Electronically Transmitted to the Securities and Exchange Commission on
June 8, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MONSTERDAATA, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2732163
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
32 East 31st Street, Suite 900
New York, New York 10016
(212) 447-2000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Samuel B. Petteway, Jr.
President and Chief Executive Officer
MonsterDaata, Inc.
32 East 31st Street, Suite 900
New York, New York 10016
(212) 447-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of communications to:
Spencer G. Feldman, Esq.
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue, 14th Floor
New York, New York 10166
Tel: (212) 801-9200
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Approximate date of commencement of proposed sale to the public:
From time to time as described in the Prospectus after the effective date
of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
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 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, 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, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price per Aggregate Offering Amount of
Securities to be Registered be Registered Share(1) Price(1) Registration Fee
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Common Stock, par value $.001 per
share........................... 18,567,772 shares $0.26 $4,827,620.72 $1,206.91
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(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 and based on the
last reported sale price of the common stock on the Over-the-Counter
Bulletin Board on May 31, 2001.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall 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 Commission, acting pursuant to said
Section 8(a), may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
18,567,772 Shares
MonsterDaata, Inc.
Common Stock
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The selling shareholders listed on pages 34 through 36 may offer and sell
up to 18,567,772 shares of our common stock under this prospectus for each of
their own accounts. We will not receive any proceeds from sales of these shares.
There is currently only a limited trading market for our common stock. Our
common stock is traded on the Over-the-Counter (OTC) Bulletin Board under the
symbol "MSRD." On May 31, 2001, the last reported sale price of our common stock
was $0.26 per share. Of the shares of common stock registered by this
prospectus, 15,836,041 shares are reserved for issuance upon the conversion of
our series B and series C preferred stock and exercise of our warrants. This
number of reserved shares, which represents approximately 485% of our total
current outstanding common stock, presents substantial dilution to our current
shareholders and may result in a drop in the market price of our common stock.
The selling shareholders may sell the shares from time to time at
prevailing market prices or at negotiated prices.
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Investing in our common stock involves a high degree of risk.
Please see "Risk Factors" beginning on page 4 of this prospectus.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is __________, 2001
MONSTERDAATA, INC.
No one (including any salesman or broker) is authorized to provide oral or
written information about this offering that is not included in this prospectus.
This prospectus is not an offer to sell common stock and is not soliciting an
offer to buy common stock in any state where the offer or sale is not permitted.
TABLE OF CONTENTS
Page
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Prospectus Summary ........................................................ 1
Risk Factors .............................................................. 4
Forward-Looking Information ............................................... 11
Use of Proceeds ........................................................... 12
Price Range of Common Stock and Dividend Policy ........................... 12
Management's Discussion and Analysis of Results of Operations
and Financial Condition ................................................... 13
About MonsterDaata ........................................................ 16
Management ................................................................ 23
Related Party Transactions ................................................ 30
Principal Shareholders .................................................... 31
Selling Shareholders ...................................................... 33
Plan of Distribution ...................................................... 37
Description of Capital Stock .............................................. 38
Legal Matters ............................................................. 40
Experts ................................................................... 40
Where You Can Find More Information ....................................... 40
Index to Financial Statements ............................................. F-1
i
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PROSPECTUS SUMMARY
This summary highlights information included elsewhere in this prospectus.
You should carefully review the more detailed information and financial
statements included in this prospectus. This summary is not complete and may not
contain all of the information you may need to consider before investing in our
common stock. We urge you to carefully read this prospectus, including the "Risk
Factors" section beginning on page 4 and the financial statements and notes to
those statements beginning on page F-1 of this prospectus. Please note that
throughout this prospectus, the words "we," "our" or "us" refer to MonsterDaata,
Inc. and not to the selling shareholders.
About Us
We are an information utility company. We repackage the look and feel of
our warehoused data and supply it to our customers. We use proprietary
web-enabling applications, distribution technology and programming tools to
supply this digital data content. Our proprietary applications and technology
consist of our ability to integrate data from many different sources and
formats, reformat this data in a highly customizable manner and track the usage
of such data, helping our partners to better target, capture and retain
customers.
The fourth quarter of 2000 was a significant period for us. We received
additional financing, completed the roll-out of new database technology enabling
us to provide real-time data feeds to our customers and released a new version
of our Neighborhood Place destination site. We also undertook cost containment
measures cutting back on salaries. We believe these actions will allow us to
enter new business markets with our products and lower our monthly costs. By
providing very specific property, school and demographic information, packaged
in almost any manner, kept current with our regular updates and with the
capability to deliver data in a variety of ways on the Internet or to handheld
computer devices and cellular phones, we believe that more businesses will
desire our data services. Our customizable, proprietary, high-speed content
delivery system enables our distribution partners to offer interactive and
localized content, facilitating e-commerce, lead generation and advertising
sales.
We believe that our products, comprised of a compilation of applications,
data, programming and customization tools and distribution technology, boost the
effectiveness of our customers and network affiliates' websites by increasing
the frequency and duration, and consequently the revenue potential, of each site
visit. Our customers and network affiliates seek content that will make their
websites more useful and attractive without the high fixed expense of developing
and maintaining their own information infrastructure. To date, our focus has
been to aggregate, transform and customize information relating to real estate
transactions. We believe our technology is applicable to a broader marketplace
in other high volume, information-intensive markets.
Our current digital content includes text, visual, geographical and
interactive programming tools, including more than 3.5 billion records of
information for over 61,000 communities composed of more than 220,000 distinct
geographically bounded areas in the United States. Our data includes
neighborhood, crime, demographic, lifestyle, risk hazard and school information.
We have very specific information geo-coded down to the census
block/neighborhood level. This information is valuable to people establishing
new businesses, moving into new neighborhoods or setting a valuation on property
that is being sold. We distribute our data through licensing, syndication and
co-branding to a broad network of affiliates including Internet portals,
consumer and professional transaction and destination websites, and classified
advertising networks. For more information about us, see "About MonsterDaata"
beginning on page 16.
Our principal executive offices are located at 32 East 31st Street, Suite
900, New York, New York 10016, our telephone number is (212) 447-2000 and our
website is located at www.monsterdaata.com. Information on our website is not
part of this prospectus.
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The Offering
The shares offered by this prospectus include currently outstanding common
stock, as well as common stock that would be issued upon conversion of our
series B and series C preferred stock and exercise of our warrants.
Maximum common stock offered by the selling shareholders,
assuming conversion of preferred stock and exercise of
warrants............................................... 18,567,772 shares
Maximum common stock outstanding after the offering,
assuming conversion of preferred stock and exercise of
warrants .............................................. 19,118,514 shares
Total current outstanding common stock................. 3,270,778 shares
OTC Bulletin Board trading symbol...................... MSRD
Use of proceeds........................................ We will not receive any proceeds from the sale of the
common stock offered by this prospectus. See "Use of
Proceeds."
Plan of distribution................................... Selling shareholders may sell their shares on the OTC
Bulletin Board, in private transactions, through the
writing of options and/or through short sales. Sales
may be at prevailing market prices or at negotiated
prices.
Risk factors........................................... The shares offered by this prospectus involve a high
degree of risk and should not be purchased by anyone
who cannot afford the loss of their entire investment.
See "Risk Factors."
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Summary Financial Data
The following table summarizes our financial information. You should read
this information with the financial statements and notes to the financial
statements appearing elsewhere in this prospectus. See also "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
Three Months
Year ended December 31, ended March 31,
------------------------------- -------------------------------
Statement of Operations Data: 2000 1999 2001 2000
---- ---- ---- ----
(unaudited)
Sales ...................................... $ 1,661,556 $ 2,488,434 $ 333,195 $ 392,386
Cost of sales .............................. 542,382 753,013 103,964 119,528
----------- ----------- ----------- -----------
Gross profit .......................... 1,119,174 1,735,421 229,231 272,858
Operating expenses:
Product development costs ............. 2,691,942 880,433 739,708 446,645
Selling, general and administrative
expenses ............................. 3,874,512 3,693,525 808,226 1,060,664
----------- ----------- ----------- -----------
Total operating expenses .... 6,539,454 4,573,958 1,547,934 1,507,309
Operating loss ............................. (5,420,280) (2,838,537) (1,318,703) (1,234,451)
Other (expenses) and income:
Interest income (expense), net ....... (1,207,101) 9,599 (154) (20,902)
Expense settlements .................. 270,004 -- -- --
Asset impairment ..................... (261,103) -- -- --
Other income ......................... -- 342 -- --
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Total other (expense) income (1,198,200) 9,941 (154) (20,902)
----------- ----------- ----------- -----------
Loss before income taxes .... (6,618,480) (2,828,596) (1,318,857) (1,255,353)
Income tax expense ......................... 5,300 750 3,576 --
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Net loss .................... (6,623,780) (2,829,346) (1,322,433) (1,255,353)
Dividends on preferred stock ............... (89,000) -- (249,953) --
----------- ----------- ----------- -----------
Loss attributable to common stockholders ... $(6,712,780) $(2,829,346) (1,572,386) (1,255,353)
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Net loss per share:
Weighted average shares outstanding .. 2,399,904 1,391,386 3,109,326 1,555,168
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Net loss per share, basic and diluted $ (2.80) $ (2.03) $ (0.51) $ (0.81)
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As of
March 31, 2001
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Balance Sheet Data: (unaudited)
Cash and cash equivalents............................................ $1,345,288
Working capital (excluding deferred revenue of $289,567)............. 1,115,004
Total assets......................................................... 3,337,819
Total liabilities.................................................... 1,908,991
Total stockholders' equity........................................... 1,428,828
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For information concerning the calculation of net loss per share, see note
1 of our notes to financial statements.
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RISK FACTORS
The achievement of our business objectives is subject to a number of
market and other factors beyond our control, and our future prospects are
speculative. If we make any forward-looking statements or assumptions concerning
our future business activities, revenues, profits or financial condition, or if
we make any forward-looking statements concerning our industry, the economy,
technological changes or our competitors, potential investors should recognize
that our predictions and assumptions are subject to a great deal of uncertainty.
Actual results could differ significantly 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.
Because of the risks inherent in our business and operations, our
shareholders could find that there is no demand for their shares at the time
they wish to sell, and it is possible that our shareholders could lose their
entire investment in our stock. Our stock should only be purchased by investors
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. Even if you are such an investor, you should carefully
consider and fully understand the following risk factors, in addition to the
other information contained in this prospectus, before purchasing the common
stock offered by this prospectus.
Risks Related to Our Business:
We have incurred significant net losses in the past and we expect losses in the
future which can have a detrimental effect on the long-term capital appreciation
of our stock.
We have incurred significant net losses since our transition to an
Internet-focused business in 1998. Our total net loss was $2,829,346 for the
year ended December 31, 1999 and that loss increased to $6,623,780 for the year
ended December 31, 2000. For the three months ended March 31, 2001, our net loss
was $1,322,433. We have also incurred and continue to incur substantial costs to
expand distribution, develop new products and services, and create, introduce
and enhance our websites. We expect operating losses and negative cash flows to
continue for the foreseeable future. Our ability to generate significant
Internet-related revenue is uncertain and we may never achieve profitability.
This could have a detrimental effect on the long-term capital appreciation of
our stock.
If we cannot obtain additional financing by the end of this year, we may have to
curtail our operations, sell some of our assets or take actions that may dilute
your financial interest.
We will require additional financing by the end of this year in order to
satisfy our longer-term cash requirements and implement our business strategy.
Additional funds may also be needed to take advantage of acquisition or
expansion opportunities. We will seek to raise these funds through public or
private debt or equity financing, but this financing may not be available on
terms acceptable to us, or at all. In addition, any additional equity financing
may be on terms that dilute the holdings of our existing shareholders or that
provide new investors with rights, preferences or privileges senior to those of
existing shareholders. Debt financing, if available, may involve restrictive
covenants which limit our operating flexibility. If we do not obtain additional
financing, we may be forced to reduce planned expenditures, curtail our
operations or sell some of our assets.
Our independent public accountants have qualified their opinion on our financial
statements raising doubt about our ability to continue as a going concern.
Our independent auditors have included an explanatory paragraph in their
report stating that our net losses, net cash flows used to fund operations and
recent launch of a new technology platform, as well
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as uncertain conditions that we face relative to the implementation of our new
product lines, create substantial doubt as to our ability to continue as a going
concern.
Our Internet strategy is relatively new and we should be considered an
early-stage business for that reason; thus, the future of our business is
uncertain.
Potential investors should evaluate us in light of the expenses, delays,
uncertainties and complications typically encountered by early-stage businesses,
many of which will be beyond our control. Our historical financial information
prior to 1998 is of limited value in predicting our Internet-related results.
Applicable early-stage business risks include the following:
o lack of sufficient capital,
o unanticipated problems, delays and expenses relating to product
development and implementation,
o lack of intellectual property,
o licensing and marketing difficulties,
o competition and technological changes and
o uncertain market acceptance of our products and services.
Because we are smaller and have fewer financial resources than many of our
competitors, we may not be able to successfully compete in the rapidly-evolving
market for Internet data services.
The market for Internet data services is relatively new, intensely
competitive and rapidly evolving. Our web services compete against a large
number of firms that provide information products through one or more media,
including print, radio, television and the Internet. Many of these competitors
offer one or more Internet sites with information products similar to those that
we provide. In addition, many of our current and potential competitors have
longer operating histories, greater name recognition, larger installed user
bases and significantly greater financial, technical, marketing and sales
resources than we do. As a result, competitors may be able to react more quickly
to emerging technologies and changes in customer requirements or to devote
greater resources to the promotion and sale of their products.
We expect competition to persist and intensify. Competitors using other
media to deliver information products, including some who supply data to us,
could adapt their businesses to include the Internet as a medium for delivering
their products. Competitors could develop or offer services that provide
superior performance, ease of use, price or other advantages over those offered
by us. In addition, certain of our current competitors in particular segments of
the information marketplace may broaden or enhance their offerings to provide a
more comprehensive data product line which would compete more effectively with
our products and services.
We depend on the accuracy, availability and integrity of our data, which is not
always under our control, and if the data is unavailable or unreliable, our
services would be less desirable to customers.
Our business is based on establishing our reputation as a trustworthy and
dependable provider of information and applications. Allegations of unreliable
or outdated data, even if unfounded, could make our services less desirable to
customers. 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 then use a variety of proprietary techniques to
enhance the content, applications and utility of the data. Our ability to
attract and retain customers and to generate revenues is highly dependent on
customer confidence in the comprehensiveness, accuracy and timeliness of our
database. Establishing and maintaining such comprehensiveness, accuracy and
timeliness requires substantial effort and resources. Although we disclaim
financial responsibility for inaccuracies in the data on our website, such
disclaimers may not be effective to shield us from all possible liability. We
also license and use data from
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third-party providers. If these licenses are not renewed, we may not be able to
obtain alternative sources of comparable data at reasonable cost, if at all.
Strategic and licensing agreements with other companies are important to our
business strategy, but they are subject to risks of termination and non-renewal
at any time on short notice and without penalty.
Many of our licensing, strategic 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. About half of these
agreements, accounting for a significant majority of our revenues, are currently
with real estate multiple listing services, rather than website operators or
other Internet-related businesses. In general, the expiring contracts will
automatically renew for successive terms if we do not give or receive a notice
of non-renewal within a specified period ranging from 30 days to six months
before the scheduled termination date. While we believe that such relatively
short-term agreements are typical in our industry, our ability to maintain and
grow our business depends significantly upon our ability to enter into and
maintain licensing and comparable relationships. We may not be able to renew or
extend these agreements when they expire on terms as favorable to us as those
that we currently have, if we can renew or extend them at all. We expect our
recurring revenues from existing agreements with multiple listing services to
decline as these agreements expire and we make our data available to more users
at substantially lower distribution cost over the Internet.
We need to license technology from third parties to operate our business, and if
this technology is not available to us on commercially reasonable terms or at
all, we will need to develop or find alternative technology, which would divert
our efforts and resources from our projects.
Because we license some of the technology integral to our business from
third parties, our inability to enter into and maintain any of these technology
licenses could have a detrimental effect on our business. We do not have any
patents or copyrights for the technology we utilize. We also may be required to
license additional technology for use in managing our website and providing
related services to users and advertising customers. These third party
technology licenses may not be available to us on acceptable commercial terms,
or at all. If appropriate licenses are not available on commercially reasonable
terms, we may be required to develop or find alternatives or be forced to alter
our products or services.
We depend upon contractual relationships with a limited number of key customers
and vendors for a large part of our revenues but these relationships may be
terminated at any time.
Our business would be detrimentally affected if we lost any of our large
multiple listing services customers or failed to induce them to use our
web-based services. Our top five customers accounted for approximately 82% of
our total revenues in 2000 and approximately 72% of our total revenues in 1999.
In late 2000, our contract with one multiple listing service customer, which had
accounted for 17% and 24% of our total revenues in 2000 and 1999, respectively,
expired and was not reviewed. If other significant customer contracts are
terminated, expired or breached, or if any of these companies ceases operations,
our operations would also likely be adversely impacted. Furthermore, any changes
to the offerings provided by these companies under these contracts may require
us to change or re-engineer our own services, and would likely disrupt our
business. In any of those situations, we may not be able to modify our services
on a timely basis or replace any of the services on favorable terms.
We also depend on outsource vendors, including a data entry and conversion
service, a CD-ROM software company and website hosting companies. If the
services of those companies become unavailable or unreasonably priced, we could
experience an interruption in some of our business activities until we identify
other suitable outsource vendors.
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We may not be able to retain and recruit key managers and employees who we need
to succeed, or to manage our growth effectively.
Our success depends heavily upon the skills of our senior management team
and key employees and upon our ability to identify, hire and retain additional
sales, marketing, technical and financial personnel. If one or more members of
senior management leave before acceptable replacements are found, our business
could be adversely affected. We currently have employment agreements with our
President and Chief Executive Officer, Samuel B. Petteway, Jr., and our Senior
Vice President - Corporate Development, Mark Siden. We also have consulting
agreements with our two Vice Chairmen, Harold S. Blue and Mitchell Deutsch. We
do not presently maintain key-person life insurance for our benefit on the lives
of any of our executive officers or key employees.
We believe that further expansion of our operations will be required in
order for us to address potential market opportunities and produce meaningful
profits. Such expansion may place a significant strain on our management,
operations and financial resources and our current personnel, systems,
procedures and controls may not be adequate to support future operations. We may
not be able to identify, hire, train, motivate or manage the required personnel
or successfully identify and exploit new market opportunities. Our failure to
manage growth effectively could have a detrimental effect on our business.
Our products employ proprietary information and technology which may be
difficult to protect and may infringe on the intellectual property rights of
third parties.
Our success and ability to compete depend on the protection of our
proprietary database offerings on the Internet and on the goodwill associated
with our trademarks, trade names and Internet domain names. We rely on copyright
laws to protect the original content that we develop for the Internet and on
contract restrictions to protect the proprietary technologies that we have
developed to manage and improve our website and database offerings. We have
obtained copyright registrations from the U.S. Copyright Office for the creative
aspects of our databases, but copyright protection does not extend to the facts
included in any of the databases. In addition, employees who are subject to
non-competition and confidentiality agreements may utilize or disclose our
proprietary information and trade secrets in violation of such agreements and
others may obtain or use our technologies without our authorization.
We have not yet obtained registrations for most of our trademarks and
service marks, including our corporate name. In view of the number of other
users of the word "monster" in their names or trademarks, including companies
doing business on the Internet, our attempt to register the mark "monsterdaata"
may not be successful or our use of this mark may be challenged by another user.
Although we believe that we have a reasonable position in favor of our right to
use and register the mark, defending such rights may be costly and an adverse
determination or settlement could require that we change our name.
Others may bring claims of copyright or trademark infringement against us
or claim that our use of special technologies or data violates the intellectual
property rights of others. Any claims of infringement, even if without merit,
could be time consuming to defend, result in costly litigation, divert
management attention, require us to enter into costly royalty or licensing
arrangements or prevent us from using important technologies or data. Any of
these could have a detrimental effect on our business. If we cease to use
intellectual property as a result of third party claims, we may not be able to
develop or acquire alternative technologies or obtain licenses on commercially
acceptable terms.
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Commonwealth Associates and its affiliates may be deemed to control us and their
interests may conflict with those of other shareholders.
Commonwealth Associates, L.P. and its affiliates, ComVest Capital
Partners, LLC and ComVest Venture Partners, L.P., are collectively the
beneficial owners of 5,860,748 shares of our common stock, representing
approximately 64% of our outstanding common stock, assuming the exercise and
conversion of all warrants and convertible preferred stock held by them.
Employees of Commonwealth Associates also own a significant number of warrants
to purchase shares of our common stock. Harold S. Blue, Keith M. Rosenbloom and
Joseph P. Wynne, employees of Commonwealth Associates, are members of our board
of directors. These ownership interests provide Commonwealth Associates with the
ability to elect a majority of our board of directors and significantly
influence our management and affairs.
In addition, because of their high level of stock ownership, Commonwealth
Associates and its affiliates could accept, or force us to accept, an offer for
us at a price below the price that we or our other shareholders would approve.
If this were to happen, we (or at least a controlling interest) could be sold on
terms that other investors may find unattractive. Similarly, these shareholders
could reject, or cause us to reject, an offer that the other shareholders might
find very attractive. These shareholders could also sell their shares (and their
control of us) without including our other shareholders in the transaction (or
giving them the opportunity to sell their shares on the same terms). Lastly,
this concentration of ownership could have the effect of delaying or preventing
a change in control of us, even when such change of control is in the best
interests of shareholders, and might adversely affect the market price of our
common stock. For more information on this relationship, see "Related Party
Transactions."
