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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.2
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of Securities Exchange Act of 1934
FREEREALTIME.COM, INC.
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(Exact Name of Small Business Issuer in Its Charter)
Delaware 84-1408716
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3333 Michelson Drive, Suite 430, Irvine, California 92612
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(Address of Principal Executive Offices) (Zip Code)
(949) 833-2959
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Issuer's Telephone Number, Including Area Code
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common
Stock, no par value
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PART I
We have elected to file the information required by Alternative 3 of Form
10-SB and are filing this Form 10-SB on a voluntary basis to:
. provide current, public information to the investment community;
. to expand the availability of secondary trading exemptions under
the Blue Sky laws and thereby expand the trading market in our
securities; and
. to comply with prerequisites for quotation of our securities on
the Over-the-Counter Bulletin Board.
Item 1. Description of Business
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We are a Web-based provider of real-time financial market information
services and analytic tools. Through our Freerealtime.com Web site, we strive to
be a "one-stop" portal for real-time financial information with our current
offering of free, real-time stock quotes and value-added content, including
news, market commentary, company research, and analytic tools such as charting
and portfolio stock tracking. We completed our fiscal year ended March 31, 1999
("Fiscal 1999") with over 500,000 registered users, a portion of whom hit our
site ("page views") approximately 103 million times in March 1999. A registered
user is described as a unique user who completes an online survey and
registration form to obtain, for free, a login id and password for access to
members-only parts of our Web site. As of March 31, 1999, we experienced in
excess of 50% sequential growth in page views from the fiscal quarter ended
December 31, 1998 when we had approximately 353,000 registered users, along with
approximately 64 million page-views for the month of December 1998. Subsequent
to the end of Fiscal 1999, we continued to realize significant growth for the
first six months of Fiscal 2000, ended September 30, 1999, as we had over
750,000 registered users, serving approximately 114 million page-views in
September 1999. A majority of our page views are real-time quotes. The
Freerealtime.com Web site is offered free of charge to our registered users and
the sale of advertising represents our primary source of revenue from this Web
site.
We also own and operate the Web site, BullSession.com, where we currently
offer active investors a subscription service of "streaming" real-time quotes
and dynamically updating stock portfolios. Our subscriber count on this Web site
has also shown significant sequential quarterly growth during Fiscal 1999.
BullSession.com finished Fiscal 1999 with over 3,500 subscribers, up from
approximately 1,800 at the end of December 1998. By the end of September 1999,
BullSession.com had almost 4,800 subscribers. Our source of revenue from the
BullSession.com Web site is the sale of subscriptions at monthly prices ranging
from $26 to $50.
Corporate History
Freerealtime.com, Inc. is the result of a merger between Pub Singin', Inc.,
a Colorado corporation ("Pub Singin") and First International Financial
Corporation, a Delaware corporation ("FIFC-Delaware"). The two companies merged
in September 1998 (the "Merger"). Immediately prior to the Merger, Pub Singin
changed its name to "Freerealtime.com" and Freerealtime.com became the surviving
entity in the merger. Pursuant to the merger agreement, all shares of FIFC-
Delaware were exchanged for shares of Freerealtime.com with the result that,
following the Merger, the former stockholders of FIFC-Delaware held
approximately a 90% controlling interest in Freerealtime.com. Pub Singin was
formed on May 3, 1989 under the laws of the State of Colorado for the purpose of
publishing and marketing song sheets. From inception through the merger with
FIFC-Delaware, Pub Singin had no material business or financial results of
operations. Our historical business began in Canada through First International
Financial Corporation, an Alberta corporation ("FIFC-Alberta"). FIFC-Alberta,
through a predecessor corporation, was formed in July 1994 under the laws of
Alberta, Canada by our founder Brad Gunn. FIFC-Alberta commenced business
operations in January 1996, when it initiated the sale of capital stock in
private placement transactions and began to develop its historical Internet
business. Mr. Gunn formed First
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International Financial Corporation, a Delaware corporation ("FIFC-Delaware")
on June 25, 1997 under the laws of the State of Delaware under the name First
International USA Corp. with the intent of moving the business of FIFC-Alberta
into the United States. FIFC-Delaware did not have any business operations until
July 31, 1998 when FIFC-Delaware acquired all of the outstanding capital stock
of FIFC-Alberta from the stockholders of FIFC-Alberta in exchange for the
issuance of shares of common stock of FIFC-Delaware. As a result of the
foregoing acquisition, FIFC-Alberta became a wholly-owned subsidiary of FIFC-
Delaware. See Risk Factors--Risks Related to Our Business--Historical
Transactions.
On November 22, 1999, the Company held a special meeting of stockholders
to, along with other things, vote on and approve the reincorporation of the
Company into Delaware. The Company believes that Delaware is a good jurisdiction
with a long history of incorporation for public companies. Discussions with
potential investors indicated that a reincorporation in Delaware would
facilitate future financings. The shareholders of the Company approved the
reincorporation proposal and on November 22, 1999, a merger certificate was
filed in Delaware which accomplished the reincorporation.
Industry Background
The Web as a New Medium. The Web has rapidly become a significant global
medium for communications, news, information and commerce. BancBoston Robertson
Stephens, a leading investment bank, estimates that in the U.S. today there are
more than 100 million users of the Internet and that the user adoption rate of
the Internet will continue to rise in the coming years reaching more than 196
million total users by 2003. This growth is being driven by a number of factors,
including:
. a growing base of personal computers, or PCs, in the home and workplace;
. improvements in network infrastructure;
. more convenient, faster and inexpensive Internet access;
. advances in PCs and modems;
. increases in the quantity and quality of content available on the Web;
and
. the overall increase in public awareness of the Web.
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The Web has become an attractive medium for advertisers, offering the
ability to target, as well as providing levels of flexibility, interactivity and
measurability not typically available with traditional media. With Internet
advertising, advertisers have the ability to gather demographic information and
target their messages to specific groups of consumers. They also have the
ability to change their advertisements frequently in response to market factors,
current events and consumer feedback. Moreover, advertisers can more accurately
track the effectiveness of their advertising messages by receiving reports of
the number of advertising "impressions" delivered to consumers, and the
resulting "hit" or click through" rate to their Web sites.
Through the Web, financial information companies can deliver timely,
personalized content in a manner not possible using other media. Using the Web,
corporate and financial-related information can be continuously updated,
distributed to a vast number of users on a real time basis, and accessed by
users at any time. Further, the interactive nature of the Web allows the
individual to access information tailored to the his/her preferences and system
requirements and it also facilitates online electronic trading and the purchase
of relevant financial services.
Demand for Business News and Financial Programming.
The Web has rapidly established itself as an effective means for investors
to manage portfolios, research investments and trade securities. At the same
time, individuals have been taking greater control of their financial affairs by
directly researching information on investments, tracking their portfolios,
purchasing no-load mutual funds and playing a more proactive role in their
relationships with financial advisors. The Web has facilitated these behavioral
shifts by providing investors with easy access to information that was once
available only to investment professionals. Examples of such information include
real-time market data and news, historical quotes, charts, SEC filings and
analysts' earnings estimates. According to BancBoston Robertson Stephens, the
number of Web users using the Web to conduct financial transactions on the Web
is estimated to be 27 million by the end of 1999, 44 million by the end of
2000, and 79 million by the end of 2001. With financial transactions defined as
checking, transferring, paying, trading, crediting or purchasing a personal
financial asset online. BancBoston Robertson Stephens also estimates that there
will be 25 million online brokerage accounts by the end of 2003. With more and
more investors transacting online, the demand for better and more timely
information continues to grow.
Other Participants in the Industry.
While there are hundreds of financial information oriented Web sites on the
Internet, only a handful of them attract the bulk of investors interested in
free, high quality, real-time financial market information. These include:
RagingBull, TheStreet.com, Telescan, and Thomson RT. In April 1999, Ragingbull,
who is partly owned by CMGi, had a non-paying registered user base of 150,000.
Publicly held TheStreet.com had 66,000 paid subscribers and 45 million page
views for the second quarter of 1999. Telescan's WallStreetCity.com Web site
generated approximately 18 million page views for the month of September 1999.
Other Web sites that provide financial programming of a less timely nature
include, but are not limited to: the major Web portals, such as Yahoo, Excite,
Lycos, etc.; CBS Marketwatch, which provides free real-time financial news but
not free real-time market data; Edgar Online; and Individual Investor. CBS
Marketwatch reported a monthly average of 78 million page views and 3.8 million
unique visitors for the first quarter of 1999. In the first quarter of 1999,
Edgar Online, a provider of formatted SEC documents, had over 225,000 non-paying
registered users and more than 10,000 subscribers paying more then $9.95 per
month. Individual Investor has reported it has more than 150,000 non-paying
registered users and its site had a monthly average of 5.3 million page views in
the second quarter of 1999.
We believe that a significant opportunity exists for a company to provide
an easy to access portal for real-time financial market information, financial
services and financial tools. By integrating real-time market information with
the best available financial tools, content and commentary, a Web-based service
can enable its audience to keep abreast of current business developments, track
industry and competitive trends, make informed, timely investment decisions and
manage their financial assets. We believe that by assembling a loyal base of
users who actively follow business and financial news, a Web site may be able to
create a targeted and demographically desirable audience that is attractive to
financial and non-financial advertisers. Further, such a Web site will have a
significant opportunity to sell related subscription services to such users.
The Company Strategy
Through our Freerealtime.com Web site, we are a Web-based provider
of free, real-time financial market data, financial programming, including news
and research, analytic tools and financial services. Freerealtime.com completed
September 1999 with over 750,000 registered users, a portion of whom viewed
pages on our site approximately 114 million times that month, causing
approximately 6 million page views per market day.
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Our primary strategy is to develop a large and loyal community of users by
offering free stock quotes and other financial tools and content. As our user
base continues to grow, we are developing a sizeable audience with demographic
attributes that is attractive to advertisers and we expect to continue growing
our revenues through the sale of advertising. As a related strategy, we intend
to market subscription-based tools and services, as well as certain financial
transaction services as described below, to our community of users. We currently
generate, and expect to experience growth in, revenues from these related
strategies through (i) the ownership of certain subscription-based tools and
services, including our BullSession.com dynamically updating portfolio
management tool, and (ii) revenue sharing and fee participation contracts with
third party owners and providers of subscription and transaction services. The
specific elements of our strategy are organized in three areas, providing free
financial content and tools, providing subscription based services and analytic
tools, and providing online financial transaction services.
FREE FINANCIAL CONTENT & TOOLS. Freerealtime.com is the primary site
through which we will develop our brand as a leading provider of easy to use,
real-time financial information. The business model of our free site is driven
by the sale of advertising ("ads"); accordingly, our near-term strategies focus
on growing our audience with attractive demographics and include the following
specific elements:
BUILD TRAFFIC AND AUDIENCE LOYALTY. We intend to build our customer
base and page view traffic by expanding the financial content, tools and
services that we offer on our Web site. In addition to providing valuable
real-time market data for free, we currently provide our members with free
real-time news, commentary, and analysis from quality third party
providers, such as Reuters and Briefing.com, as well as proprietary content
that we develop, such as our currently provided stock watch tool, and our
portfolio management tool expected to be introduced prior to the end of
Fiscal 2000. We also plan continued development of community features such
as our "Stock Talk" message boards and free e-mail services, which we
believe lead our members to remain on our site longer and return more
often.
DEVELOP "CO-BRAND," WEB-HOSTING AND OTHER MARKETING PROGRAMS. We are
actively pursuing "co-branding" contractual relationships with other high
traffic Web sites pursuant to which we produce and market a co-branded page
of content or tools with the co-brand partner. Such relationships build
users, site traffic and brand awareness for both parties, as well as,
typically generate revenue for us through ad sales and fee sharing
arrangements. We have a number of co-brand agreements, including agreements
entered subsequent to the end of Fiscal 1999, with various Web sites,
including BigCharts.com, Zacks.com, Infospace.com, MarketGuide.com,
JAGNotes.com, Telescan.com, WallstreetCity.com, INVESTools.com, and
Go2Net.com. Additionally, we will continue to rely on "cost effective"
marketing programs such as customer referrals, e-mail marketing campaigns
and free publicity. Upon the availability of additional capital resources,
we intend to initiate advertising of Freerealtime.com both on and off the
Internet.
BUILD AND CAPITALIZE ON ATTRACTIVE AUDIENCE DEMOGRAPHICS. We believe
our Web site attracts users who, as a group, are more affluent and better
educated than users of many other Web sites and therefore present an
attractive medium for companies that advertise and engage in commerce over
the Internet. Through data gathered from users who register for real-time
quotes and from periodic surveys, we have knowledge of and track user
activity on our Web site so that we can provide advertisers with detailed
demographic and other information that allows the advertisers to target
specific groups and tailor their advertisements to our users. We believe
this strategy will help attract new advertisers and increase the sales
prices we receive for our ad impressions, referred to as cost-per-thousand.
SUBSCRIPTION-BASED INFORMATION SERVICES & ANALYTIC TOOLS. We market monthly
subscriptions for certain value-added content and tools to our large community
of users on our free Web site. Our strategy to grow our subscription users and
revenues includes the following elements:
EXPAND VALUE-ADDED CONTENT. We are actively pursuing the addition or
development of more subscription-based services in order to expand the
collection of such services that we offer beyond our BullSession.com site,
where we offer active investors a subscription service of "streaming" real-
time quotes and dynamically updating stock portfolios. We plan to expand
these services through internal
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development, acquisition, and marketing and license relationships. Our
current BullSession.com site had almost 4,800 subscribers at the end of
September 1999, and we have a second-generation service under development
that we plan to introduce during Fiscal 2000. Subsequent to the end of
Fiscal 1999, we entered into certain agreements under which we will market
subscriptions and share in ongoing subscription revenue, including
subscription services related to market commentary and analysis with
JAGNotes.com and INVESTools.com, and technical analysis with Telescan.com's
ProSearch technology and WallStreetCity.com. We plan to introduce our
JagNotes.com and INVESTools.com subscription services by the end of the
first quarter of Fiscal 2001. We plan to introduce our Telescan ProSearch
technology based subscription services, including technical analysis, by
the end of the second quarter of Fiscal 2001.
DRIVE SUBSCRIPTION GROWTH WITH MARKETING PROGRAMS. We intend to drive
subscription growth by cross-marketing and "upselling" or introducing our large
non-paying registered user-base using our less valuable free services to our
more valuable pay for BullSession.com subscription service and other affiliated
subscription services, thus encouraging them to subscribe. We plan to offer
other affiliated subscription services including JAGNotes.com and INVESTools.com
(aggregated financial market commentary and analysis), and Telescan's ProSearch
service (technical analysis tools). During Fiscal 1999 we extensively advertised
BullSession.com on our free Web site and we believe this marketing program
contributed to our substantial growth in subscribers. We also plan to expand our
co-marketing contracts, such as those we have with JAGNotes.com, INVESTools.com,
and Telescan.com, pursuant to which one or both parties markets our respective
subscription services to new users and we share in the resulting revenues and
fees.
ONLINE FINANCIAL TRANSACTION SERVICES. Similar to our strategies for
subscription services, we are pursuing opportunities to sponsor certain
transaction services and capabilities to our users and to participate in the
resulting transaction fees. Our strategies are based around "alliance" marketing
opportunities and include:
DEVELOP TRANSACTION FEE OPPORTUNITIES. We believe that our customers
often use our free and subscription content and services as "decision
tools" supporting a transaction event, including, for example, the purchase
or sale of securities, insurance, banking and other financial products and
services. As such, the Company is pursuing marketing relationships with
certain third parties offering some of these transaction services,
including Herzog, Heine & Geduld (equities trading), and DirectQuote.com
(life insurance products), whereby the Company hopes to receive a network
communications fee for directing its registered users to these other sites.
These relationships will allow our registered users on-line access to these
financial transaction services which are provided directly by these third
parties. We believe the fees realized by third parties from transactions
with our customers could be substantial, and we plan to enter into
marketing arrangements by sponsoring and promoting such third party
transaction providers on our Web sites.
EXPAND TRANSACTION SERVICES ALLIANCES. We are currently pursuing
marketing alliances to direct or network our customer's transaction
activity to particular third party providers in exchange for a
participation in the resulting transaction fees. This strategy allows us to
minimize the significant investment expenditures necessary to develop and
operate transaction capabilities. We have recently entered into a letter of
intent with Herzog, Heine & Geduld, Inc. to offer Web-based equities
trading through users' accounts at Herzog, Heine & Geduld. Such transaction
services will initially be aimed at qualified small institutional investors
and may be expanded in the near term to include retail transaction
services, however there can be no assurance that a definitive agreement
will ever be reached. We are also pursuing an alliance agreement with
DirectQuote.com pursuant to which we hope to offer our members the ability
to receive a quote and apply for and obtain life insurance.
Products
The Freerealtime.com Web Site
Our Freerealtime.com Web site provides unlimited, free, real-time stock
quotes. Through this site we also offer business and company news, market
statistics and commentary, fundamental company information and research, and
certain free analytic tools such as community "stock talk," charting and
portfolio stock tracking. We believe that offering comprehensive business news,
financial programming and analytic tools is critical to our success because the
combination of these services enables us to increase audience loyalty, average
usage time and repeat visits while also creating a sense of community.
Freerealtime.com completed Fiscal 1999, ended March 31, 1999, with over
500,000 registered users, a portion of whom hit our site ("page views")
approximately 103 million times in March 1999, representing in excess of 50%
sequential growth of page views from the third fiscal quarter ended December 31,
1998 when we had
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approximately 353,000 registered users, along with approximately 64 million
page-views for the month of December 1998. Subsequent to the end of Fiscal 1999,
we continued to realize significant growth for the first six months of the
fiscal year ended March 31, 2000 ("Fiscal 2000"), as we had over 750,000
registered users, serving approximately 114 million page-views in September
1999. A majority of our page views for each fiscal period have been real-time
stock quotes. The Freerealtime.com Web site is offered free of charge to our
registered users and the sale of advertising represents our primary source of
revenue from this Web site.
The Freerealtime.com Web site provides stock quotes from all major U.S.
stock markets (the "Exchanges"). These quotes are offered in real time. Through
these stock quote pages, our audience can access other valuable information
about a particular company, including stories from several news services, SEC
filings and annual reports, summaries of analysts' information and a variety of
fundamental and technical information. In addition to a wide variety of data on
specific securities, including trading share and dollar volume information, bid
and ask quotes and size, relative indices, stock split information and other
data, the Freerealtime.com Web site also provides information as to various
market and industry indices, commodity, options and currency markets.
The Freerealtime.com Web site aggregates numerous news feeds from around
the world, sorts and organizes articles according to industry, company, and type
of news. Our news feeds include BusinessWire, PRNewswire, Reuters, Associated
Press and United Press International. Commentary is provided by Comtex News,
Reuters, RealtimeTraders.com and Zacks Investment Research and is updated
throughout the day. Subsequent to the end of Fiscal 1999, we entered agreements
to provide additional market and company commentary and analysis from
JAGNotes.com, INVESTools.com, and WallStreetCity.com.
We believe that providing a place for our audience, financial journalists
and experts in the financial world to meet and share ideas about investing will
help increase our brand awareness, as well as motivate our users to return
frequently to spend more time on our Web site. Additionally, because we intend
to integrate related news, market data and charts offered throughout our
service, community members will be able to form niche user groups around their
specific interests, which can be targeted with relevant marketing campaigns and
transaction opportunities. In addition, by integrating other content with these
community features, community members will be exposed to other areas of the
site, increasing the awareness of the breadth of our programming and other
services.
The BullSession.com Web Site
While all the programming available on Freerealtime.com is currently free
of charge, a core element of our corporate strategy includes providing
subscription-based financial content and investment tools to sophisticated
investors through affiliated Web sites. Our initial entry into subscription
services, BullSession.com, is a trader's portfolio management tool that features
"streaming" real-time, ticker-tape quotes and dynamically updating stock
portfolios. BullSession.com also provides other value-added financial content,
including business and company news, company fundamentals, charting, detailed
quotes, exchange statistics and options listings.
Our subscriber count on this Web site realized significant sequential
quarterly growth during Fiscal 1999. BullSession.com finished Fiscal 1999 with
over 3,500 subscribers, up from approximately 1,700 at the end of December 1998.
By the end of September 1999, BullSession.com had almost 4,800 subscribers. Our
source of revenue from the BullSession.com Web site is the sale of subscriptions
at monthly prices ranging from $26 to $50, with an average of $32 per month.
The central feature of the BullSession.com service is the sophisticated
TickerTracker(TM) which allows a subscriber to monitor a custom set of
portfolios consisting of stocks and indexes. Each portfolio is continuously
updated with real-time trading information and subscribers can view a variety of
information, including best bid and offer, last sale, trade volume, day high-
low, 52 week high-low, time of last sale, price targets, and company name.
TickerTracker also performs portfolio management and analytical functions,
including calculating the profit/loss position on a given stock or a given
portfolio. Users may also display their portfolios in a scrolling
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stock ticker tape format where the stock symbol and last price scroll by in a
small window that can be running at the same time as other software on the
subscriber's computer screen.
The Detailed Quotes screen allows users to query more detailed historical
data such as P/E ratios, 52-week high and low, and dividend and earnings
information. The Exchange Statistics screen allows users to query a variety of
reports on each exchange (e.g., most active, percent gainers, dollar amount
gainers, etc.). The Option Listings screen allows users to query detailed
information about the options offered on a given security.
Other Products and Services
Subsequent to the end of Fiscal 1999, we have continued to pursue our
strategies to add content and tools to our Freerealtime.com Web site as well as
to develop or add subscription and transaction services. We have recently
entered "co-branding" agreements with several parties to enhance our community
services with free e-mail from Critical Path.com, and to add free content to our
Web site in the areas of market and company commentary and analysis from
JAGNotes.com and WallStreetCity.com, investment advisory newsletters from
INVESTools.com, and stock screening, searching and technical analysis from
Telescan.com. We are in the process of developing and launching these co-branded
pages and we can give no assurance that these relationships will help increase
our users, site traffic and brand awareness or that they will result in revenue
for us through the ad sales and fee sharing arrangements.
We also have pursued a number of new initiatives in subscription and
transaction services since the end of Fiscal 1999. We are developing a second-
generation BullSession tool that we expect to complete and introduce in Fiscal
2000. We have entered into several marketing and license contracts through which
we expect to realize a share of subscription revenues derived from our marketing
activities. Apart from the free content co-branding arrangements noted in the
paragraph above, we have agreements with JAGNotes.com, INVESTools.com, and
Telescan.com, pursuant to which we will market and sell subscriptions to their
respective subscription services and share in the resulting subscription
revenues and fees. We also have entered into an agreement with
WallStreetCity.com under which they will license a private label version of our
BullSession.com service and we will share in revenues that they generate from
the sale of subscriptions. Additionally, we have entered into a Letter of Intent
with Herzog, Heine & Geduld, Inc., to jointly develop an equities transaction
service for Herzog, Heine & Geduld's qualified institutional customers through
an "order entry portal", which is described as a Web browser based system that
will allow Herzog, Heine & Geduld's customers to enter an order on a Web page on
the Freerealtime.com Web site which is then transmitted directly to Herzog,
Heine & Geduld's system for execution and clearing. We are in the process of
developing and launching these license and marketing subscription and
transaction services and we can give no assurance that these relationships will
help increase our subscribers and transactions or that they will result in
revenue for us through the subscription sales and transaction fee sharing
arrangements.
Advertising Sales on Freerealtime.com
We are focused on providing our advertisers with a large, demographically
desirable audience. We believe that our Web site attracts users who as a group
are more affluent and better educated than users of many other Web sites and
therefore represent an attractive medium for companies that advertise and engage
in commerce over the Internet. Advertisements are displayed on every page view
on our Web site, including when a user enters the service, reviews a news story,
accesses a quote or views a stock message board.
In March 1999, the final month of Fiscal 1999, we entered into an agency ad
sales contract with AdSmart, Inc., a company owned by CMGI, Inc., to represent
our Web site to advertisers and media buyers. Advertising revenues for the six
months immediately after the commencement of the AdSmart relationship exceeded
the advertising revenues for the preceding six months by 275%. This increase is
a result of both AdSmart's efforts and those of our in-house ad sales force.
Prior to AdSmart, we primarily utilized other ad sales firms and networks to
sell our ad impression inventory. Subsequent to the end of Fiscal 1999, we have
been expanding an in-house ad sales team, and expect that in-house ad sales will
represent a growing proportion of our total ad sales.
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We currently derive, and expect to continue to derive, a substantial
majority of our revenue on our free Web site from the sale of advertising and
sponsorships. Currently we offer the following advertising options on the
Freerealtime.com Web site:
. Run of Site. Run of site rotations are banner advertisements that rotate
on a random basis throughout the Freerealtime.com Web site, appealing to
advertisers seeking to establish general brand recognition across
Freerealtime.com's audience. Run of site rotations are typically sold in
blocks of 1,000 impressions and with a minimum of 100,000 guaranteed
impressions over the life of the advertising contract.
Freerealtime.com's current cost-per-thousand rate for run of site
rotations ranges from $2 to $25 depending on length of contract and
number of impressions purchased. Subsequent to the end of Fiscal 1999,
we added a second banner ad at the bottom of each page view, but to date
have used such bottom banner for internal promotion and have not sold a
significant number of bottom banner impressions to outside advertisers.
. Targeted Advertisements. Targeted advertisements are banner
advertisements that are displayed when a user browses through specific
quote or other content pages, allowing advertisers to target users based
on page view interest and activity, region or country, time of day,
frequency of use, Internet Service Provider, type of operating system or
browser. Because every user of Freerealtime.com is a registered member
in our database, we can effectively target advertising to each
individual member. Like run of site rotations, targeted advertisements
are sold in blocks of 1,000 impressions. Due to the greater selectivity
of the audience and because users typically spend more time on non-quote
content pages than on quote pages, Freerealtime.com's current rates for
targeted advertisements are generally higher than run of site rotations.
During Fiscal 1999, the substantial majority of our ad impressions were
not sold as targeted ads. In August 1999, we re-launched an improved and
revised Freerealtime.com Web site, which included the integration of new
proprietary serving software that takes advantage of Adforce's ad
targeting capabilities. This enables us to target different ads to
different users while they visit different areas of the Web site. The
capabilities of this technology facilitate the sale of such targeted
ads.
. Sponsorships. Sponsorships allow advertisers to gain maximum exposure on
the Web site by featuring "buttons" and "boxes" on certain pages. For
example, the online brokerage services of Datek and Ameritrade have had
advertisements placed in fixed positions within our Web site allowing
users to move directly to the advertiser's site to establish an account
or place an order. We offer sponsorship opportunities throughout our
entire site. Sponsorships are usually a fixed monthly fee over the life
of the contract and may include other advertising components such as
general rotation or targeted banner advertisements. Subsequent to the
end of Fiscal 1999, we expanded the number of sponsorship buttons per
page view from two to six.
Historically, our advertisers have been from technology and financial
services industry, but we have recently attracted advertisers from brands
outside of these industries. We believe that attracting additional advertisers
from businesses outside of the financial and technology industries is important
to our future success and revenue growth.
Marketing and Distribution
We are seeking to establish the Freerealtime.com brand as one of the Web's
leading providers of free real time market data and financial content and tools,
and subscription and transaction services. Despite the lack of capital resources
to fund a media-based advertising campaign, we experienced substantial growth
during Fiscal 1999 in the number of users and page view traffic on our Web
sites. The substantial increase in the number of users on the site was primarily
due to a higher level of awareness of our Web sites by users of the Internet,
which we believe is a result of user referrals, the appearance of our Web sites
in the query lists of "search portal" Web sites, favorable publicity received
for both Freerealtime.com and BullSession.com, and user traffic from our web-
hosting and co-branding relationships. Due to limited capital resources we did
not expend material amounts on advertising of our Web sites during Fiscal 1999.
Upon the availability of capital resources, we intend to increase advertising
and marketing expenditures to continue to build brand awareness, users and
traffic on our Web sites.
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Our current primary marketing and distribution strategy consists of
actively pursuing Web-hosting and "co-branding" contractual relationships with
other high traffic Web sites. Such relationships build users, site traffic and
brand awareness for both parties, as well as, typically generate revenue for us
through ad sales or fee sharing arrangements. In these relationships, we and the
co-brand partner produce and market a co-branded page of content or tools, with
the parties, as negotiated, assuming responsibility for web-hosting operations,
programming production, subscription or advertising sales, and other
administrative functions. Currently, we have a number of co-branded arrangements
and contracts, including BigCharts.com, Zacks.com, Infospace.com,
MarketGuide.com, JAGNotes.com, Telescan.com, WallstreetCity.com, INVESTools.com,
and Go2Net.com. Additionally, until we can afford a significant advertising
campaign, we will continue to rely on other "cost effective" marketing programs
such as customer referrals, e-mail marketing campaigns and free publicity.
Competition
We provide our users with consistently updated business and financial
information. An increasing number of financial news and information sources
compete for consumers' and advertisers' attention and spending. We expect this
competition to continue to increase. We compete for advertisers, readers, staff
and outside contributors with many types of companies, including:
- online services or web sites focused on business, finance and investing,
such as MarketWatch.com, CNNFn, The Wall Street Journal Interactive
Edition and The Motley Fool;
- publishers and distributors of traditional media, including print, radio
and television, such as the The Wall Street Journal, Fortune, Bloomberg
Business Radio and CNBC;
- providers of terminal-based financial news and data, such as Bloomberg
Business News, Reuters News Service, Dow Jones Markets and Bridge News
Service;
- web "portal" companies, such as Yahoo! and America Online; and
- online brokerage firms, many of which provide financial and investment
news and information, including real time stock quotes, such as Charles
Schwab and E*TRADE.
