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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 2000
REGISTRATION NO. 333-49950
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FREEREALTIME.COM, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7375 33-0881720
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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3333 MICHELSON DRIVE, SUITE 430
IRVINE, CALIFORNIA 92612
(949) 833-2959
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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GEOFFREY T. MOORE
CO-CHIEF EXECUTIVE OFFICER
FREEREALTIME.COM, INC.
3333 MICHELSON DRIVE; SUITE 430
IRVINE, CALIFORNIA 92612
(949) 833-2959
Copies to:
CARY K. HYDEN, ESQ.
LATHAM & WATKINS
650 TOWN CENTER DRIVE, 20TH FLOOR
COSTA MESA, CALIFORNIA 92626
(714) 540-1235
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |X| ____
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. | | ____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. | | ____
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. | | ____
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. | | ____
CALCULATION OF REGISTRATION FEE
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PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(1)
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Common Stock, par value $.01 per share $9,715,201 $2,565
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(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the
registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any jurisdiction where the offer or sale is not permitted.
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SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS
4,317,867 SHARES
[FREEREALTIME.COM LOGO]
COMMON STOCK
-------------------------
The selling stockholders, identified in this prospectus are selling
4,317,867 shares of common stock. We are not selling any shares of our common
stock under this prospectus and we will not receive any of the proceeds from the
shares of common stock sold by the selling stockholders.
The selling stockholders may sell the shares of common stock described
in this prospectus in a number of ways and at varying prices. We provide more
information about how the selling stockholders may sell their shares in the
section entitled "Plan of Distribution" on page 46.
Our common stock is currently quoted on the OTC Bulletin Board under
the trading symbol "FRTI." On November 13, 2000 the last reported sale price of
our common stock on the OTC Bulletin Board was $2.25 per share.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
, 2000
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TABLE OF CONTENTS
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Page
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Prospectus Summary........................................................................... 1
Summary Financial Information................................................................ 3
Risk Factors................................................................................. 4
Forward-Looking Statements................................................................... 13
Use Of Proceeds.............................................................................. 13
Dividend Policy.............................................................................. 14
Price Range Of Common Stock.................................................................. 14
Capitalization............................................................................... 15
Selected Consolidated Financial Data......................................................... 16
Management's Discussion And Analysis Of Financial Condition And Results Of Operations........ 17
Business..................................................................................... 33
Management................................................................................... 38
Transactions With Directors, Officers And 5% Stockholders.................................... 46
Principal And Selling Stockholders........................................................... 47
Description Of Capital Stock................................................................. 50
Shares Eligible For Future Sale.............................................................. 53
Plan Of Distribution......................................................................... 54
About This Prospectus........................................................................ 55
Legal Matters................................................................................ 55
Experts...................................................................................... 55
Where You Can Find Additional Information.................................................... 55
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PROSPECTUS SUMMARY
This summary highlights some of the information contained elsewhere in
this prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, especially the risks of investing
in our common stock discussed under "Risk Factors" and the financial statements
and notes to those statements appearing elsewhere in this prospectus.
OUR COMPANY
We are a Web-centric financial media and investment services company,
empowering independent investors with real-time actionable insight, including
market data, research and tools, to make knowledgeable investing decisions. We
provide investment information services to a wide range of individual and
institutional investors, with an emphasis on an audience that we refer to as
Sophisticated Online Home and Office investors, which include independent
investors, smaller institutional investors, and investment professionals such as
executives, managers, and brokers and their clients. In excess of 1.3 million
investors have registered for our online services, including
www.FreeRealtime.com, www.RedChip.com, and the Red Chip Review and related
research services. We estimate that by publishing and distributing investment
information we reach our investor audience several million times every month
and, during the month of September 2000, our investor audience viewed in excess
of 140 million pages of investment information on our various services.
We produce and distribute a broad range of investment information
services, with a focus on "real-time actionable insight" by offering free,
real-time stock quotes and value-added content, including news, market
commentary, company research, and analytical tools such as charting and
portfolio stock tracking. We publish value-added content from a number of allied
content partners as well as from our own proprietary research group, the Red
Chip Review. In proprietary content our strategy is to provide value discovery
and insight for our investors with in-depth coverage on sectors and companies
that are largely overlooked by traditional Wall Street investment banks. Our
award-winning Red Chip Review, including our professional staff of approximately
30 analysts, editors and reporters, concentrate on "discovering tomorrow's blue
chips today" with independent research on over 300 companies, financial analysis
and commentary created every trading day, and investment profiles on over 5000
publicly traded companies. We deliver our information services across an
integrated platform of various media including Websites, e-mail, print
publications, investor conferences, webcasts, teleconferences and certain
broadcast media, and we characterize ourselves as "web-centric" because we
strive to have the best practices and capabilities of the Web - such as real
timeliness, interactivity and customer targeting - influence the quality and
delivery of our information over these media.