We are subject to Section 203 of the Delaware General Corporation Law which
could discourage a takeover of us, even if beneficial to you.
Subject to specified exceptions, Section 203 of Delaware's General
Corporation Law prohibits a Delaware corporation such as us 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 stockholder 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, even if beneficial to you.
Shareholders may not be able to recover damages from our directors and executive
officers for actions taken.
Our certificate of incorporation includes provisions which eliminate the
personal liability of our directors and executive officers to the extent
permitted by applicable law. As a result, shareholders may be unable to recover
damages against our directors and executive officers for actions taken by them
which constitute negligence or a violation of some of their fiduciary duties.
Risks Related to Our Industry:
If the Internet proves to be a nonviable commercial marketplace, the demand for
our products and services could decrease.
The Internet may not prove to be a viable commercial marketplace. Known
issues in this regard include inadequate development of Internet infrastructure
to date, competing communications technologies, delays in the development of new
standards and protocols required to handle increased Internet activity and the
possibility of significant government regulation and taxation. We expect a
substantial portion of our future revenue to come from the continued development
of products and
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services distributed over the Internet. During the year ended December 31, 2000,
our Internet revenues increased to 33% of total revenues from 14% in 1999,
although this resulted partially from the loss of a multiple listing service
customer who used our legacy system. We intend to further increase our reliance
on the Internet for delivery of our products and services. As a result, future
cash flows and future results of operations will continue to rely increasingly
upon customer use of information services and transaction support products on
the Internet. Moreover, concerns over security and privacy may inhibit the
growth of the Internet, particularly as a means of conducting commercial
transactions. To the extent that our activities involve the storage and
transmission of confidential information, such as credit card numbers, security
breaches could expose us to a risk of loss or litigation and possible liability.
Contractual provisions attempting to limit our liability in these areas may not
be adequately implemented or enforceable or other parties may not accept these
contractual provisions as part of our agreements. Well-publicized security
breaches involving the Internet generally could deter our customers from
conducting electronic transactions that transmit confidential information. We
could incur significant costs to protect against security breaches or to
alleviate problems caused by such breaches. Internet issues such as reliability,
cost, ease of deployment, administration and quality of service may affect our
ability to succeed.
Adoption of new laws and government regulations relating to the Internet or
Internet domain names could cause an erosion of our current competitive
strengths.
New laws or regulations may be adopted relating to Internet issues such as
privacy, content, distribution, quality, pricing, taxation, advertising,
intellectual property rights and security. Furthermore, the growth and
development of the market for online commerce may prompt more stringent consumer
protection laws that may impose additional costs and administrative burdens on
companies conducting business online. New regulations relating to user privacy,
including the collection, use, retention and transmission of personal
information provided by on-line users, could adversely affect our business. The
adoption of any additional laws or regulations in these areas may decrease the
growth of the Internet as a medium of commerce, which could, in turn, decrease
the demand for our products and services and increase our cost of doing
business. For more information on government regulations which may have a
detrimental impact on us, see "About MonsterDaata-Government Regulations."
If we do not successfully develop new and enhanced Internet services and
products, our results of operations will be stagnant.
Business on the Internet is characterized by rapid technological change,
frequent changes in user requirements and preferences, frequent new product and
service introductions and evolving industry standards that could render our
information delivery practices obsolete. Our success will depend 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 and
emerging industry standards. As a result, we will be required to expend
substantial funds for and commit significant resources to the conduct of
continuing product development. We may not be successful in all these endeavors.
We depend on uninterrupted service for our customers; any prolonged
interruptions in our system could cause our customers to seek alternative
providers of our services.
Changing Internet technology and standards increase the risk that system
interruptions will occur. Our Internet operations are also vulnerable to
interruption due to fire, power loss, telecommunications failure and other
events beyond our control. System interruptions that result in the
unavailability of our website or decreased transmission speeds could reduce our
revenues earned from advertising, as well as the fees we collect from consumers
and businesses using our Internet-based information products. If our competitors
can provide more reliable service, these interruptions could also decrease our
advertiser and client base. We have experienced periodic system interruptions in
the past and such interruptions could continue to occur from time to time in the
future. Any substantial increase in traffic on our website could
9
require us to expand and adapt our network infrastructure. We may not be able to
expand our network infrastructure on a timely basis to meet any increased
demands.
Risks Related to Our Stock:
Sales of shares, including those underlying our stock options, warrants and
convertible preferred stock, may depress the price of our common stock.
Sales of substantial amounts of our common stock by shareholders in the
public market, or even the potential for such sales, are likely to adversely
affect the market price of our common stock and our ability to raise capital by
selling equity securities. On May 31, 2001, there were 3,270,778 shares of our
common stock issued and outstanding. We believe approximately 486,838 of these
shares are freely transferable without restriction or further registration under
the securities laws, unless held by our "affiliates," which term is defined
under the securities laws to include our directors, officers and 10% or greater
shareholders. Approximately 2,783,940 of the outstanding shares are "restricted
securities," which are eligible for sale in the public market subject to
compliance with the holding period, volume limitations, "manner of sale" and
other requirements of Rule 144 or other exemptions under the Securities Act.
Assuming that Rule 144 is available, we believe that 370,179 of these
"restricted securities" are currently eligible for resale. We also have
outstanding stock options, warrants and convertible preferred stock which are
exercisable or convertible for 17,183,091 shares of our common stock. If any of
these currently outstanding stock options, warrants and convertible preferred
stock are exercised or converted, such exercise or conversion will result in
additional outstanding shares of common stock which may, if registered or able
to take advantage of an exemption under the securities laws, be sold in the
public market. This registration statement, when effective, will permit the
resale of 15,836,041 shares of our common stock reserved for the exercise or
conversion of outstanding warrants and convertible preferred stock. This number
of reserved shares, which represents approximately 485% of our total current
outstanding common stock, presents substantial dilution to our current
shareholders and may result in a drop in the market price of our common stock.
Our common stock price has fluctuated considerably and may not appreciate in
value.
Our shares are traded on the OTC Bulletin Board under the symbol "MRSD."
There is currently no other broadly followed established trading market for our
shares. Such an "established trading market" may never develop or be maintained.
The absence of an active trading market reduces the liquidity of an investment
in our shares. The market price for our shares has been and is likely to be very
volatile. Numerous factors beyond our control may have a significant adverse
effect on prices.
The trading volume of our common stock historically has been limited and
sporadic. For example, since our common stock began trading in July 1999, our
common stock has traded at prices ranging from $40.00 per share in early 2000 to
our recent price of $0.26 per share. As a result of this trading activity, the
quoted price for our common stock on the OTC Bulletin Board is not necessarily a
reliable indicator of its fair market value. The price at which our common stock
trades may fluctuate as a result of a number of factors, including the
following:
o quarterly variations in our operating results,
o large purchases or sales of our common stock,
o actual or anticipated announcements of new products or services by
us or by other business partners or competitors,
o investor perception of our business prospects or the Internet
industry in general,
o general conditions in the markets in which we compete, and
o worldwide economic and financial conditions.
10
Our corporate charter contains authorized, unissued preferred stock which, if
issued without shareholder approval, may inhibit a takeover at a premium price
that may be beneficial to you.
Our certificate of incorporation authorizes the issuance of up to
10,000,000 shares of "blank check" preferred stock with designations, rights and
preferences that may be determined from time to time by our board of directors.
Accordingly, our board of directors is empowered, without shareholder approval,
to issue a new series of preferred stock with dividend, liquidation, conversion,
voting or other rights which could dilute the interest of, or impair the voting
power of, our common shareholders. 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 of our company.
Most of the proceeds from sales under this prospectus will not go to us, but to
the selling shareholders.
We will not receive any proceeds from the sale of shares of common stock
by any of the selling shareholders. The exercise price of the outstanding
warrants ranges from $1.25 to $21.25 per share. If all of the warrants are
exercised for cash, we would expect to receive proceeds of approximately
$9,314,523, which we will use for general corporate purposes. However, there can
be no assurance that any of these warrants will actually be exercised or,
because the warrants contain "cashless" exercise provisions, that we will
receive any proceeds even if the warrants are exercised. See "Use of Proceeds."
Investors should not anticipate receiving cash dividends on our common stock.
We have never declared or paid dividends on any of our capital stock and
we have no current intention to pay cash dividends on any of our shares of
capital stock for the foreseeable future. We intend to retain all future
earnings, if any, to finance our operations. Potential investors who anticipate
a need for dividends should not invest in our stock.
FORWARD-LOOKING INFORMATION
This prospectus, including the information incorporated by reference,
contains forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Actual results could
differ materially from those projected in the forward-looking statements as a
result of the risk factors beginning on page 4 and others detailed from time to
time in our periodic reports filed with the SEC.
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USE OF PROCEEDS
Since the only shares being offered by this prospectus are owned by
selling shareholders, we will not receive any proceeds from the sale of these
shares. If all of the warrants are exercised for cash, we would expect to
receive approximately $9,314,523, which would be used for general working
capital purposes. However, there can be no assurance that any of these warrants
will actually be exercised. In addition, the warrants contain cashless exercise
provisions, so there can be no assurance that we will receive any proceeds from
the exercise of the warrants. We estimate that our expenses in connection with
this offering will be approximately $40,000. The selling shareholders include
current executive officers and members of our board of directors.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is traded on the OTC Bulletin Board. From July 29, 1999
to March 26, 2001, we traded under the symbol "MDDC." Since March 27, 2001, we
have traded under the symbol "MSRD." 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 OTC Bulletin Board and do not necessarily reflect
retail markups, markdowns or commissions. These prices have been adjusted, as
necessary, to reflect our 1-for-5 reverse stock split effective March 27, 2001.
Calendar 1999 High Low
---- ---
Third quarter................................. $40.00 $15.00
Fourth quarter................................ 28.125 14.375
Calendar 2000 High Low
---- ---
First quarter................................. $40.00 $16.25
Second quarter................................ 24.375 3.125
Third quarter................................. 3.75 0.9375
Fourth quarter................................ 2.1875 0.9375
Calendar 2001 High Low
---- ---
First quarter................................. $ 1.2812 $ 0.625
Second quarter (through May 31, 2001)......... 1.80 0.26
The last reported sale price of our common stock on the OTC Bulletin Board
on May 31, 2001 was $0.26 per share. On May 31, 2001, there were 3,270,778
shares of common stock outstanding, which were held by approximately 550
shareholders of record.
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.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Overview
During the last four years, the focus of our business operations has been
to aggregate, transform and customize information relating to real estate
transactions. We have refined our business model to target sales of
subscriptions on a monthly basis to professionals. With the launch of our new
information infrastructure technology, we believe that we will be better
positioned to convert our existing legacy customer base to a monthly
subscription business model and to capitalize on our online, co-branded
relationships.
During the year 2000, we made progress in our transition from a private to
public company and from a traditional supplier of real estate-related
information to an Internet-enabled information utility company with an initial
focus on real estate. We believe that we have been unable to generate
significant Internet revenues because, to date, we have not had the ability to
deliver data on a broad scale in a real-time sophisticated manner. As the next
step in our transition, we are beginning to leverage our expertise in the real
estate information area to other Internet-based information segments.
We currently derive revenues from products offered from both offline or
so-called legacy sources and the Internet. We derive revenues primarily from
subscription and licensing fees pursuant to customer contracts for the use of
our content databases. Most of these revenues have been generated offline with
our legacy customer base of multiple listing services. For the years ended
December 31, 2000 and 1999, our top five customers accounted for approximately
82% and 72% of our total revenues, respectively. Our Internet-based revenues are
attributable primarily to revenue-sharing arrangements in connection with
co-branded websites that we will generally host and the sale of electronic real
estate-related reports. Internet-based revenues increased to 33% of total
revenues for the year ended December 31, 2000 compared to 14% of total revenues
for 1999, although this resulted partially from the loss of a multiple listing
service customer in 2000 who used our legacy system.
Results of Operations
First Quarter 2001 Compared to First Quarter 2000
Our total revenues for the three months ended March 31, 2001 were $333,195
compared to $392,386 for the three months ended March 31, 2000. This 15.1%
decrease in revenue respectively, is largely attributable to the loss of one
multiple listing service business account and a price reduction for the renewal
of a licensing agreement. Total operating expenses increased from $1,507,309 for
the three months ended March 31, 2000 to $1,547,934 for the three months ended
March 31, 2001. This difference resulted from a 23.8% decrease in selling,
general and administrative expenses mainly from a reduction legal fees achieved
through a capitation agreement with our law firm, and a 656% increase in our
product development costs primarily from the additional staff required to
maintain and update our web-site and technology platform. Investment in product
development permitted us to complete the development and launch of our new
technology platform. We believe that this new technology platform will enable us
to more easily distribute database content to existing and new businesses.
Our cost of sales decreased 13% from $119,528 for the three months ended
March 31, 2000 to $103,964 for the three months ended March 31, 2001. This
decrease was attributed primarily to the decrease in the amount of work
performed and the content purchased for the multiple listing service accounts.
Our gross profit margin declined from 69.5% for the three months ended March 31,
2000 to 68.8% for the three months ended March 31, 2001. With the ability to
repackage data content and deliver it more efficiently, we hope to see higher
gross margins in future years. This is because we anticipate that future
revenues will grow at a much greater rate than our data acquisition cost of
sales.
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With the implementation of our new database technology platform, we
believe future near term expenses will be lower and future revenues from new
accounts will increase.
Fiscal 2000 Compared to Fiscal 1999
Our total revenues for the year ended December 31, 2000 were $1,661,556,
compared to $2,488,434 for the year ended December 31, 1999. This 33% decrease
reflects the loss of one multiple listing service business account and reduced
services provided to two additional multiple listing service accounts. Total
operating expenses increased from $4,573,958 for the year ended December 31,
1999 to $6,539,454 for the year ended December 31, 2000. This difference
resulted from a 4% increase in selling, general and administrative expenses and
a 206% increase in our product development costs. Investment in product
development permitted us to complete the development and launch of our new
technology platform.
Our cost of sales decreased 28% from $753,013 to $542,382. This decrease
was attributed primarily to the decrease in the amount of work performed and the
content purchased for the multiple listing service accounts. Our gross profit
margin declined from 70% in 1999 to 67% in 2000.
Our total net loss increased from $2,829,346 for 1999 to $6,623,780 for
2000. This loss was directly related to our technology product development costs
and the loss of conventional multiple listing service sales.
Recent Events
In December 2000 - January 2001, we completed a private placement of $10.7
million of series C preferred stock and warrants led by ComVest Venture
Partners, JF Shea Ventures, RMC Capital and Lions Investment. See "Selling
Shareholders - Series C Preferred Stock Private Placement."
In the fourth quarter of 2000, a new organizational staffing chart was
implemented. With our technology launch completed, we took actions to lower
salary costs through both renegotiations and restructuring several staff
positions.
In May 2001, 212.44 shares of our series A preferred stock and 250 shares
of our series B preferred stock were converted into 19,120 shares and 16,700
shares of our common stock, respectively. We also issued 11,030 shares and 8,975
shares of our common stock on account of accrued dividends through December 31,
2000 on our series A preferred stock and series B preferred stock, respectively.
Liquidity and Capital Resources
As of March 31, 2001, our cash balance was $1,345,288 and our working
capital (excluding deferred revenue) was $1,115,004. Our net cash used in
operating activities increased from $548,025 to $1,445,804 for the three months
ended March 31, 2000 and, 2001 respectively. Total cash flows from financing
activities increased from $116,408 for the three months ended March 31, 2000 to
$1,019,858 for the three months ended March 31, 2001. This increase is a result
of $1,200,000 in payments received from a stockholder on a $1,600,000
subscription receivable, the balance of which was received by us in April 2001.
Our working capital requirements depend upon numerous factors, including
levels of resources that we devote to the further development of our website and
marketing capabilities, technological advances, status of competitors and our
ability to establish collaborative arrangements with other strategic alliances.
Our current cash resources, combined with cash receipts for new sales, are
expected to be sufficient to fund our current operations into the fourth quarter
of 2001. If receipts from new business are less than expected, we will implement
cost-cutting measures. We will need to generate additional cash resources in
order to continue as a going concern through December 31, 2001. Our ability to
generate
14
sufficient cash resources is dependent upon the success of our revenue model and
our ability to generate revenues, profits and positive cash flows from it in
order to survive. Our net losses, net cash flows used to fund operations and
recent launch of a new technology platform, as well as uncertain conditions that
we face relative to the implementation of our new product lines, create
substantial doubt as to our ability to continue as a going concern. For more
information, see note 1 of our notes to financial statements.
Our financial condition and results for periods prior to April 2, 1999 are
almost entirely attributable to the historical results of Taconic, which was
deemed the acquirer for accounting purposes in our business combination with
Taconic completed on that date.
New Accounting Pronouncement
During the three-month period ended March 31, 2001, we adopted SFAS No.
133. SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including some derivative instruments embedded in other contracts
(referred to as derivatives), and for hedging activities. This statement
requires than an entity recognize all derivatives as either assets or
liabilities in its balance sheet and measure those instruments at fair value.
The accounting for changes in the fair value of a derivative instrument depends
on its intended use and the resulting designation. Implementation of SFAS 133
did not have, and is not expected to have, any material impact on our financial
statements.
15
ABOUT MONSTERDAATA
Overview
We are an information utility company. We repackage the look and feel of
our warehoused data and supply it to our customers using proprietary
web-enabling applications, distribution technology and programming tools. Our
proprietary applications and technology allow us to integrate data from many
different sources and formats, reformat this data in a highly customizable
manner and track the usage of such data, helping our customers to better target,
capture and retain customers.
The fourth quarter of 2000 was a significant period for us. We received
additional financing, completed the roll-out of new database technology enabling
us to provide real-time data feeds to our customers and released a new version
of our Neighborhood Place destination site. We also undertook cost containment
measures including salary reductions. We believe these actions will allow us to
enter new business markets with our products and lower our monthly costs. By
providing very specific property, school and demographic information, flexibly
packaged and kept current with our regular updates, and with the capability to
deliver data in a variety of ways on the Internet or to handheld computer
devices and cellular phones, we believe that more businesses will desire our
data services. Our customizable, proprietary, high-speed content delivery system
enables our distribution partners to offer interactive and localized content,
facilitating e-commerce, lead generation and advertising sales.
Our customers and network affiliates seek content that will make their
websites more useful and attractive without the high fixed expense of developing
and maintaining their own information infrastructure. During the last four
years, the focus of our business operations has been to aggregate, transform and
customize information relating to real estate transactions. For more information
concerning our historical operations, see "Organizational History" below. We
believe our technology is applicable to a broader marketplace in other high
volume, information-intensive markets.
Our current digital content includes text, visual, geographical and
interactive programming tools, including more than 3.5 billion records of
information pertaining to 61,000 communities composed of more than 220,000
distinct geographically bounded areas in the United States. Our data includes
neighborhood, crime, demographic, lifestyle, risk hazard and school information.
We have very specific information geo-coded down to the census
block/neighborhood level. This information is valuable to people establishing
new businesses, moving into new neighborhoods or setting a valuation on property
that is being sold. We distribute our data through licensing, syndication and
co-branding to a broad network of affiliates including Internet portals,
consumer and professional transaction and destination websites, and classified
advertising networks.
Potential new information markets for us include education, government
services, healthcare and medical, home and small business, hospitality,
import-export, legal, library sciences, marketing, travel and tourism, both in
the United States and internationally. We currently have co-branded
relationships and agreements to deliver our digital content to more than 100
licensees and network affiliates, including a number of well known real
estate-related websites. In addition, we have licensed the software programs and
inventory of 360-degree panoramic views of more than 20,000 images and 180
virtual city tours. We believe this will enable us to combine digital media with
visual content and applications to help our partners and professional users
present this information in a more attractive manner.
Our distribution system channels our products and services to
approximately 30,000 real estate professionals and co-brands our
www.monsterdaata.com website with more than 100 websites and portals. We
currently license our content to provide value-added services to our customers
including Yahoo!, HomeStore.com and Move.com. With the launch of our new
information infrastructure technology, we believe that we will be in position to
capitalize on these co-branded relationships.
16
Recent Growth
We launched a new technology platform during the fourth quarter of 2000.
The core technology revolves around an enterprise level data processing plant
functioning in four phases: (1) the content infrastructure can readily compile
disparate data sets from myriad sources and transfer the data into secure,
scalable and fault tolerant hardware and software infrastructure, handling
billions of records for customers, (2) the processing plant aggregates data
sources into a unified database processing millions of transactions per second
with an extremely scalable foundation, (3) the business engines provide data
packaging logic with the ability to include a high degree of interactive
personalization and (4) the distribution technology allows finished data sets to
be delivered using industry standard protocols.
In December 2000, Neighborhood Place, our showcase website, was launched
(www.neighborhoodplace.com). Utilizing our new information infrastructure
technology, Neighborhood Place provides detailed property, school and
demographic information on a neighborhood level. We believe that the new site
provides direct paths to content areas that answer the questions people most
often ask when contemplating a move or a home purchase: How do schools compare?
What are current property values? How safe is the neighborhood? What is the cost
of living? We believe that we uniquely provide information all the way down to
the specific block group, as compared to just searching by zip codes. We believe
this is a major improvement over what had formerly been available in the
marketplace.
We signed a non-exclusive, worldwide perpetual licensing agreement with
Utour, Inc. in September 2000. In this agreement, we received the right to use
Utour's more than 20,000 360-degree images and 180 visual digital city tours. We
also received the rights to utilize Utour's proprietary software including the
Utour "Portalizer," software facilitating the uploading and transmission of
digital images, the "Content Addressable Visual Database" which organizes and
classifies digital images, and the Utour Java scripted "Viewer" software program
that allows image downloads.