Our ability to compete with these companies depends on many factors,
including the originality, timeliness, comprehensiveness and trustworthiness of
our content and that of competitors, the ease of use of services developed
either by us or our competitors and the effectiveness of our sales and marketing
efforts.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to devote greater resources than we
can to the development and promotion of their services. These competitors may
also engage in more extensive research and development, undertake more far-
reaching marketing campaigns, adopt more aggressive pricing policies, and make
more attractive offers to existing and potential employees, outside
contributors, strategic partners and advertisers. Our competitors may develop
content that is equal or superior to ours or that achieves greater market
acceptance than ours. It is also possible that new competitors may emerge and
rapidly acquire significant market share. One of our competitive advantages is
the offering of free, real time stock quotes to our users and other better
positioned Internet companies may begin to offer the same services. We may not
be able to compete successfully for readers, staff and outside contributors
which could have a material adverse effect on our business, results of
operations and financial condition. Increased competition could result in price
reductions, reduced margins or loss of market share, any of which could
materially adversely affect our business, results of operations and financial
condition.
We also compete with other web sites, television, radio and print media for
a share of advertisers' total advertising budgets. If advertisers perceive the
Internet or our web site to be a limited or an ineffective advertising medium,
they may be reluctant to devote a portion of their advertising budget to
Internet advertising or to advertising on our web site.
Infrastructure, Operations and Technology
The data center and network operations for our Web sites are currently
outsourced to a third party "co-location" firm, Exodus Communications, Inc., who
operates data centers for us in two locations: Jersey City, New Jersey and
Irvine, California. Freerealtime.com utilizes multiple Web servers running Sun
Microsystems Solaris 2.6 operating system and Apache Web Server. Internet access
is maintained by Exodus through multiple OC3 connections with four different
tier one backbone providers. The systems running the Web site are powered by
multiple uninteruptible power supplies backed up with multiple diesel power
generators. Full site redundancy is handled by Cisco's Global Director and
multiple Cisco Local Directors.
All of our market data serving software was created by and is owned by
Freerealtime.com. We are expanding our internal development group to create new,
and enhance existing, services, tools and features. We also utilize third party
technology for certain sections of our site, for example BigCharts for our
charting capability.
We obtain most of the information on our Web sites from suppliers of market
data and financial programming. Key contractual supply relationships include
quote and market data from the U.S. Stock Exchanges, datafeed services from S&P
Comstock, and news programming from Comtex and Reuters. We depend on these
information providers to provide information and data feeds on a timely basis.
Our Web site could experience disruptions or interruptions in service due to the
failure or delay in the transmission or receipt of this information. Our
contracts with these information providers generally provide for payments based
on our volume of traffic on our Web sites, such as number of users or volume of
real-time quotes. The rapid growth in traffic on our Web sites has caused our
expenses for services from these suppliers to grow faster than the availability
of cash from revenues and internal operations or from external capital
contributions. Subsequent to the end of Fiscal 1999, certain of these data and
operations costs decreased substantially on a per-page view basis. In the first
quarter of Fiscal 2000 ending June 30, 1999, the NASDAQ reduced market data fees
by approximately 50%, and the NYSE and AMEX have announced similar fee
reductions that are expected to take effect prior to the end of Fiscal 2000.
Additionally, we renegotiated and amended our datafeed and co-location provider
contracts to result in significant reductions in our per-page view costs for
these services. Despite these declines in our unit costs, we anticipate that
these costs will continue to increase over the foreseeable future as we realize
growth in the users and page views on our Web sites. As of the date hereof, we
believe we have satisfactory relationships with all our suppliers of market data
and financial programming. For a more detailed discussion see Management's
Discussion and Analysis--Cost of Revenues.
Our market is characterized by rapidly changing technology, evolving
industry standards and frequent new product announcements. These are exacerbated
by the recent growth of the Web and the intense competition in our industry. To
be successful, we must adapt to our rapidly changing market by continually
improving the performance, features, and reliability of our services. We could
incur substantial costs if we need to modify our services or infrastructure in
order to adapt to these changes.
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Intellectual Property
We rely primarily on a combination of copyrights, trademarks, trade secret
laws, our user policy and restrictions on disclosure to protect our intellectual
property, such as our content, trademarks, trade names and trade secrets. We
plan to enter into confidentiality agreements with our employees and consultants
to control access to and distribution of our other proprietary information.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use the content on our Web site or our other intellectual
property without authorization. There can be no assurance that these precautions
will prevent misappropriation or infringement of our intellectual property. A
failure to protect our intellectual property in a meaningful manner could have a
material adverse effect on our business, operating results and financial
condition. In addition, we may need to engage in litigation in order to enforce
our intellectual property rights in the future or to determine the validity and
scope of the proprietary rights of others. Such litigation could result in
substantial costs and diversion of management and other resources, either of
which could have a material adverse effect on our business, operating results
and financial condition.
We also license certain data and content from third parties. In December
1997, we entered into an Agreement for Receipt and Use of Market Data with the
New York Stock Exchange, Inc. pursuant to which we are permitted to use and
disseminate market data provided to us by the New York Stock Exchange. This
agreement continues until terminated by either party upon 30 days' written
notice. In June 1997, we entered into an NQDS Information Vendor Agreement with
The Nasdaq Stock Market, Inc., pursuant to which we are permitted to use and
disseminate market data provided to us by Nasdaq. This agreement has an initial
term of one year and will be automatically extended for additional periods of
one year unless terminated by either party at least ninety days prior to the
expiration of the current term. Also in June 1999, we renewed a license
agreement with S&P ComStock, Inc., pursuant to which we are permitted to use and
disseminate information provided to us by S&P Comstock. The original agreement
was entered into in June 1997. This agreement has an initial term of three years
and will be automatically extended for additional periods of one year unless
terminated by either party at least ninety days prior to the expiration of the
current term. In August 1997, we entered into a Vendor Agreement with the Option
Price Reporting Authority, pursuant to which we are permitted to use and
disseminate options pricing and sales information provided to us by the Option
Price Reporting Authority. This agreement continues until terminated by either
party upon 30 days' written notice. In these license agreements, the licensors
have generally agreed to defend, indemnify and hold us harmless with respect to
any claim by a third party that the licensed software or content infringes any
person's proprietary rights. There can be no assurance that the outcome of any
litigation between such licensors and a third party or between us and a third
party will not lead to royalty obligations for which we are not indemnified or
for which such indemnification is insufficient, or that we will be able to
obtain any additional license on commercially reasonable terms if at all. In the
future, we may seek to license additional technology or content in order to
enhance our current features or to introduce new services. There can be no
assurance that any such licenses will be available on commercially reasonable
terms, if at all. The loss of or inability to obtain or maintain any of these
technology licenses could result in delays in introduction of new services until
equivalent technology, if available, is identified, licensed and integrated,
which could have a material adverse effect on our business, results of
operations and financial condition.
There can be no assurance that infringement or other claims will not be
asserted or prosecuted against us in the future whether resulting from our
internally developed intellectual property or licenses or content from third
parties. Any future assertions or prosecutions could materially adversely affect
our business, results of operations and financial condition. Any such claims,
with or without merit, could be time-consuming, result in costly litigation and
diversion of technical and management personnel or require us to introduce new
content or trademarks, develop non-infringing technology or enter into royalty
or licensing agreements. Such royalty or licensing agreements, if required, may
not be available on acceptable terms, if at all. In the event of a successful
claim of infringement and our failure or inability to introduce new content or
trademarks, develop non-infringing technology or license the infringed or
similar technology on a timely basis, our business, results of operations and
financial condition could be materially adversely affected.
Government Regulations
There are currently few laws or regulations that specifically regulate
communications or commerce on the Web. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting certain types of
information and content over the Web. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet Service
Providers and online services providers in a manner similar to long distance
telephone carriers and to impose access fees on these companies. This could
increase the cost of transmitting data over the Internet. Moreover, it may take
years to determine the extent to which existing laws relating to issues such as
property ownership, libel and personal privacy are applicable to the Web. Any
new laws or regulations relating to the Web could adversely affect our business.
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Research and Development
For fiscal year ended March 31, 1999, and in the six months ended
September 30, 1999, we spent $60,000 and $251,000, respectively, on product
development. Our primary focus has been software and system development. For a
more detailed discussion see Management's Discussion and Analysis--Operating
Expenses--Product Development.
Employees and Consultants
As of September 1, 1999, there were 19 personnel dedicated on a full-time
basis to our business, seven of whom worked in product and content development,
four in sales and marketing, four in customer support, and four in management
and administration. We have also contracted with three consulting executives to
advise in the management of the Company. We have never had a work stoppage and
we consider our employee relations to be good.
We believe that our future success will depend in part on our continued
ability to attract, integrate, retain and motivate highly qualified sales,
technical, and managerial personnel, and upon the continued service of our
senior management and key sales and technical personnel. None of our personnel
is bound by an employment agreement that prevents such person from terminating
his or her relationship at any time for any reason. Competition for qualified
personnel is intense, particularly in the Irvine, California area, where our
headquarters are located. At times we have experienced difficulties in
attracting new personnel. There can be no assurance that we will successfully
attract, integrate, retain and motivate a sufficient number of qualified
personnel to conduct our business in the future.
Recent Developments
In November 1999, at our annual general meeting of stockholders, our
stockholders approved a proposal to change our state of incorporation from
Colorado to Delaware. Following this annual meeting, we changed our state of
incorporation by merging with and into a Delaware corporation which was formed
for the purpose of effecting this reincorporation, and which was wholly-owned by
us.
In November 1999, we entered into an agreement with some of our
stockholders for the resolution of outstanding matters pursuant to which these
stockholders returned to us an aggregate of 773,992 shares of our common stock
for cancellation. As a result of this cancellation, the number of outstanding
shares of our common stock will be reduced from 7,573,924 (as of November 1,
1999) to 6,799,932.
Reports to Security Holders
Following the effectiveness of this Form 10-SB, we will be subject to the
informational requirements of the Securities Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, we will file reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a site on
the World Wide Web at http://www.sec.gov that contains reports, proxy statements
and other information filed electronically by us.
Risk Factors
Risks Related to Our Business
OUR LIMITED OPERATING HISTORY. We were incorporated in the state of
Colorado on May 3, 1989 under the name Pub Singin', Inc. and had no prior
operations and no assets other than the initial capitalization provided by Pub
Singin's founders. On or about August 27, 1998, we entered into an agreement of
merger with First International Financial Corporation, a Delaware corporation,
("FIFC") by which we acquired, among other things, all right, title and interest
in FIFC's Web sites Freerealtime.com and BullSession.com. Immediately prior to
the merger we changed our name to Freerealtime.com, Inc. The Web sites are at
early stage of development, as they did not begin significant operations until
February 1998. Accordingly, we have a limited history upon which an evaluation
of our prospects can be made. Stockholders in our company must consider the
risk, expenses and difficulties frequently encountered by early stage companies
in new and rapidly evolving markets, including Web-based financial information
companies. There can be no assurance that we will be able to achieve profitable
operations.
HISTORICAL TRANSACTIONS. Prior to the acquisition of FIFC-Alberta, FIFC-
Delaware had intended to file an amendment to its Certificate of Incorporation
to change its name and to increase its authorized capital stock. It failed to
make these filings and, as a result, certain stockholders received shares of
common stock in a corporation that had not legally changed its name and which
were in excess of the amount of shares of common stock authorized by the
Certificate of Incorporation of FIFC-Delaware. As a further result, we needed to
make certain corrective filings with respect to the name change and the Merger
with Colorado and Delaware. We discovered FIFC-Delaware's failure to make these
filings during the preparation of this report and the Company has since made the
required corrective state filings. The former stockholders of FIFC-Alberta have
approved the necessary corrective actions.
RELIANCE ON MANAGEMENT. All decisions regarding our management are made
exclusively by our officers and directors. Stockholders may not participate in
our management, and therefore, are dependent upon the management abilities of
our officers and directors. In addition the Company contracts with several
consultants who are advising us on certain executive management functions. These
consultants are not officers and directors of the Company and our officers and
directors have no obligation to accept or follow their advice. The only
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assurance that our stockholders have that our officers and directors will not
abuse their discretion in making decisions with respect to the affairs of the
Company and other business decisions is the fiduciary obligations and business
integrity of our officers and directors. Accordingly, no person should purchase
the shares of our common stock unless that person is willing to entrust all
aspects of management to our officers and directors or their successors.
POTENTIAL FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS; UNPREDICTABILITY
OF FUTURE REVENUE; EXPECTED FUTURE LOSSES; SEASONALITY. Our quarterly operating
results may fluctuate significantly in the future as a result of a variety of
factors, many of which are outside our control. These factors include:
. the early stage of our development, particularly given that our Web
sites did not begin significant operations until February 1998;
. the level of Web usage;
. traffic levels on our Web site, which can fluctuate significantly as a
result of business and financial news events and volume and price
volatility on the various securities exchanges;
. the demand for advertising on our Web site as well as on the Web in
general;
. changes in Web advertising rates resulting from competition or other
factors;
. our ability to enter into, renegotiate or renew key agreements;
. the amount and timing of our costs related to our marketing efforts or
other initiatives;
. fees we may pay for data feed and distribution or content agreements or
other costs we incur as we expand our operations;
. new services introduced by us or our competitors;
. competitive factors;
. technical difficulties or system downtime affecting the Web generally or
the operation of our Web sites; or
. economic conditions specific to the Web as well as general economic
conditions.
Therefore, our operating results for any particular quarter may not be
indicative of future operating results.
We expect that over time our revenues will come from a mix of advertising,
content licensing, e-commerce or transaction relationships and subscription
service fees. However, we expect the majority of our revenues to come from the
sale of advertising for the foreseeable future. Therefore, our quarterly
revenues and operating results are likely to be particularly affected by the
level of our advertising revenue in each quarter. Our operating expenses are
based on our expectations of future revenues and are relatively fixed in the
short term. If we have lower revenues, particularly advertising revenues, than
we expect, we may not be able to quickly reduce our spending in response. In
addition, we intend to significantly increase our operating expenses to grow our
business. Any shortfall in our revenues would have a direct impact on our
operating results for a particular quarter and these fluctuations could affect
the market price of our common stock in a manner unrelated to our long-term
operating performance or prospects.
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We have incurred operating losses in each fiscal quarter since we were
formed. We expect operating losses and negative cash flows to continue for the
foreseeable future as our current expenses are significantly greater than our
revenues and we intend to significantly increase our operating expenses to grow
our business.
We believe that advertising sales in traditional media, such as television
and radio, generally are lower in the first and third calendar quarters of each
year. If our market makes the transition from an emerging to a more developed
medium, seasonal and cyclical patterns in our industry may develop in the
future. Therefore, if our industry follows the same seasonal patterns as those
in the traditional media, we may experience lower advertising revenues in the
first and third calendar quarters of each year. Furthermore, traffic levels on
our Web site typically fluctuate with the occurrence of significant events in
the business and financial news, such as fluctuations in trading volumes and
prices on the stock markets, which could cause changes in our audience size or
page view volume.
NEED TO MAINTAIN AND RENEW KEY SUPPLIER RELATIONSHIPS. We depend on
maintaining good relationships with our suppliers of market data and financial
programming to our Web sites. Key contractual supply relationships include quote
and market data from the Exchanges, data feed services from S&P Comstock, news
programming from Comtex, and co-location and communication services from Exodus
Communications. We depend on these information providers to provide information
and data feeds on a timely basis. Our Web site could experience disruptions or
interruptions in service due to the failure or delay in the transmission or
receipt of this information. The rapid growth in traffic on our Web sites has
caused our expenses for services from these suppliers to grow faster than the
availability of cash from revenues and internal operations or from external
capital contributions. As of September 30, 1999, we had significant accrued and
past due liabilities payable to these suppliers, which are reflected in our
significant negative working capital balance as of that date. We have obtained
sufficient capital financing to repay these past due liabilities and we believe
we have satisfactory relationships with these suppliers. In the future, we will
need to raise additional capital to fund our ongoing negative cash flow from
operations, including payments to these suppliers. We cannot assure you that we
will be able to raise additional capital on terms favorable to us or at all. The
loss of certain of these supply relationships, especially those with the
Exchanges, could have a material adverse effect on our business.
INTENSE COMPETITION FOR WEB-BASED BUSINESS AND FINANCIAL CONTENT. Many Web
sites compete for consumers' and advertisers' attention and spending,
particularly in the business and financial information and news area. We expect
this competition to continue to increase. We compete for advertisers, users and
content providers with many types of companies, including the following:
. publishers and distributors of traditional media, including television,
radio and print, such as CNN, CNBC, and The Wall Street Journal;
. general purpose consumer online services such as America Online and
Microsoft Network;
. online services or Web sites targeted to business, finance and investing
needs, such as MarketWatch.com, The Wall Street Journal Interactive
Edition, TheStreet.com and certain of the online brokerage firms,
including Schwab.com and E*TRADE;
. providers of terminal-based financial news and data, such as Bloomberg
Business News, Reuters News Service, Dow Jones Markets and Bridge News
Service; and
. Web retrieval and other Web "portal" companies, such as Excite, Inc.;
Infoseek Corporation; Lycos, Inc.; Yahoo! Inc.; and Netscape
Communications Corporation.
Increased competition could result in price reductions, reduced margins or loss
of market share, any of which would adversely affect our business.
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RISKS OF DEVELOPING NEW AND ENHANCED SERVICES AND FEATURES FOR OUR WEB
SITE. We believe that our Freerealtime.com Web site will be more attractive to
advertisers if we develop a larger audience comprised of demographically-
favorable users. We also believe our subscription-based content and analytic
tools services, as represented by our BullSession.com Web site, will be more
attractive to subscribers if we improve and expand our portfolio of higher-value
content and tools. Accordingly, we intend to introduce on our Web sites
additional or enhanced content and tools services in the future in order to
retain our current users and attract new users. If we introduce a service that
is not favorably received our current users may not continue using our services
as frequently. New users could also choose a competitive service over ours.
We may also experience difficulties that could delay or prevent us from
introducing new services, including difficulties in acquiring or allying with
content and tools providers and in developing such services internally.
Furthermore, these services may contain errors that are discovered after the
services are introduced. We may need to significantly modify the design of these
services on our Web site to correct these errors. Our business could be
adversely affected if we experience difficulties in introducing new services or
if our users do not accept these new services.
NEED TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS WITH OTHER SITES.
We depend on establishing and maintaining licensing, co-brand and revenue
sharing relationships with high-traffic Web sites. Currently, such relationships
do not account for a significant portion of our traffic or revenues. For
example, approximately 5% of our traffic and less than 10% of our projected
revenues come from our transaction, licensing and co-brand relationships.
However, increasing the number of these relationships is a key element of our
strategic plan, and we may not be able to enter into such relationships on
commercially reasonable terms or at all. Even if we enter into relationships
with these Web sites, we may not realize additional users or revenues from these
relationships. Additionally, many companies we may pursue for a strategic
relationship also offer competing services. As a result, these competitors may
be reluctant to enter into strategic relationships with us. Our business could
be adversely affected if we do not establish and maintain additional strategic
relationships on commercially reasonable terms or if any of our strategic
relationships do not result in increased use of our Web site or additional
revenues.
LETTERS OF INTENT MAY NOT MATERIALIZE INTO FINAL AGREEMENTS. Recently we
entered Letters of Intent regarding new strategic relationships for a co-
branding arrangement with JAGnotes.com and for transaction services with (i)
Herzog, Heine & Geduld, Inc for an online order execution system for qualified
institutional investors and (ii) the DirectQuote.com Venture for online term
life insurance quotes and application processing. We cannot assure you that we
will be able to execute final agreements on terms favorable to us or at all.
DEPENDENCE ON OBTAINING REAL TIME STOCK QUOTES. The Company's business is
dependent on providing its users with free real-time stock quotes which
represent a majority of the Company's page views. In order to provides its users
with free real-time stock quotes, the Company has entered into license
agreements with NASDAQ, the New York Stock Exchange and the American Stock
Exchange whereby the various exchanges provide the Company with real-time stock
quotes. The Company is dependent on receiving this licensed data. Under the
terms of each of these license agreements, each of the exchanges may terminate
such license agreement at any time, without penalty. As a result, we face risks
associated with maintaining these license agreements.
DEPENDENCE ON KEY PERSONNEL, INCLUDING MANAGEMENT CONSULTANTS. Our future
success will depend in part on the service of our key personnel and,
additionally, on our ability to identify, hire and retain additional qualified
personnel. There is intense competition for qualified personnel in our areas of
activity, and there can be no assurance that we will be able to continue to
attract and retain such personnel necessary for our development. Failure to
attract and retain key personnel could have a material adverse effect on our
business. In addition, three individuals joined us in 1999 as consultants and
they are not officers of the Company. Each consultant is providing us a
significant amount of his time and is operating under short-term consulting
agreements. As a result we face certain risks associated with this management
structure, including that our senior managers may not work sufficiently or
effectively as a team to successfully manage our growth and that, upon
expiration, we may not be able to renew these consulting arrangements on
reasonable terms to us or attract and retain new managers to replace the
consultants.
RISKS OF INCREASED USERS STRAINING OUR SYSTEMS AND OTHER SYSTEM
MALFUNCTIONS. In the past, our Web sites have experienced significant increases
in traffic when there are significant business or financial news events,
including stock market volatility. In addition, the number of our users has
continued to increase over time and we are seeking to further increase our user
base. Therefore, our Web sites must accommodate a high volume of traffic and
deliver frequently updated information. Our Web sites have in the past and may
in the future experience slower response times or other problems for a variety
of reasons, including; Internet backbone outages, server and router failures,
software bugs, and unforeseen spikes in usage for which we may not have enough
server capacity.
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We also depend on information providers to provide information and data
feeds on a timely basis. Our Web sites could experience disruptions or
interruptions in service due to the failure or delay in the transmission or
receipt of this information. In addition, our users depend on Internet service
providers, online service providers and other Web site operators for access to
our Web sites. Each of them has experienced significant outages in the past, and
could experience outages, delays and other difficulties due to system failures
unrelated to our systems in the future. These types of occurrences could cause
users to perceive our Web sites as not functioning properly and therefore cause
them to use other methods to obtain their business and financial information.
NEED TO EXPAND OUR BUSINESS AND RELATED PROBLEMS. We believe that we will
need to expand our business and operations in order to grow our business. This
growth is likely to continue to place a significant strain on our resources. As
we grow, we will also have to implement new operational and financial systems,
procedures and controls. If we are unable to accomplish any of these, our
business could be adversely affected. In addition, several members of our senior
management joined us in 1999, including three members who are consultants and
not officers of the Company. As a result we face a number of risks associated
with this management structure, including that our senior managers may not work
together effectively as a team to successfully manage our growth.
FOREIGN CURRENCY RISK. We are exposed to changes in the currency exchange
rate between U.S. Dollars and Canadian Dollars, to the extent that the Company's
wholly-owned Canadian subsidiary (First International Financial Corporation,
Calgary) has an inter-company obligation to Freerealtime.com, Inc, as it had in
the amount of approximately $260,000 U.S. as of September 30, 1999. Any future
repayment of that obligation to Freerealtime.com will result in a currency
exchange loss if re-paid at a time when the Canadian Dollar weakens against the
U.S. Dollar. Under our current policies, we do not use currency hedges (forward
contracts, options, etc) to manage exposure to currency risk.
Risks Relating to Advertising
RISKS ASSOCIATED WITH OUR BUSINESS MODEL WHICH DEPENDS ON WEB ADVERTISING.
We expect to derive the majority of our revenues in the foreseeable future from
advertising. No standards have been widely accepted to measure the effectiveness
of Web advertising. If such standards do not develop, existing advertisers may
not continue their current levels of Web advertising. Furthermore, advertisers
that have traditionally relied upon other advertising media may be reluctant to
advertise on the Web. Advertisers that already have invested substantial
resources in other advertising methods may be reluctant to adopt a new strategy.
Our business would be adversely affected if the market for Web advertising fails
to develop or develops more slowly than expected.
Different pricing models are used to sell advertising on the Web. It is
difficult to predict which, if any, will emerge as the industry standard. This
makes it difficult to project our future advertising rates and revenues. For
example, advertising rates based on the number of "click throughs," or user
requests for additional information made by clicking on the advertisement,
instead of rates based solely on the number of impressions, or times an
advertisement is displayed, could adversely affect our revenues because
impression-based advertising comprises a substantial majority of our current
advertising revenues. Our advertising revenues could be adversely affected if we
are unable to adapt to new forms of Web advertising. Moreover, "filter" software
programs that limit or prevent advertising from being delivered to a Web user's
computer are available. Widespread adoption of this software could adversely
affect the commercial viability of Web advertising.
INABILITY TO TRACK AND MEASURE THE DELIVERY OF ADVERTISEMENTS. It is
important to our advertisers that we accurately measure the demographics of our
user base and the delivery of advertisements on our Web site. We depend on a
third party, namely AdForce, who is contracted through our ad sales firm,
AdSmart, to provide a majority of these measurement and ad-serving services. If
this third party is unable to provide these services in the future, we would
be required to perform them ourselves or obtain them from another provider. This
could cause us to incur additional costs or cause interruptions in our business
during the time we are replacing these services. We are implementing additional
systems designed to record demographic data on our users. If we do not develop
these systems successfully, we may not be able to accurately evaluate the
demographic characteristics of our users. Companies may not advertise
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on our Web site or may pay less for advertising if they do not perceive our
measurements or measurements made by third parties to be reliable.
RELIANCE ON THIRD PARTY ADVERTISING SALES FORCE. We have a small internal
sales force consisting of only two members, one of whom is a consultant to our
Company. We are attempting to expand our internal sales force by hiring
additional members. The success of our internal sales effort is subject to
various risks, including competition in hiring and retaining sales personnel and
the length of time required for a new hire to become productive. For the
foreseeable future we expect to rely upon third parties to sell a majority of
the advertisements on our Freerealtime.com Web site. In March 1999, we entered a
one-year contract with ADSmart, a leading Internet ad sales firm. We depend on
maintaining our contractual relationship with AdSmart to sell our advertisements
and to serve advertisements on our free site. ADSmart has recently merged with
another ad sales firm called 2CAN Media and we have no knowledge whether or
not they may enter into future business considerations. The resulting merger
integration process, as with any merger integration, could potentially include a
re-organization of the business causing layoffs and turnover, which may
materially effect their ability to sell our advertising space. Our business
would be adversely affected if our third party sales force fails to attract
advertisements to our free Web site. Our business could also be adversely
affected if there is a material breach of our contract or we are not able, upon
expiration, to renew or replace our contract with AdSmart on reasonable terms to
us or at all.
DEPENDENCE ON FINANCIAL INDUSTRY ADVERTISERS. Prior to entering our
advertising sales relationship with ADSmart in March 1999, financial services
companies have accounted for the substantial majority of our advertising
revenues. Subsequently, advertisers other than financial firms have accounted
for the majority of our advertisers. We need to continue to sell advertising to
customers outside of the financial services industry in order to increase our
revenues. To date, relatively few advertisers from industries other than the
technology and financial services industries have devoted a significant portion
of their advertising budgets to Web advertising. If we are not successful in
continuing to attract and maintain advertisers from other industries, our
business could be adversely affected.
Risks Related to Our Industry
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE WEB. Our market is new and
rapidly evolving. Our business would be adversely affected if Web usage does not
continue to grow. Web usage may be inhibited for a number of reasons, such as:
. inadequate network infrastructure;
. security concerns;
. inconsistent quality of service; and
. unavailability of cost-effective, high-speed service.
If Web usage grows, the Internet infrastructure may not be able to support
the demands placed on it by its current growth or its performance and
reliability may decline. In addition, Web sites have experienced interruptions
in their service as a result of outages and other delays occurring throughout
the Internet network infrastructure. If these outages or delays frequently occur
in the future, Web usage, as well as usage of our Web sites, could grow more
slowly or decline.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE WEB. There
are currently few laws or regulations that specifically regulate communications
or commerce on the Web. However, laws and regulations may be adopted in the
future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting certain types of
information and content over the Web. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet Service
Providers and online service providers in a manner similar to long distance
telephone carriers and to impose access fees on these companies. This could
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increase the cost of transmitting data over the Internet. Moreover, it may take
years to determine the extent to which existing laws relating to issues such as
property ownership, libel and personal privacy are applicable to the Web. Any
new laws or regulations relating to the Web could adversely affect our business.
WEB SECURITY CONCERNS COULD HINDER INTERNET COMMERCE. The need to securely
transmit confidential information over the Internet has been a significant
barrier to electronic commerce and communications over the Web. Any well-
publicized compromise of security could deter more people from using the Web or
from using it to conduct transactions that involve transmitting confidential
information, such as stock trades or purchases of goods or services. Because
many of our advertisers seek to advertise on our Web site to encourage people to
use the Web to purchase goods or services, our business could be adversely
affected.
We may also incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by such breaches.
STORAGE OF PERSONAL INFORMATION ABOUT OUR USERS. We have a non-disclosure
policy displayed on our Web sites. Our policy is not to willfully disclose any
individually identifiable information about any user to a third party without
the user's consent. This policy is accessible to users of our personalized
services when they initially register. Despite this policy, however, if third
persons were able to penetrate our network security or otherwise misappropriate
our users' personal information or credit card information, we could be subject
to liability. These could include claims for unauthorized purchases with credit
card information, impersonation or other similar fraud claims. They could also
include claims for other misuses of personal information, such as for
unauthorized marketing purposes. These claims could result in litigation. In
addition, the Federal Trade Commission and other states have been investigating
certain Internet companies regarding their use of personal information. We could
incur additional expenses if new regulations regarding the use of personal
information are introduced or if they chose to investigate our privacy
practices.