Our investment information services are offered on a "tiered" basis
with a substantial amount of free content, centered around our FreeRealtime.com
Web site, and certain premium research and tools available on a pay or
subscription basis. Our free services are supported through the sale of
advertising to media advertisers, corporate advertisers, and sponsors and
partners. We believe we have a demographically attractive audience for our
advertisers because, based on customer survey and research, our investor
audience has income, wealth, education and consumption attributes above those of
the average U.S. consumer. We also offer subscription services from both allied
service providers as well as services that we own and operate, including our
BullSession web site, a subscription service of "streaming" real-time stock
quotes and dynamically updating stock portfolios, and the Red Chip Review
research service. Our various subscription services have prices ranging from $99
to $25,000 per year. While our service strategy remains focused on being a
leading "independent knowledge source for investors," in response to requests
from our investor audience we are developing "one click" away securities trading
and transaction services, which will be offered through allied partners and
affiliates. We have formed and own majority interest in www.DigitalOffering.com
and have recently received regulatory approval to operate as a registered
broker/dealer, which will allow DigitalOffering to realize commissions from
securities transactions and to participate in fee sharing arrangements
associated with transactions conducted through third party allies. Currently, as
many of our information services are offered free of charge to our registered
users, the sale of advertising represents our major source of revenue; however,
if we develop towards our "long term operating model," then subscription and
services sales and transaction fees and commissions are expected to represent
the majority of our sales.
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In recent years, there has been substantial growth in the ownership of
securities, as well as a related increase in securities trading volumes. For
every securities transaction, investors typically engage in multiple
information transactions, including price quotes, research, financial news and
portfolio review and tracking and, therefore, the growth in ownership and
associated trading activity has created substantial demand by investors for more
market data, investment research, news and commentary. The development of the
Web as both a robust communications medium and an efficient commerce marketplace
is also rapidly changing the markets for securities transactions and investment
information services. Consequently, individual investors -- with easy access to
Web-based information previously available generally only to investment
professionals and to faster, cheaper and more convenient online trading -- have
been taking greater control of their investments. Increasingly, this growing
group of self-directed investors is seeking timely, independent and insightful
market data, investment research and financial news and commentary that can help
them make knowledgeable investing decisions.
On August 18, 2000, we acquired RedChip.com, Inc., a Delaware
corporation. RedChip is an independent research firm with an online vertical
portal, www.redchip.com, which provides proprietary research and targeted
information on emerging growth companies with a strategy of "discovering
tomorrow's blue chips today." In conjunction with a recent significant purchase
by Jefferies & Co., Inc. of our common stock, we have entered into a non-binding
letter of intent with Jefferies regarding a wide-ranging strategic alliance to
provide online financial transaction services and to jointly market investment
information services. The proposed alliance includes the contribution by
Jefferies of certain technology resources, including licenses for existing
trading systems and programming and development resources for co-developed
trading and execution products and services, in exchange for shares of our
common stock, which shares may be valued at prices equal to or higher than the
offering price described herein. Our executive offices are located at 3333
Michelson Drive, Suite 430, Irvine, CA 92612. Our telephone number is (949)
833-2959 and our Web site is www.FreeRealtime.com. Information contained on our
Website does not constitute any part of this prospectus.
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SUMMARY FINANCIAL INFORMATION
The following table sets forth our summary consolidated financial and
operating data for the period indicated. You should read this information
together with our consolidated financial statements and the related notes to
those statements, the information under "Selected Consolidated Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus.
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SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
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1997 1998 1999 2000 1999 2000
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CONSOLIDATED STATEMENTS OF (INCEPTION) (UNAUDITED)
OPERATIONS DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Total Revenues ......................... $ 0 $ 55 $ 1,396 $ 7,198 $ 2,840 $ 5,779
Net loss ............................... (125) (161) (2,521) (4,380) (2,216) (2,659)
Basic and diluted net loss per share ... (0.03) (0.04) (0.45) (0.69) (0.37) (0.29)
========== ========== ========== ========== ========== ==========
Shares used to compute basic and
diluted net loss per share ........... 4,176,066 4,447,635 5,601,073 6,392,543 5,946,468 9,323,100
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AS OF MARCH 31, AS OF SEPTEMBER 30,
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1997 1998 1999 2000 1999 2000
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CONSOLIDATED BALANCE SHEET DATA: (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Total assets ........................... 51 99 1,132 5,606 5,569 29,394
Long term obligations .................. 22 48 58 37 51 78
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
buy our common stock. If any of the following risks actually occur, our
business, results of operations or financial condition would likely suffer. In
that case, the market price of our common stock could decline, and you might
lose all or part of the money you paid to buy our common stock.
RISKS RELATED TO OUR BUSINESSES IN GENERAL
YOU MAY HAVE DIFFICULTY EVALUATING AN INVESTMENT IN OUR STOCK BECAUSE WE HAVE A
LIMITED OPERATING HISTORY.