Internet and Real Estate Industry and Trends
The emergence of the Internet has fundamentally changed the way that many
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 and serves as a common platform for
consumers, real estate professionals, homebuilders, renters, property managers
and owners and ancillary service providers to access the relevant timely
information that they need to make better decisions.
Recognizing the commercial potential of the Internet, a number of
residential real estate-related Internet businesses have been established,
including websites that aggregate data from real estate multiple listing
services, real estate chains and brokers from different regions. Aggregators
include HomeStore.com, Microsoft Corp.'s HomeAdvisor.com 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.
Business Strategy
An integral part of our business strategy is to be a provider of
programming tools and data products that enhance the websites of our customers.
A wide range of real estate and related websites view the types of content that
we provide as important to enhancing the "stickiness" (longer visits or repeat
usage) of their sites. We provide comprehensive real estate transaction data,
due diligence and research content in one convenient location. With our products
and services, we allow our customers and users to bypass traditional and often
more expensive, fragmented real estate information sources and intermediaries.
We permit real estate professionals, consumers and investors immediate
centralized access
17
to a broad range of useful real estate information from their own homes or
offices. We believe that our services and products assist real estate agents,
brokers and other professionals to market their own services better, become more
productive and compete more effectively. We believe that we are also well
positioned to provide services to ancillary service providers and consumers
buying or selling a home.
We offer six primary data product and service categories. 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 is developed in-house or licensed and
reformatted, then integrated and enhanced for more than 70 data categories and
61,000 communities nationwide. Such information includes crime, school,
lifestyle characteristics, culture, town and community, affordability and
demographic data, 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 through our website and through Internet destination
sites.
Target Markets
We have refined our business model to target sales of subscriptions on a
monthly basis to professionals. We believe that this market opportunity within
the real estate sector alone is significant, with real estate professionals
currently spending approximately $10.0 billion per year on gathering data to
serve their businesses, according to the National Association of Realtors, an
industry trade group. The types of professional customers which we intend to
target include real estate brokers and agents, relocation specialists, mortgage
brokers and lenders, insurance brokers and agents, and title insurance
companies. With the launch of our new information infrastructure technology, we
believe that we will be well positioned to convert our existing legacy client
base to the monthly subscription business model and to capitalize on our
on-line, co-branded relationships.
We also believe that the new members of our management team and our
technology infrastructure will enable us to penetrate other, non-real estate
markets. Specifically, our goal is to penetrate the healthcare, travel and
tourism markets within the next few years. We believe that our technology
infrastructure provides a sound platform for these services. We also believe
that our text and visual content may be suitable to the travel and tourism
market. We intend to pursue business opportunities within these markets and
supplement our existing inventory of digital content as demanded by new
customers within these markets.
Technology
Our technology is intended to integrate and deliver content through
multiple distribution channels including wireless and broadband applications.
Our software is expected to accept all types of data and distribute it across
numerous computer formats and systems to many markets. For real estate
transactions, our technology has the capacity to accurately profile a community
from a number of perspectives and deliver significant amounts of information to
our customers' and network affiliates' websites. Our software and website
development efforts to enhance our remote content delivery technology are
ongoing.
Business Operations
We currently provide real estate-related information over the Internet. We
develop, license, co-brand, reformat, integrate and enhance more than 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 composed of more than 220,000
distinct geographically-bounded areas in the United States. We believe that our
Internet website and related co-branded websites have the potential to become
key destination sites for low cost real estate due diligence information, and
that we can create and
18
capture value by linking real estate professionals -- including brokers,
lenders, appraisers and insurers -- with consumers, businesses and investors
through our Internet data services.
We currently generate most of our revenues from licensing our content to
other Internet sites and our multiple listing service customers. We expect to
generate further revenues from selling eReports and subscriptions on our
website, selling national and local advertising, collecting fees for eLeads (in
which, with our users' consent, 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 multiple listing services). Through our licensing and co-branding
activities, we provide our data content to other popular Internet websites, many
of which provide links back to our website through their websites. If users on
these licensed or co-branded sites desire further information beyond the summary
or snapshot data that we license or co-brand, they may obtain detailed
customized reports from our website, for a small amount per report (currently
ranging from $4.95 to $29.95) or on an annual subscription basis. We share the
revenues that we earn from sales of these detailed eReports with the referring
website owner. We have also commenced work on a remote data delivery program in
which our data can be delivered directly to the screen of a licensee website's
end user in response to a query by that end-user. We intend to provide these
data delivery services to the licensee websites on a pay-per-use basis, under a
flat fee unlimited use license, or through a combination of these methods. For
more information, see "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
The content that we currently provide (through our website or through
co-branded sites or other licensing arrangements) includes:
o "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,
o "Relocation Place," which provides a pre- and post-move resource
center to help users plan and estimate the cost of their relocation,
o public records property data, which allows users to research
properties for sale, foreclosures, comparable sales and many other
types of information and
o risk hazard assessment data, which allows users to obtain data
regarding environmental hazards and crime risk.
Sales and Marketing Strategy
Our primary marketing objectives are to increase our user base and brand
recognition, expanding our website traffic and revenue sources. Historically,
our marketing activities have generally been limited to making sales calls on
multiple listing service prospects for the customized information services that
we provided to multiple listing services. Beginning in 1999, we began recruiting
and developing our own marketing group responsible for positioning our expanded
data offerings and ensuring that each of our Internet services is competitive
and appealing to these same professionals, as well as to a mass audience.
Protection of 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.
Copyright protection is available for the originality and creativity that
we use in the selection and arrangement of the data included in our databases.
We have obtained copyright registrations from the U.S. Copyright Office for some
of our databases. Copyright protection does not, however, extend to the facts
19
included in any of the databases. The proprietary applications that we use in
connection with the compilation of our databases are also protected by
copyrights that 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 or similar functions may be able to 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, in turn, impose such restrictions upon our customers through contracts and
the terms of our website user agreement.
We believe that our proprietary knowledge and the technical and creative
skills of our personnel are critical factors in establishing and maintaining our
business. Accordingly, we have entered into confidentiality agreements with our
key employees and consultants, and seek to control access to and distribution of
our proprietary information. These precautions may not prevent misappropriation,
infringement or other violations of our intellectual property. Third parties who
are not bound to any agreements with us may copy or otherwise use the
information on our websites without authorization.
We have filed applications with the U.S. Patent and Trademark Office to
register our rights in the trademarks Daata Superstore, Make My Daata and
Personal Private Eye. We are preparing to file applications for our common law
trademark MonsterDaata and our slogan "Information that really hits home" in a
distinctive logo form. We may not be able to obtain registrations for the
trademarks for which we have filed or are intending to file. Even if we are
successful in obtaining trademark registrations, third parties may challenge our
rights to these trademarks.
Competition
The market for Internet real estate data services is relatively new,
intensely competitive and rapidly changing. In the online real estate industry,
the principal competitive factors that 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.
We believe that our national comprehensive coverage, broad range of our
integrated real estate data products and 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
than we do. To gain market acceptance, we may provide products at reduced prices
or at no cost. 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.
20
Governmental Regulations
Our operations are not currently subject to direct regulation by any
governmental agency in the United States beyond 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 online content, user privacy, taxation, access charges and
jurisdiction. The adoption of new laws or the unfavorable application of
existing laws may decrease the use of the Internet. Our collection of data from
primary sources is often subject to the federal Freedom of Information Act and
to similar state and local regulations.
The applicability to the Internet of existing laws in various
jurisdictions governing issues such as property ownership, sales and other taxes
and personal privacy is uncertain and may take years to resolve. The Internet
Tax Freedom Act placed a three-year moratorium on new state and local taxes on
Internet commerce, but this moratorium is expected to end in October 2001. If
this moratorium is not extended, the taxation of our business may change
significantly. As we expand, we may also be required to qualify to do business
as a foreign corporation in each 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.
In June 2000, the Federal Communications Commission invited public comment
on the jurisdictional nature of Internet traffic. The debate about the
jurisdictional nature of Internet traffic will impact, among other things,
whether the large incumbent telephone companies will have to compensate
competing telephone companies for delivering traffic to Internet service
providers. Certain local telephone carriers have petitioned the FCC to impose
access fees on Internet service providers. If access fees are imposed on
Internet service providers, the cost of communicating on the Internet could
increase, which could decrease demand for our developing Internet services.
We currently hold a number of web domain names relating to our brand and
sites. The acquisition and maintenance of domain names generally is regulated by
governmental agencies and their designees. We have registered our important
domain names with Network Solutions, Inc. However, the regulation of domain
names in the United States and in foreign countries is subject to change.
Governing bodies may modify the requirements for holding domain names or change
the procedures for domain name registration. As a result, we may be unable to
acquire or maintain relevant domain names in all countries and jurisdictions in
which we may wish to conduct our business. Furthermore, we 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.
Organizational History
We were incorporated in Delaware in July 1985 under the corporate name
"TransWest, Inc." For eight years prior to September 1995, we were an inactive
corporation. In September 1995, our corporate charter was revived in Delaware,
although at that time we had no material assets or capital and no operations or
income. In February 1996, we changed our corporate name to "D-Vine, Ltd."
In April 1999, we acquired 99.2% of the outstanding capital stock of
Taconic Data Corp., a privately-held New York corporation. Taconic, which was
incorporated in New York in 1992, provided real estate-related database
information services to consumers, real estate professionals and other
businesses primarily through regional real estate multiple listing services and,
more recently, over the Internet.
In connection with this acquisition, Taconic became our majority-owned
subsidiary and all of our directors and officers were replaced by Taconic
directors and officers. The stockholders of Taconic were issued 6,000,000 shares
of our common stock in exchange for their shares, or approximately 85% of our
21
total outstanding common stock after giving effect to the acquisition.
Accordingly, a change in control of our company occurred in connection with the
Taconic acquisition and the acquisition was deemed a "reverse acquisition" for
accounting purposes. In November 2000, as part of the settlement of a legal
dispute, we acquired the remaining 0.8% of Taconic's capital stock. See "Legal
Proceedings."
In April 1999, we changed our corporate name to "MonsterDaata.com, Inc."
and, in December 2000, we shortened it to "MonsterDaata, Inc." In June 1999, we
changed our fiscal year end date to December 31 to conform to Taconic's fiscal
year, and Taconic's independent auditors were appointed as our independent
auditors.
In March 2001, we filed an amendment to our certificate of incorporation
which effected a one-for-five reverse stock split, effective at the close of
business on March 26, 2001. This amendment had been approved by our board of
directors and the holders of a majority of the outstanding shares of common
stock and series C preferred stock, voting as a single class, in February 2001.
The March 2001 amendment also reduced the number of our authorized shares of
common stock from 200 million to 100 million.
Employees
As of May 31, 2001, we employed 37 full-time officers, data managers,
website developers, salespeople and support personnel. Of our employees, four
are involved in operations, five in general and administrative, four in sales
and marketing, six in product development and 18 in technology. No employees are
covered by any collective bargaining agreements. We believe that our
relationship with employees is good.
Facilities
We currently lease our principal executive offices in New York City to
house our sales, marketing, web development and website management operations.
Our New York City lease expires in June 2004 and has an annual rent of $37,178.
Since September 2000, we have also leased several other offices in New York City
under month-to-month arrangements at a cost of $5,100 per month. We expect total
rent expense to be approximately $54,000 under real property leases for 2001.
Legal Proceedings
We have recently settled most of our material litigation. In November
2000, we settled litigation with a former consultant which had sued us in New
York Supreme Court to collect $390,000 allegedly owed by us. This action was
settled for a total of $240,000, which included our legal fees and other related
costs and the return to us of the remaining 0.8% stock interest in Taconic. In
February 2001, we settled a litigation involving a former customer which was
seeking a refund of a $175,000 down payment for work the customer alleged we did
not perform properly. This matter was settled for a payment of $75,000 and a
two-year license agreement pursuant to which we granted a $140,000 credit to be
applied to monthly fees under the license agreement. In March 2001, we also
settled litigation with our former law firm over disputed legal fees with a
payment to the law firm of $680,000.
We are still a party to litigation involving a former website developer
for collection of $163,000 in fees allegedly owed by us. This action is pending.
Other than this lawsuit, we do not believe that we are a party to any litigation
that, if determined adversely to us, would seriously affect our business or
operations.
22
MANAGEMENT
Directors, Executive Officers and Key Employees
The names and ages of our directors, executive officers and key employees,
and their positions with us, are as follows:
Name Age Position
---- --- --------
John van Leeuwen................ 43 Chairman of the Board
Harold S. Blue.................. 40 Vice Chairman of the Board
Samuel B. Petteway, Jr.......... 45 President, Chief Executive Officer, Secretary and Director
Mitchell Deutsch................ 45 Vice Chairman of the Board
Keith M. Rosenbloom............. 33 Director
Joseph P. Wynne................. 36 Director
Mark Nathan..................... 33 Chief Technology Officer
Mark Siden...................... 34 Senior Vice President - Corporate Development
Jonathan Bednarsh............... 28 Senior Vice President - Operations
Peter Goldey.................... 30 Senior Vice President - Products
- ----------------------
The principal occupations for the past five years (and, in some instances,
for prior years) of each of our directors, executive officers and key employees
are as follows:
John van Leeuwen joined us as the Chairman of the Board in January 2001.
He has more than 19 years experience in the software, Internet and chemical
industries. Mr. van Leeuwen is recognized worldwide as a leading software and
Internet entrepreneur, with a track record of identifying, incubating and
successfully exiting several ventures. Mr. van Leeuwen founded Tech
Inspirations, a technology consulting company, in 1996, and has served as its
Chief Executive Officer since then. Prior to founding Tech Inspirations, Mr. van
Leeuwen was President of the Baan Company-Canada where he started Baan's North
American business operations. Prior to the Baan Company, Mr. van Leeuwen was the
founder and Chief Executive Officer of Strohn CIM Systems, Inc., an
engineering-based software company. He also spent six years in research and
business development at the Shell and Monsanto companies. Mr. van Leeuwen is the
Chief Executive Officer of XBOX Technologies Inc., a diversified, publicly-held
technology development company.
Harold S. Blue joined us as the Chairman of the Board in August 2000 and
became a Vice Chairman in January 2001. Mr. Blue has, since January 2001, been
an employee of Commonwealth Associates, L.P. From 1993 to September 2000, Mr.
Blue served as the Chairman and Chief Executive Officer of ProxyMed, Inc., a
healthcare information technology company, and since September 2000, has served
as ProxyMed's Vice Chairman. From 1990 to 1993, Mr. Blue was President and Chief
Executive Officer of Health Services Inc., a physician practice management
company which was sold to InPhyNet Medical Management, Inc. In 1984, Mr. Blue
founded Best Generics, Inc., a generic drug distribution company. Best Generics
was later sold to pharmaceutical manufacturer, Ivax Corporation, and Mr. Blue
served as a member of Ivax's Board of Directors from 1988 to 1990. From 1979 to
1984, Mr. Blue was President and Chief Executive Officer of Budget Drugs, Inc.,
a retail discount pharmacy chain located in
23
South Florida. Mr. Blue also served as a director of iMall, Inc., the largest
independent mall on the Internet, from 1997 to 1999, when it was acquired by
Excite@Home Corp. Mr. Blue is a member of the board of directors of
publicly-held companies ProxyMed, Inc., HealthWatch, Inc., a healthcare
application provider, eB2B Commerce, Inc., a business-to-business transaction
management services provider, and FutureLink Corp., an application utility
company.
Samuel B. Petteway, Jr. joined us as the President, Chief Executive
Officer and a member of our board of directors in September 2000. Prior to
joining us, Mr. Petteway served as the President of the Managed Care Division of
Opticare Health Systems, Inc. (formerly Saratoga Resources, Inc.) from July 1996
to August 2000 and led the managed care business operations of Consolidated Eye
Care, Inc. from 1989 to 1996. Mr. Petteway holds a B.S. degree in pharmacy from
the University of North Carolina and an M.B.A. degree with distinction from
Campbell University.
Mitchell Deutsch, the founder of Taconic, has been a member of our board
of directors since April 1999, and served as our President and Chief Executive
Officer from April 1999 to August 2000. He assumed these positions in connection
with our acquisition of Taconic. Mr. Deutsch has developed and marketed
information products and services to the real estate industry as a partner in
Real Estate Resources Corp., where he worked from 1987 to 1998 and was
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. 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 B.A. degree in communications.
Keith M. Rosenbloom joined us as a member of our board of directors in
September 2000. Mr. Rosenbloom is the Director of Merchant Banking of
Commonwealth Associates L.P., where he focuses on originating client
relationships and executing direct investments and private placements. Mr.
Rosenbloom serves on that firm's commitment and executive committees and its
board of directors. Prior to joining Commonwealth Associates, Mr. Rosenbloom
worked as an investment professional with Prudential Capital Corporation, the
merchant banking arm of the Prudential Investment Company. Mr. Rosenbloom
graduated from Yale University. Mr. Rosenbloom serves on the board of directors
of TheFemaleAthlete.com, a retailing site for female athletes, Internet Gift
Registries, an online gift registry, and the Hillel International Board of
Governors.
Joseph P. Wynne joined us as a member of our board of directors in January
2001. Mr. Wynne is the Chief Financial Officer of Commonwealth Associates L.P.
and ComVest Capital Partners, LLC. Prior to joining Commonwealth Associates in
November 1993, Mr. Wynne was a supervisor in the controller's office at Bear,
Stearns & Co. He was also earlier an audit supervisor for the accounting firm of
Goldstein, Golub & Kessler. Mr. Wynne is a certified public accountant and holds
a B.A. degree in accounting from Hofstra University and an M.B.A. degree in
finance from the Stern School of Business at New York University. Mr. Wynne
serves on the board of directors of drkoop.com, Inc., an Internet-based
healthcare network.
Key Employees:
Mark Nathan has been our Chief Technology Officer since March 2000. From
1997 to February 2000, Mr. Nathan served as Director of Professional Services
for the Enterprise Division of Apple Computer, where he was responsible for
overseeing the division's technical and project staff for large-scale e-commerce
development projects. Prior to Apple, Mr. Nathan served as a technical architect
for NeXT Software from 1995 to 1997, where he was responsible for the initial
launch of Disney.com and three subsequent launches. In his role as technical
architect, Mr. Nathan created re-usable frameworks for searching the Family.com
databases, engineered, implemented and deployed intranet applications for
24
Family.com and supervised all editors, authors, production managers and
technology staff throughout the life of the project. From 1993 to 1995, he
served as a project manager at SHL Systemhouse, where he managed a team of
developers on a commercial accounting system for the integrated commodity
trading system at Phibro Energy, a division of Salomon Brothers, Inc. Mr. Nathan
is a graduate of the University of Colorado, Boulder with a B.S. degree in
electrical and computer engineering and completed graduate coursework at such
university in electrical and computer engineering, with an emphasis in control
systems, software engineering, robotics and geotechnical engineering.
Marc Siden has been our Executive Vice President - Strategy since March
2000. His title was recently changed to Senior Vice President - Corporate
Development. In 1998, Mr. Siden served as President of New Beginnings Venture
Group, a venture capital firm that provided bridge funding to Taconic. In 1993,
Mr. Siden was employed as a Managing Director of Biltmore Securities, a 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. securities laws. Mr. Siden is a graduate of the University of Maryland.
Jon Bednarsh became our Senior Vice President - Business Development in
April 2000 after serving as our Vice President - Business Development since
November 1999. Prior to joining us, Mr. Bednarsh was the Director of Interactive
Services at Z.Interactive, Inc., the Internet division of New York ad agency
Ziccardi & Partners. From 1996 to 1998, he held various management positions
with Internet Group, Inc., an early entrant in the market for Internet
development services, and managed its acquisition by Ziccardi & Partners in
1998. In 1995, Mr. Bednarsh founded Clearly Internet, Inc., an Internet training
company. Mr. Bednarsh is a graduate of Indiana University with a B.S. degree in
finance.
Peter Goldey became our Senior Vice President - Products in April 2000.
Previously, Mr. Goldey served as our Director of Production and Director of
Technology before assuming the role of Senior Vice President - Products. At
various times since 1996, he has lead the data engineering, data analysis and
client services teams. Currently, he is responsible for the functional and
creative design of our products and marketing materials, and manages our quality
control center. Prior to joining us, Mr. Goldey managed regional operations for
a division of American Retail Group, a major retailing conglomerate. Mr. Goldey
graduated from Harvard University.
Our board of directors is elected at each annual meeting of our
shareholders. 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 shareholders by the
affirmative vote of the holders of a majority of the shares of our common stock
and series C preferred stock, voting as a single class, present in person or
represented by proxy and entitled to vote at an election of directors.
Under our bylaws, officers are appointed annually by our board of
directors at the first meeting of our board of directors following the annual
meeting of our shareholders. Each officer holds office until his or her
successor has been chosen and qualified.
25
Executive Compensation
Summary Compensation Table
The following summary compensation table sets forth the compensation
earned by the persons who served as our chief executive officer during 2000 and
our other most highly compensated officers other than the chief executive
officer for services rendered in all capacities for each of the last three
completed fiscal years.