LIABILITY FOR INFORMATION DISPLAYED ON OUR WEB SITES. We may be subjected
to claims for defamation, negligence, copyright or trademark infringement or
based on other theories relating to the information we publish on our Web site.
These types of claims have been brought, sometimes successfully, against online
services as well as other print publications in the past. We could also be
subjected to claims based upon the content that is accessible from our Web sites
through links to other Web sites. Our insurance may not adequately protect us
against these types of claims.
Risk Related to Year 2000 Readiness
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field and cannot distinguish
21st century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. We are in the process of
assessing the Year 2000 issue and expect to complete the program by the fall of
1999. We have not incurred material costs to date in this process, and currently
do not believe that the cost of additional actions will have a material effect
on our results of operations or financial condition.
Although we currently believe that our systems are Year 2000 compliant in
all material respects, the current systems and products may contain undetected
errors or defects with Year 2000 date functions that may result in material
costs. Although we are not aware of any material operational issues or costs
associated with preparing our internal systems for the Year 2000, we may
experience serious unanticipated negative consequences (such as significant
downtime for one or more media properties) or material costs caused by
undetected errors or defects in the technology used in its internal systems. In
addition, we utilize third-party equipment, software and content, including non-
information technology systems ("non-IT systems"), such as our security system,
building equipment, and non-IT systems embedded microcontrollers that may not be
Year 2000 compliant. We are in the process of developing a plan to assess
whether these third parties are adequately addressing the Year 2000 issue and
whether any of our non-IT systems have material Year 2000 compliance problems.
Failure of such third-party
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equipment, software, or content to operate properly with regard to the year 2000
and thereafter could require us to incur unanticipated expenses to remedy any
problems, which could have a material adverse effect on our business, results of
operations, and financial condition. We are in the process of fully developing a
comprehensive contingency plan to address situations that may result if we are
unable to achieve Year 2000 readiness of our critical operations. Finally, we
are also subject to external forces that might generally affect industry and
commerce, such as utility or transportation company Year 2000 compliance
failures and related service interruptions. Furthermore, the purchasing patterns
of advertisers may be affected by Year 2000 issues as companies expend
significant resources to correct their current systems for Year 2000 compliance.
We do not currently have any information about the Year 2000 status of its
advertising customers. However, these expenditures may result in reduced funds
available for Web advertising or sponsorship of Web services, which could have a
material adverse effect on our business, results of operations, and financial
condition.
Item 2. Management's Discussion and Analysis or Plan of Operation
- -----------------------------------------------------------------
Selected Financial Data
The following selected financial data is qualified by reference to, and
should be read in conjunction with the financial statements of Freerealtime.com,
Inc. and the notes thereto included elsewhere in this Form 10-SB, as well as the
discussion hereunder "Management's Discussion and Analysis or Plan of
Operation", also included elsewhere in this Form 10-SB. The selected statement
of data for the year-ended March 31, 1999 and March 31, 1998 has been derived
from the financial statements of Freerealtime.com, Inc. and First International
Financial Corporation Alberta, respectively, as audited by KPMG LLP, independent
auditors, and are included elsewhere in this Form 10-SB.
The statement of operations data for the six months ended September 30,
1999 and the six months ended September 30, 1998, and the balance sheet data as
of September 30, 1999 and as of September 30, 1998, are derived from our
unaudited financial statements included in this Form 10-SB. The unaudited
financial statements have been prepared on the same basis as our audited
financial statements and, in our opinion include all material adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
this unaudited financial information. The historical results are not necessarily
indicative of results to be expected for future periods.
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Statement of Operations Data:
<TABLE>
<CAPTION>
(in thousands, except share and per share data)
Year Ended Six Months Ended
March 31, September 30
-------------------------- --------------------------
Revenues 1998 1999 1998 1999
- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Advertising Revenue (gross) $ - 631 199 1,638
Web-Host/Co-Brand Revenue - 179 21 318
Subscription Revenue 55 586 142 884
---------- ---------- ---------- ----------
Total Revenues 55 1,396 362 2,840
- -------------------------------------------------------------------------------------------------------
Cost of Revenues
Market Data 7 1,896 472 1,938
Co-location and Communications 30 588 147 817
Programming - 54 32 54
Other - 29 4 21
---------- ---------- ---------- ----------
Total Cost of Revenues 37 2,567 655 2,830
Gross Profit 18 (1,171) (293) 10
General, Administrative, Selling
and Development Expenses
Sales and Marketing - 404 128 568
General and Administrative 118 552 94 855
Product Development 50 60 28 251
Non Cash Charges-Stock Option Grants - 316 - 543
---------- ---------- ---------- ----------
Total General, Administrative, Selling
and Development Expenses 168 1,332 250 2,217
Interest Expense 11 18 10 9
---------- ---------- ---------- ----------
Loss before income tax provision/benefit $ (161) (2,521) (553) (2,216)
Income tax provision/benefit - - - -
---------- ---------- ---------- ----------
Net Loss $ (161) (2,521) (553) (2,216)
- -------------------------------------------------------------------------------------------------------
Net Loss per share:
Basic and diluted (.04) (.45) (.10) (.37)
Shares used to compute basic and diluted
net loss per share 4,447,635 5,601,073 5,787,990 5,946,468
<CAPTION>
As of As of As of As of
March 31, 1998 March 31, 1999 September 30, 1998 September 30, 1999
-------------- -------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 55 $ 493 $ 547 $ 3,602
Working capital (deficit) (123) (1,676) 115 185
Total assets 99 1,132 784 5,569
Total stockholders equity (deficit) (146) (1,461) 28 602
</TABLE>
Overview
Prior to the fiscal year commencing April 1, 1998 and ending March 31, 1999
("Fiscal 1999"), our operating activities consisted largely of developing our
Freerealtime.com and BullSession.com Web sites, along with the systems and
infrastructure necessary to support these sites, although limited revenue from
subscriptions to the Bullsession.com site was generated in the year ended March
31, 1998 ("Fiscal 1998"). We have incurred substantial costs to date in creating
and developing our Web sites. These costs include significant purchases of
computer hardware and software, the hiring of software developers, technical
support personnel, executive management, key strategic consultants, sales and
marketing staff, accounting personnel, and administrative support personnel. Our
spending has been focused on building brand awareness and other financial
related content, and providing our users with seamless access to real-time
market data. As a result, we have incurred significant net losses in each fiscal
quarter since inception. We expect
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these net losses, as well as negative cash flow from operations, to continue for
the foreseeable future as we plan to substantially increase our operating and
capital expenditures in order to continue building site traffic and brand
awareness. Our current sources of revenue with respect to the Freerealtime.com
site include ad sales, sponsorship fees, web-hosting fees and co-branding
revenues. For BullSession.com, our source of revenue is subscription fees.
Our management efforts and strategies are oriented to enhancing our
existing revenues, as well as developing new revenue opportunities. These
efforts include (i) launching a new Freerealtime.com site in August 1999 that
exhibits more robust functionality, additional content, and greater ease-of-use,
(ii) building our in-house direct ad sales force to increase revenues, (iii)
pursuing higher prices, referred to as cost-per-thousand, for our ad impressions
through greater use of user "targeting" ad serving technology and the addition
of non-quote content pages, and (iv) focusing on revenue alternatives to ad
sales, including sponsorship fees, new co-branding ventures, and opportunities
in on-line transaction services. We also have strategies to drive growth in our
subscriber base, and thereby increase our subscription fees, by enhancing our
BullSession.com service and adding new subscription-based tools and content
services. Apart from our efforts to grow our revenues, we believe that our costs
per page view should continue to decline over time due to declining costs in
programming, datafeed and other services from our suppliers as well as from the
effect of spreading certain fixed costs over greater page view traffic. Though
we expect to continue incurring net losses for the foreseeable future, we plan
to continue to execute on these and other measures which are designed with an
objective of achieving profitable operations, although we can not give any
assurances that we will achieve such objective.
Results of Operations
FISCAL YEAR ENDED MARCH 31, 1999 COMPARED TO THE FISCAL YEAR ENDED MARCH
31, 1998
Revenues
For Fiscal 1999, total net revenue amounted to $1,396,000 (2,438% increase
over Fiscal 1998 total net revenue of $55,000) and consisted primarily of the
sale of on-line banner ads and sponsorships on Freerealtime.com (collectively
45% of total revenues) and subscriptions sold on BullSession.com (42% of total
revenues). Additional net revenue was derived from Web-Hosting and Co-Branding
contracts (13%). For Fiscal 1998, total net revenue of $55,000 consisted solely
of subscriptions sold on Bullsession.com, with no revenue from advertising or
Web-Hosting/Co-Branding as Freerealtime.com had not yet been in existence.
Revenue from advertising on FreeRealTime.com. For Fiscal 1999, the
company experienced sequential month-to-month growth in both page-views and,
consequently, ad revenues. Total advertising revenue for this period was
$631,000. As discussed above, $-0- advertising revenue was generated in Fiscal
1998. Ad revenue during the first six months of Fiscal 1999 amounted to
$199,000, versus the last six months of the fiscal year which totaled $432,000,
representing growth of approximately 117%. This growth during the second half of
the year was primarily due to the substantial increase in the number of users,
page views, and ad impressions on the Freerealtime.com Web site during that
period. The substantial increase in the number of users on the site was
primarily due to a higher level of awareness of our Web sites by users of the
Internet, which we believe is a result of user referrals, the appearance of our
Web sites in the query lists of "search portal" Web sites, favorable publicity
received for both Freerealtime.com and BullSession.com, and user traffic from
our web-hosting and co-branding relationships. Due to limited capital resources
we did not expend material amounts on advertising of our Web sites during Fiscal
1999.
The ad revenue that we generate as a user views a page on our Web site is a
function of the number of ad impressions on that page and the price, or
cost-per-thousand, at which we sold the ad impression to an advertiser. An "ad
impression" is an advertisement that is displayed on a page view. We can have
multiple impressions on a single page view. During the course of Fiscal 1999,
and subsequent to the end of the fiscal year, we have increased the number of ad
impressions per page. We are also attempting to increase the cost-per-thousand
for the ads that we sell. We believe that if we are successful in developing new
content, enhancing existing quote and non-quote content pages, and building our
in-house ad sales force, then our average cost-per-thousand are likely to
increase, although there can be no assurance that we will be successful in
realizing an increase in cost-per-thousand or that advertisers will continue to
purchase ad space on the Internet, including on Freerealtime.com, at similar
levels or on the same terms as they have in the past. We recognize revenue from
the sale of banner advertisements as the ad impression is served or
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displayed. We recognize revenue from the sale of sponsorships over the period in
which the sponsorship advertisement is served or displayed. In both cases,
revenue is recognized only after there exists no further obligations on the part
of the advertiser or Freerealtime.com, Inc. During Fiscal 1999 we relied on
third party ad sales firms and networks to sell the substantial majority of our
ad impressions. Subsequent to the end of Fiscal 1999, we added additional in-
house salespeople and began to supplement the sales efforts of these ad sales
networks. We record an appropriate allowance against potentially uncollectible
accounts and/or write-off certain receivables as bad debts if they are deemed
uncollectible. Our obligations typically include guarantees of a minimum number
of impressions to the advertiser. To the extent minimum guaranteed impressions
are not met, we have no contractual obligation to the advertiser to compensate
them for un-filled impressions, nor does the advertiser have an obligation to
pay for those un-filled impressions. We defer revenue recognition with respect
to un-filled impressions until they are filled, if at all. If we were paid for
un-filled impressions, we would either return such payment to the advertiser or
issue credit to the advertiser against future impressions.
REVENUE FROM SUBSCRIPTIONS SOLD ON BULLSESSION.COM. For Fiscal 1999, we
experienced sequential month-to-month growth in both the number of subscribers
and total subscription revenue. Total subscription revenue for this period was
$586,000 as compared to $55,000 for Fiscal 1998, representing growth of
approximately 965%. Subscription revenue for the first six months of Fiscal 1999
amounted to $142,000, versus the last six months of Fiscal 1999 which totaled
$444,000, representing growth of approximately 213%. This growth in subscription
revenue both from Fiscal 1998 to Fiscal 1999, and from the first six months of
Fiscal 1999 to the last six months of Fiscal 1999, is primarily attributable to
the increase in the number of subscribers resulting from increased marketing
efforts and favorable publicity received for both Freerealtime.com and
BullSession.com. Because we regularly advertise BullSession.com on our
Freerealtime.com Web site, we believe the increased traffic on the
Freerealtime.com site has contributed to the increase in subscribers on
BullSession.com.
Subscribers to our BullSession.com service generally use a credit card to
purchase the service on either a monthly, quarterly or annual basis. We
recognize subscription revenue on a monthly basis for the month in which the
service is delivered. Any amounts prepaid for a quarterly or annual subscription
are recorded as deferred revenue and amortized to revenue over the period the
service is rendered. Monthly prices for the subscription service range from $26
to $50, depending on the level of services.
REVENUES FROM WEB-HOSTING AND CO-BRANDING VENTURES. For Fiscal 1999, total
revenues from these web-hosting and co-branding ventures amounted to $179,000
(as compared to $-0- for Fiscal 1998), of which $163,000 (approximately 91%)
resulted from our Web-hosting relationships with Infospace.com and Zacks.com.
Pursuant to agreements that may expire, if not renewed, during Fiscal 2000, we
receive a monthly fee to host Web traffic for Infospace.com and Zacks.com by
registering their users and providing them access to our market data and
financial content on Freerealtime.com. Co-branding relationships with
BigCharts.com, Marketguide.com, and WWQuote.com resulted in $16,000 in total
revenue for Fiscal 1999, reflecting our share of net advertising revenue
generated from the sale of ad impressions on co-branded pages. Under co-branding
arrangements, we either provide content to or receive content from a third party
Web site and arrange such content on a page, which may be on either our or the
co-brand partner's Web site, with brand identification for both parties.
Typically one of the parties is responsible for selling the ad impressions on
the page views and both parties share, on a negotiated basis, in the ad revenue
generated on the co-branded page views. Subsequent to the end of Fiscal 1999, we
have entered into new co-branding contracts and we expect that co-branded ad
revenues will represent a material portion of our revenue in future periods.
Cost of Revenues
Cost of revenues include the following expenditures: payments to the stock
exchanges for real-time market data, costs for data center operations incurred
with a third party "co-location" provider, datafeed, programming and other
content costs, and other costs. Cost of revenues for Fiscal 1999 amounted to
$2,567,000, or 184% of revenues, as compared to $37,000 for Fiscal 1998 (growth
of 6,838%), or 67% of revenues. Stock exchange fees represented the majority of
these costs and amounted to $1,896,000 or 74% of total cost of revenues in
Fiscal 1999. In Fiscal 1998, Co-location and Communications Costs represented
the majority of these costs totaling $30,000, or 81% of total cost of revenues.
Subsequent to the end of Fiscal 1999, certain costs of revenues decreased
substantially on a per-page view basis. In the first quarter of Fiscal 2000
ending June 30, 1999, the NASDAQ reduced market data fees by approximately 50%,
and the NYSE and AMEX Exchanges
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have announced similar fee reductions that are expected to take effect prior to
the end of Fiscal 2000. Additionally, we renegotiated and amended our datafeed
and co-location provider contracts to result in significant reductions in our
per-page view costs for these services. Despite these declines in our unit
costs, we anticipate that total cost of revenues will continue to increase over
the foreseeable future as we realize growth in the users and page views on our
Web sites. Prior to the renegotiation of the datafeed contract, we paid a fee on
a per user basis to the datafeed provider and following the renegotiation, we
currently pay a fixed monthly charge regardless of the number of monthly users
and page views. The change to a fixed fee has resulted in an approximate 10%
reduction in our per page-view datafeed costs from January 1999 as compared to
June 1999. The Company should continue to enjoy greater cost savings as a result
of economies of scale associated with anticipated growth in user traffic.
Co-location fees are paid to a provider of facilities for our active
computer servers which support both our Freerealtime.com and BullSession.com Web
sites. These fees are fixed based on the number of servers installed.
Communications fees are paid to this same provider and are paid for connection
and transmission to and from the Internet for both Web sites. These fees include
a fixed and variable charge. The fixed charge is based on the number of and
types of internet connections. The variable charge pertains to the bandwidth or
"size" of transmission, and has been effectively reduced from $1,300 per megabit
immediately prior to the renegotiation to $700 per megabit immediately following
the renegotiation. The Company currently utilizes a total of approximately 80
megabits of bandwidth, but this number can change on a daily basis.
Operating Expenses
SALES AND MARKETING. Sales and Marketing expense for the twelve months
ended March 31, 1999 totaled $404,000 (29% of revenues), as compared to $-0- for
Fiscal 1998, and primarily reflected advertising commissions paid to third party
ad sales firms and networks that represented the Freerealtime.com Web site to
advertisers and media buyers, and amounts paid to a marketing consulting firm
engaged to manage our advertising sales function and to direct the overall
marketing efforts of the company, including managing our relationships with
AdSmart and other ad sales networks and building an in-house ad sales force
responsible for selling banner ads, buttons, and sponsorships on
Freerealtime.com. Subject to the availability of sufficient funds, we plan to
hire additional sales and marketing personnel, and to implement new marketing
programs during Fiscal 2000. As such, we anticipate that total sales and
marketing expense will increase over the foreseeable future; however, sales and
marketing expense as a percentage of net revenues may fluctuate depending on the
timing of the addition of new sales and marketing personnel and on new marketing
initiatives.
GENERAL AND ADMINISTRATIVE. General and administrative expense totaled
$552,000, (40% of revenues), for Fiscal 1999 as compared to $118,000 (215% of
revenues) for Fiscal 1998, representing growth of approximately 368%. General
and administrative expense consists primarily of compensation and benefits for
various administrative and technical personnel, fees for independent consultants
providing management advisory and investor relations services, occupancy costs,
legal and accounting fees, depreciation, insurance, telecommunications costs,
provision for uncollectible amounts, and other overhead costs. We plan to hire
additional personnel in all areas of the organization including management,
customer support, accounting, and administrative support during Fiscal 2000. As
such, we anticipate that general and administrative expenses will increase over
the foreseeable future; however, general and administrative expense as a
percentage of net revenues may fluctuate depending on the timing of the addition
of these new personnel and of future expenditures in general and administrative
related activities.
PRODUCT DEVELOPMENT. Product development expense primarily consists of
compensation and benefits for software developers, as well as fees paid to third
party developers and systems consultants. These individuals are located
primarily in Calgary, Alberta. Total Product Development expense for Fiscal 1999
was $60,000 (4% of revenues) as compared to $50,000 (91% of revenues) for Fiscal
1998, representing 20% growth. This reflects cash compensation paid to these
individuals for the period. In addition, certain of these employees have
received non-cash compensation in the form of stock option grants. Such non-cash
compensation is reflected in our financial statements as unearned compensation
and is amortized as an expense to the company as described below under "Non Cash
Charges-Stock Option Grants". We employ a technical staff that includes a Vice
President of Development, several developers and programmers, and a Systems
Administrator. These individuals, along with third party consultants, have
developed and maintained our Web sites during Fiscal 1999. To date, all internal
product development costs have been expensed as incurred. We believe that
significant investments in product development are required to remain
competitive. Consequently, we plan to hire additional personnel in this area of
the organization including product managers, additional software developers, and
quality assurance personnel. As such, we anticipate that product development
expense will increase over the foreseeable future as we continue to enhance our
existing Web sites and develop new products; however, product development
expense as a percentage of net revenues may fluctuate depending on the timing of
the addition of these new personnel and related overhead.
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NON CASH CHARGES-STOCK OPTION GRANTS. During Fiscal 1999, we recorded
aggregate unearned compensation of $520,000 reflecting the grant of stock
options to employees and non-employees, as compared to $-0- for Fiscal 1998.
These options were granted at exercise prices less than the deemed fair market
value of the underlying common stock on the grant date. We also expect to record
additional unearned compensation in the first quarter ended June 30, 1999 to
reflect additional option grants at exercise prices less than the deemed fair
market value of common stock on the grant date. The deferred compensation is
being amortized to compensation expense over the vesting period of the options.
Of the total deferred compensation of $520,000 recorded during Fiscal 1999,
$316,000 was amortized as a non-cash charge during Fiscal 1999 and the balance
of $204,000 will be amortized in future periods. See Note 6 of Notes to
Financial Statements.
Interest Income (Expense), Net
Net interest expense of $18,000 for Fiscal 1999 and $11,000 for Fiscal 1998
(growth of 64%) primarily resulted from interest incurred on debt obligations,
including a bank loan, capital leases, and loans from an officer and director;
partially offset by interest income earned on our cash balances.
Income Taxes
We have incurred losses since inception, and anticipate losses for the
foreseeable future. We have therefore recorded no provision for income taxes in
Fiscal 1999 or Fiscal 1998. Deferred tax assets for the year ended March 31,
1999 which would otherwise reflect the tax net operating loss carryforwards
existing at the balance sheet date, as well as the taxable temporary differences
in the treatment of certain items are fully offset by valuation allowances. We
will re-assess the need to record such valuation allowances, or a current or
deferred tax liability as appropriate, over future periods. For a more detailed
discussion see Note 5 of notes to the audited financial statements.
SIX MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE SIX MONTHS ENDED
SEPTEMBER 30, 1998
Revenues
Revenues increased from $362,000 in the six months ended September 30, 1998
to $2,840,000 for the six months ended September 30, 1999. The increase in
revenue, which is comprised primarily of ad sales and subscription fees, was a
direct result of the substantial increase from period to period in the number of
users, page views, and ad impressions on the Freerealtime.com Web site and in
the number of subscribers on the BullSession.com Web site.
Revenue from advertising on Freerealtime.com increased from $199,000 in the
six months ended September 30, 1998 to $1,638,000 in the six months ended
September 30, 1999. Revenue from subscriptions to the BullSession.com Web site
increased from $142,000 in the six months ended September 30, 1998 to $884,000
in the six months ended September 30, 1999. Revenue from web-hosting and co-
branding ventures increased from $21,000 in the six months ended September 30,
1998 to $318,000 during the six months ended September 30, 1999.
Cost of Revenues
Cost of revenues increased from $655,000 in the six months ended September
30, 1998 to $2,830,000 for the six months ended September 30, 1999. The period
to period increase was the result of the substantial increase in the site
traffic on our Web sites as most of the components of cost of revenues are based
on certain measures of site traffic volume, including the number of real-time
quotes, the number of periodic users, and the amount of communications bandwidth
utilized. Cost of revenues as a percent of revenues was 181% for the six months
ended September 30, 1998 as compared to 100% for the six months ended September
30, 1999. This change was primarily the result of reduced rates paid for real-
time quotes from the Exchanges and reduced datafeed costs as a result of an
amendment of our datafeed contract with our supplier, as well as from economies
of scale associated with higher volumes of Web-site traffic and revenues.
Operating Expenses
SALES AND MARKETING. Sales and Marketing expense increased from $128,000 in
the six months ended September 30, 1998 to $568,000 for the six months ended
September 30, 1999. Sales and Marketing expense as a percent of revenues was 35%
for the six months ended September 30, 1998 as compared to 20% for the six
months ended September 30, 1999. The period to period increase on an absolute
dollar was primarily the result of increased advertising sales commissions paid
to third party ad sales firms, as well as increased costs of additional
employees and consultants retained to manage our advertising sales function and
to direct the overall marketing efforts of the Company, including the
development of an in-house ad sales force and new marketing programs during
Fiscal 2000.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased
from $94,000 in the six months ended September 30, 1998 to $855,000 for the six
months ended September 30, 1999. General and administrative expense as a percent
of revenues was 26% for the six months ended September 30, 1998 as compared to
30% for the six months ended September 30, 1999. The period to period increase
on an absolute dollar and percentage basis was primarily the result of increased
costs of additional personnel, including administrative and technical personnel,
fees for independent consultants providing management advisory and investor
relations services, as well as greater occupancy costs, legal and accounting
fees, telecommunications costs, and other overhead costs associated with
managing our rapid growth in traffic on our Web sites.
PRODUCT DEVELOPMENT. Product development expense increased from $28,000 in
the six months ended September 30, 1998 to $251,000 for the six months ended
September 30, 1999. Product development expense as a percent of revenues was 8%
for the six months ended September 30, 1998 as compared to 9% for the six months
ended September 30, 1999. The period to period increase on an absolute dollar
and percentage basis was primarily the result of costs of additional personnel,
including costs for software developers, as well as fees paid to third party
developers and systems consultants.
NON-CASH CHARGES-STOCK OPTION GRANTS. For the six months ended September
30, 1999, we recorded aggregate unearned compensation of $414,000 reflecting the
grant of stock options to employees and non-employees. These options were
granted at exercise prices less than the deemed fair market value of the
underlying common stock on the grant date. We expect to record additional
unearned compensation in future periods to reflect additional option grants at
exercise prices less than the deemed fair market value of common stock on the
grant date. For the six months ended September 30, 1999, $543,000 was amortized
to expense as a non-cash charge from deferred compensation recorded as the
result of stock options granted during this as well as previous periods. We
recorded no aggregate unearned compensation for the six months ended September
30, 1998. As the deferred compensation expense is amortized based on the vesting
period of the granted stock options, we expect there will be material variations
in the amount of this expense from quarter to quarter and that quarterly
comparisons of such expense are not meaningful.
Interest Income (Expense), Net
Net interest expense decreased from $10,000 in the six months ended
September 30, 1998 to $9,000 for the six months ended September 30, 1999.
Income Taxes
We have incurred losses since inception and again during the six months
ended September 30, 1999, and anticipate losses for the foreseeable future. We
have therefore recorded no provision for income taxes in the six months ended
September 30, 1999. Deferred tax assets for the six months ended September 30,
1999 which would otherwise reflect the tax net operating loss carryforwards
existing at the balance sheet date, as well as the taxable temporary differences
in the treatment of certain items, are fully offset by valuation allowances. We
will reassess the need to record such valuation allowances. We will reassess the
need to record such valuation allowances, or a current or deferred tax liability
as appropriate, over future periods.
Liquidity and Capital Resources
To date, our operations have been financed primarily from, the sale of
equity securities, and to a lesser extent, a non-revolving loan from Royal Bank
in Calgary, loans from stockholders, Directors, and other outside parties, and
from capital lease arrangements. As of September 30, 1999, approximately $3.6
million in cash and cash equivalents was on hand. All but $34,000, which was
restricted as collateral by Royal Bank, was available to the company.
Operating Activities
We used net cash in our operating activities in the amount of $374,000
during Fiscal 1999 compared to $135,000 during Fiscal 1998, which was primarily
the result of our net losses for these periods, and an increase in accounts
receivable (in Fiscal 1999), partially offset by an increase in accounts payable
and accrued liabilities. Net cash used in operating activities was $186,000
during the six months ended September 30, 1999, which was primarily the result
of our net loss for this period and an increase in accounts receivable,
partially offset by an increase in accounts payable and accrued liabilities, as
well as an increase in unearned revenue. Our operating activities for Fiscal
1999 and the six months ended September 30, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended March 31, 1998 Year Ended March 31, 1999 Six Months Ended September 30, 1999
------------------------- ------------------------- -----------------------------------
<S> <C> <C>
. Net loss of approximately $161,000; . Net loss of approximately $2,521,000; . Net loss of approximately $2,216,000;
. A decrease in accounts receivable . An increase in accounts receivable of . An increase in accounts receivable of
of approximately $13,000; approximately $424,000; approximately $572,000;
. An increase in accounts payable and . An increase in accounts payable and . An increase in accounts payable and accrued
accrued expenses of approximately accrued expenses of approximately expenses of approximately $2,121,000;
$6,000; $2,078,000; . Depreciation of approximately $51,000;
. Depreciation of approximately $7,000; . Depreciation of approximately $47,000; . Non-cash charges-stock-option grants of
. Non-cash charges-stock-option grants . Non-cash charges-stock option grants of approximately $543,000;
of approximately $-0-; approximately $316,000; . An increase in unearned revenue of
$523,000.
</TABLE>
Accounts payable increased as a result of an overall increase in our cost of
sales and operating expenses over the course of Fiscal 1999 and Fiscal 1998, and
in the six months ended September 30, 1999, as our business has grown during
these same periods. This increase in accounts payable from Fiscal 1999 forward
primarily reflects amounts due in arrears as of March 31, 1999 and September 30,
1999 to our major suppliers of market data. Subsequent to the end of Fiscal
1999, we have received sufficient net proceeds from the sale of equity
securities to fund the payment of these accrued accounts payable. The amount of
our accounts receivable at each period-end varies, primarily due to the timing
of revenue recognition associated with the running of our advertising and
sponsorship campaigns, and the growth in our Web-host related revenue and
subscription revenue. To date, we have not
23
<PAGE>
experienced material collection difficulties, but have recorded certain write-
offs of bad debts as well as an allowance for uncollectible accounts.
Investing Activities
Cash used in investing activities was approximately $246,000 during Fiscal
1999 compared to $24,000 in Fiscal 1998, and approximately $127,000 during the
six months ended September 30, 1999, and consisted of property and equipment
expenditures in both periods.
