 per share (the
"1999 Warrant"). The 1999 Warrant expires on March 31, 2004, and is
not exercisable until March 31, 2000. The 1999 Warrant was issued
pursuant to the provisions of Regulation S.
o On April 2, 1999, we issued 6,000,000 of our shares of common stock
to 18 shareholders of Taconic, in exchange for their shares of
Taconic. Our shares of common stock were issued solely for shares of
Taconic. These shares were issued in a transaction that did not
involve any public offering of our shares within the meaning of
Section 4(2) of the Securities Act and Rule 506 of Regulation D. On
December 1, 1999, we issued to Barry Hartheimer 31,000
II-1
shares of our common stock for services he provided to us in
connection with the issuance of our shares to Taconic on April 2,
1999, and in connection with the completion of a $243,075 capital
contribution that was made to us by certain of our shareholders
prior to April 2, 1999. These shares were also issued in a
transaction that did not involve any public offering of our shares
within the meaning of Section 4(2) of the Securities Act and Rule
506 of Regulation D.
o Also on April 2, 1999, OSHL exercised its rights under the 1997
Warrant to purchase 1,000,000 shares of our common stock for
$1,000,000. The 1,000,000 shares issued upon exercise of the 1997
Warrant were issued pursuant to the provisions of Regulation S, and
the funds received were used for Web site development costs and
general corporate purposes.
o On August 23, 1999, pursuant to a development and consulting
agreement with X-Ceed, Inc., we issued to X-Ceed, Inc. 82,142 shares
of our common stock. These shares were issued in a transaction that
did not involve any public offering of our shares within the meaning
of Section 4(2) of the Securities Act and Rule 506 of Regulation D.
o Pursuant to transactions completed during the month of November,
1999, we issued 1,561.23 shares of Series A Cumulative Convertible
Preferred Stock and related warrants to purchase common stock to
private investors for an aggregate offering amount of $1.5 million.
These shares were issued in a transaction that did not involve any
public offering of our shares within the meaning of Section 4(2) of
the Securities Act and Rule 506 of Regulation D, and the proceeds
will be used for general corporate purposes.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibit
Number Description of Document
-----------------------
2.1 Acquisition Agreement and Plan of Reorganization, dated March 26,
1999, among D-Vine, Ltd., Taconic Data Corp., and certain shareholders
of D-Vine, Ltd. and of Taconic Data Corp. (incorporated by reference
from our Current Report filed on Form 8-K with the SEC on April 16,
1999).
3.1 Amended and Restated Certificate of Incorporation (incorporated by
reference from our amendment to our Annual Report filed on Form
10-KSB/A with the SEC on December 7, 1999).
3.2 Amended and Restated By-laws (incorporated by reference from our
amendment to our Annual Report filed on Form 10-KSB/A with the SEC on
December 7, 1999).
4.1 Warrant to purchase 500,000 shares of our common stock, at an
exercise price of $3.00 per share, issued to Ocean Strategic Holdings,
Limited on March 31, 1999 (incorporated by reference from our Current
Report filed on Form 8-K with the SEC on April 16, 1999).
4.2 Certificate of Designations, Preferences and Rights for the Series A
Cumulative Convertible Preferred Stock (incorporated by reference from
our amendment to our Annual Report filed on Form 10-KSB/A with the SEC
on December 7, 1999).
4.3 *Form of Series A Cumulative Convertible Preferred Stock Purchase
Agreement
4.4 *Form of Warrant to purchase shares of our common stock, exercisable
for one year.
4.5 *Form of Warrant to purchase shares of our common stock, exercisable
for five years.
5.1 Opinion of Roberts, Sheridan & Kotel, a Professional Corporation.
10.1 1999 Stock Option Plan (incorporated by reference from our amendment
to our Registration Statement filed on Form S-8 with the SEC on June
18, 1999).
10.2 **Employment Agreement for Mitchell Deutsch (to be filed by amendment).
10.3 **Employment Agreement for James Garfinkel (to be filed by amendment).
10.4 **Employment Agreement for John Evans (to be filed by amendment).
II-2
21 *Subsidiaries of the registrant
23.1 Consent of Marcum & Kleigman, LLC
23.2 Consent of Roberts, Sheridan & Kotel, a Professional Corporation
(included with Exhibit 5.1)
24 *Power of attorney of certain directors and officers of
MonsterDaata.com, Inc.
27 *Financial data schedule
- ----------
* Previously filed
** To be filed by post-effective amendment
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) Include any additional or changed material information on the plan
of distribution.
(2) For determining liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial BONA FIDE offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the Delaware General Corporation Law, the Certificate of Incorporation or the
By-Laws of the Company, or otherwise, the Company has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer, or controlling person of
the Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered hereunder, the Company will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that it will:
(1) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Company pursuant to Rule 424(b)(1), or (4) or 497(h) under the Act as part of
this registration statement as of the time it was declared effective.
(2) For determining any liability under the Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and that offering of such
securities at that time as the initial bona fide offering of those securities.
II-3
SIGNATURES
In accordance with the requirements of the Securities Act, we certify that
we have reasonable grounds to believe that we meet all of the requirements for
filing on Form SB-2 and authorized this registration statement to be signed on
its behalf by the undersigned in the City of New York, State of New York, on the
11th day of January, 2000.
MONSTERDAATA.COM, INC.
By: /s/ Mitchell Deutsch
-----------------------------------------
Mitchell Deutsch
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
amended registration statement has been signed on the 11th day of January, 2000,
by the following persons in the capacities indicated:
Signature Title Date
- --------- ----- ----
/s/ Mitchell Deutsch President and Chief Executive Officer, Director January 11, 2000
- -------------------- (Principal Executive Officer)
Mitchell Deutsch
/s/ John Evans* Chief Financial Officer and Executive Vice January 11, 2000
- -------------- President - Corporate Development
John Evans (Principal Accounting and Financial Officer)
/s/ James Garfinkel* Secretary, Treasurer, Vice-President, Director January 11, 2000
- -------------------
James Garfinkel
/s/ Thomas Ingegneri* Director January 11, 2000
- --------------------
Thomas Ingegneri
* By: /s/ Mitchell Deutsch
--------------------------------
Mitchell Deutsch
Attorney-in-Fact
II-4