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary (1) Bonus (1) Compensation Options Compensation
- --------------------------- ---- ---------- --------- ------------ ------- ------------
John van Leeuwen (2) ........ 2000 -- -- -- -- --
Chairman of the Board 1999 -- -- -- -- --
1998 -- -- -- -- --
Harold S. Blue (3) .......... 2000 -- -- -- -- $ 49,000
Vice President 1999 -- -- -- -- --
1998 -- -- -- -- --
Samuel B. Petteway, Jr. (4) . 2000 $ 55,786 $ 50,000 -- -- --
President and Chief Executive 1999 -- -- -- -- --
Officer 1998 -- -- -- -- --
Mitchell Deutsch (5) ........ 2000 $240,000 $ 13,000 -- 320,000 --
Vice Chairman 1999 212,893 11,200 $ 55,667 98,000 --
1998 64,487 371,163 -- --
Mark Nathan (6) ............. 2000 $124,445 -- -- 202,000 --
Chief Technology Officer 1999 -- -- -- -- --
1998 -- -- -- -- --
John Evans (6) .............. 2000 $116,667 -- -- 60,000 $ 2,500
Senior Vice President - 1999 80,099 $ 39,500 -- 45,600 --
Corporate Development 1998 0 -- --
Marc Siden (6) .............. 2000 $ 77,083 -- -- 90,000 $ 20,500
Senior Vice President - 1999 67,500 -- -- 20,000 --
Corporate Development 1998 0 -- -- -- --
- --------
(1) The salary information prior to April 2, 1999 relates to employment with
Taconic, our predecessor.
(2) Mr. van Leeuwen became our Chairman of the Board in January 2001.
(3) Mr. Blue is paid by us pursuant to his consulting agreement. He is not an
employee of MonsterDaata.
(4) Mr. Petteway became our President and Chief Executive Officer in September
2000.
(5) Mr. Deutsch served as our President and Chief Executive prior to September
2000.
(6) Messrs. Nathan, Evans and Siden became employees of MonsterDaata in March
2000, March 1999 and February 1999, respectively.
26
Option Grants in Fiscal 2000
The following table contains information concerning the stock option
grants made to the following officers for the year ended December 31, 2000.
Number of Percent of total
Securities options granted
Underlying to employees in Exercise or Expiration
Name and Principal Position Options granted fiscal year (1) Base Price Date
- --------------------------- --------------- --------------- ---------- ----------
John van Leeuwen, Chairman of the Board.. -- -- -- --
Harold S. Blue, Vice Chairman............ -- -- -- --
Samuel B. Petteway, Jr., President and
Chief Executive Officer.................. -- -- -- --
Mitchell Deutsch, Vice Chairman.......... 320,000 30.5% $1.25 11/30/10
Mark Nathan, Chief Technology Officer.... 15,000 1.4% $5.45 5/16/10
John Evans, Senior Vice President - 187,000 17.8% $1.15 10/23/10
Corporate Development .................. 30,000 2.9% $1.15 10/23/10
30,000 2.9% $1.25 11/30/10
Aggregate Option Exercises in Fiscal 2000 and Fiscal Year-End Option Values
The following table sets forth information concerning option exercises and
option holdings for the year ended December 31, 2000.
Shares
Acquired on Number of Securities Underlying Value of Unexercised In the
Name Exercise (#) Unexercised Options at Year End (#) Money Options at Year End(2)
- ---- ------------ ----------------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
John van Leeuween........ -- -- -- -- --
Harold S. Blue........... -- -- -- -- --
Samuel B. Petteway, Jr... -- -- -- -- --
Mitchell Deutsch......... -- 119,200 298,800 -- --
Mark Nathan.............. -- 12,000 190,000 -- --
John Evans............... 1,000 36,667 43,333 -- --
- -------------------------
(1) Percentage based on 1,049,252 options issued in the year ended December
31, 2000.
(2) Based on the fair market value of our common stock at year-end ($0.9375
per share), less the exercise price payable for such shares.
Employment and Consulting Agreements
In January 2001, our board of directors agreed to grant John van Leeuwen,
our Chairman of the Board, an option to purchase up to 1,200,000 shares of
common stock at an exercise price of $1.25 per share, vesting in three equal
installments over a three-year period.
27
Harold S. Blue, our Vice Chairman, has a consulting agreement, dated as of
August 29, 2000, with us through a corporation owned by him. Under his
agreement, Mr. Blue is paid $10,000 per month through August 29, 2001. Under an
oral agreement effective December 1, 2000, Mr. Blue voluntarily reduced this
monthly fee to $9,000 to conserve our cash. Pursuant to this agreement, Mr. Blue
was granted a ten-year option to purchase up to 200,000 shares of our common
stock at a price of $1.25 per share, vesting 25% at the end of each 90-day
period of the agreement. Mr. Blue has agreed not to disclose our confidential
information at any time following the termination of his consulting agreement
and has also agreed not to compete with us for at least 12 months following his
termination. We retain the right to terminate this agreement for cause and to
replace Mr. Blue as a director with or without cause.
Mitchell Deutsch, our Vice Chairman, has an agreement for consulting
services, dated as of November 30, 2000, with us. Under his agreement, he is
paid $10,000 per month through November 2002. In addition, he is entitled to
receive commissions of 5% of gross revenues received by us through November 2003
from sales of our products or services for which Mr. Deutsch is primarily
responsible. Pursuant to this agreement, Mr. Deutsch was granted a four-year
option to purchase 320,000 shares of common stock at a price of $ 1.25 per
share, vesting one-eighth at the end of each three-month period of the
agreement. The agreement also provides that, for each 12-month period of the
agreement and, in addition to the commissions provided for above, Mr. Deutsch is
to be granted options to purchase 8,000 shares of common stock at $1.25 per
share for each $100,000 of gross revenues received by us during that period from
sales of our products or services for which Mr. Deutsch is primarily
responsible, up to a maximum award during the term of the agreement of 160,000
shares.
Pursuant to the agreement, Mr. Deutsch retains the right to be on our
board of directors until November 2001 and thereafter has agreed to resign from
the board if requested to do so. Mr. Deutsch has agreed not to disclose our
confidential information for at least three years following the termination of
his consulting agreement and has also agreed not to compete with us for at least
18 months following his termination. This agreement can be terminated by us for
cause.
Samuel B. Petteway, Jr., our President and Chief Executive Officer, has an
employment agreement, dated as of September 1, 2000, with us. His agreement has
a three-year term and provides for a salary of $180,000 in the first year,
$200,000 in the second year and $225,000 in the third year, plus a year-end
bonus opportunity of up to 100% of salary in the discretion of our board of
directors. Under a verbal agreement effective December 1, 2000, Mr. Petteway
voluntarily reduced his annual salary to $168,000 to conserve our cash. In
addition, the agreement provides for the granting of a ten-year option to
purchase 550,000 shares of common stock at a price of $1.25 per share, vesting
one-quarter on each of the six month, 12 month, 24 month and 36 month
anniversaries of the agreement date. This option fully vests upon our change in
control or upon a sale of substantially all of our assets.
Mr. Petteway's employment may be terminated by us with or without cause,
but if we terminate him without cause, he is entitled to 12 months' salary as
severance. Mr. Petteway has agreed not to disclose our confidential information
at any time following the termination of his consulting agreement and has also
agreed not to compete with us for at least 12 months following his termination.
In February 2001, our board of directors agreed to grant Mr. Petteway an option
to purchase up to 883,600 shares of common stock at an exercise price of $1.25
per share.
Marc Siden, our Senior Vice President - Corporate Development, has an
employment agreement, dated December 1, 1999, with us, which was amended in
November 2000. His agreement provides for a salary of $90,000, plus a commission
equal to 5% of gross revenues received by us from sales of real-estate related
information to authorized leads as agreed between Mr. Siden and our Chief
Executive Officer. Pursuant to this agreement, Mr. Siden was granted options to
purchase up to 70,000 shares of common stock at a price of $1.25 per share under
our 2000 Plan, vesting one-third on each anniversary of the agreement or vesting
fully upon our change in control or the sale of substantially all of our assets.
Mr. Siden's employment may be terminated by us with or without cause, but if we
terminate him without cause, he is entitled to six months' salary as severance.
Mr. Siden has agreed not to disclose our
28
confidential information at any time following the termination of his employment
agreement and has also agreed not to compete with us for at least 12 months
following a voluntary termination by him of his employment.
Stock Option Plans
1999 Stock Option Plan. A total of 350,000 shares of our common stock has
been reserved for issuance under our 1999 Stock Option Plan. Our 1999 Plan was
adopted by the Board of Directors in June 1999, and approved by our stockholders
in July 1999. The 1999 Plan will continue in effect until the earlier of its
termination by our board or the date on which all of the shares of common stock
available for issuance under the 1999 Plan have been issued and all restrictions
on such shares under the terms of the 1999 Plan and agreements evidencing
options granted under the 1999 Plan have lapsed. However, all options shall be
granted, if at all, within ten years from the date the 1999 Plan was approved by
our shareholders. Employees, directors and consultants are eligible to receive
options under the 1999 Plan.
The 1999 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 1999 Plan is currently administered by our board of
directors, 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 1999 Plan requires that the exercise price for each option shall be
established in the sole discretion of our board; provided 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 1999 Plan is ten 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 30 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.
Pursuant to the 1999 Plan, on May 31, 2001, options to purchase 296,586
shares of common stock were outstanding, with exercise prices between $2.40 and
$20.00 per share and 187,954 of these options were vested and exercisable at
that time.
2000 Stock Option Plan. In September 2000, our board approved a 2000 Stock
Option Plan with substantially similar terms as those of the 1999 Plan. The 2000
Plan has reserved 5,000,000 shares of common stock for issuance upon the
exercise of stock options. The 2000 Plan has been ratified by our shareholders.
On May 31, 2001, options to purchase 3,554,143 shares of common stock were
outstanding, with exercise prices between $0.65 and $1.25 per share, and
1,085,750 of these options were vested and exercisable at that time.
Limitations of Liability and Indemnification
Section 145 of Delaware's General Corporation Law authorizes and permits,
subject to specified conditions and limitations, indemnification of officers,
directors and other persons. Pursuant to this statutory provision, our by-laws
provide, within these limits, for broad indemnification of those persons when
acting on our behalf. In addition, we have purchased insurance to indemnify
officers and directors against liabilities that may result from these capacities
and from their actions in these capacities. The
29
indemnification provided may protect officers and directors from liabilities
arising under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers or persons controlling
us pursuant to the foregoing provisions, we have been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
RELATED PARTY TRANSACTIONS
The information set forth herein briefly describes transactions and
proposed transactions over the past two 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.
Financial Advisory Arrangements and Private Placements
In May 2000, we entered into an engagement letter with Commonwealth
Associates, L.P., a New York limited partnership, pursuant to which we engaged
Commonwealth Associates as a financial advisor. ComVest Capital Partners LLC, a
Delaware limited liability company and an affiliate of Commonwealth Associates,
agreed to lend us up to $1.5 million. Commencing with an initial loan in June
2000, ComVest Capital loaned us a total of $1,478,000 pursuant to a series of
senior secured promissory notes. In September 2000, ComVest Capital converted
$750,000 of the notes into 7.5 units in our August-November 2000 private
placement (described below). The remaining principal amount of the notes was
converted into series C preferred stock and warrants in our December
2000-January 2001 private placement (described below).
As an inducement for ComVest Capital to lend us money, we issued to
ComVest Capital a warrant to purchase 1,500,000 shares of our common stock at an
exercise price of $.05 per share. This warrant was issued and exercised in June
2000. ComVest Capital was issued 1,200,000 shares of common stock for $60,000
and Commonwealth Associates was issued 300,000 shares of common stock for
$15,000 in connection with the exercise of this warrant.
During the period August-November 2000, we conducted a private placement
of units, each unit consisting of an 8% convertible subordinated promissory note
in the principal amount of $100,000 and a seven-year warrant to purchase 20,000
shares of our common stock at an exercise price of $1.25 per share, subject to
adjustment and callable under specified circumstances. The offering price was
$100,000 per unit. We sold 39.1 units in this private placement for total
proceeds of $3,910,000. Of this amount, $750,000 resulted from the conversion by
ComVest Capital of notes into units and $250,000 resulted from the conversion by
Mitchell Deutsch of a loan that he had made to us in August 2000 into 2.5 units.
In connection with this private placement, Commonwealth Associates received a
commission of $203,700, a structuring fee of $87,300 and seven-year warrants to
purchase 195,500 shares of common stock at an exercise price of $1.25 per share.
During the period December 2000-January 2001, we conducted a private
placement of units, each unit consisting of 10,000 shares of series C preferred
stock and warrants to purchase 40,000 shares of our common stock at an exercise
price of $1.25 per share, subject to adjustment and callable under specified
circumstances. The offering price was $100,000 per unit. We sold 107.28 units in
this private placement for total proceeds of $10,728,000. Of this amount,
$3,910,000 resulted from the conversion of notes sold in the August-November
2000 private placement into units in this private placement. Another $728,000
resulted from the conversion of notes into units by ComVest Capital. In
connection with the December 2000-January 2001 private placement, Commonwealth
Associates received a commission of $426,300, a structuring fee of $182,700 and
five-year warrants to purchase 1,931,040 shares of our common stock at an
exercise price of $1.25 per share.
Harold S. Blue, Keith M. Rosenbloom and Joseph P. Wynne, employees of
Commonwealth Associates, are members of our board of directors. ComVest Capital
Partners LLC and ComVest Venture Partners, L.P. are controlled by executive
officers of Commonwealth Associates.
30
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of May 31, 2001. The table includes:
o each of our directors and executive officers who beneficially owns
any shares of common stock;
o all of our directors and executive officers as a group; and
o each person or entity known by us to be the beneficial owner of more
than 5% of our common stock.
For purposes of this table, information as to our shares of common stock
is calculated based on 3,270,778 shares of common stock outstanding on May 31,
2001. Except as otherwise indicated, and subject to community property laws when
applicable, the persons named in the table below have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned by
them. Each of these persons may be reached through our offices at 32 East 31st
Street, Suite 900, New York, New York 10016.
Shares
Beneficially
Name of Beneficial Owner Owned (1) Percent
- ------------------------ --------- -------
Directors and executive officers:
John van Leeuwen (2)............................................ 400,000 10.9%
Harold S. Blue (3).............................................. 221,053 6.3%
Samuel B. Petteway, Jr. (4)..................................... 360,900 9.9%
Mitchell Deutsch (5)............................................ 1,093,536 25.1%
Marc Siden (6).................................................. 94,399 2.8%
Jonathan Bednarsh (7)........................................... 4,687 *
Mark Nathan (8)................................................. 56,333 1.7%
Keith M. Rosenbloom ............................................ 5,933,139 64.5%
Joseph P. Wynne ................................................ 5,891,906 64.3%
Peter Goldey.................................................... 4,353 *
All directors and executive officers
as a group (11 persons)....................................... 8,199,558 71.3%
5% Shareholders:
Commonwealth Associates, L.P. and affiliates (9)................ 5,860,748 64.2%
Michael Falk (9)................................................ 6,340,546 66.0%
J.F. Shea Co., Inc., as Nominee................................. 2,600,000 44.3%
RMC Capital, LLC................................................ 2,500,000 43.3%
Lions Investment Ltd............................................ 2,400,000 42.3%
Carol R. Hill Spousal Trust..................................... 400,000 10.9%
James Garfinkel (10)............................................ 286,795 8.1%
William T. McCaffrey............................................ 260,000 7.4%
Noam Gottesman.................................................. 180,000 5.2%
- --------------------------------
* Less than one percent.
(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
31
such person has the right to acquire within 60 days. 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 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) Represents stock options held by Mr. van Leeuwen currently exercisable for
400,000 shares. Does not include shares held by Lions Investment Ltd. Mr.
van Leeuwen, through his personal companies, provides investment advisory
services to Lions Investment Ltd. In that capacity, he often sits on the
boards of, or is an officer of, companies in which Lions Investment
chooses to invest. Mr. van Leeuwen is not an officer, director or
shareholder of Lions Investment Ltd., nor of any of its shareholders.
(3) Includes stock options held by Mr. Blue currently exercisable for 200,000
shares and warrants currently exercisable for 21,053 shares. See
"Executive Compensation - Employment and Consulting Agreements."
(4) Represents stock options currently exercisable for 220,900 shares,
warrants currently exercisable for 60,000 shares and 10,000 shares of
series C preferred stock convertible into 80,000 shares held by Mr.
Petteway. See "Executive Compensation - Employment and Consulting
Agreements."
(5) Includes stock options currently exercisable for 138,800 shares, warrants
currently exercisable for 151,540 shares, and 25,000 shares of series C
preferred stock convertible into 200,000 shares held by Mr. Deutsch. Also
includes 20,622 shares owned by Mr. Deutsch's dependent children. Does not
include shares issuable upon exercise of outstanding warrants owned by
pension accounts managed for the benefit of his spouse nor does the amount
shown include 30,820 shares owned by such accounts.
(6) Represents stock options held by Mr. Siden currently exercisable for
21,333 shares and 73,066 shares held in the name of What About Me, Inc.,
an entity owned by Mr. Siden.
(7) Includes stock options held by Mr. Bednarsh currently exercisable for
4,667 shares.
(8) Represents stock options held by Mr. Nathan currently exercisable for
56,333 shares.
(9) Commonwealth Associates, L.P., ComVest Capital Partners, LLC and ComVest
Venture Partners, LP are affiliates. Includes 1,200,000 shares issued to
these entities and 245,000 of the 300,000 shares issued to these entities
upon exercise of warrants (Commonwealth Associates transferred 55,000
shares to an unrelated party as a finder's fee). Includes warrants
currently exercisable for 2,408,348 shares and 247,800 shares of series C
preferred stock convertible into 1,982,400 shares. Mr. Falk is the
Chairman and Chief Executive Officer, Mr. Rosenbloom is the Director of
Merchant Banking, and Mr. Wynne is the Chief Financial Officer of
Commonwealth Associates. Accordingly, each of them may be deemed to be an
affiliate of Commonwealth Associates, ComVest Capital and ComVest Venture
and a beneficial owner of the shares held by Commonwealth Associates,
ComVest Capital and ComVest Venture.
(10) Includes stock options held by Mr. Garfinkel currently exercisable for
42,000 shares and 15,108 shares held by Mr. Garfinkel's spouse and child.
Does not include 126,827 shares owned by Mr. Garfinkel's father and
brother, as to which James Garfinkel disclaims beneficial ownership.
32
SELLING SHAREHOLDERS
General
The selling shareholders currently hold unregistered shares of our common
stock, shares of our series B or series C preferred stock convertible into our
common stock or warrants exercisable for our common stock. We are required to
register these shares of common stock pursuant to contractual obligations which
we entered into with the selling shareholders in connection with the
transactions described below. The cost of registering the shares will be borne
by us.
Series A Preferred Stock Private Placement
We sold 1,591.76 shares of series A preferred stock and warrants to
purchase 118,862 shares of common stock at an exercise price of $18.75 per
share, subject to adjustment (the exercise price has since been adjusted to
$1.25 for most outstanding warrants), between November 1999 and January 2000.
These securities were sold to accredited investors in an offering exempt from
registration under Rule 506 of Regulation D under the Securities Act. The total
offering price for these securities was $1,492,000 and the net proceeds were
used for general corporate purposes. In January 2000, we filed a registration
statement with the SEC to register the common shares issuable upon conversion of
the series A preferred stock. We have since issued 44,522 additional shares of
common stock to holders of series A preferred stock on account of accrued
dividends and we are registering these shares pursuant to this prospectus.
Series B Preferred Stock Private Placement
We sold 425 shares of series B preferred stock and warrants to purchase
11,334 shares of common stock at an exercise price of $21.25 per share, subject
to adjustment (the exercise price has since been adjusted to $1.25 for most
outstanding warrants), in April 2000. These securities were sold to accredited
investors in an offering exempt from registration under Rule 506 of Regulation D
under the Securities Act. The total offering price for these securities was
$425,000 and the net proceeds were used for general corporate purposes. We have
since issued 14,360 additional shares of common stock to holders of series B
preferred stock on account of accrued dividends.
Financial Advisory Arrangements
In consideration of its investment in us and its services in structuring
and placing several rounds of financing for us, Commonwealth Associates and its
affiliates, officers, directors and employees received 3,120,989 shares of
common stock at an exercise price of $1.25 per share and 147,800 shares of
series C preferred stock. For further details, see "Related Party
Transactions-Financial Advisory Arrangements and Private Placements" above.
Series C Preferred Stock Private Placement
We sold 821,000 shares of series C preferred stock and two-year warrants
to purchase 3,284,000 shares of common stock at an exercise price of $1.25 per
share on December 6, 2000 for $8,210,000 ($3,910,000 of which involved the
conversion of notes from a previous private placement). We sold an additional
164,000 shares of series C preferred stock and warrants to purchase 656,000
shares of common stock on December 29, 2000 for $1,640,000 and 87,800 shares of
series C preferred stock and warrants to purchase 351,200 shares of common stock
on January 5, 2001 for $878,000. These securities were sold to accredited
investors in an offering exempt from registration under Rule 506 of Regulation D
under the Securities Act. The total offering price for these securities was
$10,728,000. The net proceeds were used for general corporate purposes.
33
Number of Shares of Common Stock That We May Issue
Assuming the full conversion of the series B and series C preferred stock
and exercise of all of the warrants, we would issue 15,836,041 shares of our
common stock to the selling shareholders. These 15,836,041 shares would
represent approximately 485% of our total current outstanding common stock.
Selling Shareholder Table
The table below lists, in each case as of May 31, 2001:
o the name of each selling shareholder;
o the number of shares each selling shareholder beneficially owns;
o how many shares of common stock the selling shareholder may resell
under this prospectus; and
o assuming each selling shareholder sells all the shares listed next
to its name, how many shares of common stock each selling
shareholder will beneficially own after completion of the offering
(based upon 3,270,778 shares outstanding on May 31, 2001).
Beneficial ownership is determined in accordance with rules set by the
SEC, and the information is not necessarily indicative of beneficial ownership
for any other purpose. This table is based upon information supplied to us by
the selling shareholders. Except as otherwise indicated, we believe that the
entities named in the table have sole voting and investment power with respect
to all shares of the common stock shown as beneficially owned by them, subject
to community property laws where applicable.