Financing Activities
Net cash provided by financing activities was approximately $1,058,000
during Fiscal 1999 compared to approximately $207,000 in Fiscal 1998, and
approximately $3.4 million during the six months ended September 30, 1999. Cash
used in financing activities during Fiscal 1999, Fiscal 1998 and during the six
months ended September 30, 1999, was approximately $157,000, $-0- and $757,000,
respectively, and consisted of payments of debt obligations and stock issuance
costs. Cash provided by financing activities during these same periods was
approximately $1,215,000, $207,000 and $4,179,000, respectively, which consisted
primarily of proceeds from the sale of common stock and also a bank loan during
Fiscal 1998.
We have no material financial commitments other than obligations under our
bank loan agreements, and to several of our stockholders, and under our leases.
Subject to cash availability, we anticipate significant increases in our
operating and capital expenditures over the foreseeable future, including:
. web-site development and enhancement for Freerealtime.com and
BullSession.com, including functionality, content, and back-end
systems;
. computer servers and other computer equipment to support growth in
site traffic;
. software developers and computer programmers;
. information systems management;
. bandwidth and networking equipment and infrastructure;
. computer equipment and furniture and fixtures for new employees and
facilities expansion;
. additional personnel in the areas of sales, marketing, business
development, customer support, accounting, and administration;
. increased promotional activities and branding efforts;
. content development and acquisition;
In addition to purchasing computer hardware, software, and office
equipment, we also lease certain equipment under short term and long term leases
with terms ranging from one to three years. We may exercise purchase options at
the end of the lease terms if determined to be favorable to replacing such items
at that time through lease renewal or capital acquisition. During Fiscal 2000 we
plan to spend up to $500,000 for additional computer hardware, software, office
equipment, and tenant improvements. We lease our Irvine, California facility
under a noncancelable operating lease that expires on May 31, 2000. We lease our
Calgary, Alberta facility under a noncancelable operating lease which expires on
February 28, 2000. We currently intend to renew our Irvine lease, but do not
intend to renew the Calgary lease as we intend to relocate our Calgary
operations to a larger facility sometime in Fiscal 2000. We will incur
additional costs related to the relocation of the Calgary facility and may have
to pay rent on two leases for a period of time.
The timing of these additional capital and operating expenditures, as well
as the timing of hiring additional personnel to support our growth plans, and
our ability to continue sustaining net losses and negative cash flows from
operations will depend largely on our ability to continue to obtain additional
capital through financing transactions. The failure to raise such capital when
needed could have a material adverse effect on our business, operating results,
and our financial condition. If additional funds are raised through the sale of
equity, or convertible debt securities, the percentage ownership of our
stockholders will be reduced, our stockholders may experience significant
dilution and these securities may have rights, preferences, or privileges senior
to those of our common stockholders. There can be no assurance that additional
financing will be available to us or on terms favorable to us. If adequate
capital funds are not available or are not available on acceptable terms, our
ability
24
<PAGE>
to fund our current growth plans and to take advantage of unanticipated
opportunities, develop or enhance our Web sites, or otherwise respond to
competitive pressures, could be significantly limited. Based on net proceeds
received from the sale of equity securities subsequent to the end of Fiscal
1999, and management contingency plans to curtail our growth plans and reduce
our current scope of operations in the event that additional capital funds are
not available to us, management believes we can continue our operations through
Fiscal 2000.
During Fiscal 1999 we completed two private equity financings in which we
sold an aggregate of 965,000 shares of common stock for a total proceeds of
$965,000. Subsequent to the end of Fiscal 1999 (and as of November 15, 1999) we
completed two private equity financings in which we sold an aggregate of
1,019,200 shares of Common Stock and stock purchase warrants to purchase 182,500
shares of Common Stock for total proceeds of $4,913,500. For a more detailed
discussion see "Market for Common Equity and Related Stockholder Matters --
Recent Sales of Unregistered Securities." Concurrent with the second private
equity financing in September 1999, we entered into a strategic co-marketing and
cross-licensing agreement with Telescan, Inc. ("Telescan") covering certain of
each other's Web-based products and services. Telescan purchased $3,000,000 of
the shares of Common Stock sold in the private equity financing.
Item 3. Description of Property
- -------------------------------
Our principal administrative, marketing, and management facilities are
located in approximately 3,800 square feet of office space in Irvine, California
which is subleased from South Coast Financial Securities, Inc., a California
corporation. The term of the sublease began on February 22, 1999 and will
terminate on May 31, 2000. There is no existing option to extend the sublease.
Our research development facilities are located in approximately 1,900 square
feet of office space in Calgary, Alberta, Canada. The term of the lease is for
one year for the period covering August 1, 1998 through July 31, 1999. This
lease was extended through February 28, 2000 commencing on August 1, 1999, and
provides us with an option to renew for an additional year beyond February 28,
2000. Due to our growth, we believe we will require more office space beginning
in 2000. All of our communications, network, and server infrastructure are
hosted in the Exodus Communications data centers in Jersey City, New Jersey and
Irvine, California. Any system failure at these locations could lead to
interruptions, delays, or cessations in service to our members, which could have
a material adverse effect on our business, results of operations and financial
condition.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
- ----------------------------------------------------------------------
The following table sets forth, as of November 15, 1999, the number of
shares and percentage of voting interest (on a fully diluted basis) represented
by shares of Common Stock held by each of our directors and executive officers
and of each person who beneficially owns more than 5% of our Common Stock.
Except as specified below, management is not aware of any individual or entity
that owns 5% or more of the voting securities of the Company; unless otherwise
stated, each of the stockholders below has sole voting and dispositive power
with respect to shares beneficially owned by stockholder.
<TABLE>
<CAPTION>
Name and Address of Number of Shares of Percentage of
Beneficial Owner/(1)/ Common Stock Class
-------------------- ------------------- -------------
<S> <C> <C>
Brad Gunn 2,735,002/(2)/ 37.6
Stuart Robson 777,786/(3)/ 10.7
John Gunn 303,771 4.2
Telescan 600,000 8.2
All directors, officers
and beneficial owners
of 5% or more
as a group 4,416,559 60.7
</TABLE>
(1) The address for each of Messrs. Gunn, Robson and Gunn is 3333 Michelson
Drive, Suite 430, Irvine, California 92612. The address for Telescan is
5959 Corporate Drive, Suite 2000, Houston, Texas 77036.
25
<PAGE>
(2) Includes 118,901 shares which Mr. Gunn has the option to acquire at an
exercise price of $0.40 per share and 59,451 shares which Mr. Gunn has the
option to acquire at $1.00 per share.
(3) Includes 302,400 shares which Mr. Robson has the option to acquire at an
exercise price of $0.10.
Item 5. Directors, Executive Officers, Promoters and Control Persons
- ----------------------------------------------------------------------
The following table sets forth the names and principal positions of the
directors and executive officers of the Company as of September 29, 1999:
<TABLE>
<CAPTION>
Name Age Title
- --------------------------------- -------------------------- ------------------------------------------------
<S> <C> <C>
Brad G. Gunn 30 President, Chief Executive Officer, Chief
Financial Officer & Director
Stuart Robson 38 Executive Vice President of Operations &
Director
Darrell Nash 23 Vice President, Development
John Gunn 57 Director
</TABLE>
Brad G. Gunn, is our President, Chief Executive Officer and Chief Financial
Officer. He has operated in this capacity since 1996. As a co-founder, Mr. Gunn
has spent the last two years with the Company involved in strategic planning,
overseeing the development teams, overseeing revenue initiatives, raising
financing, acting as a subscriber liaison and overseeing market research,
developing new products, developing new strategic alliances, and managing
existing strategic relationships. Mr. Gunn was previously an equities trader
with the Toronto Dominion Bank, and an equities trader and options specialist
with Royal Bank of Canada. In 1992, Mr. Gunn received a bachelor's degree in
Economics with a minor in Management from The University of Calgary. Mr. Gunn is
also a member of the Board of Directors and has served as such since 1996.
Stuart Robson, has been our Executive Vice President of Operations since 1996.
Mr. Robson is responsible for. the orderly operation and administration of
billing, customer service, contract administration and negotiation, and data
operations. Prior to joining us, Mr. Robson worked as Vice President Marketing
for Netway Internetworking Technologies, Inc., an Internet software startup. Mr.
Robson's previous experience includes owning and operating an international
grain marketing company. Mr. Robson is also a member of the Board of Directors
and has served as such since 1996.
Darrell Nash, is our Vice President of Development. Mr. Nash oversees all
technical responsibilities for the company, including managing the development
teams, designing and implementing the system architecture, capacity planning,
ordering and installing hardware, and dealing with our strategic alliance
technical groups. He has been with us since our inception. Prior to joining us,
Mr. Nash worked as a system administrator and web site administrator for the
Department of Computer Science. In 1997, Mr. Nash received a bachelor's in
Computer Science from the University of Calgary.
John Gunn, is a Director of the Company. Mr. Gunn has 28 years of general
business and management experience and has particular expertise in the area of
corporate negotiations in an international setting. Mr. Gunn received his Master
of Science in Engineering from The University of Alberta in 1968. Mr. Gunn has
served as a member of the Board of Directors since 1997.
26
<PAGE>
Family Relationships
John Gunn, a member of the Board of Directors, is the father of Brad Gunn,
our President, Chief Executive Officer, and Chief Financial Officer.
Item 6. Executive Compensation
- ------------------------------
The tables below set forth certain information concerning the annual rates
of compensation paid by us to our executive managers, for each of the last three
completed fiscal years ending March 31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION> Annual Compensation Long-Term Compensation
----------------------------------- --------------------------------------
Securities
Name and Restricted Stock Underlying
Position Year Salary Awards Options
- ------------------------------- ------------ -------------------- --------------------- -----------
<S> <C> <C> <C> <C>
Brad G. Gunn 1997 $ 5,300 $0 0
CEO, CFO and President 1998 0 0 0
1999 0 0 356,703
Stuart Robson 1997 0 0 0
EVP Operations 1998 4,700 0 0
1999 64,652 0 302,405
Darrell Nash 1997 0 0 0
VP Development 1998 6,060 0 0
1999 27,327 87,194 44,390
</TABLE>
27
<PAGE>
The following table sets forth certain information with respect to grants
of options during Fiscal 1999 to our Executive Officers.
Option Grants in Last Fiscal Year(1)
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year (per Share) Date
-------------------------- ----------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Brad Gunn 118,901 15.2% $0.40 06/10/2000
237,802 30.3% 1.00 06/01/2001
Subtotal................. 356,703 45.5%
Stuart Robson 143,870 18.4% 0.10 06/10/2000
158,535 20.2% 0.10 12/10/2000
Subtotal................. 302,405 38.6%
Darrell Nash 44,390 5.7% 0.10 06/10/2000
(1) There were no SAR awards in the last fiscal year.
</TABLE>
The following table sets forth certain information with respect to options
exercised during Fiscal 1999 and exercisable and unexercisable options held by
the Executive Officers as of March 31, 1999.
Aggregated Year-End Option Values/(1)/
<TABLE>
<CAPTION>
Number of Securities Underlying Value Of Unexercised In-The-Money Options
Unexercised Options at Fiscal Year At Fiscal Year End(2)
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Brad Gunn 0 356,703 $0 $71,341(3)
Stuart Robson 0 302,405 0 272,165(4)
Darrell Nash 0 44,390 0 39,951
</TABLE>
- -----------------------
(1) There were no options exercised in this last Fiscal Year.
(2) Based on the fair market value as determined by the Board of Directors of
$1.00, minus the exercise price of the option, multiplied by the number of
shares to which the option relates.
(3) This number reflects 118,901 options to purchase shares of Common Stock at
an exercise price of $0.40 and 237,802 options to purchase shares of Common
Stock at an exercise price of $1.00.
(4) This number reflects 143,870 options to purchase shares of Common Stock at
an exercise price of $0.10 and 158,535 options to purchase shares of Common
Stock at an exercise price of $0.10.
28
<PAGE>
Item 7. Certain Relationships and Related Transactions
- ------------------------------------------------------
Brad Gunn loaned the Company approximately $51,000 pursuant to a note dated
April 1, 1998 with interest at 10% per annum and a final due date of March 31,
2001. At the end of Fiscal 1999, the unpaid balance on the note was
approximately $27,000.
We are unaware of any other transactions during the last two years in which
we were a party and any of our directors or executive officers, or any family
member of our directors or officers, had a direct or indirect material interest.
Item 8. Description of Securities.
- ---------------------------------
The following description of our capital stock and certain provisions of
our Articles of Amendment and Restatement of Articles of Incorporation (the
"Articles") and Bylaws is a summary and is qualified in its entirety by the
provisions of the Articles and Bylaws, which have been filed as exhibits hereto.
General
Our Articles provide that we are authorized to issue 50,000,000 shares of
Common Stock, par value $.01 per share. As of November 15, 1999, 6,799,932
shares of Common Stock were outstanding and held of record by approximately 100
stockholders. We are also authorized to issue 5,000,000 shares of preferred
stock, par value $.01 per share. No shares of preferred stock are currently
issued and outstanding.
Subsequent to November 1, 1999, we entered into an agreement with some of
our stockholders for the resolution of outstanding matters pursuant to which
these shareholders returned to us an aggregate of 773,992 shares of our common
stock for cancellation. The shares outstanding as of November 1, 1999 after
giving affect to the 773,992 shares subsequently cancelled totals 6,799,932
common shares.
Common Stock
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders. The holders of Common Stock are
not entitled to cumulative voting rights with respect to election of directors,
and as a consequence, minority stockholders will not be able to elect directors
on the basis of their shares alone. Holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors of legally available funds, subject to any preferences that may be
applicable to any shares of preferred stock issued in the future. In the event
of our liquidation, dissolution and winding up, holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preference of any outstanding preferred stock. Holders of
Common Stock have no preemptive, subscription, redemption or conversion rights.
All outstanding shares of Common Stock are fully paid and nonassessable.
Preferred Stock
The Board of Directors has the authority to issue up to 5,000,000 shares
of preferred stock. Our Board of Directors has the authority to issue the
authorized shares of preferred stock and to fix the powers, preferences, rights
and limitations of such shares or any class or series thereof, without
shareholder approval. Persons acquiring such shares could have preferential
rights with respect to voting, liquidation, dissolution or dividends over
existing stockholders. Shares could be issued to deter or delay a takeover or
other change in control. We have no current plans to issue any shares of
preferred stock.
PART II
Item 1. Market Price of and Dividends on Our Common Equity and Other Shareholder
- --------------------------------------------------------------------------------
Matters.
- -------
Our Common Stock has been quoted and traded in the over-the-counter market
on the NASD OTC Bulletin Board system under the symbol "FRTI" since September
1998. The following table indicates high and
29
<PAGE>
low bid and asked quotations for our Common Stock for the periods indicated.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commissions, and may not reflect actual transactions.
<TABLE>
<CAPTION>
Calendar 1999 Calendar 1998
---------------------- -----------------------
Calendar Quarter High Low High Low
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Quarter One 20.000 4.750
Quarter Two 10.125 6.625
Quarter Three(1) 9.125 6.375 7.188 6.500
Quarter Four 9.500 4.000
</TABLE>
- -------------------
(1) Third quarter results for Calendar 1998 reflect information available for
September 21 through September 30 only.
As of November 15, 1999, there were approximately 100 holders of record of
our Common Stock. We have not declared any dividends and do not intend to
declare any dividends in the foreseeable future.
Item 2. Legal Proceedings
- -------------------------
We are aware of no pending or active legal proceedings involving
Freerealtime.com or any of our properties.
Item 3. Changes in and Disagreements with Accountants.
- -----------------------------------------------------
None.
Item 4. Recent Sales of Unregistered Securities
- -----------------------------------------------
As discussed above, Freerealtime.com resulted from the merger of FIFC-
Delaware and Pub Singin. Accordingly, information concerning the recent sales of
unregistered securities is provided for each of the entities that collectively
constitute Freerealtime.com.
FIFC-Delaware. FIFC-Delaware was merged into Freerealtime.com in September
1998. Prior to the merger, FIFC-Delaware had completed two issuances of its
common stock. The first occurred on July 31, 1998, pursuant to the acquisition
of FIFC-Alberta by FIFC-Delaware. In this offering, FIFC-Delaware issued
4,544,990 shares of common stock to the former stockholders of FIFC-Alberta in
exchange for their shares of common stock of FIFC-Alberta. FIFC-Delaware relied
on the registration exemption in Section 4(2) of the Securities Act of 1933 (the
"1933 Act") to issue these shares without registration. As a result of this
acquisition, FIFC-Alberta became a wholly owned subsidiary of FIFC-Delaware. The
second offering occurred in August 1998. In this offering, the FIFC-Delaware
issued 215,000 shares of its common stock at $1.00 per share for a total of
$215,000. FIFC-Delaware relied on the registration exemption in Section 4(2) of
the 1933 Act to issue these shares without registration. The offering was
subscribed to by eleven investors. No underwriters were involved in either of
these sales.
Pub Singin. In September 1997, Pub Singin issued 5,680,000 shares common
stock at $.005 per share for a total of $2,840. The shares were sold to
approximately 29 investors all of whom executed subscription agreements in
connection with their purchases. Pub Singin relied on the registration exemption
in Rule 504 of the 1933 Act to issue these shares without registration. The
primary qualifying factor for a Rule 504 exemption is an offering price of less
that $1,000,000. Pub Singin changed its name to Freerealtime.com, Inc.,
immediately prior to its merger with FIFC-Delaware.
30
<PAGE>
Freerealtime.com. Since our merger with FIFC-Delaware, we have completed
three issuances of additional common stock. In October 1998, we sold a total of
750,000 shares to three investors for $750,000 (less cash costs incurred of
approximately $75,000 and excluding issuance costs paid by issuing 500,000
shares of common stock valued at $500,000). We relied on the registration
exemption in Rule 504 of the 1933 Act to issue these shares without
registration. No underwriters were involved in this offering.
The second issuance occurred during June and July 1999. In this issuance we
offered 1,250,000 units at $4.00 per unit consisting of one share of common
stock and one warrant to purchase an additional share of common stock at $4.75.
Seven elected to participate and 182,500 units were sold for a total of $730,000
(less costs incurred of $96,000). We relied on the registration exemption in
Section 4(2) of the 1933 Act to issue these units without registering the
underlying securities. No underwriters were involved in this offering.
The third issuance occurred during September and October 1999. We relied on
the registration exemption in Section 4(2) of the Securities Act of 1933 to
issue these shares without registration. Twenty-one investors purchased 836,700
shares for a total purchase price of $4,143,500 (less costs incurred of
approximately $426,000, a portion of which was paid with 16,734 shares of common
stock in lieu of cash) as of the date of the filing of this Amendment No. 1 to
Form 10-SB. No underwriters were involved in this offering.
While we believe that all of the issuances discussed above qualified for
either the Rule 504 or Section 4(2) exemption from registration, a court could
determine that these issuances did not qualify for either exemption. If that
were to occur, we would be in violation of the Securities Laws and we could be
exposed to liability for damages suffered by our investors.
Item 5. Indemnification of Directors and Officers.
- -------------------------------------------------
Section 102(b)(7) of the Delaware General Corporation Law permits a
Delaware corporation to limit the personal liability of its directors in
accordance with the provisions set forth therein. The Certificate of
Incorporation of the Company provides that the personal liability of its
directors shall be limited to the fullest extent permitted by applicable law.
Section 145 of the Delaware General Corporation Law contains provisions
permitting corporations to indemnify any person who is or was a director,
officer, employee or agent of the corporation, or who is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, in
accordance with the provisions set forth therein. Our Certificate of
Incorporation provides for indemnification of such persons to the fullest extent
allowed by applicable law.
The inclusion of the above provisions in the Certificate of Incorporation
may have the effect of reducing the likelihood of stockholder derivative suits
against directors and may discourage or deter stockholders or management from
bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have benefited us and our
stockholders.
PART F/S
The Financial Statements, Interim Financial Statements and Notes thereto
can be found beginning on page FS-1 "Index to Financial Statements" following
the signature page hereof.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Act of 1934,
as amended, the registrant has duly caused this Amendment No. 2 to Form 10-SB to
be signed on its behalf by the undersigned, thereunto duly authorized, on this
the 22nd day of November 1999.
FREEREALTIME.COM
By: /s/ Brad G. Gunn
--------------------------------------
Brad G. Gunn
President, Chief Executive Officer
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1934, as amended,
this Amendment No. 2 to Form 10-SB has been signed by the following persons in
the capacities indicated on this the 22nd day of November, 1999.
Name Title
---- -----
/s/ Brad G. Gunn President, Chief Executive Officer, Chief
- ---------------------------- Financial Officer & Director
Brad G. Gunn
* Executive Vice President, Business Development,
- ---------------------------- & Director
Stuart Robson
* Director
- ----------------------------
John Gunn
* By: /s/ Brad G. Gunn
----------------------
Brad G. Gunn
Attorney-in-fact
1
<PAGE>
Exhibit
No. Description
- ------- -----------
2.1** Certificate of Incorporation
2.2** Bylaws
6.1* Agreement for Receipt and Use of Market Data between First
International Financial Corporation and the New York Stock Exchange,
Inc., dated December 23, 1997 pursuant to which Freerealtime.com
obtains certain information relating to the New York Stock Exchange
and the American Stock Exchange
6.2.1+* NQDS Information Vendor Agreement between The Nasdaq Stock Market,
Inc. and First International Financial Corporation (Alberta), dated
March 25, 1997 pursuant to which Freerealtime.com obtains certain
market information relating to the Nasdaq National Market and the
National Small Cap Market
6.2.2* Amendment to Attachment A - System Description of NQDS Information
Vendor Agreement, dated April 25, 1997
6.2.3* Addendum to the Vendor Agreements for Level 1 Service and Last Sale
Service of The National Stock Market, Inc., between The Nasdaq Stock
Market, Inc., and First International Financial Corporation (Alberta),
dated May 20, 1999 adjusting subscriber pricing and revenue guarantees
6.3.1* S&P Comstock Information Distribution License Agreement between S&P
Comstock, Inc. and First International Financial Corporation
(Alberta), dated June 13, 1997 pursuant to which Freerealtime.com
obtains certain securities and commodities prices and other data.
6.3.2* Addendum to Exhibit C of License Agreement by and between S&P
Comstock, Inc. and First International Financial Corporation
(Alberta), dated June 13, 1997 allowing First International Financial
Corporation to operate a second site
6.3.3** S&P ComStock Information Distribution License Agreement between S&P
ComStock, Inc., and Freerealtime.com, Inc., dated June 1, 1999
pursuant to which Freerealtime.com obtains certain securities and
commodities prices and other data.
6.4* Options Price Reporting Authority Vendor Agreement, between First
International Financial Corporation (Alberta) and the American Stock
Exchange, Inc., Chicago Board Options Exchange, Incorporated and
Philadelphia Stock Exchange, Inc., dated August 12, 1997 pursuant to
which Freerealtime.com obtains market information relating to options
6.5* Representation Agreement between 2CAN Media, Inc. and
Freerealtime.com, dated March 10, 1999 relating to advertising sales
representation for FreeRealtime.com
6.6* Letter Agreement between Arete Advisors & Investors, Inc. ("Arete")
and FreeRealtime.com, Inc., dated January 27, 1999 relating to certain
consulting services to be supplied Arete
6.7* Letter Agreement between the Lawson Marketing Group ("Lawson") and
FreeRealtime.com, dated April 14, 1999 relating to certain consulting
services to be provided by Lawson
6.8.1* Letter Agreement between Neufeld & Co. and Freerealtime.com dated
April 5, 1999 relating to certain consulting services
6.8.2* Letter Agreement between Neufeld & Co. and Freerealtime.com dated July
15, 1999 relating to certain consulting services
____________
+ Attachments available from the Company upon request.
* Previously filed with Form 10-SB
** Filed herewith.
<PAGE>
Exhibit
No. Description
-- -----------
6.9* Lease between Daniel Pearse & Associates Ltd. and First International
Financial Corporation, dated June 17, 1997, relating to facilities
located in Calgary, Alberta Canada
6.9.1* Offer to Amend Lease between Daniel Pearse & Associates Ltd. and First
International Financial Corporation, dated June 17, 1998
6.9.2* Offer to Amend Lease between Daniel Pearse & Associates Ltd. and First
International Financial Corporation.
6.10* Sublease between South Coast Financial Services, Inc. and
Freerealtime.com, dated February 20, 1999, relating to facilities
located in Irvine, California
6.11* Equipment Lease between Balboa Capital Corporation and
Freerealtime.com, dated March 25, 1999 relating to material equipment
used by Freerealtime.com
6.12* Master Services Agreement between Exodus Communications, Inc. and
Freerealtime.com, Inc. dated July 1, 1999
6.13** Marketing and License Agreement between Telescan, Inc. and
Freerealtime.com, Inc., dated September 30, 1999.
8.1** Agreement and Plan of Merger by and between Freerealtime.com Delaware,
Inc., a Delaware corporation and Freerealtime.com, Inc., a Colorado
corporation
27.1** Financial Data Schedule
_______________
* Previously filed with Form 10-SB
** Filed herewith.
<PAGE>
Independent Auditors' Report
The Stockholders
FreeRealTime.com, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheet of FreeRealTime.com,
Inc. and subsidiary (the Company) as of March 31, 1999 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the years in the two-year period then ended. In connection
with our audit of the consolidated financial statements, we have also audited
the consolidated financial statement schedule as of and for the year ended March
31, 1999. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FreeRealTime.com,
Inc. and subsidiary as of March 31, 1999 and the results of their operations and
their cash flows for each of the years in the two-year period then ended in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ KPMG LLP
Orange County, California
July 29, 1999, except as to Note 8 to the consolidated,
financial statements which is as of September 29, 1999.
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheet
March 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Assets 1999
-------
<S> <C>
Current assets:
Cash and cash equivalents $ 493
Accounts receivable, net of allowance for
doubtful accounts of $66 358
Prepaid expenses and other current assets 8
-------
Total current assets 859
-------
Property, plant and equipment, net 265
Other assets, net 8
-------
$ 1,132
-------
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current installments of note payable to bank $ 70
Current installments of loan payable to shareholders 3
Current portion of capital lease obligations 11
Trade accounts payable 2,078
Advances payable 250
Accrued expenses 44
Deferred revenue 79
-------
Total current liabilities 2,535
-------
Notes payable to bank, excluding current portion 12
Notes payable to stockholders, excluding current portion 38
Capital lease obligations, net of current portion 8
Stockholders' deficit:
Preferred stock, no par value, 5,000,000 shares
authorized; no shares issued and outstanding. --
Common stock, no par value, 50,000,000 shares
authorized; 6,537,990 issued and outstanding. 1,550
Accumulated deficit (2,807)
Unearned Compensation (204)
-------
Total stockholders' deficit (1,461)
-------
Commitments and contingencies $1,132
=======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
Years ended March 31, 1999 and 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Revenues $ 1,396 $ 55
Cost of revenues 2,567 37
--------- ---------
Gross profit (loss) (1,171) 18
--------- ---------
General, administrative, selling and development
expenses 1,016 168
Non-cash charge - stock option grants 316 --
--------- ---------
Total general, administrative, selling and
development expenses 1,332 168
Interest expense 18 11
--------- ---------
Net loss $ (2,521) $ (161)
========= =========
Basic and diluted loss per common share $ (0.45) $ (0.04)
========= =========
Common shares used in computing basic and diluted
per share amounts 5,601,073 4,447,635
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
Years ended March 31, 1999 and 1998
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Common
shares Common Accumulated Unearned
outstanding stock deficit Compensation Total
----------- -------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1997 4,176,066 104 (125) -- (21)
--
FIFC-Alberta stock offerings 368,924 36 -- -- 36
Net loss -- -- (161) -- (161)
----------- -------- ---------- ------------- -------
Balance at March 31, 1998 4,544,990 140 (286) -- (146)
FIFC-Delaware stock offering 215,000 215 -- -- 215
Shares issued to acquire FreeRealTime.com,
Inc. (the former Pub Singin', Inc.)
with a fair value of $528, net of effects
of recapitalization 528,000 -- -- -- --
Stock offering, net of issuance costs
of $575 1,250,000 675 -- -- 675
Issuance of options as compensation,
net of amortization -- 520 -- (204) 316
Net loss -- -- (2,521) -- (2,521)
----------- -------- ---------- ------------- -------
Balance at March 31, 1999 6,537,990 $ 1,550 (2,807) (204) (1,461)
=========== ======== ========== ============= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended March 31, 1999 and 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998
------- -----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,521) $(161)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 47 7
Provision for doubtful accounts 66 --
Non-cash charge - stock options 316 --
Receivables (424) 13
Inventories, prepaid expenses and other assets (15) --
Trade accounts payable and accrued liabilities 2,078 6
Unearned revenue 79 --
------- -----
Net cash used by operating activities (374) (135)
------- -----
Cash flows from investing activities:
Capital expenditures (246) (24)
------- -----
Net cash used in investing activities (246) (24)
------- -----
Cash flows from financing activities:
Advances payable 250 --
Borrowings (repayments) of long-term debt (75) 144
Increase (decrease) in note payable to shareholder (7) 27
Proceeds from issuance of common stock 965 36
Stock issuance costs (75) --
------- -----
Net cash provided by financing activities 1,058 207
------- -----
Net increase in cash 438 48
------- -----
Cash at beginning of year 55 7
------- -----
Cash at end of year $ 493 $ 55
======= =====
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 18 $ --
======= =====
Supplemental disclosure of noncash investing and financing
activities:
Borrowings related to the acquisition of assets $ 22 $ --
Unearned compensation related to stock options 520 --
Common stock issued to pay for stock issuance fees 500 --
======= =====
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
(1) Business Description and Organization
FreeRealTime.com, Inc. ("the Company" or "FreeRealTime.com") is a web based
provider of real-time financial market information services and analytic
tools. The Company has a free web site and web site which is accessible
only to paid subscribers. The Company derives its revenues from the sale of
advertising space on its free web site and from the collection of
subscription fees.