We may amend or supplement this prospectus from time to time in the future
to update or change this list of selling shareholders and shares which may be
resold.
Beneficial Ownership Beneficial Ownership
Before the Offering After the Offering
--------------------------- ------------------------
Shares That
May be Sold
in the
Selling Shareholder Shares (1) Percent Offering Shares (1) Percent
------------------- ---------- ------- -------- ---------- -------
Commonwealth Associates, L.P.
and affiliates(2) .............. 5,860,748 64.2% 5,860,748 -- *
Michael Falk ................... 6,340,546 66.0% 479,798 -- *
Keith M. Rosenbloom ............ 5,933,139 64.5% 72,391 -- *
Robert O'Sullivan .............. 64,992 1.9% 64,992 -- *
Inder Tallur ................... 35,369 1.1% 35,369 -- *
Joseph P. Wynne ................ 5,891,906 64.3% 31,158 -- *
Harold S. Blue ................. 221,053 6.3% 21,053 200,000 1.1%
David Boris .................... 53,263 1.6% 53,263 -- *
Carl Kleidman .................. 36,842 1.1% 36,842 -- *
Joshua Landau .................. 8,211 * 8,211 -- *
Basil Asciutto ................. 8,000 * 8,000 -- *
Peter Latour ................... 26,496 * 26,496 -- *
Beth Lipman .................... 6,497 * 6,497 -- *
Bruce Glaser ................... 20,000 * 20,000 -- *
Scott Greiper .................. 20,000 * 20,000 -- *
Anne Falk ...................... 4,846 * 4,846 -- *
34
Beneficial Ownership Beneficial Ownership
Before the Offering After the Offering
--------------------------- ------------------------
Shares That
May be Sold
in the
Selling Shareholder Shares (1) Percent Offering Shares (1) Percent
------------------- ---------- ------- -------- ---------- -------
Richard Campanella ............. 4,000 * 4,000 -- *
Anthony Giardina ............... 4,000 * 4,000 -- *
Jerome Messana ................. 3,158 * 3,158 -- *
Thom Waye ...................... 9,895 * 9,895 -- *
Philip R. Ladoucer ............. 2,105 * 2,105 -- *
Edwin M. Cooperman ............. 2,105 * 2,105 -- *
Richard Yalen .................. 2,105 * 2,105 -- *
Richard Rosenblatt ............. 2,105 * 2,105 -- *
Susan Hoffman .................. 1,000 * 1,000 -- *
Barry Hartheimer ............... 25,000 * 25,000 -- *
Adina Winston .................. 25,000 * 25,000 -- *
Cornell Capital Partners ....... 40,000 1.2% 40,000 -- *
American Market Support
Network ........................ 8,400 * 8,400 -- *
Mark Deutsch ................... 6,468 * 6,468 -- *
Ron Deutsch .................... 76,652 2.3% 56,924 19,728 *
Kevin Heneghan ................. 12,937 * 12,937 -- *
Gustavo Larramendi ............. 15,480 * 8,423 7,057 *
Allegra Films Pension, LP. ..... 19,514 * 11,592 7,922 *
Eve Silverman .................. 32,820 * 32,801 19 *
Leslie VanDermeer .............. 4,416 * 1,338 3,078 *
Pala Management Corp. Retirement
Trust .......................... 4,417 * 1,339 3,078 *
Dave Jacquin ................... 7,880 * 2,880 5,000 *
George Regan ................... 3,940 * 1,440 2,500 *
Todd Roberts ................... 22,118 * 1,618 20,500 *
Holly Schepisi ................. 788 * 288 500 *
Troy Roberts ................... 1,576 * 576 1,000 *
Huneke Family Trust ............ 18,912 * 6,912 12,000 *
Ziona Silverman ................ 3,468 * 984 2,484 *
Robert Lawrence ................ 7,651 * 4,131 3,520 *
Steven Bergman ................. 6,468 * 6,468 -- *
Susan Nussbaum ................. 41,468 1.3% 41,468 -- *
J.F. Shea Co., Inc. as nominee . 2,600,000 44.3% 2,600,000 -- *
RMC Capital, LLC ............... 2,500,000 43.3% 2,500,000 -- *
Lions Investment Ltd. .......... 2,400,000 42.3% 2,400,000 -- *
Carol R. Hill Spousal Trust .... 400,000 10.9% 400,000 -- *
Mitchell Deutsch ............... 1,093,536 25.1% 951,254 142,282 4.2%
Noam Gottesman ................. 180,000 5.2% 180,000 -- *
Conzetta Europa Invest Ltd. .... 140,000 4.1% 140,000 -- *
Hardy Family Limited
Partnership .................... 140,000 4.1% 140,000 -- *
William T. McCaffrey ........... 260,000 7.4% 260,000 -- *
Samuel B. Petteway, Jr ......... 140,000 9.9% 140,000 -- 1.2%
Daniel S. Och .................. 140,000 4.1% 140,000 -- *
Sheldon Lipton ................. 158,750 4.6% 140,000 18,750 *
Flynn Corporation .............. 120,000 3.5% 120,000 -- *
Michael Singer ................. 120,000 3.5% 120,000 -- *
35
Beneficial Ownership Beneficial Ownership
Before the Offering After the Offering
--------------------------- ------------------------
Shares That
May be Sold
in the
Selling Shareholder Shares (1) Percent Offering Shares (1) Percent
------------------- ---------- ------- -------- ---------- -------
Jacob Goldfield ................ 108,000 3.2% 108,000 -- *
Harvard Developments, Inc. ..... 100,000 3.0% 100,000 -- *
Harvard Investments ............ 90,000 2.7% 90,000 -- *
Harry A. Gampel ................ 70,000 2.1% 70,000 -- *
Ira M. Leventhal ............... 70,000 2.1% 70,000 -- *
David Morley ................... 60,000 1.8% 60,000 -- *
Paul Goldenheim ................ 60,000 1.8% 60,000 -- *
Barry Garfinkel ................ 159,701 4.7% 152,737 6,964 *
David Garfinkel ................ 113,286 3.3% 106,322 6,964 *
James Garfinkel ................ 286,795 8.1% 234,595 52,200 *
Elior Garfinkel ................ 4,908 * 4,908 -- *
Georganne Garfinkel ............ 10,200 * 10,200 -- *
Sol Kiperman ................... 25,609 * 25,609 -- *
Thomas Associates .............. 23,953 * 19,953 4,000 *
What About Me, Inc. ............ 73,066 2.2% 73,066 -- *
Allan & Ellen MacDonald,
JTWROS 30,000 * 30,000 -- *
Stephen J. Warner .............. 30,000 * 30,000 -- *
Steven Hart .................... 14,000 * 14,000 -- *
- -------------------------
* Less than one percent.
(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. 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 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 holdings of ComVest Capital Partners LLC and ComVest Venture
Partners, L.P. See footnote (9) under "Principal Shareholders."
Relationships
Except as described below, none of the selling shareholders has had any
position, office or other material relationship with us or any of our affiliates
within the past three years.
o Harold S. Blue has, since August 2000, been a member of our board of
directors.
o Samuel B. Petteway, Jr. has, since September 2000, been an executive
officer and a member of our board of directors.
o Mitchell Deutsch has, since April 1999, been an executive officer
and a member of our board of directors.
36
o Keith M. Rosenbloom has, since September 2000, been a member of our
board of directors.
o Joseph P. Wynne has, since January 2001, been a member of our board
of directors.
o Commonwealth Associates, L.P. acted as the placement agent of our
securities in private placements conducted during August-November
2000 and December 2000-January 2001, as described above and in
"Related Party Transactions." Commonwealth Associates does not act
as a market maker for our common stock. ComVest Capital Partners LLC
and ComVest Venture Partners, L.P. are controlled by executive
officers of Commonwealth Associates. Messrs. Blue, Rosenbloom and
Wynne, members of our board of directors, are also employees of
Commonwealth Associates. Michael Falk is the Chairman and Chief
Executive Officer of Commonwealth Associates and some of the other
selling shareholders are employees of Commonwealth Associates.
PLAN OF DISTRIBUTION
The selling shareholders may sell their shares of common stock in one or
more transactions, which may involve block transactions,
o on the OTCBB,
o on any other markets on which our common stock may from time to time
be trading,
o in privately-negotiated transactions or
o through the writing of options on the shares of common stock, short
sales or any combination of the two.
The selling shareholders may sell at market prices at the time of sale or
at negotiated prices. The selling shareholders may use broker-dealers to sell
their shares. If this happens, the broker-dealers will either receive discounts
or commissions from the selling shareholders or they will receive commissions
from purchasers of shares for whom they acted as agents. Selling shareholders
and broker-dealers acting on their behalf may be deemed underwriters under the
Securities Act of 1933. We are not aware of any agreement, arrangement or
understanding entered into by the selling shareholders with any broker-dealers
or underwriters as of the date of this prospectus with respect to the sale of
their shares of common stock.
The selling shareholders may attempt to sell all of the shares. This could
cause the supply of shares to exceed demand, which could drive the price of our
shares down.
37
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares of common
stock, par value $.001 per share, and 10,000,000 shares of preferred stock, par
value $.01 per share. On May 31, 2001, there were issued and outstanding
3,270,778 shares of common stock, 418.05 shares of series A preferred stock, 25
shares of series B preferred stock and 1,072,800 shares of series C preferred
stock. We have reserved (1) 3,850,729 shares of common stock for issuance upon
exercise of outstanding stock options, (2) 7,275,102 shares of common stock for
issuance upon exercise of outstanding warrants and (3) 8,621,695 shares of
common stock for issuance upon conversion of our series A, series B and series C
preferred stock.
Common Stock
Holders of our common stock have the right to cast one vote for each share
of common stock held in all matters as to which the vote or consent of our
shareholders is required or taken. There are no cumulative voting rights.
Accordingly, the holders of a majority of our 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.
Holders of our common stock have no preemptive rights by virtue of such
ownership.
Shareholders 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 dividends as and if
declared by our board of directors 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.
Series A Preferred Stock and Warrants
Each share of our series A preferred stock is convertible, at any time at
the option of the holder, into 90 validly issued, fully paid and nonassessable
shares of common stock. Series A preferred stock will be converted automatically
into common stock upon our merger or consolidation into another company the
transfer of more than 75% of our voting securities, the sale of substantially
all of our assets or the election of over 90% in interest of the series A
shareholders. Holders of series A preferred stock 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. The series A preferred
stock carries the right to a 6% compounded annual dividend (which we have never
paid) and a right to our assets upon liquidation of $1,000 per share in
preference to our common stock. We may redeem the series A preferred stock at
any time for $1,000 per share. In general, the Series A preferred stock does not
have voting rights.
The warrants issued with the series A preferred stock 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.
The majority of the holders of our series A preferred stock have agreed to
convert each share of their series A preferred stock into 90 shares of common
stock, plus additional shares of common stock in lieu of accrued preferred stock
dividends through December 31, 2000. These holders also received warrants to
purchase shares at an exercise price of $1.25 per share.
38
Series B Preferred Stock and Warrants
Each share of our series B preferred stock is convertible, at any time at
the option of the holder, into 67 validly issued, fully paid and nonassessable
shares of common stock. Series B preferred stock will be converted automatically
into common stock upon our merger or consolidation into another company, the
transfer of more than 75% of our voting securities, the sale of substantially
all of our assets or the election of over 90% in interest of the series B
shareholders. Holders of series B preferred stock 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. The series B preferred
stock carries the right to a 6% compounded annual dividend (which we have never
paid) and a right to assets upon liquidation of $1,000 per share in preference
to our common stock. We may redeem the series B preferred stock at any time for
$1,100 per share. In general, the series B preferred stock does not have voting
rights.
The warrants issued with the series B preferred stock 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.
The majority of the holders of series B preferred stock have agreed to
convert each share of their series B preferred stock into approximately 67
shares of common stock, plus additional shares of common stock in lieu of
accrued preferred stock dividends through December 31, 2000. These holders also
received warrants to purchase shares at an exercise price of $1.25 per share.
Series C Preferred Stock and Warrants
Each share of our series C preferred stock is convertible, at any time at
the option of the holder, into eight validly issued, fully paid and
nonassessable shares of common stock. Series C preferred stock will be converted
automatically into common stock upon our merger or consolidation into another
company, the transfer of more than 75% of our voting securities, the sale of
substantially all of our assets or the election of over 90% in interest of the
series C shareholders. Holders of series C preferred stock 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. The series C preferred
stock carries the right to a 6% compounded annual dividend (which we have never
paid) and a right to assets upon liquidation of $1,000 per share in preference
to our common stock. We may redeem the series C preferred stock at any time for
$1,100 per share. In general, the series B preferred stock does not have voting
rights.
The warrants issued with the series C preferred stock may be exercised by
paying the exercise price of $1.25 per share 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.
Delaware Anti-Takeover Provision
We are subject to a statute under the Delaware General Corporation Law
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.
39
Transfer Agent
The transfer agent and registrar for our common stock is Corporate Stock
Transfer, Inc. of Denver, Colorado.
LEGAL MATTERS
Greenberg Traurig, LLP, New York, New York, will issue an opinion for us
about the legality of the shares.
EXPERTS
Our consolidated financial statements and schedules included in this
prospectus and elsewhere in the registration statement have been audited by
Marcum & Kliegman LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to Section 15(d) under the Securities Exchange Act of 1934
(as required for trading on the OTC Bulletin Board) and, accordingly, we file
annual, quarterly and special reports with the SEC. You may read and copy any
document we file at the public reference facilities of the SEC in Washington,
D.C., Chicago, Illinois and New York, New York. Please call the SEC at (800)
SEC-0330 for further information on the public reference rooms. Our SEC filings
are also available to the public from the SEC's website at http://www.sec.gov.
40
MONSTERDAATA, INC.
CONTENTS
- --------------------------------------------------------------------------------
Page
ANNUAL AUDITED FINANCIAL STATEMENTS - DECEMBER 31, 2000
Independent Auditors' Report .................................. F-2
Balance Sheet ................................................. F-3 - F-4
Statements of Operations ...................................... F-5
Statements of Changes in Stockholders' Equity (Deficiency) .... F-6 - F-7
Statements of Cash Flows ...................................... F-8 - F-9
Notes to Financial Statements ................................. F-10 - F-30
INTERIM FINANCIAL STATEMENTS (UNAUDITED) - THREE MONTHS
ENDED MARCH 31, 2001
Condensed Balance Sheet ....................................... F-31 - F-32
Condensed Statements of Operations ............................ F-33
Condensed Statements of Cash Flows ............................ F-34 - F-35
Notes to Condensed Financial Statements ....................... F-36 - F-41
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
MonsterDaata, Inc.
We have audited the accompanying balance sheet of MonsterDaata, Inc. (formerly
known as MonsterDaata.com, Inc.) as of December 31, 2000 and the related
statements of operations, changes in stockholders' equity (deficiency) and cash
flows for the years ended December 31, 2000 and 1999. 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, Inc. as of
December 31, 2000, and the results of its operations and its cash flows for the
years ended December 31, 2000 and 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12 the Company
incurred a net loss of $6,623,780 during the year ended December 31, 2000, and
net cash flows used to fund operations was $5,773,442. These factors, as well as
the uncertain conditions that the Company faces relative to its implementation
of a new revenue model, create substantial doubt as to the Company's ability to
continue as a going concern. The Company launched a new technology platform
during the fourth quarter of fiscal 2000, which offers new product lines. The
ability of the Company to continue as a going concern is dependent upon the
success of the new platform and new line of products. The financial statements
do not include any adjustments to the financial statements that might be
necessary should the Company be unable to continue as a going concern.
\s\ Marcum & Kliegman LLP
March 2, 2001 except for the last paragraph of
Note 13 which is dated March 19,2001
New York, New York
F-2
MONSTERDAATA, INC.
BALANCE SHEET
December 31, 2000
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,774,777
Accounts receivable 124,312
Prepaid expenses 492,114
Cash held in escrow 451,000
----------
Total Current Assets $2,842,203
PROPERTY AND EQUIPMENT, Net 1,206,515
OTHER ASSETS
Deposits 325,688
----------
TOTAL ASSETS $4,374,406
==========
The accompanying notes are an integral part of these financial statements.
F-3
MONSTERDAATA, INC.
BALANCE SHEET
December 31, 2000
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 563,837
Deferred revenue-current 308,719
Current maturities of capital lease obligations 302,301
Dividends payable 89,000
Loan from Stockholders 1,408,000
------------
Total Current Liabilities $ 2,671,857
Capital lease obligations, net of current maturities 814,670
Deferred revenue - non current 6,000
------------
Total Other Liabilities 820,670
------------
TOTAL LIABILITIES 3,492,527
STOCKHOLDERS' EQUITY
Series A Preferred stock, $1,000 stated value 10,000,000
shares authorized, 1,261.76 issued and outstanding
(liquidating preference $1,000 per share) 1,261,760
Series B Preferred stock, $1,000 stated value 10,000,000 shares
authorized, 425 issued and outstanding( liquidating preference
$1,000 per share) 425,000
Series C Preferred stock, $10 stated value 10,000,000 shares
authorized, 985,000 issued and outstanding( liquidating
preference $20 per share) 9,850,000
Common stock, $0.01 par value; 100,000,000 shares
authorized, 3,100,841 issued and outstanding 31,008
Additional paid in capital 3,476,182
Note receivable, stockholder (101,838)
Subscription receivable (1,600,000)
Accumulated deficit (12,460,233)
------------
TOTAL STOCKHOLDERS' EQUITY 881,879
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,374,406
============
The accompanying notes are an integral part of these financial statements.
F-4
MONSTERDAATA, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2000 and 1999
- --------------------------------------------------------------------------------
2000 1999
------------------------------
SALES $ 1,661,556 $ 2,488,434
COST OF SALES 542,382 753,013
----------- -----------
GROSS PROFIT 1,119,174 1,735,421
----------- -----------
OPERATING EXPENSES
Product development costs 2,691,942 880,433
Selling, general and administrative expenses 3,847,512 3,693,525
----------- -----------
TOTAL OPERATING EXPENSES 6,539,454 4,573,958
OPERATING LOSS (5,420,280) (2,838,537)
----------- -----------
OTHER INCOME AND (EXPENSES)
Interest income (expense), net (1,207,101) 9,599
Expense settlements 270,004
Asset impairment (261,103) --
Other income -- 342
----------- -----------
TOTAL OTHER INCOME (EXPENSE) (1,198,200) 9,941
----------- -----------
LOSS BEFORE INCOME TAXES (6,618,480) (2,828,596)
----------- -----------
INCOME TAX EXPENSE 5,300 750
----------- -----------
NET LOSS (6,623,780) (2,829,346)
Dividends on Preferred Stock (89,000) --
----------- -----------
Loss attributable to common stockholders' $(6,712,780) $(2,829,346)
=========== ===========
Net Loss Per Share
Weighted Average Shares Outstanding 2,399,904 1,391,386
=========== ===========
Net Loss Per Share, basic and diluted $ (2.80) $ (2.03)
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
MONSTERDAATA, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
For the Years Ended December 31, 2000 and 1999
- --------------------------------------------------------------------------------
Series B Series C
Series A Preferred Stock Preferred Stock Preferred Stock Common Stock
--------------------------------------------------------------------------------------------------
Shares
-----------------------
Stated Stated Stated Par Value
Subscribed Issued Value Shares Value Shares Value Shares $ 0.01
--------------------------------------------------------------------------------------------------
BALANCE - January 1, 1999 -- -- $ -- -- -- -- -- 1,204,955 $12,050
Exercise D-Vine warrant and
issuance of new warrants -- -- -- -- -- -- -- 200,000 2,000
Options granted under stock
option plan -- -- -- -- -- -- -- -- --
Issuance of Options -- -- -- -- -- -- -- -- --
Exercise of options by
employees and consultants -- -- -- -- -- -- -- 54,100 541
Conversion of accounts
payable -- -- -- -- -- -- -- 22,628 226
Issuance of Series A Preferred
stock and warrants -- 1,561.23 1,561,230 -- -- -- -- -- --
Exercise of warrants on a
cashless basis -- -- -- -- -- -- -- 50,507 505
Series A Preferred stock
subscribed 20.53 -- 20,530 -- -- -- -- -- --
Payments received on note
receivable net of accrued
interest of $2,950 -- -- -- -- -- -- -- -- --
Net Loss -- -- -- -- -- -- --
---------- ---------- ---------- ------ ------ ------ ------ --------- -------
BALANCE - December 31, 1999 20.53 1,561.23 $1,581,760 -- -- -- -- 1,532,190 $15,322
========== ========== ========== ====== ====== ====== ====== ========= =======
Additonal
Paid in Notes Subscription Accumulated
Capital Receivable Receivable Deficit Total
--------------------------------------------------------------------
BALANCE - January 1, 1999 $ 2,007,977 $ -- -- $(2,918,107) $ (898,080)
Exercise D-Vine warrant and
issuance of new warrants 1,162,040 -- -- -- 1,164,040
Options granted under stock
option plan 215,355 -- -- -- 215,355
Issuance of Options 75,000 -- -- -- 75,000
Exercise of options by
employees and consultants 269,959 (118,000) -- -- 152,500
Conversion of accounts
payable 312,274 -- -- -- 312,500
Issuance of Series A Preferred
stock and warrants (408,464) -- -- -- 1,152,766
Exercise of warrants on a
cashless basis (505) -- -- -- --
Series A Preferred stock
subscribed (530) -- -- -- 20,000
Payments received on note
receivable net of accrued
interest of $2,950 -- 22,050 -- -- 22,050
Net Loss -- -- -- (2,829,346) (2,829,346)
----------- --------- ---------- ----------- -----------
BALANCE - December 31, 1999 $ 3,633,106 $ (95,950) -- $(5,747,453) $ (613,215)
=========== ========= ========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
MONSTERDAATA, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY), Continued
For the Years Ended December 31, 2000 and 1999
- --------------------------------------------------------------------------------
Series B
Series A Preferred Stock Preferred Stock
---------------------------------------------------------------------------------
Shares
------------------------------
Stated Stated
Subscribed Issued Value Shares Value
--------------------------------------------------------------------------------
BALANCE - January 1, 2000 20.53 1,561.23 $ 1,581,760 -- $ --
Issuance of Series A Preferred
stock (20.53) 30.53 10,000 -- --
Conversion of Series A Preferred
stock -- (330.00) (330,000) -- --
Issuance of Series B preferred
stock and warrants -- -- -- 425 425,000
Issuance of Series C preferred
stock and warrants -- -- -- -- --
Issuance of common stock -- -- -- -- --
Repurchase of stock warrant -- -- -- -- --
Issuance of warrants - debt discount -- -- -- -- --
Issuance of options -- -- -- -- --
Proceeds from exercise of option -- -- -- -- --
Exercise of warrants -- -- -- -- --
Exercise of warrants on a
cashless basis -- -- -- -- --
Accrued Interest -- -- -- -- --
Dividends Declared -- -- -- -- --
Adjustment for fractional shares
issued in connection with
Reverse split -- -- -- -- --
Net Loss -- -- -- -- --
------------- ------------- ------------- ------------- -------------
BALANCE - December 31, 2000 -- 1,261.76 $ 1,261,760 425 $ 425,000
============= ============= ============= ============= =============
Series C
Preferred Stock Common Stock
------------------------------------------------------------- Additional
Stated Par Value Paid in
Shares Value Shares $0.01 Capital
-----------------------------------------------------------------------------
BALANCE - January 1, 2000 -- $ -- 1,532,190 $ 15,322 $ 3,633,106
Issuance of Series A Preferred
stock -- -- -- -- (10,000)
Conversion of Series A Preferred
stock -- -- 29,700 297 329,703
Issuance of Series B preferred
stock and warrants -- -- -- -- (98,523)
Issuance of Series C preferred
stock and warrants 985,000 9,850,000 -- -- (881,565)
Issuance of common stock -- -- 20,000 200 (200)
Repurchase of stock warrant -- -- -- -- (40,000)
Issuance of warrants - debt discount -- -- -- -- 386,700
Issuance of options -- -- -- -- 92,150
Proceeds from exercise of option -- -- 5,100 51 4,949
Exercise of warrants -- -- 1,500,000 15,000 60,000
Exercise of warrants on a
cashless basis -- -- 13,720 137 (137)
Accrued Interest -- -- -- -- --
Dividends Declared -- -- -- -- --
Adjustment for fractional shares
issued in connection with
Reverse split -- -- 131 1 (1)
Net Loss -- -- -- -- --
------------- ------------- ------------- ------------- -------------
BALANCE - December 31, 2000 985,000 $ 9,850,000 3,100,841 $ 31,008 $ 3,476,182
============= ============= ============= ============= =============
Notes Subscription Accumulated
Receivable Receivable Deficit Total
-----------------------------------------------------------------
BALANCE - January 1, 2000 $ (95,950) $ -- $ (5,747,453) $ (613,215)
Issuance of Series A Preferred
stock -- -- -- --
Conversion of Series A Preferred
stock -- -- -- --
Issuance of Series B preferred
stock and warrants -- -- -- 326,477
Issuance of Series C preferred
stock and warrants -- (1,600,000) -- 7,368,435
Issuance of common stock -- -- -- --
Repurchase of stock warrant -- -- -- (40,000)
Issuance of warrants - debt discount -- -- -- 386,700
Issuance of options -- -- -- 92,150
Proceeds from exercise of option -- -- -- 5,000
Exercise of warrants -- -- -- 75,000
Exercise of warrants on a
cashless basis -- -- -- --
Accrued Interest (5,888) -- -- (5,888)
Dividends Declared -- -- (89,000) (89,000)
Adjustment for fractional shares
issued in connection with
Reverse split -- -- -- --
Net Loss -- -- (6,623,780) (6,623,780)
------------- ------------- ------------- -------------
BALANCE - December 31, 2000 $ (101,838) $ (1,600,000) $ (12,460,233) $ 881,879
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
F-7
MONSTERDAATA, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2000 and 1999
- --------------------------------------------------------------------------------
2000 1999
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(6,623,780) $(2,829,346)
----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 604,867 106,542
Amortization of deferred debt discount 386,700 --
Amortization of deferred debt costs 636,728 --
Asset impairment 261,103 --
Loss on disposal of fixed asset 11,825 --
Stock based compensation 92,150 531,051
Accrued interest (5,888) (2,950)
Legal Settlement (58,702) --
Changes in operating assets and liabilities:
Accounts receivable 173,204 361,426
Prepaid expenses (454,580) (37,534)
Cash held in escrow (451,000) --
Deposits (309,100) (8,255)
Accounts payable and accrued expenses 169,373 1,197,614
Deferred revenue (206,342) (562,650)
----------- -----------
TOTAL ADJUSTMENTS 850,338 1,585,244
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (5,773,442) (1,244,102)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (255,839) (302,957)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of Series A preferred stock -- 897,766
Net proceeds from issuance of Series B preferred stock 326,477 --
Net proceeds from issuance of Series C preferred stock 3,458,435 --
Net proceeds from Bridge Notes 4,001,272 --
Net proceeds from issuance of common stock -- 1,093,540
Repurchase of stock warrants (40,000) --
Proceeds from sale of warrant -- 223,000
----------- -----------
(Forward) $ 7,746,184 $ 2,214,306
----------- -----------
The accompanying notes are an integral part of these financial statements.
F-8
MONSTERDAATA, INC.
STATEMENTS OF CASH FLOWS, Continued
For the Years Ended December 31, 2000 and 1999
- --------------------------------------------------------------------------------
2000 1999
-----------------------------
(Forward) $ 7,746,184 $ 2,214,306
Repayments of notes payable -- (62,236)
Repayments of notes payable, related parties (240,000) (21,833)
Proceeds from exercise of option 5,000 --
Proceeds from exercise of warrants 75,000 --
Payments received on note receivable, stockholder -- 25,000
Principal repayments of capital lease obligations (401,672) (44,224)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 7,184,512 2,111,013
----------- -----------
NET INCREASE IN CASH 1,155,231 563,954
CASH AND CASH EQUIVALENTS - Beginning 619,546 55,592
----------- -----------
CASH AND CASH EQUIVALENTS - Ending $ 1,774,777 $ 619,546
=========== ===========
CASH PAID DURING THE PERIODS FOR:
Interest $ 771,195 $ 1,957
Taxes paid $ 1,500 $ 750
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of Series A cumulative convertible preferred stock
into common stock $ 330,000 $ --
Conversion of accounts payable to note payable stockholder $ 680,000 $ --
Purchase of equipment through capital leases $ 1,447,761 $ 51,935
Issuance of Series C cumulative convertible preferred stock
and conversion of bridge notes $ 3,910,000 $ --
Accrued Dividends $ 89,000 $ --
Exercise of options for a note $ -- $ 118,000
Conversion of accounts payable to preferred stock $ -- $ 275,000
Conversion of accounts payable to common stock and options $ -- $ 312,500
The accompanying notes are an integral part of these financial statements.
F-9
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies
The Company
MonsterDaata, Inc. (the "Company") was incorporated in Delaware on July
22, 1985 under the corporate name "Trans West, Inc." For eight years prior
to September 27, 1995, the Company was an inactive corporation. On
September 27, 1995, the corporate charter was revived in Delaware and was
reactivated, although the Company had no material assets or capital, and
no operations or income. On February 13, 1996, the Company changed the
Company's corporate name to "D-Vine, Ltd."
On April 2, 1999, the Company acquired 99.2% of the outstanding capital
stock of Taconic Data Corp. ("Taconic"), a provider of database
development and management services to the real estate industry. Taconic
was incorporated in New York in 1992. In connection with this acquisition,
Taconic became a majority-owned subsidiary and Taconic directors and
officers replaced all of the Company's directors and officers. The
stockholders of Taconic were issued 6,000,000 of the Company's shares of
Common Stock, par value $0.01 per share ("Common Stock") in exchange for
their shares, or approximately 85% of the Company's total outstanding
common shares after giving effect to the acquisition (and the exercise of
certain warrants referenced in Note 4 below). Accordingly, a change in
control of the Company occurred in connection with the acquisition, and
the acquisition was deemed a "reverse acquisition" for accounting
purposes. The reverse acquisition was accounted for as a recapitalization
and the stockholders' deficiency was retroactively restated to January 1,
1998. The financial statements are those of Taconic prior to April 2,
1999.
The accompanying financial statements represent a consolidation of the
Company's business with that of Taconic, and the consolidation has been
prepared assuming that the Company owned 100% of Taconic after the
acquisition. Subsequent to the acquisition, the Company changed its fiscal
year end from September 30 to December 31 to correspond with the fiscal
year end of Taconic. On April 5, 1999, the Company changed its corporate
name to "MonsterDaata.com Inc." On December 7, 2000 the Company changed
its corporate name to "MonsterDaata, Inc".
On November 20, 2000 the Company acquired the remaining 0.8% (31,250
shares) of Taconic capital stock (see Note 7).
On February 16, 2001, the Company's Board of Directors (the "Board")
approved an amendment to the charter to effect a one-for-five reverse
stock split of the Company's issued and outstanding Common Stock. As of
February 16, 2001, this amendment was approved in a written consent
executed by the holders of more than a majority of the outstanding shares
of common stock and Series C Preferred, voting as a single class.
Accordingly, in the accompanying financial statements all Common Share and
Per Share amounts have been retroactively restated to show the effect of
the one-for-five reverse split.
F-10
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
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 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 referred to above was held by an entity, which owned
0.8% of Taconic until it was acquired by the Company on November 20, 2000.
This entity's interest in the net assets of Taconic had been reduced to
zero in the accompanying Balance Sheet. Therefore, in accordance with
generally accepted accounting principles, the entity's minority interest
in the losses during the years ended December 31, 2000 and 1999 have not
been recorded on the Company's accompanying financial statements.
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 in the sale of certain data base
contracts. Typical contracts extend from one to five years and require the
delivery of the Data base and subsequent database maintenance. Revenue on
these contracts is recognized as follows:
Upon delivery of the original data base, the Company recognizes revenue
proportional to the cost incurred on the project compared to the estimated
total contract cost remaining. Historically, the portion of revenue
recognized upon delivery of the database approximated ten percent (10%) of
the total contract value.
The remainder of the contract is allocated to the maintenance of the data
base and are recognized on a straight-line basis over the remaining life
on the contact.
Co-Branding
The Company is involved in revenue sharing arrangements with its online
partners where the consumer uses co-branded sites principally hosted by
the Company. The Company recognizes co-brand setup fees on a straight-line
basis over the term of the respective agreements, generally twelve (12)
months. As of December 31, 2000, no other revenue has been generated from
co-brand relationships. The Company expects to generate further revenues
from advertising, subscriptions and lead generation. Advertising revenue
will be recognized monthly based on actual impressions. Subscription
revenue will be recognized monthly on a straight-line basis over the term
of the respective agreement. Lead generation revenue will be recognized as
the leads and referrals are delivered.
F-11
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Revenue Recognition, continued
E-Commerce
The Company recognizes revenue from sales of real estate related reports
on their website which are recorded at the point of sale.
Deferred Revenue
Deferred revenue represents billings in excess of estimated earnings on
long-term data base contracts in the amount of $44,882, unamortized
licensing fees in the amount of $248,918, and unearned co-branding set-up
fees in the amount of $20,919 at December 31, 2000.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term investments with an original maturity of three months or less
to be cash equivalents.
The Company has cash balances in banks in excess of the maximum amount
insured by the FDIC as of December 31, 2000.
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 operations.
Advertising Costs
Advertising costs are expensed as incurred. Total advertising costs were
$36,379 and $31,468 for the years ended December 31, 2000 and 1999,
respectively.
Product and Website Development Costs
Product and Website development costs consist principally of payroll and
related expenses for development, editorial, systems personnel and
consultants; and costs of acquired content, including licensed data.
Product development costs are generally expensed as incurred.
The Company follows the provisions of Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for
Internal use, which requires the capitalization of costs incurred in
connection with developing or obtaining software for internal use. The
useful life of website development costs is less than one year and
accordingly, these costs are expensed as incurred and are included in
"Product development cost" in the accompanying financial statements.
F-12
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Reclassifications
Certain accounts in the prior year financial statements have been
reclassified for comparative purposes to conform to the presentation in
the current year financial statements. These reclassifications have no
effect on previously reported income.
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 affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Net 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 loss available to common
stockholders by the weighted-average number of common shares outstanding
for the period. Outstanding stock options, warrants have not been
considered in the computation of diluted per share amounts, since the
effect of their inclusion would be antidilutive.
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 employee 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 employee stock
based compensation plans in accordance with the provisions of APB 25. For
non-employee options and warrant the intends to use the fair value method
as prescribed in SFAS 123.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" requires that the Company disclose
estimated fair values of financial instruments. The carrying amounts
reported in the statement of financial position for current assets and
current liabilities qualifying as financial instruments is a reasonable
estimate of fair value. The fair value of long-term debt is estimated to
approximate fair market value based on the current rates offered to the
Company for debt of the same remaining maturities.
F-13
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Impairment of Long-Lived Assets
Long lived assets are 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.
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. SFAS No. 131 establishes the criteria
for determining an operating segment and establishes the disclosure
requirements for reporting information about operating segments. 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.
Start-up Activities Costs
In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants ("AcSEC of AICPA")
issued SOP No. 98-5, "Reporting on the Costs of Start-up Activities",
which are 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 adopted this standard in 1999 and
the implementation of this standard did not have a material impact on its
financial statements.
Accounting Developments
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 15, 2000 by the
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.
F-14
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 - Property and Equipment
Property and equipment at December 31, 2000 consisted of the following:
Estimated
Useful
Amount Lives
--------------------------
Furniture and fixtures $ 104,351 5-7 years
Computer equipment and software 2,375,310 3-5 years
----------
2,479,661
Less: accumulated depreciation 1,273,146
----------
Property and Equipment, Net $1,206,515
==========
Depreciation expense for the years ended December 31, 2000 and 1999 was
$604,867 and $106,542, respectively.
NOTE 3 - Capitalized Lease Obligations
The Company is the lessee of equipment under certain capital leases
expiring through the year 2005. 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 for the years
ended December 31, 2000 and 1999 amounted to $497,092 and $57,582,
respectively. The following is a summary of property held under capital
leases included in equipment:
Equipment $ 1,823,214
Less: accumulated depreciation (807,539)
-----------
$ 1,015,675
===========
Minimum future lease payments under capital leases as of December 31, 2000
for each of the next four years, and in the aggregate, are as follows:
F-15
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 - Capitalized Lease Obligations, continued
For the Year Ending
December 31, Amount
- ----------------------------------------------------------------------
2001 $ 380,200
2002 354,822
2003 354,822
2004 266,116
----------
Total minimum lease
payments 1,355,960
Less: amount representing
interest 238,989
----------
Present value of net minimum
lease payments 1,116,971
Less: Current portion 302,301
----------
Long-term portion $ 814,670
===========
Interest rates on capitalized leases vary from 6.4% to 17.38% and are
imputed based on the lessors' implicit rate of return.
The Company has paid a deposit of $314,592 pursuant to a lease
transaction.
NOTE 4 - Stockholders' Equity
Warrant
On April 2, 1999, an existing warrant issued by D-Vine, Ltd. in August
1997 to purchase 200,000 shares of common stock was exercised, in
connection with the reverse acquisition (Note 1), with an increase in
exercise price from $0.05 per share to $5.00 per share. In consideration
of such increase, the Company issued to the holder an additional warrant
to purchase 100,000 shares of its common stock with an exercise price of
$15.00 per share for $223,000. The newly issued warrant, was to expire on
March 31, 2004. An aggregate of 100,000 shares of common stock had been
reserved for issuance under this warrant. In addition, the Company
incurred direct expense of $58,960 in connection with this transaction.
On December 8, 2000, the Company executed an agreement with the holder to
purchase this warrant for the sum of $40,000. On December 14, 2000 the
Company paid the purchase price by wire transfer to the seller,
concurrently with such wire transfer, all of the seller's right, title and
interest to the warrant immediately terminated.
F-16
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - Stockholders' Equity, continued
Conversion of Accounts Payable
During the year ended December 31, 1999, the Company converted accounts
payable in the amount of $312,500 to 22,628 shares of Common Stock and
options to purchase 5,000 shares of Common Stock. The options were valued
at $82,500 under the Black-Scholes option-price model.
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 Cumulative Convertible Preferred Stock (the "Series A
Preferred") to investors, resulting in cash proceeds in the aggregate of
$1,152,766, net of direct expenses of $319,234. In connection with the
issuance, the Company authorized the designation of 2,000 shares of Series
A Preferred. Holders of the Series A Preferred are entitled to a quarterly
cumulative dividend equal to 1.5% of the then applicable liquidation
preference, as defined.
Each share of the Series A Preferred is convertible into 90 shares of
Common Stock, at the option of the holder, subject to certain adjustments
and conditions. The Series A Preferred will automatically convert into
shares of Common Stock upon occurrence of the special events, as defined.
In addition, the Company has filed a registration statement with the
Securities Exchange Commission to register the Common Stock issuable upon
conversion of the Preferred Stock. On February 28, 2000, the Company did
not meet certain conversion conditions; accordingly, the conversion rate
was changed from 1:60 to 1:90.
The Company also issued warrants to purchase 118,862 shares of its Common
Stock at an exercise price of $18.75 per share, subject to adjustment, to
the Series A Preferred holders for the November 1999, issuances.
On December 1, 1999, warrants to purchase 79,367 shares of Common Stock
with an adjusted exercise price of $10.00 per share were exercised, on a
cashless basis, when the market value of the Common Stock was $27.50 per
share. 50,507 shares of the Common Stock were issued in connection with
the exercise of such warrants.
On March 9, 2000, March 10, 2000, and March 23, 2000, warrants to purchase
667 shares, 1,033 shares and 13,667 shares, respectively, of Common Stock
with an adjusted exercise price of $10.00 per share were exercised, on a
cashless basis, when the market value was $30.00, $29.375, and $22.50 per
share, respectively. 333, 768 and 12,617 shares, respectively, of the
Common Stock were issued in connection with the exercise of such warrants.
The remaining warrants to purchase 23,412 shares will expire in November
2004.
F-17
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - Stockholders' Equity, continued
Series A Preferred Stock, continued
On January 6, 2000, the Company issued 20.53 shares of the Series A
Preferred to an investor, resulting in cash proceeds of $20,000, received
by the Company December 9, 1999. In connection therewith, the Company
issued to the investor warrants for the purchase of 616 shares of the
Company's Common Stock, at an exercise price of $18.75 per share.
In February 2000, the Company issued 10 additional shares of the Series A
Preferred to an investor as a correction to the 123.33 shares issued to
the investor on November 1, 1999.
During the year ended December 31, 2000 330.00 shares, of Series A
Preferred was converted into 29,700 shares of Common Stock.
Series B Preferred Stock
On April 6, 2000, the Company issued 425 shares of its Series B Cumulative
Convertible Preferred Stock (the "Series B Preferred") to investors,
resulting in aggregate cash proceeds of $425,000 less direct expense of
$98,523. In connection with this issuance, the Company authorized the
designation of 2,000 shares of Series B Preferred. Holders of the Series B
Preferred are entitled to a quarterly cumulative dividend equal to 1.5% of
the then applicable liquidation preference as defined.
Each share of Series B Preferred is convertible into 67 shares of Common
Stock, at the option of the holder, subject to certain adjustments and
conditions. The Series B Preferred will automatically convert into shares
of Common Stock upon the occurrence of certain defined events. On December
1, 2000, the company did meet certain conversion conditions. Accordingly,
the conversion rate was changed from 1.53 to 1.67.
The Company also issued warrants to purchase 11,334 shares of Common Stock
at an exercise price of $21.25 per share, subject to adjustment, to the
Series B Preferred holders for the April 6, 2000 issuance. These warrants,
expire in April 2004.
Exercise of Options
On March 9, 2000, options to purchase 4,800 and 4,000 shares of Common
Stock with exercise prices of $20.00 and $15.10, respectively, were
exercised, on a cashless basis, when the market value was $30.00 per
share. 2,061 and 2,039 shares, respectively, of Common Stock were issued
in connection with the exercise of such options.
On March 9, 2000, options to purchase 1,000 shares of Common Stock were
exercised, resulting in cash proceeds of $5,000.
Bridge Financing and Financial Advisory Agreement
On May 2, 2000, the Company signed an engagement letter (the "Engagement
Letter") with Commonwealth Associates, L.P., a limited partnership
organized under the laws of the State of New York ("Commonwealth"),
pursuant to which the Company engaged Commonwealth as an advisor.
F-18
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - Stockholders' Equity, continued
Bridge Financing and Financial Advisory Agreement, continued
ComVest Capital Partners LLC, a Delaware limited liability company and an
affiliate of Commonwealth ("ComVest"), agreed to provide a credit facility
to the Company in an aggregate principal amount of up to $1,500,000.
ComVest has loaned the Company a total of $1,478,000, commencing with an
initial loan on June 7, 2000, pursuant to a series of 8% Senior Secured
Promissory Notes (the "Notes"). On September 13, 2000, ComVest converted
$750,000 in principal amount of notes into 7.5 units at the initial
closing of the Company's August/November 2000 private placement (See
August/November 2000 Private Placement). Subsequent to December 31, 2000
the remaining $728,000 was converted into Series C Preferred Stock (see
Series C Convertible Preferred Stock).