FreeRealTime.com, Inc. is the result of a merger between Pub Singin', Inc.,
a Colorado corporation ("Pub Singin") and First International Financial
Corporation, a Delaware corporation ("FIFC-Delaware"). The two companies
merged in September 1998. Immediately prior to the merger, Pub Singin
changed its name to "FreeRealTime.com, Inc." and FreeRealTime.com, Inc.
became the surviving entity. Prior to the merger, FreeRealTime.com, Inc.
had approximately 528,000 shares of common stock issued and outstanding
(after giving effect to a 5-for-1 reverse stock split) and FIFC-Delaware
had approximately 4,760,000 shares of common stock issued and outstanding.
Pursuant to the merger agreement, all shares of FIFC-Delaware were
exchanged on a 1-for-1 basis for shares of FreeRealTime.com, Inc.
Accordingly, following the merger the former shareholders of FIFC-Delaware
held approximately a 90% controlling interest in FreeRealTime.com, Inc.
Pub Singin was formed on May 3, 1989 under the laws of the State of
Colorado for the purpose of publishing and marketing song sheets for use in
piano bars and restaurants. From the period of its inception through the
time of its merger with FIFC-Delaware, Pub Singin had no business
operations and sustained minimal losses each year.
The Company's business began in Canada through First International
Financial Corporation, an Alberta corporation ("FIFC-Alberta"). FIFC-
Alberta was originally named Divitae Financial Corporation and was formed
in July 1994 under the laws of Alberta, Canada by founder Brad Gunn. Mr.
Gunn formed FIFC-Alberta as an investment vehicle for his family but the
company never conducted any business operations until January 1996, when
Divitae Financial Corporation changed its name to First International
Financial Corporation. At that time, FIFC-Alberta sold capital stock in
several private placements and began to develop its Internet business.
First International Financial Corporation (Delaware) ("FIFC-Delaware") was
formed on June 25, 1997 under the laws of the State of Delaware under the
name First International USA Corp. with the intent of moving the business
of FIFC-Alberta into the United States and into an entity governed by the
laws of the State of Delaware. FIFC-Delaware did not have any business
operations until July 31, 1998 when FIFC-Delaware acquired 566,689 shares
of common stock of FIFC-Alberta, representing all of the outstanding
capital stock, from the stockholders of FIFC-Alberta. FIFC-Delaware
issued, in the aggregate, 4,544,990 shares of common stock in a private
placement to the stockholders of FIFC-Alberta in exchange for their shares
of FIFC-Alberta. As a result of the foregoing acquisition, FIFC-Alberta
became a wholly-owned subsidiary of FIFC-Delaware.
Prior to the acquisition of FIFC-Alberta, FIFC-Delaware intended to file an
amendment to its Certificate of Incorporation to change its name to "First
International Financial Corporation" and to increase its authorized capital
stock. Due to the failure to file the amendment to the Certificate of
Incorporation of FIFC-Delaware, stockholders of FIFC-Alberta received
shares of common stock in a corporation that had
6
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
not legally changed its name and which were in excess of the amount of
shares of common stock authorized by the Certificate of Incorporation of
FIFC-Delaware. In addition, due to the failure to legally effect the name
change of FIFC-Delaware, the Company has made a corrective filing with the
State of Colorado and has filed a merger certificate in Delaware to effect
the merger of FIFC-Delaware and Pub Singin. The failure to file this
amendment to the Certificate of Incorporation was discovered during the
preparation of the Company's annual report on Form 10-SB and an amendment
to the Certificate of Incorporation was filed with the Secretary of State
of the State of Delaware on September 29, 1999.
(2) Summary of Significant Accounting Policies
Business Combinations and Basis of Presentation
The combination between FIFC-Delaware and Pub Singin', Inc. was accounted
for as recapitalization. The increase in common stock for the fair value of
the shares issued was treated as a reduction of capital. The combination
between FIFC-Delaware and FIFC-Alberta was a combination between commonly
controlled corporations and has been accounted for using the "as if
pooling" method of accounting. The accompanying financial statements have
been restated as if the pooling took place at beginning of the earliest
year presented. All share and per share information has been retroactively
restated for the effects or all stock splits and share exchanges. All
intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities to prepare the consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Foreign Currency
The financial statements of the Canadian subsidiary are measured using the
local currency as the functional currency. Assets and liabilities of the
Canadian subsidiary are translated using the rate of exchange at the
balance sheet date. Income and expense items are translated at the average
rate of exchange during each period. Translation gains and losses are nil.
Foreign currency transaction gains and losses are included in income
currently.
Revenue Recognition
Advertising revenues are recognized during the period the advertising is
displayed. Subscription fees are recognized on a straight-line basis over
the subscription period.
7
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. At March 31, 1999, $50 of the
Company's cash and cash equivalents balance was restricted in accordance
with the Company's collateralized bank loan.
Plant and Equipment
Plant and equipment are stated at cost. Depreciation has been provided on
a straight-line basis over periods ranging from 5 to 7 years.
Long Lived Assets
Long lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
Advertising, Start-up Costs and Development Costs
The Company charges all advertising costs, start-up costs and development
costs to expense as incurred. Selling expenses of the Company include
advertising and promotion costs of approximately $12 and $13 for the years
ended March 31, 1999 and 1998, respectively.
Software Development Costs for Internal Use Software
Internal costs associated with the development of software used internally
is generally expensed as incurred.
Stock Based Compensation
The Company measures the compensation cost of employee stock option plans
using the intrinsic value based method prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company makes pro forma
disclosures of net loss and loss per share as if the fair value method
prescribed by Statement of Financial Accounting Standards No. 123 had been
applied.
Income Taxes
Income taxes are accounted for using the asset and liability method. Under
this method, deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
8
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
Earnings Per Share
Basic and diluted earnings per share have been retroactively restated to
give effect to stock splits and the Company's business combination
accounted for using the "as if pooling" method.
Other Comprehensive Income
Net income and other comprehensive income are substantially identical for
all periods presented because foreign currency translation adjustments are
nil.
Business Segment Reporting
The Company adopted Statement of Financial Accounting Standard No. 131,
"Disclosures About Segments of an Enterprise and Related Information"
effective in the fiscal year ended March 31, 1999. SFAS No. 131
establishes new standards for reporting information about business segments
and related disclosures about products, geographic areas and major
customers, if applicable. Management of the company has determined that it
operates in only one reportable business segment. The company does not
have any individually significant customers. Substantially all sales are
derived from customers located in the United States.
Fair Value of Financial Instruments
The Company believes that the fair value of its financial instruments
approximates their recorded historical cost due to the short term
maturities of the instruments and where applicable, the similarity of
stated interest rates with market rates.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 modifies the accounting for derivative and hedging activities and is
effective for fiscal years beginning after June 15, 2000. Since the
Company and its subsidiaries do not presently invest in derivatives or
engage in hedging activities, SFAS No. 133 should not impact the Company's
financial position or results of operations.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." The Company
will adopt SOP 98-1 effective April 1, 1999. The adoption of SOP 98-1 will
require the Company to modify its method of accounting for software. The
Company is still evaluating the impact of SOP 98-1.
In April 1998, The American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities." SOP 98-5 provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred.
Based on information currently available, the Company does not expect the
adoption of SOP 98-5 to have a significant impact on its financial position
or results of operations. The Company will adopt SOP 98-5 effective April
1, 1999.
9
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
(3) Property, Plant and Equipment
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
1999
--------
<S> <C>
Computer hardware and software $ 323
Office equipment 10
--------
333
Less accumulated depreciation and amortization 68
--------
$ 265
========
</TABLE>
(4) Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1999
--------
<S> <C>
Collateralized bank loan, bearing interest
at the rate of bank's prime rate plus 4%.
Interest only payments until June 30, 1998.
Commencing June 1, 1998, principal payments
of $9 plus interest monthly for 36 months. 82
Unsecured shareholder loans, bearing interest
at the rate of 10%. Interest only payments
until maturity. Maturity dates range from
March 31, 2001 to April 24, 2001. 41
--------
Total long-term debt 123
Less current installments of long-term debt 73
--------
Long-term debt, excluding current installments $ 50
========
</TABLE>
Under the terms of the collateralized bank loan, the Company is required to
meet certain non-financial covenants and ratios. The Company was in
compliance with all covenants and ratios at March 31, 1999.
Included in the table above is a loan with an original balance of $51,000
from the majority shareholder granted in April 1998. The loan is due on
March 31, 2001 and had an outstanding balance of $27,000 on March 31,
1999.
Annual maturities of long-term debt for the next five years for the periods
ended March 31 are as follows:
<TABLE>
<CAPTION>
1999
--------
<S> <C>
2000 $ 73
2001 37
2002 13
--------
$ 123
========
</TABLE>
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
(5) Income Taxes
The Company has no significant net, taxable temporary differences which
would require recognition of deferred tax liabilities and, due to the
uncertainty of future realizability, has recorded a valuation allowance
against all deferred tax assets for deductible temporary differences and
tax operating loss carryforwards. The Company increased its valuation
allowance by approximately $273 for the year ended March 31, 1999,
primarily as a result of the increase in tax operating loss carryforwards.
The Company has had losses since inception and therefore has not provided
for income taxes. At March 31, 1999, the Company has net operating loss
carryforwards of approximately $273 for both Federal and state income tax
reporting purposes which begin to expire in 2011 and 2004, respectively.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, as well as
operating loss and tax credit carryforwards.
Significant components of the Company's deferred income tax assets are as
follows:
<TABLE>
<CAPTION>
1999
----------
<S> <C>
Deferred tax asset -- net operating losses $ 273
Valuation allowance (273)
----------
Net deferred tax asset -- net operating losses $ --
==========
</TABLE>
Due to the uncertainty surrounding the realization of the benefits of the
net operating loss carryforward, the Company has established a valuation
allowance for all of its deferred tax asset as of March 31, 1999. In
assessing the potential realization of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. In addition, the utilization of the net operating loss
carryforwards may be limited due to restrictions imposed under applicable
Federal and state tax law due to a change in ownership.
(6) Shareholders' Equity
Sales of Unregistered Securities
FIFC-Delaware merged with FreeRealTime.com (formerly Pub Singin) in
September 1998. Prior to the merger, FIFC-Delaware had completed two
issuances of its common stock. The first occurred in July 1998. FIFC-
Delaware, whose shareholders were identical to those of FIFC-Alberta,
issued approximately 8 shares of FIFC-Delaware common stock to acquire each
outstanding common share of FIFC-Alberta. FIFC-Delaware issued a total of
4,544,990 shares of common stock in this exchange. All share amounts prior
to this acquisition reflect the 8-for-1 share exchange. This share exchange
has been FIFC-Delaware relied on the registration exemption in Section 4(2)
of the Securities Act of 1933 (the "1933 Act") to issue those shares
without registration. As a result of this acquisition, each shareholder of
FIFC-Alberta became a shareholder of FIFC-Delaware and FIFC-Delaware became
the sole shareholder of FIFC-Alberta, making FIFC-Alberta a wholly-owned
subsidiary of FIFC-Delaware. In August 1998, FIFC-Delaware issued 215,000
shares of its common stock at $1.00 per share for a total of $215. FIFC-
Delaware relied on the registration exemption in Section 4(2) of the 1933
Act to issue these shares without registration.
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
In September 1998, FIFC Delaware acquired the company formerly known as Pub
Singin (Pub Singin changed its name to FreeRealTime.com, Inc. just prior to
the acquisition). Pub Singin was an inactive public shell company with no
operations and no assets. To complete the acquisition, FIFC Delaware issued
528,000 shares of common stock with a market value of $528 to acquire all
of the common stock belonging to the former Pub Singin shareholders. The
increase in common stock for the fair value of the shares issued was
treated as a reduction of capital.
The acquisition described above was accounted for as a recapitalization.
Accordingly, the accompanying Consolidated Statements of Operations do not
include any revenues or expenses related to Pub Singin prior to the closing
date. Following are the Company's pro forma results for fiscal years 1999
and 1998 assuming the acquisition occurred on April 1, 1997 (in thousands,
except for per share data).
Because Pub Singin had no operations, the pro forma results of operations
for 1999 and 1998 are identical to the results reported in the Consolidated
Statements of Operations included herein, except for the effects on
weighted average shares outstanding and earnings per share:
<TABLE>
<CAPTION>
1999 1998
---------------------------------------------------------------------------
<S> <C> <C>
Net revenues $ 1,396 $ 55
Net loss (2,521) (161)
Net loss per common share:
Basic and diluted (0.43) (0.03)
Weighted average outstanding common shares:
Basic and diluted 5,865,073 4,975,635
</TABLE>
In October 1998, the Company offered 1 million shares of common stock in
FreeRealTime.com, Inc. The aggregate offering price for the issuance was
$1,000. The Company relied on the registration exemption in Rule 504 of the
1933 Act to issue these units without registration. Three investors
purchased a total of 750,000 shares for $750 (less issuance costs of $75
paid in cash). In addition, the Company issued 500,000 shares of common
stock with a fair market value of $500 as stock issuance costs which had no
net effect on stockholders' equity.
While the Company believes that all of the issuances discussed above
qualified for either the Rule 504 or Section 4(2) exemption from
registration, a court could determine that these issuances did not qualify
for either exemption. If that were to occur, the Company would be in
violation of the Securities Laws and the Company could be exposed to
liability for damages suffered by investors.
Stock Option Plan
As of March 31, 1999, the Company had two stock-based compensation plans,
the Non-Qualified Stock Option Plan and the 1999 Equity Incentive Plan.
Stock options are granted at the discretion of the Board of Directors.
Options vest at varying rates from the date of grant up to 16 months.
Compensation expense, related to stock options granted with exercise prices
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
below fair market value, are amortized over the option vesting period. During
the fiscal year ended March 31, 1999, the Company recognized $316,000 of
compensation expense related to stock options. Options expire at varying rates
of up to 47 months from the date of grant. The total number of options
exercisable as of March 31, 1999 was 300,000 with a weighted average exercise
price of $1.06.
The following tables summarize the Company's option activity:
<TABLE>
<CAPTION>
Number of Weighted-average exercise
options price per option
<S> <C> <C>
Outstanding at March 31, 1998 - $ -
Granted during the year ended
March 31, 1999 1,436,000 1.02
----------- -------------------------
Outstanding at March 31, 1999 1,436,000 $ 1.02
=========== =========================
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ----------------------------
Weighted-
Number average Weighted-
Range of outstanding remaining Average Weighted-
exercise at March 31, contractual Exercise Number of average
prices 1999 life Price Shares exercise price
-------- ------------ ----------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C>
$
.10 -- 1,230,000 2.10 $ 0.58 285,500 $ 1.00
1.00
2.20 -- 206,000 2.96 3.63 14,500 2.20
8.00
------------ ---------
Total 1,436,000 2.22 $ 1.02 300,000 $ 1.06
============ =========
</TABLE>
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
The following table presents pro forma information as if the Company had
recorded compensation cost using the fair value method of SFAS No. 123 for
the issued stock options using the minimum value valuation model:
<TABLE>
<CAPTION>
Year Ended
March 31, 1999
--------------
<S> <C>
Net loss:
As reported $ (2,521)
Assumed stock compensation cost (5)
--------------
Pro forma, adjusted $ (2,526)
--------------
Pro forma loss per share:
Basic and diluted (0.45)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options pricing model, with the following weighted-
average assumptions: risk-free interest rate of 5.5%; no stock dividend
yield; expected lives of approximately 6 months. The average fair value of
options granted amounted to $0.02 per option granted in 1999.
(7) Commitments and Contingencies
Leases
The Company is obligated under various capital leases for computer hardware
that expire at various dates during the next three years. At March 31,
1999, the gross amount of computer hardware and related accumulated
amortization recorded under capital leases are as follows:
<TABLE>
<CAPTION>
1999
--------
<S> <C>
Computer hardware $ 22
Less accumulated amortization 2
--------
$ 20
========
</TABLE>
Amortization of assets held under capital leases is included with
depreciation expense.
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Notes to the Consolidated Financial Statements
March 31, 1999
(Dollars in thousands, except per share data)
The Company also has two noncancelable operating leases for buildings, that
expire in 2000. Future minimum lease payments under the noncancelable
operating leases (with initial or remaining terms in excess of one year)
and future minimum capital lease payments as of March 31, 1999 are:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
2000 $ 11 $ 15
2001 8 -
2002 3 -
------- ---------
Total minimum lease payments 22 $ 15
=========
Less amount representing interest
(at rates ranging from 9.05% to 15.60%) 3
-------
Present value of net minimum
capital lease payments 19
Less current installments of obligations
under capital leases 11
-------
$ 8
=======
</TABLE>
Total rental expense, including month-to-month rentals, approximated $34 in
1999.
(8) Subsequent Events
During June and July 1999, the Company offered units consisting of one
share of common stock and one warrant to purchase an additional share of
common stock. The price of each unit was $4.00 and 182,500 units were
issued, for total offering proceeds of $730 (less issuance costs of $76).
The Company relied on the registration exemption in Section 4(2) of the
1933 Act to issue these units without registering the underlying
securities.
In September 1999 (through September 29, 1999), the Company issued 727,800
shares of common stock at $5.00 per share for a total of $3,639. The
Company relied on the registration exemption in Section 4(2) of the 1933
Act to issue these units without registering the underlying securities.
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheet
As of September 30, 1999 and March 31, 1999
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Assets September 30, 1999 March 31, 1999
------------------ --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,602 $ 493
Accounts receivable, net of allowance for
doubtful accounts of $54 and $66 at September 30
and March 31, 1999, respectively 876 358
Prepaid expenses and other current assets 373 8
------- -------
Total current assets 4,851 859
------- -------
Property, plant and equipment, net 385 265
Other assets, net 333 8
------- -------
$ 5,569 $ 1,132
======= =======
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current installments of note payable to bank $ 49 $ 70
Current installments of loan payable to shareholders - 3
Current portion of capital lease obligations 25 11
Trade accounts payable 4,217 2,078
Advances payable - 250
Accrued expenses 23 44
Deferred revenue - short term 352 79
------- -------
Total current liabilities 4,666 2,535
------- -------
Deferred revenue - long term 250 -
Note payable to bank, excluding current portion - 12
Notes payable to stockholders, excluding current portion 13 38
Capital lease obligations, net of current portion 38 8
Stockholders' deficit:
Preferred stock, no par value, 5,000,000 shares authorized;
no shares issued and outstanding - -
Common stock, no par value 50,000,000 shares authorized;
6,636,298 and 6,537,990 issued and outstanding at
September 30 and March 31, 1999, respectively 5,701 1,550
Accumulated deficit (5,023) (2,807)
Unearned Compensation (76) (204)
------- -------
Total Stockholders' Equity (deficit) 602 (1,461)
Commitments and contingencies ------- -------
$ 5,569 $ 1,132
======= =======
</TABLE>
See accompanying notes to consolidated and interim financial statements.
F-17
<PAGE>
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
Six months ended September 30, 1999 and 1998
(Dollars in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended September 30,
-------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues $ 2,840 $ 362
Cost of revenues 2,830 655
---------- ----------
Gross profit/(loss) 10 (293)
General, administrative, selling and development expenses 1,674 250
Non-cash charge - stock option grants 543 -
---------- ----------
Total general, administrative, selling and
development expenses 2,217 250
Interest expense 9 10
---------- ----------
Net loss $ (2,216) $ (553)
========== ==========
Basic and diluted loss per common share $ (0.37) $ (0.10)
========== ==========
Common shares used in computing basic and diluted
per share amounts 5,946,468 5,787,990
========== ==========
</TABLE>
See accompanying notes to consolidated and interim financial statements.
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six months ended September 30, 1999 and 1998
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended September 30,
-------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,216) $ (553)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 51 24
Provision for doubtful accounts 54 3
Non-cash charge - stock option grants 543 -
Receivables (572) (91)
Prepaid expenses and other assets (690) (66)
Trade accounts payable and accrued liabilities 2,121 522
Unearned revenue 523 29
---------- ----------
Net cash used in operating activities (186) (132)
---------- ----------
Cash flows from investing activities:
Capital expenditures (127) (55)
---------- ----------
Net cash used in investing activities (127) (55)
---------- ----------
Cash flows from financing activities:
Advances payable (250) -
Repayments of long-term debt (33) (23)
Proceeds from issuance of common stock 4,179 700
Stock issuance costs (446) -
Increase (decrease) in note payable to shareholder (28) 2
---------- ----------
Net cash provided by financing activities 3,422 679
---------- ----------
Net increase (decrease) in cash 3,109 492
Cash at beginning of period 493 55
---------- ----------
Cash at end of period $ 3,602 $ 547
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 11 $ 11
========== ==========
Supplemental disclosure of noncash investing and financing
activities:
Borrowings related to the acquisition of assets 44 -
Unearned compensation related to stock options 76 -
========== ==========
</TABLE>
See accompanying notes to consolidated and interim financial statements.
<PAGE>
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999.
1. Basis of Presentation
The consolidated financial statements as of September 30, 1999 and for the
six-month periods ended September 30, 1999 and 1998, include, in the opinion of
management, all adjustments (consisting of normal recurring adjustments and
reclassifications) necessary to present fairly the financial position, results
of operations and cash flows at September 30, 1999 and for all periods
presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial statements and
notes thereto for the year ended March 31, 1999, included herein. The results of
operations for the six-month period ended September 30, 1999 is not necessarily
indicative of the operating results to be expected for the full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
2. Sale of Unregistered Securities (amounts are actual, not in thousands)
In June and July 1999, the Company offered units consisting of one share of
common stock and one warrant to purchase one additional share of common stock.
The price of each unit was $4.00 and 182,500 units were issued for total
offering proceeds of $730,000 (less issuance costs of $96,000). The Company
relied on the registration exemption in Section 4(2) of the 1933 Act to issue
these units without registering the underlying securities. In September 1999,
the Company offered shares of common stock at a price of $5.00 per share.
689,800 shares were issued for total offering proceeds of $3,449,000 (less
issuance costs of $350,000). The Company relied on the registration exemption in
Section 4(2) of the 1933 Act to issue these shares without registration.
3. Subsequent Event
In November 1999, the Company entered into an agreement with certain
shareholders to resolve an outstanding matter. As a result, these shareholders
agreed to return to the Company an aggregate of 773,992 shares of common stock
for cancellation. All common shares and per share amounts have been adjusted
retroactively back to April 1, 1999 to reflect the effects of the cancellation
of these shares.
<PAGE>
EXHIBIT 2.1
CERTIFICATE OF INCORPORATION
OF
FREEREALTIME.COM DELAWARE, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
ARTICLE I
The name of the corporation (hereinafter the "Corporation") is:
Freerealtime.com Delaware, Inc.
ARTICLE II
The name and address, including street, number, city and county, of the
registered agent of the Corporation in the State of Delaware are:
THE CORPORATION TRUST COMPANY
Corporation Trust Center
1209 Orange Street
Wilmington, New Castle County, Delaware 19801
ARTICLE III
The nature of the business and the purposes to be conducted and promoted by
the Corporation shall be to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE IV
The total number of shares of all classes of stock that the Corporation
shall have authority to issue is fifty five million (55,000,000) shares, to be
divided into two classes designated "Common Stock" and "Preferred Stock". The
Corporation shall be authorized to issue:
(i) fifty million (50,000,000) shares of Common Stock, par value $0.01 per
share; and
(ii) five million (5,000,000) shares of Preferred Stock, par value $0.01
per share.
The Board of Directors is hereby empowered to cause the Preferred Stock to
be issued from time to time for such consideration as it may from time to time
fix, to cause such Preferred Stock to
<PAGE>
be issued in series with such voting powers and such designations, preferences,
privileges and relative, participating, optional or other special rights as
designated by the Board of Directors in the resolution providing for the
issuance of such series and, unless otherwise provided in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase (but not above the total number of
authorized shares of the class) or decrease (but not below the number of shares
of such series then outstanding), the number of shares of any such series
subsequent to the issue of shares of that series. Shares of Preferred Stock of
any one series shall be identical in all respects.
All shares of any series of Preferred Stock which shall have been redeemed,
converted, exchanged or otherwise surrendered to or acquired by the Corporation
pursuant to its terms, shall be cancelled and have the status of authorized but
unissued shares of Preferred Stock of the Corporation.
ARTICLE V
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, repeal, alter, amend
and rescind Bylaws of the Corporation.
ARTICLE VI
Notwithstanding Article V hereof, the Bylaws may be rescinded, altered,
amended or repealed in any respect by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting stock
of the Corporation, voting together as a single class.
ARTICLE VII
The Board of Directors shall have that number of directors set out in the
Bylaws of the Corporation as adopted or as set from time to time by a duly
adopted amendment thereto by the directors or stockholders of the Corporation.
ARTICLE VIII
Elections of directors at an annual or special meeting of stockholders need
not be by written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE IX
No action shall be taken by the stockholders except at an annual or special
meeting of stockholders. The stockholders may not take action by written
consent.
ARTICLE X
Special meetings of the stockholders of the Corporation for any purpose or
purposes may be called at any time by the Board of
2
<PAGE>
Directors, or by a majority of the members of the Board of Directors, or by a
committee of the Board of Directors which has been duly designated by the Board
of Directors and whose powers and authority, as provided in a resolution of the
Board of Directors or in the Bylaws of the Corporation, include the power to
call such meetings, but such special meetings may not be called by any other
person or persons; provided, however, that if and to the extent that any special
meeting of stockholders may be called by any other person or persons specified
in any provisions of the Certificate of Incorporation or any amendment thereto
or any certificate filed under Section 151(g) of the Delaware General
Corporation Law, then such special meeting may also be called by the person or
persons, in the manner, at the times and for the purposes so specified.
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation; provided, however, that no amendment,
alteration, change or repeal may be made to Article VI, IX or XI without the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding voting stock of the Corporation, voting together as
a single class.
ARTICLE XII
Each reference in this Certificate of Incorporation to any provision of the
Delaware General Corporation Law refers to the specified provision of the
General Corporation Law of the State of Delaware, as the same now exists or as
it may hereafter be amended or superseded.
ARTICLE XIII
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented. Any repeal or modification of this Article by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE XIV
The name and mailing address of the incorporator is:
Kasey R. Hume
Latham & Watkins
650 Town Center Drive
Suite 2000
Costa Mesa, California 92626
ARTICLE XV
The Corporation is to have perpetual existence.
3
<PAGE>
ARTICLE XVI
The Corporation shall, to the fullest extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
ARTICLE XVII
To the fullest extent permitted by the General Corporation Law of the
State of Delaware, this Certificate of Incorporation may be amended by the Board
of Directors, with respect to corrections not affecting the rights, preferences
and privileges of the Corporation's stockholders.
Signed on _________, 1999
___________________________________
Kasey R. Hume
Incorporator
4
<PAGE>
EXHIBIT 2.2
BYLAWS
OF
FREEREALTIME.COM DELAWARE, INC.,
a Delaware corporation
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
ARTICLE I. OFFICES.......................................................... 1
Section 1.1. Registered Office....................................... 1
-----------------
Section 1.2. Other Offices........................................... 1
-------------
ARTICLE II. MEETINGS OF STOCKHOLDERS........................................ 1
Section 2.1. Place of Meetings....................................... 1
-----------------
Section 2.2. Annual Meeting of Stockholders.......................... 1
------------------------------
Section 2.3. Quorum; Adjourned Meetings and Notice Thereof........... 1
---------------------------------------------
Section 2.4. Voting.................................................. 2
------
Section 2.5. Proxies................................................. 2
-------
Section 2.6. Nominations and Proposals by Stockholders............... 2
-----------------------------------------
Section 2.7. Special Meetings........................................ 4
----------------
Section 2.8. Notice of Stockholder's Meetings........................ 4
--------------------------------
Section 2.9. Maintenance and Inspection of Stockholder List.......... 4
----------------------------------------------
Section 2.10. Stockholder Action by Written Consent Without a Meeting. 5
--------------------------------------------------------
ARTICLE III. DIRECTORS...................................................... 5
Section 3.1. Number, Election and Tenure............................. 5
---------------------------
Section 3.2. Vacancies............................................... 5
---------
Section 3.3. Powers.................................................. 5
------
Section 3.4. Directors' Meetings..................................... 6
-------------------
Section 3.5. Regular Meetings........................................ 6
----------------
Section 3.6. Special Meetings........................................ 6
----------------
Section 3.7. Quorum.................................................. 6
------
Section 3.8. Action Without Meeting.................................. 6
----------------------
Section 3.9. Telephonic Meetings..................................... 6
-------------------
Section 3.10. Committees of Directors................................. 7
-----------------------
Section 3.11. Minutes of Committee Meetings........................... 7
-----------------------------
Section 3.12. Compensation of Directors............................... 7
-------------------------
Section 3.13. Indemnification......................................... 7
---------------
ARTICLE IV. OFFICERS........................................................ 10
Section 4.1. Officers................................................ 10
--------
Section 4.2. Election of Officers.................................... 10
--------------------
Section 4.3. Subordinate Officers.................................... 11
--------------------
Section 4.4. Compensation of Officers................................ 11
------------------------
Section 4.5. Term of Office; Removal and Vacancies................... 11
-------------------------------------
Section 4.6. Chairman of the Board................................... 11
---------------------
Section 4.7. President............................................... 11
---------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.8. Vice President.......................................... 11
--------------
Section 4.9. Secretary............................................... 11
---------
Section 4.10. Assistant Secretaries................................... 12
---------------------
Section 4.11. Chief Financial Officer................................. 12
-----------------------
Section 4.12. Assistant Treasurer..................................... 12
-------------------
ARTICLE V. CERTIFICATES OF STOCK............................................ 12
Section 5.1. Certificates............................................ 12
------------
Section 5.2. Signatures on Certificates.............................. 13
--------------------------
Section 5.3. Statement of Stock Rights, Preferences, Privileges...... 13
--------------------------------------------------
Section 5.4. Lost Certificates....................................... 13
-----------------
Section 5.5. Transfers of Stock...................................... 13
------------------
Section 5.6. Fixing Record Date...................................... 13
------------------
Section 5.7. Registered Stockholders................................. 14
-----------------------
ARTICLE VI. GENERAL PROVISIONS.............................................. 14
Section 6.1. Dividends............................................... 14
---------
Section 6.2. Payment of Dividends.................................... 14
--------------------
Section 6.3. Checks.................................................. 14
------
Section 6.4. Fiscal Year............................................. 14
-----------
Section 6.5. Corporate Seal.......................................... 14
--------------
Section 6.6. Manner of Giving Notice................................. 15
-----------------------
Section 6.7. Waiver of Notice........................................ 15
----------------
Section 6.8. Annual Statement........................................ 15
----------------
ARTICLE VII. AMENDMENTS..................................................... 15
Section 7.1. Amendment by Directors or Stockholders.................. 15
---------------------------------------
</TABLE>
ii
<PAGE>
BYLAWS
OF
FREEREALTIME.COM DELAWARE, INC.,
a Delaware corporation
ARTICLE I.