In connection with this loan, the Company issued to ComVest a warrant to
purchase 1,500,000 shares of Common Stock for an exercise price of $.05
per share (the "ComVest Warrant"). The ComVest Warrant was issued on June
7, 2000 and was valued at $240,000 by an independent third party. This
amount was recorded as a deferred debt discount and was amortized over the
life of the Notes.
The Company agreed that, as long as this loan remained outstanding, the
Board of Directors of the Company would consist of seven directors, of
which five would be nominated by the Company with the consent of ComVest,
which consent would not be unreasonably withheld.
Exercise of ComVest Warrant
On June 9, 2000, ComVest and Commonwealth exercised the ComVest Warrant,
purchasing 1,200,000 shares of Common Stock in the case of ComVest and
300,000 shares of Common Stock in the case of Commonwealth. The purchase
price for these shares was $60,000 in the case of ComVest and $15,000 in
the case of Commonwealth.
August/November 2000 Private Placement
From August to November 2000, the Company conducted a private placement
offering of 40 units at a price of $100,000 per unit. Each unit consists
of an 8% convertible subordinated promissory note and warrant to purchase
20,000 shares of Common Stock. During this period, 31.6 units (3,160,000)
were sold to approximately 21 investors. The Company paid fees in the
amount of $636,728 in connection with the private placement. A portion of
the net proceeds raised from the placement has been used to fund the
Company's working capital and capital expenditure requirements, including
the purchase of computer hardware.
Each unit issued in the August/November 2000 private placement will
automatically convert into 10,000 shares of Series C Convertible Preferred
stock, par value $.01 per share with each such share convertible, at the
holder's option, into 8 shares of Common Stock, or an aggregate of 80,000
shares of Common Stock, and two-year warrants to purchase 40,000 shares of
Common Stock, at an exercise price of $1.25 per share (the "Warrants"), in
each case, subject to adjustment. These Warrants have an estimated fair
value of $146,700, which was valued by an independent third party. This
amount was recorded as a deferred debt discount and was amortized over the
life of the notes.
F-19
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - Stockholders' Equity, continued
Series C Preferred Stock
On December 6, 2000 and December 29, 2000 the Company issued 430,000 and
164,000, respectively, shares of the Company's Series C Preferred Stock
(the "Series C Preferred") to investors, resulting in aggregate cash
proceeds of $3,458,435 net of direct expenses of $881,565 and a
subscription receivable of $1,600,000. In addition, on December 6, 2000
the Company converted notes payable stockholder of $3,910,000 into 391,000
shares of Series C Preferred. Holders of the Series C Preferred are
entitled to an annual cumulative dividend equal to 7% of the then
applicable liquidation preference as defined.
Each share of Series C Preferred is convertible into 8 shares of Common
Stock, at the option of the holder, subject to certain adjustments and
conditions. The Series C Preferred will automatically convert into shares
of Common Stock upon the occurrence of certain defined events.
The Company also issued warrants to purchase 3,284,000 and 656,000 shares
of Common Stock at an exercise price of $1.25 per share, subject to
adjustment, to the Series C Preferred holders for the December 6, 2000 and
December 29, 2000 issuances, respectively. These warrants, expire in
December 2002.
Summary of Warrant Activity
The following is a summary of the warrant activity relating to the above
Equity transactions:
Number
of
Warrants
----------
Balance - January 1, 1999 200,000
Warrants issued 218,146
Warrants repurchased --
Warrants exercised (279,367)
----------
Balance December 31, 1999 138,779
Warrants issued 6,429,550
Warrants repurchased (100,000)
Warrants exercised (1,515,467)
----------
Balance December 31, 2000 4,952,862
==========
F-20
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - Contingent Equity Participation
On September 19, 2000, the Company entered into a license and contingent
equity participation agreement with Utour.com, Inc. ("Utour"), a privately
held Portland, Oregon software developer. Pursuant to the agreement, the
Company obtained a non-exclusive, worldwide, perpetual license to use
Utour software programs and digital image inventory. The Company paid
Utour a one-time license fee of $150,000, which is being amortized over
three years. As part of this agreement, the Company was to receive 10%
ownership in Utour. As of March 2, 2001, no shares of Utour's stock has
been issued to the Company.
NOTE 6 - Database Impairment
During August 1999, the Company entered into an agreement to purchase a
database of public and private school information. Delivery of the
completed database was to be on or about December 31, 1999. The database
was never completely delivered and the Company was not able to put the
asset in place for the Company's intended use. The Company believes that
there are no future cash flows to recover this asset. Therefore, the
Company wrote off the asset valued at $261,103 during the year ended
December 31, 2000.
NOTE 7 - Litigation
In addition to the items below 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.
Former Law Firm
The Company is currently involved in litigation with the Company's former
law firm (which is also a stockholder) concerning disputed legal fees in
the sum of approximately $650,000 (plus interest at the rate of 18% per
annum). This liability is recorded as Loan from Stockholder in the amount
of $680,000 in the accompanying balance sheet. In July 2000, the Company
commenced an action in New York Supreme Court seeking a declaratory
judgment to have related promissory note ruled invalid. Subsequently, the
former law firm commenced a summary proceeding in the same Court to
foreclose upon the promissory note. By order dated August 11, 2000, the
Court denied both of their motions for summary judgment on the promissory
note and the Company's motion for dismissal or stay of the suit on the
note. However, the Court granted a conditional preliminary injunction and
directed the Company to deposit revenues from specified client contracts
into an escrow account up to an amount of $560,000. As of December 31,
2000 approximately $451,000 in revenues have been deposited in such escrow
account.
F-21
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - Litigation, continued
Former Law Firm, continued
On March 1, 2001, the Company entered into a settlement agreement with the
law firm regarding the above litigation. In connection with this agreement
the Company agreed to pay $680,000, which was paid on March 2, 2001.
Former Consultants
The Company was involved in a litigation regarding a note payable to a
stockholder and former consultant of Taconic which was payable in 36
monthly installments of $12,902 including interest of 9.71% per annum. The
Company defaulted on this note, making the entire balance due. The former
consultant sued the Company in New York Supreme Court to collect the sum
of $390,000. In connection with the lawsuit the consultant was granted
summary judgment against the Company, with the Court directing a hearing
on the issue of damages.
On November 20, 2000, the Company entered into an agreement settling this
litigation. As part of the agreement the Company agreed to pay a portion
of the note payable in exchange for the remaining 0.8% of Taconic's common
stock and the Company obtained a release from any further obligation. The
settlement amounted to $240,000, including legal fees and other related
costs, which were all paid in the fourth quarter of 2000.
The Company is party to a litigation involving a former web site developer
regarding disputed fees of approximately $163,000. This action is still
pending. The Company is unable to predict the ultimate outcome of this
claim and accordingly, no adjustments have been made in the financial
statements regarding this matter.
Customer
The Company is also a party to litigation involving a customer which is
seeking a refund of a $175,000 down payment for work the customer alleges
the Company did not perform properly. The Company recorded deferred
revenue upon receipt of the $175,000. On February 1, 2001 the Company
entered into an agreement settling the above litigation. The agreement
requires a settlement payment of $75,000 and the execution of a two year
Internet Content Licensing Agreement in which the Company grants licensee
a credit ("Licensee Credit") of one hundred and forty thousand dollars
($140,000) to be applied to the agreed to monthly fee (which will be based
on actual usage), as well as any additional service fees mutually agreed
upon by the parties. Once the Licensee Credit has been reduced to a zero
balance, the licensee will be obligated to pay a monthly fee in accordance
with the payment terms set forth in the agreement. On February 1, 2001 the
Company paid the full cash settlement amount. At December 31, 2000, the
entire settlement is recorded in current liabilities in the accompanying
balance sheet.
F-22
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8 - Income Taxes
The provision for income taxes for the years ended December 31, 2000 and
1999 consists of the following:
2000 1999
-----------------------------
State and Local
Current $ 5,300 $ 750
Deferred -- --
----------- -----------
Total $ 5,300 $ 750
=========== ===========
Reconciliation from Federal statutory rate:
2000 1999
-----------------------------
Federal tax at 34% $(2,252,085) $ (961,978)
State and local taxes, net of federal benefit 5,300 750
Deferred revenue (206,342) (230,687)
Expenses not deductible for tax purposes 10,897 76,193
Valuation allowance 2,447,530 1,116,472
----------- -----------
Total $ 5,300 $ 750
=========== ===========
The components of deferred tax assets and liabilities at December 31, 2000
and 1999 consist of the following:
2000 1999
-----------------------------
Deferred tax assets
Deferred Revenue $ 129,000 $ 214,000
Depreciation and amortization 190,000 54,000
Net operating loss carryforwards 4,081,000 1,375,000
----------- -----------
4,400,000 1,643,000
Less: Valuation Allowance (4,400,000) (1,643,000)
----------- -----------
Total Deferred Tax Assets $ -- $ --
=========== ===========
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 or all of the deferred tax assets will not be
realized. Management concluded a valuation allowance was appropriate due
to operating losses incurred. The Company estimated the available net
operating loss carryforwards to be approximately $9,950,000, which will
expire on various dates through 2020. In addition, there may be certain
restrictions on the use of the net loss carryforwards resulting from
changes in ownership.
F-23
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9 - Commitments and Contingencies
Office Lease
The Company leases its offices under two noncancelable leases expiring
September 30, 2002 and June 30, 2004, respectively. The Company pays its
portion of property taxes, insurance, and other expenses related to the
leased properties. Rent expense was $147,889 and $111,952 for the years
ended December 31, 2000 and 1999, respectively.
Future minimum rental payments required under the above non-cancelable
operating leases at December 31, 2000 are as follows:
For the
Year Ending
December 31, Amount
---------------------------------------------
2001 $ 54,000
2002 51,000
2003 40,000
2004 41,000
---------
Total $186,000
========
Computer Lease
The Company leases equipment computer under a two (2) year operating lease
expiring in October 2001.
Future minimum rental payments under the above noncancelable operating
lease as of December 31, 2000 are $19,890.
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 at December 31, 2000 is $24,689.
Related Party Transaction
During the year ended December 31, 2000, the Company incurred legal and
consulting fees to a stockholder, which amounted to $338,102.
Harold S. Blue, Keith M. Rosenbloom and Joseph P. Wynne, employees of
Commonwealth Associates, are members of the Company's board of directors.
ComVest Capital Partners LLC and ComVest Venture Partners, L.P. are
controlled by executive officers of Commonwealth Associates.
Executive Compensation
The Company has entered into agreements to provide for the payment of
minimum salaries and fees to its officers and members of its Board of
directors. In addition, the agreements may provide, based on the terms of
each agreement, for the issuance of stock options and other various
incentives and benefits. A member of the Board of Directors was granted
options to purchase 320,000 shares of Common Stock pursuant to a
consulting agreement, and the 2000 Stock Option Plan, at an exercise price
of $1.25 per share (see Note 11). Future minimum payments to be made as of
December 31, 2000 pursuant to these agreements are as follows:
F-24
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9 - Commitments and Contingencies, continued
Executive Compensation, continued
For the
Year Ending
December 31, Amount
---------------------------------------------
2001 $ 537,333
2002 408,333
2003 240,000
2004 90,000
2005 90,000
----------
Total $1,365,666
==========
NOTE 10 - Major Customers
During the year ended December 31, 2000, the Company sold a substantial
portion (greater than 10% of sales) of its product to five major
customers. Sales to these customers were $365,448 (22%), $300,552 (18%),
$286,545 (17%), $228,750 (14%) and $175,000 (11%). The amount due from
these customers included in accounts receivable at December 31, 2000 was
$117,312.
During the year ended December 31, 1999, the Company sold a substantial
portion (greater than 10% of sales) of its product to four major
customers. Sales to these customers were $674,333 (27%), $474,070 (19%),
$365,448 (15%) and $300,552 (12%). The amount due from these customers
included in accounts receivable at December 1999 was $183,395.
NOTE 11 - Stock Option Plans
Stock Option
1999 Stock Option Plan:
On June 15, 1999, the Company adopted a stock option plan (the "1999
Plan"). The 1999 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
number of shares of Common Stock for which options may be granted under
the Plan is 350,000. No stock option may be granted under the Plan after
June 15, 2009.
F-25
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11 - Stock Option Plans, continued
Stock Option, continued
1999 Stock Option Plan, continued:
During the year ended December 31, 2000, the Company granted 136,800 and
10,500 options to its employees and consultants, respectively, with
exercise prices ranging from $2.40 to $5.45. During the year ended
December 31, 1999, the Company granted 284,984 and 37,300 options to its
employees and consultants, respectively, with exercise prices ranging from
$5.00 to $20.00. Of the 37,300 options, 15,000 options were issued for
$75,000. As of December 31, 2000, 304,868 options are outstanding of which
147,267 options are exercisable.
On July 26, 1999, an employee exercised his option to purchase 24,600
shares of Common Stock at the exercise price of $5.00 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 Common Stock.
During December 1999, $25,000 of this note was repaid.
Activities under the 1999 Plan are as follows:
Number Weighted
of Average
Options Exercise Price
-----------------------------
Balance - December 31, 1998 -- --
Options granted 322,284 $ 8.90
Options cancelled (4,000) 5.00
Options exercised (54,100) 5.00
------------ ------
Balance - December 31, 1999 264,184 8.90
Options granted 147,300 4.50
Options cancelled (96,816) 8.85
Options exercised (9,800) 16.45
------------ ------
Balance - December 31, 2000 304,868 $ 7.50
============ ======
At December 31, 2000, the remaining life of the options is 8.6 years.
F-26
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11 - Stock Option Plans, continued
Stock Option, continued
2000 Stock Option Plan:
On September 21, 2000 the Company adopted a stock option plan (the "2000
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
number of shares of Common Stock for which options may be granted under
the 2000 Plan is 1,600,000. No stock option may be granted under the 2000
Plan after September 21, 2010.
During the year ended December 31, 2000, the Company granted 897,952 and
4,000 options to its employees and consultants, respectively, with
exercise prices ranging from $0.95 to $1.25. As of December 31, 2000,
882,309 options are outstanding of which 47,000 options are exercisable.
Activities under the 2000 Plan are as follows:
Number Weighted
Of Average
Options Exercise Price
-----------------------------
Balance - December 31, 1999 -- --
Options granted 901,952 $ 1.20
Options cancelled (19,643) 1.15
Options exercised --
--------
Balance - December 31, 2000 882,309 $ 1.20
========
At December 31, 2000 the weighted average exercise price and remaining
life of the options are $1.20 and 9.8 years, respectively.
Proforma Information
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 to be $0.25 per
share with the following weighted-average assumptions for the year ended
December 31, 2000:
F-27
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11 - Stock Option Plans, continued
Proforma Information, continued
Assumptions
---------------------------------------------------------------------------------------
Risk-free rate 5.9 -- 6.45%
Dividend yield --%
Volatility factor of the expected market price of the Company's
Common Stock 10% -- 172%
Average life 10 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. The Company's employee stock options have
characteristics significantly different from those of traded options, and
changes in the subjective input assumptions can materially affect the fair
value estimate.
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 years ended December 31, 2000
and 1999 is as follows:
2000 1999
----------- -----------
Pro forma net loss $(7,245,588) $(3,123,831)
Pro forma net loss per share
- basic and diluted $ (3.00) $ (2.25)
=========== ===========
NOTE 12 - Going Concern Uncertainty
The Company incurred a net loss of $6,623,780 for the year ended December
31, 2000 and net cash flows used to fund operations were $5,773,442.
Management of the Company is implementing a plan to increase revenues
through the expansion of product lines. As part of managements plan the
Company launched a new web site in January of 2001, which offers new
products and new technology for product distribution to current and
potential customers. Under this plan, management hopes to increase
revenues, generate profits and positive cash flows from operations. If the
Company is unable to generate positive cash flows from operations, the
Company will need to raise additional cash from outside sources to fund
operations through December 31, 2001.
There can be no assurances that the Company will be successful in its
attempts to generate positive cash flows or raise sufficient capital
essential to its survival. To the extent that the Company is unable to
generate or raise the necessary operating capital it will become necessary
to curtail operations. Additionally, even if the Company does raise
operating capital, there can be no assurances that the net proceeds will
be sufficient enough to enable it to develop its business to a level where
it will generate profits and positive cash flows.
F-28
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12 - Going Concern Uncertainty, continued
These matters raise substantial doubt about the Company's ability to
continue as a going concern. However, the accompanying financial
statements have been prepared on a going concern basis, which contemplates
the realization of assets and satisfaction of liabilities in the normal
course of business. The financial statements do not include any
adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the
Company be unable to continue as a going concern.
NOTE 13 - Subsequent Events
On January 5, 2001, the Company issued 87,800 shares of its Series C
Preferred Stock, of which 72,800 shares were issued to a stockholder in
connection with the conversion of a note payable in the amount of
$728,000. In connection therewith, the Company issued to the investors
warrants for the purchase of 291,200 and 60,000 shares, respectively of
the Company's common stock at an exercise price of $1.25 per share, in
each case, subject to adjustment. These warrants expire on January 5,
2003. In addition, on January 5, 2001, the Company issued a warrant to the
placement agent to purchase 1,931,040 shares of common stock at an
exercise price of $1.25.
On March 1, 2001 the Company settled the litigation with its former law
firm as discussed in Note 7.
In January 2001 the Company sent letters requesting that the holders of
the Company's Series A and B Preferred Stock convert their shares into
shares of the Company's common stock. Formal agreements have not been
signed, and there can be no assurances that the holders will convert.
On January 8, 2001 the Company's Board of Directors agreed to grant the
Chairman of the Board of Directors (pursuant to his employment agreement)
an option to purchase up to 1,200,000 shares of the Company's common stock
at an exercise price of $1.25 per share.
On January 25, 2001, the Company granted a Vice Chairman (pursuant to his
consulting agreement) an option to purchase up to 200,000 shares of the
Company's Common Stock at a exercise price of $1.25 per share.
On February 12, 2001, the Company's Board of Directors approved an
amendment to the Company's 2000 stock option plan to increase the number
of shares of common stock for which options may be granted from 1,600,000
to 5,000,000.
On February 13, 2001 the Company granted the President and CEO (pursuant
to his employment agreement) an option to purchase up to 883,600 shares of
the Company's Common Stock at an exercise price of $1.25 per share.
F-29
MONSTERDAATA, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13 - Subsequent Events
On February 16, 2001, the Board also approved an amendment to the charter
to reduce the number of shares of Common Stock authorized by the charter
from 200,000,000 to 100,000,000. As of February 16, 2001, this amendment
was approved in a written consent executed by the holders of more than a
majority of the outstanding shares of Common Stock and Series C Preferred,
voting as a single class.
On February 20, 2001, the Company issued 8,400 shares of Common Stock to a
consultant as a fee for investor relations services.
On March 19, 2001 the Company granted the 5 Advisory Board members
(pursuant to their consulting agreements) an option to purchase up to
80,000 shares each of the Company's Common Stock at an exercise price of
$0.65 per share.
F-30
MONSTERDAATA, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
March 31, 2001
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,345,288
Accounts receivable 285,722
Prepaid expenses and other current assets 351,271
----------
Total Current Assets $1,982,281
PROPERTY AND EQUIPMENT, Net 1,028,691
----------
OTHER ASSETS
Deposits 326,847
----------
TOTAL ASSETS $3,337,819
==========
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 231,958
Deferred revenue 289,567
Current maturities of capital lease obligation 296,366
Dividends payable 338,953
----------
Total Current Liabilities $1,156,844
OTHER LIABILITIES
Capital lease obligations, less current maturities 752,147
----------
TOTAL LIABILITIES $1,908,991
----------
See accompanying condensed notes to financial statements.
F-31
MONSTERDAATA, INC.
CONDENSED BALANCE SHEET, Continued
(UNAUDITED)
March 31, 2001
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Series A Preferred stock - $1,000 stated value; 10,000,000
shares authorized 1,261.76 issued and outstanding (liquidating
preference $1,000 per share) $ 1,261,760
Series B Preferred stock - $1,000 stated value; 10,000,000
shares authorized 425 issued and outstanding (liquidating
preference $1,000 per share) 425,000
Series C Preferred stock - $10 stated value; 10,000,000 shares
authorized 1,072,800 issued and outstanding (liquidating
preference $20 per share) 10,728,000
Common stock - $0.01 par value; 100,000,000 shares
authorized; 3,109,241 outstanding 31,092
Additional paid in capital 3,740,315
Deferred consulting expense (218,230)
Notes receivable stockholder (106,490)
Subscription receivable - Series "C" (400,000)
Accumulated deficit (14,032,619)
------------
TOTAL STOCKHOLDERS' EQUITY 1,428,828
----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $3,337,819
==========
See accompanying condensed notes to financial statements.
F-32
MONSTERDAATA, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
2001 2000
-----------------------------
SALES $ 333,195 $ 392,386
COST OF SALES 103,964 119,528
----------- -----------
GROSS PROFIT 229,231 272,858
OPERATING EXPENSES
Product development costs 739,708 446,645
Selling, general and administrative expenses 808,226 1,060,664
----------- -----------
TOTAL OPERATING EXPENSES 1,547,934 1,507,309
OPERATING LOSS (1,318,703) (1,234,451)
OTHER EXPENSE
Interest expense net (154) (20,902)
----------- -----------
LOSS BEFORE INCOME TAXES (1,318,857) (1,255,353)
INCOME TAXES 3,576
NET LOSS (1,322,433) (1,255,353)
Dividends on Preferred stock (249,953) --
----------- -----------
Loss Attributable to Common Stockholders $(1,572,386) $(1,255,353)
=========== ===========
Weighted Average Number of Shares Outstanding 3,104,382 1,555,168
Net Loss Per Share, Basic and Diluted (0.51) (0.81)
See accompanying condensed notes to financial statements.