OFFICES
-------
Section 1.1. Registered Office. The registered office shall be in
-----------------
the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The corporation may also have offices at
-------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.1. Place of Meetings. Meetings of stockholders shall be
-----------------
held at any place within or without the State of Delaware designated by the
Board of Directors. In the absence of any such designation, stockholders'
meetings shall be held at the principal executive office of the corporation.
Section 2.2. Annual Meeting of Stockholders. The annual meeting of
------------------------------
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 2.3. Quorum; Adjourned Meetings and Notice Thereof. A
---------------------------------------------
majority of the stock issued and outstanding and entitled to vote at any meeting
of stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less than a quorum and the votes present may continue to
transact business until adjournment. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, a majority of the
voting stock represented in person or by proxy may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the
<PAGE>
meeting as originally notified. If the adjournment is for more than thirty days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat.
Section 2.4. Voting. When a quorum is present at any meeting, the
------
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes, or the Certificate of Incorporation, or these Bylaws, a different vote
is required in which case such express provision shall govern and control the
decision of such question.
Section 2.5. Proxies. At each meeting of the stockholders, each
-------
stockholder having the right to vote may vote in person or may authorize another
person or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. Each stockholder
shall have one vote for each share of stock having voting power, registered in
his name on the books of the corporation on the record date set by the Board of
Directors as provided in Article V, Section 5.6 hereof. All elections shall be
had and all questions decided by a plurality vote.
Section 2.6. Nominations and Proposals by Stockholders.
-----------------------------------------
(a) Annual Meetings of Stockholders.
-------------------------------
(1) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (i)
pursuant to the corporation's notice of meeting, (ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
corporation who was a stockholder of record both at the time of giving
of notice provided for in this Section 2.6(a) and at the time of the
annual meeting, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Section 2.6(a).
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of
paragraph (a)(1) of this Section 2.6, the stockholder must have given
timely notice thereof in writing to the secretary of the corporation
and such other business must otherwise be a proper matter for action
by stockholders. To be timely, a stockholder's notice shall be
delivered to the secretary at the principal executive offices of the
corporation not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the
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stockholder to be timely must be so delivered not earlier than the
90th day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to such annual meeting.
Such stockholder's notice shall set forth (i) as to each person whom
the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to
be disclosed in solicitations of proxies for election of directors, or
is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (ii)
as to any other business that the stockholder proposes to bring before
the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder
and of the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal
is made, (x) the name and address of such stockholder, as they appear
on the corporation's books, and of such beneficial owner and (y) the
number of shares of each class of stock of the corporation which are
owned beneficially and of record by such stockholder and such
beneficial owner.
(b) Special Meeting of Stockholders. Only such business shall be
-------------------------------
conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the corporation's notice of
meeting. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which
directors are to be elected (i) pursuant to the corporation's notice
of meeting, (ii) by or at the direction of the Board of Directors or
(iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder
of the corporation who is a stockholder of record both at the time of
giving of notice provided for in this Section 2.6(b) and at the time
of the special meeting, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Section 2.6(b).
In the event the corporation calls a special meeting of stockholders
for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons (as
the case may be) for election to such position as specified in the
corporation's notice of meeting, if the stockholder's notice
containing the information required by paragraph (a)(2) of this
Section 2.6 shall be delivered to the secretary at the principal
executive offices of the corporation not earlier than the close of
business on the 90th day prior to such special meeting and not later
than the close of business on the later of the 60th day prior to such
special meeting.
(c) General.
-------
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 2.6 shall be eligible to serve as
directors and
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only such business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance with the
procedures set forth in this Section 2.6. The chairman of the meeting
shall have the power and the duty to determine whether a nomination or
any business proposed to be brought before the meeting was made or
proposed, as the case may be, in accordance with the procedures set
forth in this Section 2.6 and, if any proposed nomination or business
is not in compliance with this Section 2.6, to declare that such
defective nomination or proposal shall be disregarded.
(2) Notwithstanding the foregoing provisions of this Section
2.6, a stockholder shall also comply with all applicable requirements
of state law and of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section 2.6.
Nothing in this Section 2.6 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2.7. Special Meetings. Special meetings of the
----------------
stockholders, for any purpose, or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called by the President
and shall be called by the President or the Secretary at the request in writing
of a majority of the Board of Directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding, and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice.
Section 2.8. Notice of Stockholder's Meetings. Whenever
--------------------------------
stockholders are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which notice shall state the place,
date and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. The written notice of any meeting
shall be given to each stockholder entitled to vote at such meeting not less
than ten nor more than sixty days before the date of the meeting. If mailed,
notice is given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
Section 2.9. Maintenance and Inspection of Stockholder List. The
----------------------------------------------
officer who has charge of the stock ledger of the corporation shall prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time
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and place of the meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
Section 2.10. Stockholder Action by Written Consent Without a
-----------------------------------------------
Meeting. Unless otherwise provided in the Certificate of Incorporation, any
- -------
action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III.
DIRECTORS
---------
Section 3.1. Number, Election and Tenure. The number of directors
---------------------------
which shall constitute the whole Board shall be not less than three (3) nor more
than seven (7). The Board shall be fixed from time to time within the limits
specified above, by a duly adopted resolution of the Board or the stockholders
in accordance with the Certificate of Incorporation. Until otherwise determined
by such resolution, the Board shall consist of three (3) persons. Directors
shall be elected at the annual meeting of stockholders and each director shall
serve until such person's successor is elected and qualified or until such
person's death, retirement, resignation or removal.
Section 3.2. Vacancies. Vacancies on the Board of Directors by
---------
reason of death, resignation, retirement, disqualification, removal from office,
or otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery of the State of
Delaware (the "Court of Chancery") may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3.3. Powers. The property and business of the corporation
------
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and
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authorities by these Bylaws expressly conferred upon them, the Board may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
Section 3.4. Directors' Meetings. The directors may hold their
-------------------
meetings and have one or more offices, and keep the books of the corporation
outside of the State of Delaware.
Section 3.5. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 3.6. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by the President on forty-eight hours' notice to each
director, either personally or by mail, by facsimile or by telegram; special
meetings shall be called by the President or the Secretary in like manner and on
like notice on the written request of two directors unless the Board consists of
only one director; in which case special meetings shall be called by the
President or Secretary in like manner or on like notice on the written request
of the sole director.
Section 3.7. Quorum. At all meetings of the Board of Directors a
------
majority of the authorized number of directors shall be necessary and sufficient
to constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at any meeting at which there is a quorum,
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these Bylaws. If a quorum shall not be present at any meeting of the Board of
Directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. If only one director is authorized, such sole director shall
constitute a quorum.
Section 3.8. Action Without Meeting. Unless otherwise restricted by
----------------------
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 3.9. Telephonic Meetings. Unless otherwise restricted by
-------------------
the Certificate of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such meeting.
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Section 3.10. Committees of Directors. The Board of Directors may,
-----------------------
by resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the Bylaws of the corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 3.11. Minutes of Committee Meetings. Each committee shall
-----------------------------
keep regular minutes of its meetings and report the same to the Board of
Directors when required.
Section 3.12. Compensation of Directors. Unless otherwise
-------------------------
restricted by the Certificate of Incorporation or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
Section 3.13. Indemnification.
---------------
(a) The corporation shall, to the fullest extent
permitted by the Delaware General Corporation Law (the "DGCL"), as the same
exists or may hereafter be amended (but in the case of any such amendment, only
to the extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment), indemnify any and all persons whom it shall have power to
indemnify under the DGCL from and against any and all of the expenses,
liabilities or other matters referred to in or covered by the DGCL, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or
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otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
(b) The corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(c) The corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or 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, such person is fairly and
reasonably entitled to indemnity for such expenses which such Court of Chancery
or such other court shall deem proper.
(d) To the extent that a director, officer,
employee or agent of the corporation shall be successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in paragraphs
(a) and (b) of this Section 3.13, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
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(e) Any indemnification under paragraphs (a) and
(b) of this Section 3.13 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
paragraphs (a) and (b) of this Section 3.13. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action, suit
or proceeding, even though less than a quorum, or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(f) Expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
(g) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of this section shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
(h) The Board of Directors may authorize, by a vote
of a majority of a quorum of the Board of Directors, the corporation to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under this Section 3.13.
(i) For purposes of this Section 3.13, references to
"the corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this
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Section 3.13 with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(j) For purposes of this Section 3.13, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Section 3.13.
(k) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 3.13 shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(l) The Court of Chancery is hereby vested with
exclusive jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this Section 3.13 or under any bylaw,
agreement, vote of stockholders or disinterested directors, or otherwise. The
Court of Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
ARTICLE IV.
OFFICERS
--------
Section 4.1. Officers. The officers of this corporation shall be
--------
chosen by the Board of Directors and shall include a President, a Secretary, and
a Chief Financial Officer. The corporation may also have at the discretion of
the Board of Directors such other officers as are desired, including a Chairman
of the Board, one or more Vice Presidents, one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 4.3 hereof. In the event there are two or more
Vice Presidents, then one or more may be designated as Executive Vice President,
Senior Vice President, or other similar or dissimilar title. At the time of the
election of officers, the directors may by resolution determine the order of
their rank. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
Section 4.2. Election of Officers. The Board of Directors, at its
--------------------
first meeting after each annual meeting of stockholders, shall choose the
officers of the corporation.
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Section 4.3. Subordinate Officers. The Board of Directors may
--------------------
appoint such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
Section 4.4. Compensation of Officers. The salaries of all officers
------------------------
and agents of the corporation shall be fixed by the Board of Directors.
Section 4.5. Term of Office; Removal and Vacancies. The officers of
-------------------------------------
the corporation shall hold office until their successors are chosen and qualify
in their stead. Any officer elected or appointed by the Board of Directors may
be removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
Section 4.6. Chairman of the Board. The Chairman of the Board, if
---------------------
such an officer be elected, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or prescribed by
these Bylaws. If there is no President, the Chairman of the Board shall in
addition be the Chief Executive Officer of the corporation and shall have the
powers and duties prescribed in Section 4.7 of this Article IV.
Section 4.7. President. Subject to such supervisory powers, if any,
---------
as may be given by the Board of Directors to the Chairman of the Board, if there
be such an officer, the President shall be the Chief Executive Officer of the
corporation, unless such an officer is elected separately by the Board of
Directors, and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the stockholders and, in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be an ex-officio member of all committees and
shall have the general powers and duties of management usually vested in the
office of President and Chief Executive Officer of corporations, and shall have
such other powers and duties as may be prescribed by the Board of Directors or
these Bylaws.
Section 4.8. Vice President. In the absence or disability of the
--------------
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall have such other duties as from time to time
may be prescribed for them, respectively, by the Board of Directors.
Section 4.9. Secretary. The Secretary shall attend all sessions of
---------
the Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose; and
shall perform like duties for the standing committees when required by the Board
of Directors. He shall give, or cause to be given, notice
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of all meetings of the stockholders and of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
these Bylaws. He shall keep in safe custody the seal of the corporation, and
when authorized by the Board, affix the same to any instrument requiring it, and
when so affixed it shall be attested by his signature or by the signature of an
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature.
Section 4.10. Assistant Secretaries. The Assistant Secretary, or if
---------------------
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors, or if there be no such determination, the Assistant
Secretary designated by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 4.11. Chief Financial Officer. The Chief Financial Officer
-----------------------
shall have the custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys, and other valuable effects in the name
and to the credit of the corporation, in such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Chief Financial Officer and of the financial condition of the
corporation. If required by the Board of Directors, he shall give the
corporation a bond, in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors, for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 4.12. Assistant Treasurer. The Assistant Treasurer, or if
-------------------
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors, or if there be no such determination, the Assistant
Treasurer designated by the Board of Directors, shall, in the absence or
disability of the Chief Financial Officer, perform the duties and exercise the
powers of the Chief Financial Officer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE V.
CERTIFICATES OF STOCK
---------------------
Section 5.1. Certificates. Every holder of stock of the corporation
------------
shall be entitled to have a certificate signed by, or in the name of the
corporation by, the Chairman or Vice Chairman of the Board of Directors, or the
President or a Vice President, and by the Secretary or an Assistant Secretary,
or the Chief Financial Officer or an Assistant Treasurer of
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the corporation, certifying the number of shares represented by the certificate
owned by such stockholder in the corporation.
Section 5.2. Signatures on Certificates. Any or all of the
--------------------------
signatures on the certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of issue.
Section 5.3. Statement of Stock Rights, Preferences, Privileges. If
--------------------------------------------------
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the DGCL, in lieu of the foregoing requirements, there may be set forth
on the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 5.4. Lost Certificates. The Board of Directors may direct
-----------------
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5.5. Transfers of Stock. Upon surrender to the corporation,
------------------
or the transfer agent of the corporation, of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignation or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 5.6. Fixing Record Date. In order that the corporation may
------------------
determine the stockholders entitled to notice of or to vote at any meeting of
the stockholders, or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
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entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix a record date which shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 5.7. Registered Stockholders. The corporation shall be
-----------------------
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
ARTICLE VI.
GENERAL PROVISIONS
------------------
Section 6.1. Dividends. Dividends upon the capital stock of the
---------
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 6.2. Payment of Dividends. Before payment of any dividend
--------------------
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
Section 6.3. Checks. All checks or demands for money and notes of
------
the corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
-----------
Section 6.4. Fiscal Year. The fiscal year of the corporation shall
be fixed by resolution of the Board of Directors.
Section 6.5. Corporate Seal. The corporate seal shall have
--------------
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
14
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Section 6.6. Manner of Giving Notice. Whenever, under the
-----------------------
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
facsimile or by telegram.
Section 6.7. Waiver of Notice. Whenever any notice is required to
----------------
be given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed to be equivalent to notice. Except as otherwise
provided in Section 222 of the DGCL, attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called or
convened.
Section 6.8. Annual Statement. The Board of Directors shall present
----------------
at each annual meeting, and at any special meeting of the stockholders when
called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
ARTICLE VII.
AMENDMENTS
----------
Section 7.1. Amendment by Directors or Stockholders. These Bylaws
--------------------------------------
may be altered, amended or repealed or new Bylaws may be adopted by the
stockholders or by the Board of Directors, when such power is conferred upon the
Board of Directors by the Certificate of Incorporation, at any regular meeting
of the stockholders or of the Board of Directors or at any special meeting of
the stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new Bylaws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal Bylaws is conferred upon
the Board of Directors by the Certificate of Incorporation it shall not divest
or limit the power of the stockholders to adopt, amend or repeal Bylaws.
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EXHIBIT 6.3.3
S&P COMSTOCK INFORMATION DISTRIBUTION
LICENSE AGREEMENT
AGREEMENT, made as of June 1, 1999, by and between S&P ComStock, Inc. a
corporation having offices at 600 Mamaroneck Avenue, Harrison, New York 10528,
and FreeRealTime.com, Inc. ("Distributor"), having an office at 3333 Michelson
Drive, Ste 430, Irvine, CA 92612.
WHEREAS, S&P ComStock, Inc. gathers, formats and distributes an information
service comprised of certain securities and commodities prices and other data
which is known as the S&P ComStock Service ("ComStock") and
WHEREAS, S&P ComStock, Inc. is licensed to distribute information from
various Stock Exchanges, Commodity Exchanges, and other sources (collectively,
"Sources") as part of S&P ComStock; and
WHEREAS, the parties desire that certain delayed information from S&P
ComStock ("the ComStock Information") as specified in Exhibit A (Part 1),
attached hereto, be made available to Distributor for display by Distributor on
its Internet World Wide Web site (collectively, the "Distributor Service"), as
described fully in Exhibit B, attached hereto.
NOW, THEREFORE, the parties mutually agree as follows:
1. Distribution License.
(a) Distributor is hereby granted for the term of this Agreement a
nonexclusive, nontransferable right and license to distribute electronically the
ComStock Information via the Distributor Service solely for access by Internet
users of the Distributor, provided that the ComStock Information is supplied to
the users by means (such as data encryption, or packet transmission-digitizing)
which prevent unauthorized reception, use or retransmission and further provided
that Distributor has executed in advance any and all necessary documents with
the various Sources, which documents have been accepted and approved by the
Sources. Notice of such Sources' acceptance and approval must be supplied to
S&P ComStock, Inc. prior to Distributor's use or distribution of the ComStock
Information.
(b) Distributor agrees and understands that it is not permitted to
sublicense, transfer, or assign its rights except as specified in Exhibit B
hereunder and that it shall not permit the redistribution of the ComStock
Information by any user or by any other third party without the express prior
authorization of S&P ComStock, Inc. pursuant to a separate agreement or by
mutually agreeable amendment executed and attached hereto.
<PAGE>
2. ComStock Equipment.
(a) During the term of this Agreement, S&P ComStock, Inc. shall provide
Distributor the equipment listed in Exhibit C, attached hereto ("the ComStock
Equipment"), for installation only at the site(s) specified therein. Distributor
shall not relocate the ComStock Equipment without the written permission of S&P
ComStock, Inc.
(b) S&P ComStock, Inc. shall, at Distributor's expense and request,
install, furnish, and maintain necessary modems and/or communications interface
equipment.
(c) Distributor shall not attach, or permit or cause to be attached, any
non-ComStock equipment to the ComStock communications line or the ComStock
Equipment without the prior written permission of S&P ComStock, Inc..
(d) Distributor shall have no right in or to any of the ComStock Equipment
except for the rights of use herein granted. Distributor shall pay all
extraordinary costs for repair or replacement of the ComStock Equipment, over
and above ordinary maintenance which shall be performed by S&P ComStock, Inc..
Such extraordinary maintenance includes electrical work external to the
ComStock Equipment, maintenance of accessories or attachments, and repair of
damage to the ComStock Equipment resulting from accident, neglect, misuse,
failure of electrical power or causes other than ordinary use. Distributor shall
promptly return the ComStock Equipment in good condition, ordinary wear and tear
excepted, upon termination of this Agreement for any reason.
3. ComStock Information.
(a) The furnishing to Distributor of the ComStock Information is
conditioned upon strict compliance with the provisions of this Agreement, the
applicable policies of the Sources, and with all local, state and federal
regulations which might pertain to the use of the ComStock Information. It shall
be the sole responsibility of Distributor to confirm with the applicable Sources
whether or not all of the ComStock Information may be distributed by Distributor
to its Subscribers. S&P ComStock, Inc. may discontinue provision of the ComStock
Information hereunder, without notice, whenever the terms of its agreements with
the Sources require such discontinuance. Notwithstanding the above, if in its
reasonable judgment S&P ComStock, Inc. finds a breach by Distributor of any of
the provisions of this Agreement, S&P ComStock shall give Distributor at least
thirty (30) days notice and an opportunity to cure such breach during that
thirty (30) days before discontinuance..
(b) Neither S&P ComStock, Inc., nor any of its affiliates, nor any Sources
make any express or implied warranties (including, without limitation, any
warranty of merchantability or fitness for a particular purpose or use). Neither
S&P ComStock, Inc., any of its affiliates, or any Sources warrant that the
ComStock information will be uninterrupted or error-free. However, if, due to
issues within the control of S&P ComStock, Inc. the feed becomes interrupted for
a substantial period of time or the data has material errors and stands
uncorrected for a substantial period of time ("substantial"
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<PAGE>
and "material" to be interpreted using a reasonability approach, however at a
minimum "substantial" constitutes 8 consecutive market hours), then Distributor
may terminate the Agreement without further liability. Distributor expressly
agrees that its use and distribution of the ComStock Information and its use of
the ComStock Equipment is at the sole risk of Distributor and its Subscribers.
S&P ComStock, Inc., its affiliates, and all Sources involved in creating or
providing the ComStock Information will in no way be liable to Distributor or
any of its Subscribers for any inaccuracies, errors or omissions, regardless of
cause, in the ComStock Information or for any defects or failures in the
ComStock Equipment, or for any damages (whether direct or indirect, or
consequential, punitive or exemplary) resulting therefrom. The liability of S&P
ComStock, Inc. and its affiliates in any and all categories, whether arising
from contract, warranty, negligence, or otherwise shall, in the aggregate, in no
event exceed one month's ComStock Information Delivery Fee.
(c) Prior to commencing distribution of the SPC Information to any
Subscriber who's receiving continuously updated real-time information,
Distributor shall enter into a written subscription agreement with each such
Subscriber. The form of any such agreement shall be subject to the prior review
and written approval of SPC and shall include provisions to the effect that each
Subscriber:
(i) agrees that SPC and the Sources shall have no liability for the
accuracy or completeness of the SPC Information or for delays,
interruptions, or omissions therein;
(ii) agrees not to use or permit anyone to use the SPC Information for
any unlawful purpose;
(iii) agrees that the SPC Information is to be used solely for the
internal use of the Subscriber and its employees and not for
redistribution to any other person or entity, including but not
limited to, any entity which is not wholly-owned by the
Subscriber; provided, however, that "internal use" shall be
deemed to include use by third parties with whom the Subscriber
share but to whom Subscriber does not sell or beneficially
provide the SPC Information, provided that usage by such third
parties constitutes an integral and inseparable part of the
Subscriber's business;
(iv) agrees that its arrangement with Distributor for receipt of the SPC
Information is subject to termination in the event that this
Agreement between Distributor and SPC is terminated for any
reason;
(v) agrees, where applicable, to make application for receipt of the SPC
Information from each and every Source prior to commencing
receipt of the SPC Information and agrees to comply with any
conditions, restrictions or limitations imposed by any of the
Sources, including paying all such fees
3
<PAGE>
or charges as such Sources may impose either directly or
through SPC or Distributor; and
(vi) acknowledges that the Sources described in the preceding paragraph
may have the right to terminate provision of the SPC
Information to Subscriber with or without notice and that
neither any such Source, SPC nor Distributor shall have any
liability in connection therewith.
(d) Distributor agrees that it shall not display the ComStock Information
in the Distributor Service without a prominent notice indicating that the
ComStock Information is being displayed on a minimum fifteen (15) minute delayed
basis, except for where real-time information is displayed.
(e) Distributor also agrees to include S&P Comstock's Terms and Condition
of Use, a copy of which is attached hereto as Exhibit E, within the Distributor
Service in a manner which alerts Subscribers of the applicability thereof.
(f) Distributor shall clearly and prominently identify S&P ComStock as the
source of the ComStock Information by display of the S&P ComStock logo (the
"Logo") in a manner to be agreed to by the parties. Distributor shall also
create a hypertext or other computer link from the Logo to the S&P ComStock site
on the World Wide Web.
(g) Distributor represents and warrants that it has and will employ
adequate security procedures to prevent the unauthorized access to the ComStock
Information or corruption of the ComStock Information.
(h) Distributor agrees to indemnify and hold S&P ComStock, Inc. and its
affiliates harmless from and against any and all losses, damages, liabilities,
costs, charges and expenses, including reasonable attorneys' fees, arising out
of: (i) any liability of S&P ComStock, Inc. to any Subscriber where Distributor
has failed to include the Terms and Conditions of Use in the Distributor Service
pursuant to Section 3(d) above, or (ii) any breach or alleged breach on the part
of Distributor or any users with respect to its/their obligations to obtain
prior approvals from appropriate Sources and to comply with any applicable
conditions, restrictions or limitations imposed by any Source.
(i) S&P ComStock, Inc. represents that it has the rights and licenses
necessary to transmit the ComStock Information to Distributor, and that to the
best of S&P ComStock, Inc.'s knowledge, the license granted to Distributor
hereunder does not infringe any proprietary right or any third party right at
common law or any statutory copyright.
(j) S&P ComStock, Inc. shall deliver the ComStock Information to
Distributor at the site(s) set forth in Exhibit C or at such other locations as
Distributor may designate within the continental United States or Canada.
4
<PAGE>
4. Payments.
In consideration for the license granted to Distributor by S&P ComStock,
Inc. under this Agreement, Distributor shall make the following payments to S&P
ComStock, Inc.:
(a) Distributor shall pay to S&P ComStock, Inc. a basic ComStock
Information Delivery Fee of $520 per month, including all recurring charges for
ComStock network connection, modem/line interface equipment, and standard
equipment maintenance services as determined by S&P ComStock, Inc.'s standard
price list. These charges, plus any applicable Source fees and state/local
taxes, will be billed monthly in advance. Non-recurring charges such as
installation, relocation and removals of ComStock Equipment will be separately
billed in accordance with S&P ComStock, Inc.'s then-current standard rates.
(b) Distributor shall pay to S&P ComStock, Inc. monthly fees as described
in Exhibit D. The monthly fees will be due and payable on the fifteenth (15th)
day of each month following the month in which services are rendered.
Distributor shall provide to S&P ComStock, Inc. on a monthly basis the number of
web hosting 3rd parties and their respective page views (only for those web-
hosted pages for which Distributor is displaying data and/or information
originally provided to Distributor by S&P Comstock). S&P ComStock, Inc. shall
keep such list confidential.
(c) In addition to the monthly fees outlined in Exhibit D, Distributor
shall pay a total of $200,000 in complete satisfaction of all past due amounts
due to S&P ComStock resulting from fourteen (14) months of services rendered
through May 31, 1999. The $200,000 shall be paid in six equal monthly
installments of $33,333.34 each beginning in July 1999. Each monthly installment
will represent a pro rata share of the complete satisfaction of the total past
due indebtedness of $200,000 (for example, two monthly payments will constitute
payment in full of 2/6 of the total past due indebtedness through May 31, 1999.
Distributor shall have no further obligation to S&P ComStock with respect to the
past due amounts through May 31, 1999 as each pro rata share of the past due
indebtedness is paid based on the schedule above.
(d) Distributor shall be responsible for the payment of any and all
applicable fees billed to S&P ComStock, Inc. or directly to Distributor by
Sources, which fees result from Distributor's use and distribution of the
ComStock Information. Distributor shall also be responsible for payment of any
Subscriber's Source fees which must be paid directly by Distributor to the
Sources. Distributor shall provide to S&P ComStock, Inc. a copy of its monthly
Source fee reports when and as filed with the Sources.
(e) Any amounts payable to S&P ComStock, Inc. by Distributor hereunder
which are more than thirty (30) days past due shall bear interest at the rate of
1-1/2% per month.
(f) S&P ComStock, Inc. may, in its sole discretion and at any time
following the initial term of this Agreement, change the fee payment only with
respect to Exhibit D, Schedule of Fees as specified herein after having provided
written notice to Distributor at least ninety (90) days in advance of such
changes.
5
<PAGE>
(g) S&P ComStock, Inc. may audit Distributor's records for the sole purpose
of verifying the accuracy of Distributor's reported monthly Subscriber Fee
payments as set forth in Exhibit D, Schedule of Fees. Distributor will make such
records readily available to S&P ComStock, Inc. for inspection during normal
working hours on one week's notice. S&P ComStock, Inc. agrees that Distributor's
records will be treated as confidential and will not be used for any purpose
other than verifying Distributor's compliance with this Agreement. Any such
audit shall be at S&P ComStock, Inc.'s expense unless it is determined that S&P
ComStock, Inc. has been underpaid by an amount exceeding five percent (5%) of
the revenues actually received by S&P ComStock, Inc. in the period covered by
the audit; in such case, the expense of the audit shall be borne by Distributor.
5. Information Enhancements; Changes to Data Specification.
(a) Any additions of new Sources or other enhancements to the ComStock
Information which may be made by S&P ComStock, Inc. during the term of this
Agreement, while unidentified at this time, will be offered to Distributor under
terms and conditions to be negotiated, provided that (i) S&P ComStock, Inc. has
the necessary rights to convey such new information to Distributor for
redistribution; and (ii) Distributor and S&P ComStock, Inc. execute a separate
agreement or an amendment to this Agreement.
(b) S&P ComStock, Inc. shall have the right, on at least six (6) months
prior written notice, to change the ComStock Data Format Specification for all
of its Information, provided that any such change shall be made effective
generally by S&P ComStock, Inc. to its customers. Distributor shall be
responsible at its own expense for making any modifications to its software
necessitated by such change. If this change proves to be a substantial material
burden for Distributor, then Distributor has the right to cancel this agreement.
6. Term.
(a) This Agreement shall take effect June 1, 1999.
(b) The term of this Agreement shall be for an initial term of three (3)
years effective June 1, 1999 (the "Initial Term"), and shall continue thereafter
for additional consecutive twelve (12) month terms, unless written notice of
termination shall have been received by either party from the other at least
ninety (90) days prior to the end of the initial term or of any additional
twelve-month term. If S&P ComStock, Inc. increases charges to Distributor
pursuant to Paragraph 4(f), above, Distributor shall have the option to
terminate this Agreement by written notice to S&P ComStock, Inc. within sixty
(60) days of Distributor's receipt of notice of such increases; such termination
will become effective no sooner than thirty (30) days from the last day of the
month in which notice of termination by Distributor is received by S&P ComStock,
Inc. Distributor shall have the right to cancel this agreement by providing at
least ninety (90) days written notice after the first twelve (12) months, only
if Distributor does not continue providing market information as part of its
Distributor's service. If, at anytime after the eighteenth (18) month of this
agreement, Distributor experiences at least a 20% decline in
6
<PAGE>
monthly revenue directly attributable to the ComStock information (the "ComStock
Revenue") from the amount of ComStock Revenue recognized for the month ending
December 31, 2000, then Distributor has the right, by providing 60 days written
notice, to cancel this agreement. If Distributor exercises this right, it shall
pay S&P ComStock 50% of the Monthly License Fee for each month remaining under
the Initial Term. In addition, for the web host information services, S&P
ComStock shall have the right, after the first year, to increase web host fees
by providing ninety (90) days written notice. Distributor shall then have the
right to cancel such service.
7. Marketing.
Distributor may not use the names "ComStock", "SPC", or "S&P ComStock,
Inc.", which are proprietary to S&P ComStock, Inc., or refer to the ComStock
Information in marketing or advertising materials without the prior written
consent of S&P ComStock, Inc., such consent not to be unreasonably withheld.
Upon S&P ComStock, Inc.'s written request, Distributor shall notify Subscribers
by a display in the service itself that S&P ComStock is the source of the quote
information and any sales literature discussing ComStock provided quotes shall
list S&P ComStock as the provider of the service.
8. Rights to Data Specification; Other Confidential Information.
(a) Distributor agrees and acknowledges that the Data Specification is a
confidential and proprietary trade secret belonging to ComStock, and nothing in
this Agreement conveys any proprietary rights whatsoever with regard to the Data
Specification to Distributor. The Data Specification is provided to the
Distributor strictly and solely for the purpose of developing internal computer
software to receive the ComStock Information (provided that nothing herein
restricts Distributor from developing and implementing its own internal computer
software and hardware that allows Distributor to receive information similar to
the ComStock Information from parties other than S&P Comstock, as such
information is not considered to be confidential and proprietary trade secret
belonging to ComStock). Distributor may not use the Data Specification for any
other purpose whatsoever, including, but not limited to, the development of
systems for the receipt or transmission of computer data. Distributor may not
give, transmit, or provide access to the ComStock Data Specification to any
Subscriber or other third party. On any termination of this Agreement,
regardless of cause, Distributor shall promptly return the Data Specification to
S&P ComStock, Inc. and shall provide a written certification by an officer that
no copies have been retained by Distributor.
(b) In addition to the duties imposed on Distributor pursuant to Paragraph
8(a), above, S&P ComStock, Inc. and Distributor agree to hold confidential any
and all of each other's trade secrets, procedures, formulae, financial data,
Subscriber lists, and future plans, which may be learned before and during the
term of this Agreement. Notwithstanding the foregoing, however, such duty of
confidentiality shall not extend to information which is or comes into the
public domain, is rightfully obtained from third parties not under a duty of
confidentiality, or which is independently developed without reference to the
other party's confidential information.
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(c) The duties of confidentiality imposed herein shall survive any
termination of this Agreement.
9. Prevention of Performance.
Neither party shall be liable for any failure in performance of this
Agreement if such failure is caused by acts of God, war, governmental decree,
power failure, judgment or order, strike, or other circumstances, whether or not
similar to the foregoing, beyond the reasonable control of the party so
affected. Neither party shall have any liability for any default resulting from
force majeure, which shall be deemed to include any circumstances beyond its
control. Such circumstances shall include, but are not limited to acts of the
government, fires, flood, strikes, power failures or communications line or
network failures.
10. Right of Termination in the Event of Breach or Bankruptcy; Right to
Injunctive Relief.
(a) Either party shall have the right to terminate this Agreement for
material breach by the other party by giving thirty (30) days prior written
notice, such termination to take effect unless the breach is cured or corrected
within such notice period.
(b) If a receiver is appointed for either party's business or if either
party petitions under the Bankruptcy Act and is adjudicated a bankrupt, declared
an insolvent, or makes an assignment for the benefit of creditors, then the
other party shall, upon thirty (30) days prior written notice, have the right
to terminate this Agreement.
(c) Upon termination of this Agreement for any reason, Distributor shall
cease all use and distribution of any of the ComStock Information.
(d) In addition to and notwithstanding the above, if Distributor, or any of
its employees, agents or representatives, shall attempt to use or dispose of the
Comstock Information or the Data Specification in a manner contrary to the terms
of this Agreement, S&P ComStock, Inc. shall have the right, in addition to such
other remedies as may be available to it, to injunctive relief enjoining such
acts or attempt, it being acknowledged that legal remedies are inadequate.
11. Assignment.
This Agreement may not be assigned, sublicensed or otherwise transferred by
either party without the written consent, except to a wholly owned subsidiary
or to a parent holding company such that parent holding company owns at least
80% of the capital stock of the Distributor, of the other party, such consent
not to be unreasonably withheld, provided, however, that no such consent shall
be required with respect to any assignment by S&P ComStock, Inc. to its parent
company, or to any S&P ComStock, Inc. affiliate. Any attempted transfer or
assignment of this Agreement in violation of this provision shall be null and
void.
8
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12. Entire Agreement.
This Agreement and its Exhibits embodies the entire agreement between the
parties hereto. There are no promises, representations, conditions or terms
other than those herein contained. No modification, change or alteration of this
Agreement shall be effective unless in writing and signed by the parties hereto.
13. Non-Waiver.
The failure of either party to exercise any of its rights under this
Agreement for a breach thereof shall not be deemed to be a waiver of such rights
nor shall the same be deemed to be a waiver of any subsequent breach.
14. Notices
All notices under this Agreement shall be given in writing to the parties as
follows:
To: S&P ComStock, Inc.
600 Mamaroneck Avenue
Harrison, New York 10528
Attn.: Mr. Paul Zinone
To: FreeRealTime.com, Inc.
3333 Michelson Dr., Ste 430
Irvine, CA 92612
Attn. Mr. Brad Gunn
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<PAGE>
15. Governing Law.
This Agreement shall be governed by the laws of the State of New York and
the parties agree to select New York jurisdiction for any claims or disputes
which may arise hereunder.
IN WITNESS WHEREOF, Distributor and S&P ComStock, Inc. have caused this
Agreement to be executed by their duly authorized respective officers, as of the
day and year above written.
S&P COMSTOCK, INC.
By: /s/ Paul S. Zinone
Title: Vice President
Date: Aug. 11,
DISTRIBUTOR
By: /s/ Brad Gunn
Title: President
Date: Aug. 10, 1999
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<PAGE>
EXHIBITS
A. COMSTOCK INFORMATION DEFINITION; AUTHORIZED COUNTRIES
B. DESCRIPTION OF DISTRIBUTOR SERVICE
C. LISTING OF COMSTOCK EQUIPMENT; DISTRIBUTOR DELIVERY SITES
D. SCHEDULES OF SUBSCRIBER FEES
E. TERMS AND CONDITIONS OF USE
F. YEAR 2000 READY CONTRACT LANGUAGE
11
<PAGE>
EXHIBIT A
PART I: INFORMATION DEFINITION
STOCKS:
NYSE
NYSE Corporate Bonds
AMEX, Boston, Philadelphia, Cincinnati, Midwest, Pacific Stock Exchanges and
Instinet, NASD
NASDAQ Over-the-Counter
NASDAQ National Market System
NASDAQ Level II
U.S. Mutual Funds
Alberta Stock Exchange
Canadian OTC Automated Trading System
Montreal Stock Exchange
Toronto Stock Exchange
Vancouver Stock Exchange
STOCK/CURRENCY OPTIONS:
AMEX, OPRA: Chicago Board of Options Exchange
NYSE, Pacific, Philadelphia Stock Exchange
FUTURE EXCHANGE BASIC FUNDAMENTAL INFORMATION
Chicago Board of Trade U.S. Company names
Chicago Mercantile Exchange P/E Ratio
Commodities Exchange Center 52 week high/low
Kansas City Board of Trade Dividend Rate
Mid-America Commodity Exchange Dividend Amount
Minneapolis Grain Exchange Dividend Yield
New York Mercantile Exchange
New York Commodity Exchange
Winnipeg Commodity Exchange
PART II: AUTHORIZED GEOGRAPHICAL AREA
Distribution of the ComStock Information may only be made by Distributor to
Subscribers located in the United States and Canada. Subscribers may access the
ComStock Information outside of the U.S. and Canada but Distributor shall not
purposely market outside of these regions.
12
<PAGE>
EXHIBIT B
DESCRIPTION OF DISTRIBUTOR SERVICE
The FreeRealtime.com, Inc. information services provide delayed and real-time
market and related data to users accessing such data over the Internet. The
Distributor currently operates through two primary Web sites: (1)
FreeRealtime.com -- a free, advertising-supported market data, news and analytic
tools service and (2) BullSession.com -- a subscription-based market data, news
and analytic tools service. A description of the Distributor's Internet-based
services including current and contemplated services, includes the following:
A. Advertising-Supported Information Services
. Delayed and real-time snapshot (collectively "Delayed/RT") market
information offered free to users who have properly registered with the
Distributor (the "Registrants").
. The Business Model for the Distributor is dependent on the sale of
advertising, sponsorships, and other advertising and marketing-related
fees and revenues. All quote requests connect with FRTI servers. FRTI may
sell, serve, and/or collect banner advertising to support the display of
the page.
. Distributor's FreeRealtime.com Web site and linked sites that are
accessible via reciprocal hyperlinks between the two sites are the current
operations for this type of service.
B. Web-Host Information Services
. Snapshot Delayed/RT market information offered to Registrants of
FreeRealtime.com where such users come from other host Web sites ("Web
Hosts") whereby the FreeRealtime.com Web site is private labeled for
"other" host sites with the "other" host site's "look" and "feel".
. The Business Model for the Distributor consists exclusively of "per quote"
or "per user" sub-license fees paid to the Distributor by the Web Host.
. Distributor's arrangements with Zack's and Infospace are the current
examples of this type of service.
. Distributor shall not provide continual updated real-time market
information as part of this service.
. Other than those web host sites listed in Exhibit D, Distributor shall not
allow any other web hosts to host sites on behalf of other third parties.
. Distributor agrees that at the next renewal date for those web hosts
listed in Exhibit D (the "Web Hosts"), Distributor shall terminate the Web
Hosts' right of hosting sites on behalf of any new third parties solely
with respect to the dissemination of the ComStock information by the
Distributor. The Web Hosts can continue to host sites on behalf of third
parties that they've already entered into an agreement with or will enter
into an agreement with prior to the Distributor's next renewal date with
the Web Hosts.
13
<PAGE>
C. Continual Update RT Subscription-based Information Services (current
BullSession product)
. Continual Update RT market information offered to to users who have
properly registered with the Distributor and who pay periodic subscription
fees to the Distributor for such services ("Subscribers"). Information is
refreshed automatically in specified time increments (typically 7-10
seconds) depending on the subscribers connection.
. The Business Model for the Distributor is dependent on subscription fees
paid by the Subscriber.
. Distributor's BullSession.com Web site is the current operation for this
type of service.
D. Continuous Tick-by-tick RT Subscription-based Information Services
. Continuous, real-time, tick-by-tick, (collectively "Continuous RT") market
information, including continuous real-time quotes, NASDAQ Level II
quotes, S&P News, offered to to users who have properly registered with
the Distributor and who pay periodic subscription fees to the Distributor
for such services ("Subscribers").
. The Business Model for the Distributor is dependent on subscription fees
paid by the Subscriber.
. The Distributor does not have a current operation for this type of service
but may develop and offer such services in the future.
14
<PAGE>
EXHIBIT C
DESCRIPTION OF COMSTOCK EQUIPMENT
Licensee will use the ComStock Digital Data feed from equipment to be
provided at the Licensee's site. The feed will be distributed through a port of
the ComStock Client Site Processor (CSP) into the head end service of the
Licensee. The ComStock CSP is fed with 56KB baud data run via satellite
equipment.
Licensee location(s) are registered at:
3333 Michelson Drive, Ste 430
Irvine, CA 92612
Jersey City, NJ
15
<PAGE>
EXHIBIT D
SCHEDULE OF FEES
Monthly Fees:
- -------------
Monthly Base Rate $ 520
Satellite Equipment if needed $ 200
Monthly License Fee: $50,000
. Distributor has the right to distribute the ComStock Information to an
unlimited number of Registrants pursuant to Advertising-supported
Information Services, such as FreeRealTime.com and Continual Update RT
Subscription-based Information Services, such as BullSession.com, without
incurring any additional monthly fees.
. Monthly License Fee includes Web Host Information Services with
Zacks.com, Infospace.com, 4Anything.com, Briefing.com, and all other
websites which serve as Web Hosts to the above parties (i.e. no
additional fees including, Web Host fees, will be incurred by Distributor
for the above Web Host relationships).
Subscriber Fees:
. Subscriber Fees relate to Continuous RT Information Services which
the Distributor is not currently offering.
. Such fees are not applicable to Continual Update R.T. Subscription-
based Information Services, such as BullSession.com, as described in
Exhibit B.
<TABLE>
<CAPTION>
Subscriber Fees:
- ----------------
# of Subscribers Real-time Tick-by-Tick # of Subscribers Real-time Tick-by-Tick
Continuously Updated Continuously Updated
Non Professionals Professionals
<S> <C> <C> <C>
1 -100 $20.00 1 + $25
101 - 500 $15.00
501 - 1000 $13.00
1001+ $10.00
</TABLE>
NASDAQ Level II $15/average daily user (RT Tick-by-Tick
Continuously Updated)
Full Fundamental Data $ 2/average daily user - if needed
S&P News $10/average daily user - if needed
16
<PAGE>
Web Host Fees:
--------------
. Web Host Fees relate to Web Host Information Services as described in
---------------------------------------------------------------------
Exhibit B.
---------
. Such fees are neither applicable to Web Host arrangements with Zacks.com,
------------------------------------------------------------------------
Infospace.com, 4Anything.com, or Briefing.com nor any other websites
--------------------------------------------------------------------
which serve as Web Hosts for the above parties.
-----------------------------------------------
<TABLE>
<CAPTION>
Per Delayed Quote Per RT Quote
#of Page Views
<S> <C> <C>
0-5,000,000 $.0025 $.005
5,000,001 - 10,000,000 $.0020 $.004
10,000,001+ $.0010 $.003
</TABLE>
One-Time Fees:
Installation already installed
Refundable Security Deposit $ 500
17
<PAGE>
EXHIBIT E
TERMS AND CONDITIONS OF USE OF COMSTOCK INFORMATION
All information provided by S&P ComStock, Inc. ("ComStock") and its
affiliates (the "ComStock Information") on _____ World Wide Web site is owned by
or licensed to ComStock and its affiliates and any user is permitted to store,
manipulate, analyze, reformat, print and display the ComStock Information only
for such user's personal use. In no event shall any user publish, retransmit,
redistribute or otherwise reproduce any ComStock Information in any format to
anyone, and no user shall use any ComStock Information in or in connection with
any business or commercial enterprise, including, without limitation, any
securities, investment, accounting, banking, legal or media business or
enterprise.
Prior to the execution of a security trade based upon the ComStock
Information you are advised to consult with your broker or other financial
representative to verify pricing information.
Neither ComStock nor its affiliates make any express or implied warranties
(including, without limitation, any warranty or merchantability or fitness for a
particular purpose or use) regarding the ComStock Information. The ComStock
Information is provided to the users "as is." Neither ComStock nor its
affiliates will be liable to any user or anyone else for any interruption,
inaccuracy, error or omission, regardless of cause, in the ComStock Information
or for any damages (whether direct or indirect, consequential, punitive or
exemplary) resulting therefrom.
18
<PAGE>
EXHIBIT F
YEAR 2000 READY CONTRACT LANGUAGE
Year 2000. S&P ComStock represents that it has used reasonable efforts to review
- ----------
the products and/or services that are the subject of this Agreement (the
"Service") for compatibility with dates in the Year 2000 and beyond in a manner
that is intended to be consistent with general industry practice for
verification and acceptance testing and S&P ComStock believes that it has
achieved a satisfactory level of compatibility with such dates. Notwithstanding,
S&P ComStock does not and cannot warrant that the Service is Year 2000 ready or
free of Year 2000 defects and no such warranty, express or implied, is given or
should be imputed from the statements made above. Further, except as provided in
the next sentence, S&P ComStock will have no liability for the Year 2000
readiness of, or for any Year 2000 defect in the Service or any portion thereof
or in any third party system or other item provided by S&P ComStock under this
Agreement. In the event that all or any portion of the Service is found not to
be Year 2000 ready in a manner that materially and adversely affects the value
of the Service to the Distributor, the sole and exclusive remedy of the
Distributor shall be to suspend (on written notice to S&P ComStock),
Distributor's further right to use and obligation to pay for the affected
portion of the Service until the Service or such portion of the Service is Year
2000 ready, and S&P ComStock shall refund or credit to the Distributor any
prepayments that relate to the unused, suspended Service while the Service or
such portion of the Service is so affected. To the extent that any liability
nevertheless is at any time imposed upon S&P ComStock under this provision, such
liability shall be subject to the limitations and/or exclusions of liability
implemented elsewhere by the terms of this Agreement.
19
<PAGE>
EXHIBIT 6.13
MARKETING AND LICENSE AGREEMENT
This MARKETING AND LICENSE AGREEMENT ("Agreement") is made and entered into
effective as of September 30, 1999, between FREEREALTIME.COM, INC., a Colorado
corporation having its principal business office at 3333 Michelson Drive, Suite
430, Irvine, California 92612 ("FRT"), and Telescan, Inc., a Delaware
corporation having its principal place of business at 5959 Corporate Drive,
Suite 2000, Houston, Texas 77036 ("TSCN" and, collectively with FRT, the
"Parties").
RECITALS
A. WHEREAS, the Parties desire to enter into this Agreement to
memorialize their commitments to provide marketing and licensing services to
each other;
B. WHEREAS, TSCN will license its ProSearch application and provide
other WallStreetCity.com content to FRT and the Parties will co-market
subscriptions to TSCN subscription services;
C. WHEREAS, FRT will license its BullSession application to TSCN and
the Parties will co-market subscriptions to the TSCN-BullSession portfolio
management tool;
D. WHEREAS, the Parties will co-market TSCN's INVESTools subscription
content on FRT's Web sites and to FRT's customers;
E. WHEREAS, TSCN will be the exclusive agent for the E-mail marketing
program of FRT and the Parties will share ad revenues from such program.
F. WHEREAS, the Parties will cooperate to jointly develop a new wealth
management tool combining BullSession and ProSearch enhanced features;
G. WHEREAS, the Parties will cooperate to jointly explore
relationships and alliances in several areas, including FRT providing real-time
quotes to TSCN Web sites, the Parties selling each other's ad inventory, and
certain other contract service opportunities;
H. WHEREAS, as partial consideration to enter this Agreement, the
Parties will also contribute to each other certain rights, securities and other
assets, including ad impression inventory; and
I. WHEREAS, the Parties intend to enter into this binding contractual
arrangement, the Parties intend to amend and restate this Agreement once
additional details about their relationship are determined.
NOW, THEREFORE, in consideration of the recitals, premises and mutual
covenants contained in this Agreement, the parties agree as follows:
<PAGE>
Agreement
---------
1. ProSearch License
Commitment. TSCN hereby grants FRT a worldwide, non-exclusive, non-
-----------
transferable license, subject to the terms and conditions of this Agreement,
to receive and display the TSCN ProSearch feature on Internet Web sites owned
by FRT and operated in its name ("FRT's Web sites"). TSCN will offer certain
mutually agreed upon ProSearch content, "ProSearch Lite", for free
distribution to FRT through co-branded pages via FRT's Web sites, FRT will
market and promote the subscription-based co-branded ProSearch tools and
content on FRT's Web sites including the co-branded pages and will receive a
share of subscription revenues generated from such activities as set forth
below. Except as set forth herein, no other copying, dissemination,
publication, display or distribution in any form of TSCN's content, in whole
or in part, by FRT is permitted without the prior written consent of TSCN.
TSCN Responsibilities. TSCN shall be obligated to fulfill certain
----------------------
responsibilities pursuant to the ProSearch license and co-marketing
agreement:
(a) Develop and deliver the free content to the FRT-ProSearch co-
branded page in accordance with co-branded page specifications to
be mutually agreed upon by both Parties. Free content shall
include pre-programmed searches, charts, company snapshots,
industry group requests, financial statistics, quarterly earnings
and technical data.
(b) Provide Web-hosting services for the co-branded page,
(c) Develop and deliver marketing campaigns, including banner ads and
price promotions, to market the ProSearch subscription products
on the FRT Web sites, including FRT-ProSearch co-branded page.
TSCN may use its FRT Impression Allocation to advertise and
promote the TSCN subscription services.
(d) Maintain commercially reasonable performance levels for the
ProSearch subscription services, including Web site and on-line
site performance, customer support and billing/administration.
(e) Provide monthly reporting regarding subscription activity,
including subscription revenue, activations, deactivations, and
subscriber traffic metrics for the ProSearch subscribers
generated by this co-marketing agreement.
FRT Responsibilities. FRT shall have an obligation to fulfill certain
---------------------
responsibilities to the ProSearch license and co-marketing agreement:
(a) Develop and the FRT-ProSearch co-branded page, including
designing the content design and layout in accordance with co-
branded page specifications to be mutually agreed upon by both
Parties.
(b) Determine the execution of the marketing programs on the co-
branded page and actively promote TSCN's subscription service
throughout FRT's Web sites as well as through other means, as
mutually agreed to by both Parties, with an objective to maximize
"up-selling" from the TSCN free content to the ProSearch
subscription services.
License Fee. Upon signing the Agreement, FRT will pay TSCN a non-
-----------
refundable license fee equal to $650,000. FRT will pay such fee in cash
upon the execution of this Agreement.
Subscription Revenue Sharing. In consideration of promoting the
-----------------------------
ProSearch subscription services and in delivering subscribers, TSCN shall
pay FRT 50% of Net Revenues from subscriptions attributed to marketing
activity on the FRT Web sites, including the FRT-ProSearch co-branded
pages. Said payments shall be remitted to FRT by the end of each calendar
month for revenues received during the preceding calendar month. In
determining Net Revenues (i.e., Gross revenues less Direct Costs), Telescan
shall be entitled to deduct direct costs ("Direct Costs") related to the
operation of TSCN ProSearch and the co-branded pages, including data center
operations, data feed and programming costs, and exchange fees (if
applicable). Telescan shall permit "open-book" accounting and verification
of such Direct Costs.
<PAGE>
2. BullSession License
Commitment. FRT hereby grants TSCN a worldwide, non-exclusive, non-
-----------
transferable license, subject to the terms and conditions of this Agreement,
to receive and display the BullSession streaming, real-time quote and
portfolio management tool from FRT (the "TSCN-BullSession") on Internet Web
sites ("TSCN Proprietary Sites") owned by TSCN and operated in its name and
on Internet Web sites ("TSCN Customer Sites") hosted by Telescan for its
private label and co-branded customers]. FRT will set-up, develop and deliver
the co-branded or private-label TSCN-Bull Session Tool with certain features
specified by TSCN, as mutually agreed to by both Parties. TSCN will market
and promote TSCN-BullSession Tool on the TSCN Proprietary Sites and subject
to the agreement of its customers, on TSCN Customer Sites, and will share
subscription revenue with FRT as set forth below. Except as set forth herein,
no other copying, dissemination, publication, display or distribution in any
form of FRT's BullSession application, in whole or in part, by TSCN is
permitted without the prior written consent of FRT. In the event that TSCN
terminates this Agreement pursuant to paragraphs 10 (e) (ii) or (iii), TSCN
shall have the right for the remaining period of the Initial Term, and for
such additional months as any TSCN-BullSession subscriber who is active and
paid-in-full at the conclusion of the Initial Term continues as an active and
paid-in-full subscriber for consecutive monthly periods, TSCN shall have the
right to assume Web hosting and other operations as necessary to continue the
normal operation and delivery of the TSCN-BullSession service; provided,
that after assumption of such operations, TSCN will be obligated to pay to
FRT the share of Net Revenue provided for in "Subscription Revenue Sharing"
below, after deduction of the Direct Costs incurred by Telescan as provided
below.
FRT Responsibilities. FRT will have an obligation to fulfill certain
---------------------
responsibilities to the TSCN-Bull Session license and co-marketing agreement:
(a) Develop and deliver the TSCN-Bull Session Tool with certain
modifications and features as reasonably specified by TSCN and as
mutually agreed to by both Parties.
(b) Provide Web hosting for the TSCN-Bull Session tool and technical
support to TSCN.
(c) Maintain commercially reasonable performance levels for the TSCN-
BullSession subscription services, including Web site and on-line site
performance.
(d) Provide monthly reporting regarding subscriber activity, including
subscriber traffic metrics for the subscribers generated by this co-
marketing agreement.
TSCN Responsibilities. TSCN will have an obligation to fulfill certain
----------------------
responsibilities to the TSCN-Bull Session license and co-marketing
agreement:
(a) Cooperate in the joint development/modification of the TSCN-
BullSession tool as mutually agreed to by both Parties.
(b) Develop and execute marketing programs, and actively promote the TSCN-
BullSession subscription service throughout the TSCN Proprietary Sites
and, subject to the agreement of Telescan's customers, on TSCN Customer
Sites as well as through other means, including outbound e-mail to its
subscribers and ads and promotions on the Telescan Proprietary Sites
and subject to the agreement of its Customers, on Telescan Customer
Sites, as mutually agreed to by both Parties, with an objective to
maximize subscription revenues to TSCN-BullSession.
(c) Provide customer support, billing, collection and other subscriber-
related functions.
(d) Provide monthly reporting regarding subscription activity, including
subscription revenue, activations, deactivations, and subscriber
traffic metrics for the subscribers generated by this co-marketing
agreement.
Subscription Revenue Sharing. In consideration of providing the
-----------------------------
TSCN-BullSession Tool and certain Web-hosting and related services, TSCN shall
pay FRT 35% of monthly Net Revenues on TSCN-BullSession subscriptions for the
first 3000 subscribers, and 25% of monthly Net Revenues on subscriptions derived
from subscribers in excess of 3000. In determining Net Revenues, FRT shall be
entitled to deduct Direct Costs from revenues related to the operation of
TSCN-BullSession, including
<PAGE>
data center operations, data feed and programming costs, and exchange fees
(if applicable). FRT shall permit "open-book" accounting and verification of
such Direct Costs, and such FRT Direct Costs will not exceed $9 per month per
subscriber. Said payments shall be remitted to FRT by the end of each
calendar month for revenues received during the preceding calendar month.
3. INVESTools
Commitment. TSCN will provide FRT with free mutually agreed upon "teaser"
----------
content to be displayed on FRT's Web sites, including on a co-branded FRT-
INVESTools page. FRT will develop and execute an "up-selling" marketing
program, as mutually agreed to by both Parties, with an objective to generate
new subscriptions for INVESTools. TSCN may use its FRT Impression Allocation
to advertise and promote the INVESTools subscription service. An "impression"
is each advertisement or promotion served on a Web page.
Subscription Revenue Sharing. TSCN will pay FRT 20% of Gross Revenues from
----------------------------
subscriptions attributed to marketing activity on the FRT Web sites and to
the FRT customers, including any FRT-INVESTools co-branded page. Said
payments shall be remitted to FRT by the end of each calendar month for
revenues received during the preceding calendar month.
4. Ad Sales of Parties Ad Inventory
Commitment. The Parties will have a non-exclusive right to represent each
----------
other in the sales of banner ads and sponsorships. Each Party will provide a
periodic allocation of ad inventory available for the other Party to sell. In
order to minimize conflicts between the other Party and a Party's in-house ad
sales department and its third Party ad sales rep firm, if applicable, the
other Party will cooperate and coordinate with the Party in contacts with
potential advertisers and the proposed terms of advertising campaigns. Each
party must approve each specific ad sold by the other party, such approval
not to be unreasonably withheld. Each Party will have responsibility for ad
serving, traffic, reporting and credit billing-collections functions
(collectively "Ad Administration") for ad sales of its ad impression
inventory.
Ad Revenue Sharing. The Party owning the ad inventory will pay the selling
------------------
Party 30% of the Net Revenues from advertising campaigns which are sold by
the selling Party. Payment shall be made by the end of each calendar month
for revenues received during the preceding calendar month. In determining Net
Revenues, the Party responsible for Ad Administration will deduct Direct
Costs associated with Ad Administration which Direct Costs shall including
data center operations, data feed, programming costs, and ad agency fees. The
Ad Administration Party shall permit "open-book" accounting and verification
of such Ad Administration Direct Costs, and such Direct Costs will not exceed
$.25 per 1000 impressions served.