F-33
MONSTERDAATA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
2001 2000
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,322,433) $(1,255,353)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 181,367 13,317
Loss on disposal of fixed asset 11,825
Stock based compensation 78,671 --
Accrued interest (4,652) (1,439)
Changes in operating assets and liabilities:
Accounts receivable (161,410) 147,445
Prepaid expenses and other current assets 140,843 22,534
Deposits (1,159)
Accounts payable and accrued expenses (331,879) 534,847
Deferred revenue (25,152) (21,201)
----------- -----------
TOTAL ADJUSTMENTS (123,371) 707,328
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,445,804) (548,025)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (3,543) (12,321)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of Series C preferred stock 117,316 --
Repayments of notes payable, stockholder (229,000) --
Payments received on subscription receivable, stockholder 1,200,000 --
Principal repayments of capital lease obligations (68,458) (32,416)
Net proceeds from issuance of Series B preferred stock -- 143,824
Proceeds from exercise of option -- 5,000
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,019,858 116,408
NET DECREASE IN CASH AND CASH
EQUIVALENTS $ (429,489) $ (443,938)
----------- -----------
See accompanying condensed notes to financial statements.
F-34
MONSTERDAATA, INC.
CONDENSED STATEMENTS OF CASH FLOWS, Continued
(UNAUDITED)
For the Three Months Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
2001 2000
------------------------
CASH AND CASH EQUIVALENTS - Beginning $1,774,777 $619,546
---------- --------
CASH AND CASH EQUIVALENTS - Ending $1,345,288 $175,608
========== ========
Cash paid during the periods for:
Interest $ 72,079 $ 23,000
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Notes Payable to Series C cumulative
convertible preferred stock $ 728,000
Note payable, stockholder paid from escrow $ 451,000
Preferred stock dividend $ 249,953
Conversion of series A cumulative convertible preferred stock into
common stock $ 24,440
Issuance of Series A cumulative convertible preferred stock $ 10,000
Subscription receivable Series B cumulative convertible preferred
Stock $200,000
See accompanying condensed notes to financial statements.
F-35
MONSTERDAATA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - The Company and Basis of Presentation
The Company
MonsterDaata, Inc. (the "Company") was incorporated in Delaware in July
1985 under the corporate name "Trans West, Inc." For eight years prior to
September 1995, the Company was an inactive corporation. In September
1995, the corporate charter was revived in Delaware, although the Company
had no material assets or capital and no operations or income. In February
1996, the Company changed its corporate name to "D-Vine, Ltd."
In April 1999, the Company acquired 99.2% of the outstanding capital stock
of Taconic Data Corp. ("Taconic"), a provider of database development and
management services to the real estate industry. Taconic was incorporated
in New York in 1992. In connection with this acquisition, Taconic became a
majority-owned subsidiary and Taconic directors and officers replaced all
of the Company's directors and officers. The stockholders of Taconic were
issued 6,000,000 of the Company's shares of common stock, in exchange for
their shares, or approximately 85% of the Company's total outstanding
common stock after giving effect to the acquisition (and the exercise of
certain warrants). Accordingly, a change in control of the Company
occurred in connection with the acquisition and the acquisition was deemed
a "reverse acquisition" for accounting purposes. The reverse acquisition
was accounted for as a recapitalization and the stockholders' deficiency
was retroactively restated to January 1, 1998. The Company's financial
statements are those of Taconic prior to April 2, 1999.
The accompanying financial statements represent a consolidation of the
Company's business with Taconic, and the consolidation has been prepared
assuming that the Company owned 100% of Taconic after the acquisition. In
November 2000, the Company acquired the remaining 0.8% (31,250 shares) of
Taconic common stock. Subsequent to the acquisition, the Company changed
its fiscal year end from September 30 to December 31 to correspond with
the fiscal year end of Taconic. In April 1999, the Company changed its
corporate name to "MonsterDaata.com, Inc." In December 2000, the Company
changed its corporate name to "MonsterDaata, Inc."
Reverse Common Stock Split
On February 16, 2001, the Company's Board of Directors approved an
amendment to the charter to effect a one-for-five reverse stock split of
the Company's issued and outstanding common stock, which amendment became
effective on March 26, 2001. This amendment was approved in a written
consent executed by the holders of more than a majority of the outstanding
shares of common stock and series C preferred stock, voting as a single
class. Accordingly, in the accompanying financial statements all common
stock and per share amounts have been retroactively restated to show the
effect of the one-for-five reverse split.
F-36
MONSTERDAATA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - The Company and Basis of Presentation, continued
Reverse Common Stock Split, continued
In addition, on February 16, 2001, the Board also approved an amendment to
the charter to reduce the number of shares of common stock authorized by
the charter from 200,000,000 to 100,000,000. This amendment was approved
in a written consent executed by the holders of more than a majority of
the outstanding shares of common stock and series C preferred stock,
voting as a single class.
Going Concern Uncertainty
The Company incurred a net loss of $1,322,433 for the three months ended
March 31, 2001. Net cash flows used to fund operations were $1,445,804.
Management of the Company is implementing a plan to increase revenues
through the expansion of product lines. As part of management's plan, the
Company launched a new website in January 2001, which offers new products
and new technology for product distribution to current and potential
customers. Under this plan, management is seeking to increase revenues,
generate profits and generate positive cash flows from operations. If the
Company is unable to generate positive cash flows from operations, the
Company will need to raise additional cash from outside sources to fund
operations through December 31, 2001.
There can be no assurance that the Company will be successful in its
attempts to generate positive cash flows or raise sufficient capital
essential to its survival. To the extent that the Company is unable to
generate or raise the necessary operating capital, it will become
necessary to curtail operations. Additionally, even if the Company does
raise operating capital, there can be no assurance that the net proceeds
will be sufficient to enable it to develop its business to a level where
it will generate profits and positive cash flows.
These matters raise substantial doubt about the Company's ability to
continue as a going concern. However, the accompanying financial
statements have been prepared on a going concern basis, which contemplates
the realization of assets and satisfaction of liabilities in the normal
course of business. The financial statements do not include any
adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the
Company be unable to continue as a going concern.
Derivative Instruments and Hedging Activities
During the period ended March 31, 2001 the Company adopted SFAS No. 133.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (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 Balance Sheet and
measure those instruments at fair value. The accounting for changes in the
fair value of a derivative instrument depends on its intended use and the
resulting designation. Implementation of SFAS 133 did not have any
material impact on the financial statements of the Company.
F-37
MONSTERDAATA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - The Company and Basis of Presentation, continued
Basis of Presentation
Our accompanying unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to a fair statement of
the results of the interim periods presented. All such adjustments are of
a normal recurring nature. The results of operations for the three months
ended March 31, 2001 are not necessarily indicative of the results that
may be expected for any other interim period of the full year. The
financial statements should be read in conjunction with the notes to the
financial statement and in conjunction with the Company's audited
financial statements contained in its Annual Report on Form 10-KSB for the
year ended December 31, 2000. The accounting policies used to prepare the
condensed financial statements are consistent with those described in the
December 31, 2000 financial statements.
NOTE 2 - Stockholders' Equity
Series C Preferred Stock
On January 5, 2001, the Company issued 87,800 shares of its series C
preferred stock, of which 72,800 shares were issued to a stockholder in
connection with the conversion of a note payable in the amount of $728,000
and 15,000 shares resulting in cash proceeds of $150,000 less offering
expense of $32,684. In connection therewith, the Company issued to the
investors warrants for the purchase of 291,200 and 60,000 shares,
respectively, of the Company's common stock at an exercise price of $1.25
per share, in each case, subject to adjustment. These warrants expire on
January 5, 2003.
In addition, on January 5, 2001, the Company issued a warrant to the
placement agent to purchase 1,931,040 shares of common stock at an
exercise price of $1.25 per share, subject to adjustment. This warrant
expires on January 5, 2008.
Warrant
On January 11, 2001, the Company issued a warrant to purchase 40,000
shares of common stock at an exercise price of $1.85 to a consultant for
services provided. The warrant is valued at $38,964 under the
Black-Scholes pricing model. This warrant expires on October 10, 2002.
Common Stock
On February 13, 2001, the Company issued 8,400 shares of common Stock
($1.0156 per share) to a consultant as a fee for investor relations
services provided during the months of February, March and April 2001.
Accordingly, the Company has recorded expense of $5,687 with the remaining
$2,844 recorded as a prepaid expense.
F-38
MONSTERDAATA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 3 - Litigation
Former Law Firm
The Company was involved in litigation with the Company's former law firm
(which is also a stockholder) concerning disputed legal fees in the sum of
approximately $650,000 (plus interest). In July 2000, the Company
commenced an action in New York Supreme Court seeking a declaratory
judgment to have a promissory note ruled invalid. Subsequently, the former
law firm commenced a summary proceeding in the same Court to foreclose
upon the promissory note. By order dated August 11, 2000, the Court denied
both motions for summary judgment on the promissory note and the Company's
motion for dismissal or stay of the suit on the note. However, the Court
granted a conditional preliminary injunction and directed the Company to
deposit revenues from specified client contracts into an escrow account up
to an amount of $560,000.
On March 1, 2001, the Company entered into a settlement agreement with the
law firm regarding the litigation. In connection with this agreement, the
Company agreed to pay $680,000 in settlement of all lawsuits with the law
firm. The settlement amount was recorded at December 31, 2000 and paid on
March 2, 2001.
Customer
The Company was also a party to litigation involving a customer which was
seeking a refund of a $175,000 down payment for work the customer alleged
the Company did not perform properly. The Company recorded deferred
revenue upon receipt of the $175,000. On February 1, 2001, the Company
entered into an agreement settling this litigation. The agreement provides
for a settlement payment of $75,000 and the execution of a two year
Internet Content Licensing Agreement in which the Company grants licensee
a credit ("Licensee Credit") of $140,000 to be applied to the agreed to
monthly fee (which will be based on actual usage), as well as any
additional service fees mutually agreed upon by the parties. Once the
Licensee Credit has been reduced to a zero balance, the licensee will be
obligated to pay a monthly fee in accordance with the payment terms set
forth in the agreement. On December 31, 2000, the Company accrued the cash
settlement liability and, on February 1, 2001, the Company paid the full
cash settlement amount.
Consultant
The Company is a party to litigation involving a former website developer
for collection of $163,000 in fees allegedly owed by the Company. This
action is pending.
Other than the lawsuits described above, the Company does not believe that
they are a party to any litigation that, if determined adversely to them,
would seriously affect their business or operations.
F-39
MONSTERDAATA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 4 - Stock Option Plans
2000 Stock Option Plan
On January 8, 2001, the Company's Board of Directors agreed to grant the
Chairman of the Board of Directors an option to purchase up to 1,200,000
shares of the Company's common stock at an exercise price of $1.25 per
share.
On January 25, 2001, the Company granted the Vice-Chairman (pursuant to
his consulting agreement) an option to purchase up to 200,000 shares of
the Company's common stock at an exercise price of $1.25 per share.
On February 12, 2001, the Company's Board of Directors approved an
amendment to the Company's 2000 Stock Option Plan to increase the number
of shares of Common Stock for which options may be granted from 1,600,000
to 5,000,000 shares.
On February 13, 2001, the Company granted the President and CEO (pursuant
to his employment agreement) an option to purchase up to 883,600 shares of
the Company's common stock at an exercise price of $1.25 per share.
On March 19, 2001, the Company granted five advisory board members
(pursuant to their advisory letters) each an option to purchase up to
80,000 shares (400,000 in aggregate) of the Company's common stock at an
exercise price of $0.65 per share. These options are valued at $249,406
using the Black-Scholes pricing model. As of March 31, 2001, the Company
has recorded $31,176 in consulting expense for the 50,000 shares vested as
of that date. The remaining 350,000 shares vest in equal quarterly
installments, with all options vested on March 27, 2001. Accordingly, the
Company has recorded the balance of $218,230 as a deferred consulting
expense, which will be expensed as vested.
NOTE 5 - Major Customers
During the three months ended March 31, 2001, the Company sold a
substantial portion (greater than 10% of sales) of its products to three
major customers. Sales to these customers were $96,975 (29%), $75,138
(22%) and $43,750 (13%). The amount due from these customers included in
accounts receivable at March 31, 2001 was $231,360.
During the three months ended March 31, 2000, the Company sold a
substantial portion (greater than 10% of sales) of its products to three
major customers. Sales to these customers were $91,362 (23%), $75,138
(19%) and $43,750 (11%). The amount due from these customers included in
accounts receivable at March 31, 2000 was $35,112.
F-40
MONSTERDAATA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 6 - Subsequent Events
On April 3, 2001, 631.27 shares of series A preferred stock were converted
into 56,815 shares of common stock. In addition, 33,492 shares were issued
in lieu of accrued preferred stock dividends through December 31, 2000.
On April 3, 2001, 150 shares of series B preferred stock were converted
into 10,020 shares of common Stock. In addition, 5,385 shares were issued
in lieu of accrued preferred stock dividends through December 31, 2000.
F-41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 102(b)(7) of the Delaware General Corporation Law (Delaware Law)
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
a corporation or its stockholders for violations of the director's fiduciary
duty, except:
o for any breach of a director's duty of loyalty to the corporation or
its stockholders,
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
o pursuant to Section 174 of the Delaware Law (providing for liability
of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions), or
o for any transaction from which a director derived an improper
personal benefit.
The Amended and Restated Certificate of Incorporation of MonsterDaata
provides in effect for the elimination of the liability of directors to the
extent permitted by the Delaware Law.
Section 145 of the Delaware Law provides, in summary, that directors and
officers of Delaware corporations are entitled, under certain circumstances, to
be indemnified against all expenses and liabilities (including attorney's fees)
incurred by them as a result of suits brought against them in their capacity as
a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct. MonsterDaata's bylaws
entitle officers and directors of MonsterDaata to indemnification to the fullest
extent permitted by the Delaware Law.
MonsterDaata has agreed to indemnify each of its directors and certain
officers against certain liabilities, including liabilities under the Securities
Act of 1933. In addition, MonsterDaata maintains an insurance policy with
respect to potential liabilities of its directors and officers, including
potential liabilities under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
MonsterDaata pursuant to the provisions described above, or otherwise,
MonsterDaata has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
MonsterDaata of expenses incurred or paid by a director, officer or controlling
person of MonsterDaata 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, MonsterDaata will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a
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court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fee.
To be Paid
by the
Registrant
----------
SEC registration fee ................ $ 1,207
Accounting fees and expenses ........ 10,000
Legal fees and expenses ............. 25,000
Miscellaneous expenses .............. 3,793
-------
Total ..................... $40,000
=======
Item 26. Recent Sales of Unregistered Securities.
During the period November 1999 - January 2000, MonsterDaata issued
1,591.76 restricted shares of series A convertible preferred stock (convertible
into 143,260 shares of common stock) and warrants for the purchase of 118,862
shares of common stock, for a total of $1,492,000 in proceeds. The securities
were sold to accredited investors pursuant to Section 4(2) of the Securities Act
of 1933 and Regulation D thereunder. No underwriters were used in connection
with such offering, and no underwriting discounts or commissions were paid by
MonsterDaata.
During the period March - April 2000, MonsterDaata issued 425 restricted
shares of series B convertible preferred stock (convertible into 28,390 shares
of common stock) and warrants for the purchase of 11,334 shares of common stock,
for a total of $450,000 in proceeds less direct expenses of $98,523. The
securities were sold to accredited investors pursuant to Section 4(2) of the
Securities Act of 1933 and Regulation D thereunder. No underwriters were used in
connection with such offering, and no underwriting discounts or commissions were
paid by MonsterDaata.
In May 2000, MonsterDaata issued to ComVest Capital Partners LLC, a
Delaware limited liability company, a warrant for the purchase of 1,500,000
shares of common stock. The securities were sold pursuant to Section 4(2) of the
Securities Act of 1933. No underwriters were used in connection with such
offering, and no underwriting discounts or commissions were paid by
MonsterDaata.
During the period August - November 2000, MonsterDaata issued 8%
convertible subordinated promissory notes in the aggregate principal amount of
$3,910,000 (automatically convertible into the securities to be issued by
MonsterDaata in the December 2000 private placement) and warrants for the
purchase of 782,000 shares of common stock, for a total of $3,910,000 in
proceeds. The securities were sold to accredited investors pursuant to Section
4(2) of the Securities Act of 1933 and Regulation D thereunder. No underwriters
were used in connection with such offering, and no underwriting discounts or
commissions were paid by MonsterDaata. MonsterDaata engaged Commonwealth
Associates as placement agent in connection with the offering of these
securities and Commonwealth Associates received fees and commissions totaling
$476,728 as well as warrants for the purchase of an additional 195,500 shares of
common stock (issued pursuant to Section 4(2) of the Securities Act of 1933 and
Regulation D thereunder) in consideration of its services as placement agent.
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During the period December 2000 - January 2001, MonsterDaata issued
1,072,800 restricted shares of series C convertible preferred stock (convertible
into 8,582,400 shares of common stock) and warrants for the purchase of
4,291,200 shares of common stock, for a total of $10,728,000 in proceeds
(inclusive of the convertible notes). The securities were sold to accredited
investors pursuant to Section 4(2) of the Securities Act of 1933 and Regulation
D thereunder. No underwriters were used in connection with such offering, and no
underwriting discounts or commissions were paid by MonsterDaata. MonsterDaata
engaged Commonwealth Associates as placement agent in connection with the
offering of these securities and Commonwealth Associates received fees and
commissions totaling $609,000, as well as warrants for the purchase of an
additional 1,931,040 shares of common stock (issued pursuant to Section 4(2) of
the Securities Act of 1933 and Regulation D thereunder) in consideration of its
services as placement agent.
Effective at the close of business on March 26, 2001, MonsterDaata
effected a one-for-five reverse stock split, which is reflected in the stock
amounts above.
Item 27. Exhibits.
The following exhibits are filed with this Registration Statement:
Exhibit No. Description of Document
----------- -----------------------
2.1 Acquisition Agreement and Plan of Reorganization, dated
March 26, 1999, among the registrant (formerly known as
D-Vine, Ltd.), certain stockholders of registrant, Taconic
and certain stockholders of Taconic.(1)
3.1 Amended and Restated Certificate of Incorporation.(2)
3.2 Amended and Restated By-laws.(2)
4.1 Certificate of Designations, Preferences and Rights for
Series A Cumulative Convertible Preferred Stock.(2)
4.2 Certificate of Designations, Preference and Rights of Series
B Cumulative Convertible Preferred Stock.(3)
4.3 Certificate of Designation, Preferences and Rights of 7%
Series C Convertible Preferred Stock.(4)
5.1 Opinion of Greenberg Traurig, LLP.
10.1 MonsterDaata.com, Inc. 1999 Stock Option Plan.(5)
10.2 MonsterDaata.com, Inc. 2000 Stock Option Plan.(4)
23.1 Consent of Marcum & Kliegman LLP.
23.2 Consent of Greenberg Traurig, LLP (included in the opinion
filed as Exhibit 5.1).
24.1 Power of Attorney (set forth on signature page of the
Registration Statement).
- ------------------------
(1) Incorporated by reference to the exhibits filed with MonsterDaata's
Current Report on Form 8-K on April 16, 1999.
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(2) Incorporated by reference to the exhibits filed with MonsterDaata's Annual
Report on Form 10-KSB/A on December 7, 1999.
(3) Incorporated by reference to the exhibits filed with MonsterDaata's Annual
Report on Form 10-KSB on March 31, 2000.
(4) Incorporated by reference to the exhibits filed with MonsterDaata's Annual
Report on Form 10-KSB on April 16, 2001.
(5) Incorporated by reference to the exhibits filed with MonsterDaata's
Registration Statement on Form S-8 (No. 333-91097) on June 18, 1999.
Item 28. Undertakings.
(a) The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; (2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission 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
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant 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, the Registrant 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 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.
(d) The undersigned Registrant hereby undertakes that: (i) for the
purposes of determining any liability under the Securities Act, 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
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of the registration statement as of the time it was
declared effective; and (ii) for the purposes of determining any liability under
the Securities Act, each post-effective amendment that contains a form of
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prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of 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 May 31, 2001.
MONSTERDAATA, INC.
By: /s/ SAMUEL B. PETTEWAY, JR.
---------------------------------
Samuel B. Petteway, Jr.
President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Harold S. Blue and Samuel B. Petteway, Jr., and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, in any and all capacities, to sign all
amendments (including post-effective amendments) to the registration statement
to which this power of attorney is attached, and to file all those amendments
and all exhibits to them and other documents to be filed in connection with
them, including any registration statement pursuant to Rule 462 under Securities
Act of 1933, with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ JOHN VAN LEEUWEN Chairman of the Board May 31, 2001
- --------------------------------------
John van Leeuwen
/s/ HAROLD S. BLUE Vice Chairman of the Board May 31, 2001
- --------------------------------------
Harold S. Blue
/s/ MITCHELL DEUTSCH Vice Chairman of the Board May 31, 2001
- --------------------------------------
Mitchell Deutsch
/s/ SAMUEL B. PETTEWAY, JR. President, Chief Executive Officer and Director May 31, 2001
- -------------------------------------- Director (principal executive and
Samuel B. Petteway, Jr. principal financial or accounting officer)
/s/ KEITH M. ROSENBLOOM Director May 31, 2001
- --------------------------------------
Keith M. Rosenbloom
/s/ JOSEPH P. WYNNE Director May 31, 2001
- --------------------------------------
Joseph P. Wynne
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