5. E-mail Customer-Base Management
Commitment. TSCN will have the exclusive agency or third party right to
----------
manage the e-mail relationship with FRT's subscribers and customers. TSCN
will determine the scope and elements of the e-mail marketing program. FRT
will have the right, in its sole discretion, to limit or reject any e-mail
communication with its subscribers and to manage on an in-house basis the
e-mail relationship with its subscribers and customers TSCN may not access,
utilize or otherwise exploit the FRT subscriber database outside of its
e-mail management services to FRT. TSCN will be responsible for selling and
managing ads, links and sponsorships on the e-mail communications that it
manages.
Ad Revenue Sharing and E-mail Advance. Upon the execution of this
-------------------------------------
Agreement, TSCN will pay FRT a $500,000 cash advance (the "E-mail Advance")
against the FRT E-mail Fees to be paid by TSCN to FRT TSCN will pay FRT 50%
of the Gross Revenues from marketing campaigns, including sponsorships and
advertisements, that are sold by TSCN on the e-mail communications (the "FRT
E-mail Fees"). Payment shall be made by the end of each calendar month for
revenues received during the preceding calendar month; provided that any FRT
E-mail Fees payable to FRT shall be
<PAGE>
retained by TSCN and deducted from the E-mail Advance until the outstanding
balance of the E-mail Advance has been reduced to zero.
6. FRT Impression Allocation
As separate and distinct obligation unrelated to the Ad Sales of Parties Ad
Inventory, FRT will allocate a monthly ad inventory of two million
impressions to TSCN (the "FRT Impression Allocation") subject to FRT's right
to reject inappropriate content and ads from direct competitors. TSCN will
determine in its sole discretion whether such inventory is sold to third
Party advertisers or utilized for internal marketing and promotions;
provided, however, that TSCN agrees to use at least 50% of the monthly
inventory to advertise and promote jointly managed and/or co-branded content
(e.g. ProSearch subscriptions, INVESTools, BullSession/ProSearch II).
TSCN will retain 100% of any revenues realized from the sale of the FRT
Impression Allocation and FRT will bear the responsibility to perform ad
serving and traffic management functions.
7. Joint Cooperation Efforts
TSCN-Bull,Session II. The Parties agree to cooperate and to commit
---------------------
development resources as reasonably required in an effort to develop a second
generation TSCN-BullSession tool ("TSCN-BullSession II"). TSCN-Bullsession II
will enhance and modify the existing BullSession application and will include
certain TSCN content and tools. The specifications and development will be
a joint effort, with the allocation of resources as mutually agreed by both
Parties provided that each party shall continue to exclusively own their
contributions to the joint application with the other party only having the
right to use the other party's contribution only in TSCN-BullSession II as
expressly contemplated by this Agreement. TSCN-BullSession II will be a co-
branded tool and will be sold by both Parties on a subscriptions basis
pursuant to a marketing plan, including pricing and promotion, which will be
jointly determined by the Parties. The Parties will jointly determine
responsibility for Web hosting, support and other administrative functions.
TSCN and FRT will share Net Revenues on a 50:50 basis, with Net Revenues
determined after the deduction of direct costs associated with sale and
operation of TSCN-BullSession II.
Snapshot Real-Time Quotes and Co-Branded Message Boards. FRT agrees to
--------------------------------------------------------
offer "snapshot" real-time quotes to TSCN's Proprietary and Customer Sites.
Such quote services will be similar in form and content to that offered by
FRT's freerealtime.com Web site and will be provided through a co-branded
page that will be developed, hosted, served and administrated by FRT. FRT
will pay TSCN 10% of the Net Revenue realized on the co-branded page, with
Net Revenue determined after the deduction of sales commission and expense,
which will not exceed 30%.
Data Center, Ad Serving Operations and Subscriber Administration. The
-----------------------------------------------------------------
Parties agree to enter discussions regarding the availability of excess
capacity and existing systems and personnel resources at TSCN to provide
contract services to FRT. In particular, the Parties have identified
potential opportunities in the areas of data center, communications and co-
location services; ad serving, reporting and traffic management functions;
and BullSession subscriber billing and administration services. While the
Parties are committed to holding exploratory discussions, nothing herein
obligates either (i) FRT to contract for such services from TSCN or (ii) TSCN
to offer to provide such services on reasonable terms and conditions.
8. TSCN Right to Participate In FRT Private Offerings
Any time prior to the consummation of a public offering of shares of FRT
resulting in gross proceeds to FRI of at least $10 million ("the FRT
Qualified Public Offering"), if FRT proposes to sell equity securities
representing at least 2.5% of the then outstanding shares of common stock
("Shares") of FRT ("Proposed Offering"), TSCN shall have a right to purchase
all or part of the Proposed Offering; provided that this provision shall not
apply to any business combination transaction to which FRT is a party. FRT
shall provide written notice of the terms and conditions of the Proposed
Offering, along with disclosure and other documentation customary for such
offerings. TSCN shall have a right to participate
<PAGE>
by giving written notice to FRT within seven days after FRT has provided
written notice of the Proposed Offering, including an indication of the
amount of equity securities TSCN elects to purchase. TSCN's right to
participate shall terminate upon the earlier or (i) TSCN's election not to
participate in any Proposed Offering and (ii) the consummation of a FRT
Qualified Public Offering.
9. Exchange Consideration
TSCN and FRT have entered this Agreement with the binding commitment to
exchange certain licenses for technology, certain contractual rights, other
assets and certain services. The consideration for each Party's exchange
includes the following:
The TSCN Consideration shall consist of the following arrangements set forth
in this Agreement:
(i.) the ProSearch Technology and Other Wallstreetcity.com Content
License and Co-Marketing Agreement;
(ii.) the INVESTools Co-Marketing Agreement;
(iii.) the TSCN-BullSession II Joint Development Agreement; and
(iv.) the Joint Cooperation Agreement.
The FRT Consideration shall consist of the following arrangements set forth
in this Agreement:
(i.) the TSCN-BullSession Technology License and Co-Marketing
Agreement
(ii.) the TSCN-BullSession II Joint Development Agreement
(iii.) the Ad Impression Inventory Contribution Agreement
(iv.) the Joint Cooperation Agreement, and
(v.) the Private Offering Participation Rights Agreement
10. General Terms & Conditions
(a) Mutual Assistance. Both Parties shall provide each other with
reasonable technical assistance, advice and expertise regarding each other's
business, content, tools and Web sites in order to facilitate each Party's
compliance with its obligations hereunder.
(b) Confidentiality. Each Party undertakes to retain in confidence the
non-public terms of this Agreement and all other non-public information and
know-how, including e-mail, subscriber and customer lists, programs,
applications, data and other information, disclosed pursuant to this
Agreement which is either designated as proprietary and/or confidential or
by the nature of the circumstances surrounding disclosure, ought in good
faith to be treated as proprietary and/or confidential ("Confidential
Information"); provided that each Party may disclose the terms and
conditions of this Agreement to its immediate legal and financial
consultants in the ordinary course of its business. Each Party agrees to use
best efforts to protect Confidential Information, with precautions at least
as great as those taken to protect its own confidential information. A
Party's disclosure of Confidential Information as required by government or
judicial order is not prohibited by this Agreement, provided that the
disclosing Party gives the other Party prompt notice of such order and
assists in the procurement of appropriate protective order (or equivalent)
imposed on such disclosure. Nothing contained herein limits either Party's
right to develop products independently without the use of the other Party's
Confidential Information. Except as may otherwise be specified in a duly
countersigned rider hereto, to the extent not inconsistent with this
Section, the terms of any non-disclosure agreement(s) entered into between
the Parties prior to this Agreement expressly survive the execution of this
Agreement and arc deemed incorporated herein by this reference.
(c) Audit Rights. In accordance with generally accepted accounting
standards, both Parties will keep such books of account and records as are
necessary to fulfill its obligations herein. Either Party (each an "Auditing
Party" and an "Audited Party", as the case may be) is entitled, at its own
expense, and upon twenty (20) days' written notice to the Audited Party to
designate independent auditors or accountants who may, once each year during
the Term, examine or audit the Audited Party's relevant books and records in
order to verify the fees to the Auditing Party pursuant to this Agreement.
Any such audit will be conducted during the Audited Party's normal business
hours and at the Audited
<PAGE>
Party's location where the relevant records are kept in the normal course of
business. If, it is determine that the Audited Party misreported any figure, the
Auditing Party will promptly furnish to the Audited Party a copy of the report
of its auditors or accountants setting forth the discrepancy. The Audited Party
will remit to the Auditing Party, or vice versa as the case may be, a sum equal
to the amount of any discrepancy within thirty (30) days after notification of
the discrepancy.
(d) Term. The initial term of this Agreement will take effect on the date
hereof and unless terminated earlier pursuant to this Agreement, will terminate
upon the second (2nd) anniversary (the "Initial Term"). After the Initial Term,
this Agreement shall be automatically renewed for successive one-year periods
("Extension Terms") unless FRT or TSCN gives the other Party written notice of
intent to terminate not less then sixty (60) days before the end of a Term. As
used herein, the term "Term" means the Initial Term and any Extension Term(s).
(e) Termination. In addition to any other remedy available at law or in
equity, either Party may terminate this Agreement immediately, without further
obligation to the other Party in the event of:
(i.) any material breach of this Agreement by the other Party, which
breach is not cured within thirty (30) days following written
notice of the breach to such Party;
(ii.) the other Party's making an assignment for the benefit of its
creditors, the filing of a voluntary or involuntary petition
under any bankruptcy or insolvency law that is not dismissed
within thirty (30) days, under the reorganization or arrangement
provisions of the United States Bankruptcy Code, or under the
provisions of any law of like import in connection with the
other Party, or the appointment of a trustee or receiver for the
other Party or its property; or
(iii.) in the event that either Party, and its successors, no longer
generally provide or support (a) the license or co-marketing
content to be provided to the other Party hereunder or (b) the
Party's Web sites specified herein.
(f) Obligations Upon Termination. Promptly upon termination of this Agreement
for any reason, the Parties will:
(i.) remove links to each other's content and Web sites from the
other Party's Web sites;
(ii.) delete or destroy the co-branded pages and any Party's content
and Confidential Information stored on the other Party's
servers, or otherwise in its, possession, custody or control;
and
(iii.) pay all amounts due under the terms of this Agreement;
provided, however, the Parties' obligations to make ongoing
subscription revenue sharing payments for subscriptions which
continue beyond termination shall survive the termination of
this Agreement.
(g) Mutual Warranties. Each Party to this Agreement represents and warrants to
the other Parry that:
(i.) it is a duly organized corporation; and
(ii.) such Party has the full corporate right, power and authority to
enter into this Agreement and to perform the acts required of it
hereunder; and
(iii.) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties
hereunder, do not and will not violate any agreement to which
such Party is a party or by which it is otherwise bound; and
(iv.) when executed and delivered by such Party, this Agreement will
constitute the legal, valid and binding obligation of such
Party, enforceable against such party in accordance with its
terms; and
(v.) it either owns or has the right to supply the content, tools,
services and information to the other party in accordance with
this Agreement; and
(vi.) use of the content, tools, services and information as permitted
by this Agreement will not violate or infringe any Intellectual
Property Rights of any third party; and
(vii.) the content, information, advertisements, and other marketing
material will not include any information which constitutes
defamatory or obscene material.
<PAGE>
(h) No Other Warranties. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, NEITHER
PARTY MAKES ANY OTHER OR DIFFERENT REPRESENTATIONS OR WARRANTIES TO THE OTHER OR
TO ANY THIRD PARTY, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
THE IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(i) Rights of the Parties. TSCN acknowledges that FRT exclusively owns
all Intellectual Property Rights in FRT'S Web sites, content, tools, services
and information or has been licensed by third parties to grant the rights set
forth herein. All rights with respect to such content and derivatives thereof,
whether now existing or which may hereafter come into existence, which are not
expressly granted to TSCN herein are reserved to FRT. FRT acknowledges that TSCN
exclusively owns all Intellectual Property Rights in the TSCN Proprietary and
Customer Sites, content, tools, services and information or has been licensed by
third parties to grant the rights set forth herein. All rights with respect to
such content and derivatives thereof, whether now existing or which may
hereafter come into existence, which are not expressly granted to FRT herein
are reserved to TSCN.
(j) Indemnification. Each Party is liable for and will indemnify and keep
indemnified the other Party as well as its clients, officers, directors,
employees, agents and contractors from and against all loss, cost, damage and/or
expense (including reasonable legal fees and expenses) arising out of or in
connection with:
(i) Subject to subparagraph (k) below, a Party's misrepresentations
or breaches of representation or warranty made or to be
performed by such Party in connection with this Agreement; and
(ii) all claims, actions, proceedings or judgments in connection with
allegations that possession, use, distribution or exploitation
of such Party's content or anything else done or omitted to be
done within the scope of the licenses granted in this Agreement
infringes or violates any copyright or other Intellectual
Property Rights of any third party; and
(iii) subject to subparagraph (k) below, all claims relating to a
Party's content, provided that such claims do not result from
any abstract or translation created by the other Party, or any
use of a Party's content by the other Party which is not in
accordance with the terms of this Agreement.
(k) Limitation of Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE
LIABLE TO ANOTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES ARISING FROM THIS AGREEMENT, EVEN IF THAT PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH AS, BUT NOT LIMITED TO, LOSS OF
REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS. IN ANY EVENT A PARTY'S
LIABILITY UNDER THIS AGREEMENT HOWEVER ARISING SHALL BE LIMITED TO THE AMOUNT OF
NET REVENUES RECEIVED BY BOTH PARTIES DURING THE TWELVE-MONTH PERIOD PRECEDING
THE EVENT GIVING RISE TO SUCH LIABILITY.
(l) Accuracy/Reliability. Although each Party makes reasonable efforts to
ensure the accuracy and reliability of its content, the other Party
acknowledges that the Party and its officers, directors, and employees will not
be held liable for any loss, cost or damage suffered or incurred by the other
Party arising out of: (a) any faults, interruptions or delays in the content, or
(b) any inaccuracies, errors or omissions in the content, however such faults,
interruptions, delays, inaccuracies, errors or omissions arise unless due to the
Party's gross negligence or wilful misconduct.
(m) Entire Agreement. This Agreement and any and all addenda, schedules
or exhibits attached hereto represent the entire agreement of the Parties
regarding the subject matter hereof. There are no other oral or written
collateral representations, agreements, or understandings regarding the subject
matter hereof.
<PAGE>
(n) Amendments. This Agreement may not be amended, modified or superseded,
unless expressly agreed to in writing by both Parties. Within 90 days of the
date hereof, the Parties shall use their best efforts to amend and restate this
Agreement so as to reflect the Parties' subsequent agreements regarding the
subject matter hereof as additional details regarding the nature and extent of
the business relationship between the Parties are determined. Failure to so
amend and restate the Agreement shall not be deemed a breach of the Agreement
which shall remain a valid and binding obligation of both Parties in accordance
with its terms.
(o) Public Announcements. The Parties shall promptly cooperate to develop a
mutually agreeable press release announcing the execution of this Agreement and
the subsequent commencement of the various services hereunder. Except to the
extent required by law, any press releases in conjunction with this Agreement
shall be subject to mutual written approved by Parties.
(p) Force Majeure. Neither Party is liable for, and will not be considered in
default or breach of this Agreement on account of, any delay or failure to
perform as required by this Agreement (other than payment) as a result of any
causes or conditions that are beyond such Party's reasonable control and which
such Party is unable to overcome by the exercise of reasonable diligence,
provided that the affected Party will use reasonable commercial efforts to
resume normal performance.
(q) Assignment. This Agreement will bind and inure to the benefit of each
Party's permitted successors and assigns. Neither Party may assign this
Agreement, in whole or in part, without the other Party's prior written consent;
provided however, that either party may assign this Agreement without such
consent in connection with any merger, consolidation, any sale of all or
substantially all of such Party's assets or any other transaction in which 50%
of such Party's voting securities are transferred.
(r) Controlling Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware.
(s) Waiver. No waiver of any breach of any provision of this Agreement
constitutes a waiver of any prior, concurrent or subsequent breach of the same
or any other provisions, and will not be effective unless made in writing and
signed by an authorized representative of the waiving Party.
(t) Notices. All notices, authorizations, and requests in connection with this
Agreement will be deemed given on the day (i) deposited in the U.S. mails,
postage prepaid, certified or registered, return receipt requested; or (ii) sent
by air express courier, charges prepaid and addressed as follows (or to such
other address as the Party to receive the notice or request so designates by
written notice to the other):
TSCN: Telescan, Inc.
5959 Corporate Drive
Suite 2000
Houston, Texas
Attention: In House Counsel
FRT: FreeRealTime.com, Inc.
3333 Michelson Dr.
Suite 430
Irvine, CA 92612
Attention: In House Counsel
(u) Severability; Headings. If any provision or term of this Agreement, not
being of a fundamental nature is held to be invalid, illegal or unenforceable,
the validity, legality and
<PAGE>
enforceability of the remainder of this Agreement will continue in full
force without being impaired or invalidated in any way. The Parties agree
to replace any invalid provision with a valid provision that most closely
approximates the intent and economic effect of the invalid provision.
Headings are for reference purposes only and in no way define, limit,
construe or describe the scope or extent of such section.
(v) Counterparts. This Agreement may be executed in any number of
counterparts each of which when executed and delivered shall be an
original, but all counterparts together shall constitute one and the same
instrument.
(w) Survival. Any provision of this is Agreement which must survive to
give effect to its meaning or to the intent of the Parties will survive
termination of this agreement, including but not limited all disclaimers
and indemnities contained herein or in any schedules to this Agreement.
Agreed to and accepted this 29th day of September, 1999
Telescan, Inc,
/s/ ROGER WADSWORTH
- ----------------------------------
SENIOR V.P.
Agreed to and accepted this 29th day of September, 1999
FreeRealtime.com, Inc.
/s/ BRAD GUNN
- ----------------------------------
PRESIDENT & CO-CEO
<PAGE>
EXHIBIT 8.1
AGREEMENT AND PLAN OF MERGER
by and between
FREEREALTIME.COM DELAWARE, INC.,
a Delaware corporation
and
FREEREALTIME.COM, INC.,
a Colorado corporation
This Agreement and Plan of Merger (this "Agreement") dated as of November
__, 1999, is by and between FREEREALTIME.COM DELAWARE, INC., a Delaware
corporation (hereinafter sometimes called "Freerealtime Delaware"), and
FREEREALTIME.COM, INC., a Colorado corporation (hereinafter called "Freerealtime
Colorado"). Freerealtime Delaware and Freerealtime Colorado are sometimes
hereinafter referred to as the "constituent corporations."
STIPULATIONS AND RECITALS
1. Freerealtime Delaware is a corporation duly organized and existing
under the laws of the State of Delaware, with its registered office located at
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. Freerealtime Delaware has a capitalization of fifty-five
million (55,000,000) authorized shares divided into two classes designated
"Common Stock" and "Preferred Stock": (a) 50,000,000 shares of Common Stock, par
value $.01 per share, and (b) 5,000,000 shares of Preferred Stock, par value
$.01 per share. Freerealtime Delaware has 1,000 shares of Common Stock issued
and outstanding, all of which are owned by Freerealtime Colorado.
2. Freerealtime Colorado is a corporation duly organized and existing
under the laws of the State of Colorado, with its principal office located at
3333 Michelson Drive, Suite 430, Irvine, California 92612. Freerealtime
Colorado has a capitalization of fifty-five million (55,000,000) authorized
shares divided into two classes designated "Common Stock" and "Preferred Stock":
(a) 50,000,000 shares of Common Stock, no par value, and (b) 5,000,000 shares of
Preferred Stock, no par value. Freerealtime Colorado has _______________ shares
of Common Stock issued and outstanding and ________________ shares of Preferred
Stock issued and outstanding.
3. Freerealtime Delaware and Freerealtime Colorado have entered into this
Agreement in accordance with Section 252 of the General Corporation Law of the
State of Delaware (the "DGCL") and Section 7-111-104 of the Colorado Business
Corporation Act (the "CBCA") providing for the merger of Freerealtime Colorado
with and into Freerealtime Delaware (the "Merger"), which Agreement has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations.
4. The boards of directors of the constituent corporations deem it
desirable and in the best interests of the corporations and their shareholders
that Freerealtime Colorado be merged into Freerealtime Delaware in accordance
with the provisions of Section 252 of the DGCL and Article 111 of the CBCA, in
order that the transaction qualify as a "reorganization" within the
<PAGE>
meaning of Sections 368(a)(1)(A) and 368(a)(1)(F) of the Internal Revenue Code
of 1986, as amended.
5. The CBCA permits a merger of a business corporation of the State of
Colorado with and into a business corporation of another jurisdiction.
6. The DGCL permits the merger of a business corporation of another
jurisdiction with and into a business corporation of the State of Delaware.
7. The Agreement has been approved and adopted by the requisite
percentages of the outstanding voting stock of Freerealtime Colorado and
Freerealtime Delaware.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly entered into by
Freerealtime Delaware and approved by resolutions adopted by its Board of
Directors and by its sole stockholder and being thereunto duly entered into by
Freerealtime Colorado and approved by resolutions adopted by its Board of
Directors and by the requisite vote of its shareholders at its 1999 Annual
Meeting of Shareholders, the Merger and the terms and conditions thereof and the
mode of carrying the same into effect, together with any provisions required or
permitted to be set forth herein are hereby determined and agreed upon as
follows:
SECTION ONE -- STATEMENT OF MERGER
Freerealtime Colorado shall, pursuant to the provisions of the DGCL, be
merged with and into Freerealtime Delaware, and from and after the effective
date of the Merger, Freerealtime Colorado shall cease to exist and Freerealtime
Delaware shall continue to exist pursuant to the provisions of the DGCL.
Freerealtime Delaware, as the surviving corporation from and after the effective
date of the Merger, is sometimes hereinafter referred to as the "Surviving
Corporation."
SECTION TWO -- TERMS AND CONDITIONS
(a) On the effective date of the Merger, the separate existence of
Freerealtime Colorado shall cease, and Freerealtime Delaware shall succeed to
all the rights, privileges, immunities, and franchises, and all the property,
real, personal and mixed, of Freerealtime Colorado, without the necessity for
any separate transfer. Freerealtime Delaware shall thereafter be responsible
and liable for all liabilities and obligations of Freerealtime Colorado, and
neither the rights of creditors nor any liens on the property of Freerealtime
Colorado shall be impaired by the Merger.
(b) Upon approval of this Agreement by the shareholders of Freerealtime
Colorado and the sole stockholder of Freerealtime Delaware, the sole stockholder
of Freerealtime Delaware shall be deemed to have adopted and approved (i) the
stock option plan of Freerealtime Colorado, and (ii) all options that are
outstanding under such stock option plan immediately prior to the Merger. Such
plan, options and warrants shall be deemed adopted and approved on the
2
<PAGE>
same terms and conditions existing under such plan, options and warrants
immediately prior to the Merger.
SECTION THREE -- CONVERSION OF SHARES
The manner and basis of converting the shares of Freerealtime Colorado into
shares of Freerealtime Delaware upon the effective date of the Merger shall be
as follows:
(a) Each share of the shares of Common Stock of Freerealtime Colorado
issued and outstanding on the effective date of the Merger shall be converted
into one share of Common Stock of the Surviving Corporation, which shall
thereafter be issued and outstanding shares of Common Stock of the Surviving
Corporation.
(b) Each share of the 1,000 shares of Common Stock of Freerealtime Delaware
issued and outstanding on the effective date of the Merger shall be canceled and
shall cease to exist.
(c) After the effective date of the Merger, the conversion and exchange of
shares provided by this Section Three shall be effected as follows:
(i) No certificates for shares of the Surviving Corporation's Common
Stock will be issued to holders of any of the shares of Freerealtime
Colorado's Common Stock upon consummation of the Merger.
(ii) Certificates representing shares of Freerealtime Colorado's
Common Stock shall upon the consummation of Merger be deemed for all
purposes to represent that number of shares of Common Stock of the
Surviving Corporation receivable in exchange therefor as provided in
Section 3(a) hereof.
(iii) Freerealtime Colorado, as the holder of a certificate for
shares of Common Stock in Freerealtime Delaware described in paragraph (c)
of this Section Three, shall surrender such certificate for cancellation.
(d) Each option under Freerealtime Colorado's stock option plan outstanding
immediately prior to the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and become an option
or right to purchase a number of shares of the Surviving Corporation's Common
Stock equal to the number of shares of Common Stock of Freerealtime Colorado
subject to such option, without change in the exercise price therefor and
otherwise upon the same terms and conditions of such option.
SECTION FOUR -- CERTIFICATE OF INCORPORATION
The Certificate of Incorporation of Freerealtime Delaware (the
"Certificate") shall continue to be the certificate of incorporation of the
Surviving Corporation following the effective date of the Merger until the same
shall be thereafter altered or amended; provided,
--------
3
<PAGE>
however, that on the effective date, Article I of the Certificate shall be
- -------
amended to read, in its entirety, as follows:
"ARTICLE I
The name of the corporation (hereinafter the "Corporation") is:
Freerealtime.com, Inc."
SECTION FIVE -- BYLAWS
The bylaws of Freerealtime Delaware shall continue to be the bylaws of the
Surviving Corporation following the effective date of the Merger until the same
shall be thereafter altered or amended.
SECTION SIX -- DIRECTORS
The directors of Freerealtime Colorado as of the effective date of the
Merger shall be the directors of the Surviving Corporation from and after the
effective date of the Merger. All of such directors shall hold their
directorships until the election and qualification of their respective
successors, or until their prior resignation, removal or death.
SECTION SEVEN -- OFFICERS
The officers of Freerealtime Colorado as of the effective date of the
Merger shall be the officers of the Surviving Corporation from and after the
effective date of the Merger. All of such officers shall hold their offices
until the election and qualification of their respective successors or until
their tenure is otherwise terminated in accordance with the bylaws of the
Surviving Corporation, or until their prior resignation or death.
SECTION EIGHT -- DEFERRAL, TERMINATION AND AMENDMENT
The parties hereto may amend, modify, supplement or terminate this
Agreement at any time prior to the effective date of the Merger, whether prior
to or after approval of the Merger and this Agreement by the shareholders of
Freerealtime Colorado and the sole stockholder of Freerealtime Delaware, without
shareholder or stockholder approval, in such manner as may be agreed upon by
Freerealtime Colorado and Freerealtime Delaware in writing.
SECTION NINE -- AGREEMENT ON FILE
An executed copy of this Agreement is on file at the principal place of
business of Freerealtime Delaware located in the State of California, 3333
Michelson Drive, Suite 430, Irvine, California 92612.
SECTION TEN -- FURTHER ASSURANCES
4
<PAGE>
In the event that this Agreement shall have been fully approved and adopted
on behalf of Freerealtime Colorado in accordance with the provisions of the CBCA
and on behalf of Freerealtime Delaware in accordance with the provisions of the
DGCL, the constituent corporations agree that they will cause to be executed and
filed and recorded any document or documents prescribed by the laws of the State
of Colorado and by the laws of the State of Delaware, and that they will cause
to be performed all necessary acts within the State of Colorado and the State of
Delaware and elsewhere to effectuate the Merger.
The boards of directors and the proper officers of Freerealtime Colorado
and of Freerealtime Delaware are hereby authorized, empowered and directed to do
any and all acts and things, and to make, execute, deliver, file and record any
and all instruments, papers and documents which shall be or become necessary,
proper or convenient to carry out or put into effect any of the provisions of
this Agreement.
SECTION ELEVEN -- EFFECTIVE DATE
The Merger shall have become effective on the date of filing of this
Agreement with the Secretary of State of the State of Delaware in accordance
with Sections 252(c) and 103 of the DGCL.
5
<PAGE>
IN WITNESS WHEREOF, Freerealtime Delaware and Freerealtime Colorado, as
duly authorized by their respective boards of directors, have caused this
Agreement to be executed and acknowledged as of the date first set forth above.
FREEREALTIME.COM DELAWARE, INC.,
a Delaware corporation
By:_______________________________________
Brad G. Gunn
President, Secretary and Chief Financial
Officer
FREEREALTIME.COM, INC.,
a Colorado corporation
By:_______________________________________
Brad G. Gunn
President and Chief Financial Officer
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> MAR-31-2000 MAR-31-1999
<PERIOD-START> APR-01-1999 APR-01-1998
<PERIOD-END> SEP-30-1999 MAR-31-1999
<CASH> 3,602,000 493,000
<SECURITIES> 0 0
<RECEIVABLES> 930,000 424,000
<ALLOWANCES> (54,000) (66,000)
<INVENTORY> 0 0
<CURRENT-ASSETS> 373,000 8,000
<PP&E> 436,000 312,000
<DEPRECIATION> (51,000) (47,000)
<TOTAL-ASSETS> 5,569,000 1,132,000
<CURRENT-LIABILITIES> 4,666,000 2,535,000
<BONDS> 0 0
0 0
0 0
<COMMON> 5,701,000 1,550,000
<OTHER-SE> (5,099,000) (3,011,000)
<TOTAL-LIABILITY-AND-EQUITY> 5,569,000 1,132,000
<SALES> 0 0
<TOTAL-REVENUES> 2,840,000 1,396,000
<CGS> 2,830,000 2,567,000
<TOTAL-COSTS> 2,217,000 1,332,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,000 18,000
<INCOME-PRETAX> (2,216,000) (2,521,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,216,000) (2,521,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,216,000) (2,521,000)
<EPS-BASIC> (0.37) (0.45)
<EPS-DILUTED> 0 0
</TABLE>