Our stockholders must consider the risks, expenses and difficulties
frequently encountered by early stage companies in new and rapidly evolving
markets, including web-based financial information companies. The Freerealtime
and BullSession web sites did not begin significant operations until February
1998. We recently acquired RedChip.com which altered and expanded our product
line. In addition, in May 2000 we acquired a minority interest in Digital
Offering to provide transaction services for the purchase and sale of equity
securities. We have not offered transactional services in the past and we cannot
assure you that we will operate this line of business successfully. We cannot
predict whether these new business operations will result in increased revenues
for our company. Our limited operating history makes it difficult to evaluate
our business.
WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES, AND WE MAY NEVER ACHIEVE
OR MAINTAIN PROFITABILITY.
Since our inception, we have incurred significant operating losses, and
as of September 30, 2000 we had an accumulated deficit of approximately
$9,846,000. To date, we have been successful in raising additional capital,
and we expect to significantly increase our operating expenses to expand our
media-based and subscription and transaction based operations, including in the
areas of sales and marketing, software development and web operations, customer
support, accounting, and administrative support. We also intend to significantly
increase our level of capital expenditures to further develop and maintain our
content, back-end systems, and overall market position. Such increases in
operating expense levels and capital expenditures will adversely affect
operating results and we believe that we will incur substantial losses for the
foreseeable future. Accordingly, we will need to increase our revenue
substantially in order to achieve and maintain profitability, which we may not
be able to do.
OUR OPERATING RESULTS ARE DIFFICULT TO PREDICT IN ADVANCE AND MAY FLUCTUATE
SIGNIFICANTLY, AND A FAILURE TO MEET THE REVENUE EXPECTATIONS OF SECURITIES
ANALYSTS OR INVESTORS MIGHT RESULT IN A DECLINE OF OUR STOCK PRICE.
As a result of our limited operating history and the emerging nature of
the on-line financial services markets in which we compete, we are unable to
accurately predict our revenues. Our future operating results may vary
significantly due to a variety of factors, many of which are outside of our
control. These factors include:
- the number of users of the Freerealtime, BullSession and
RedChip web sites;
- continued and increased use of the Internet and on-line
services and increased consumer acceptance of the Internet as
a medium for commerce;
- the demand for advertising on our web sites and on the
Internet generally;
- our ability to enter into, renegotiate or renew key
contractual arrangements;
- our ability to upgrade and develop our systems and
infrastructure and attract new personnel in a timely and
effective manner;
- the announcement or introduction of new sites, services and
products by us and our competitors;
- fees for data feed and distribution of content or other costs
we may incur as we expand our operations;
- technical difficulties, system downtime or Internet brownouts;
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- the amount and timing of operating costs and capital
expenditures relating to expansion of our business, operations
and infrastructure;
- governmental regulation; and
- general economic conditions and economic conditions specific
to the Internet and on-line commerce.
Due to the foregoing factors, in one or more future quarters, our
operating results may fall below the expectations of securities analysts and
investors. In such event our stock price is likely to decline.
FAILURE TO RENEW AND MAINTAIN OUR RELATIONSHIPS WITH KEY SUPPLIERS COULD CAUSE
US TO LOSE MARKET OPPORTUNITIES AND LIMIT OUR GROWTH.
We depend on maintaining good relationships with our suppliers of
market data and financial content. We believe that we are currently in good
standing with all of our suppliers. Key contractual supply relationships include
stock quote and market data from the various stock exchanges, data feed services
from S&P Comstock, news programming from Comtex and Reuters, and co-location and
communication services from Exodus Communications and S&P Comstock. We depend on
these information and service 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. The rapid growth in traffic on our web sites has at times 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. The loss of certain of these supply relationships,
especially those with the stock exchanges, could have a material adverse effect
on our business. We have a long standing relationship with the American Stock
Exchange but have an outstanding issue concerning the amount of past due
obligations which we are currently in discussions to resolve. We believe that we
have accrued the proper amount pertaining to these obligations. However, this
issue may give rise to a contingent obligation that we believe will not exceed
an additional $300,000 above that which has already been accrued in our
financial statements.
THE MARKET IN WHICH WE OPERATE IS HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY, ESPECIALLY AGAINST ESTABLISHED COMPETITORS WITH
SIGNIFICANTLY GREATER FINANCIAL RESOURCES.
Many web sites compete for consumers' and advertisers' attention and
spending, particularly in the on-line financial services area. Our current
competitors include:
- 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
- other online financial service providers such as Fool.com,
Yahoo!Finance, Raging Bull, Silicon Investor and Wall Street
City.
We believe that the principal competitive factors in our market are
simplicity, brand recognition, product selection, personalized services,
convenience, price, accessibility, customer service, quality of editorial and
other site content and reliability and speed of fulfillment. Many of our
competitors have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial, marketing and other
resources than us. Certain of our competitors may be able to devote greater
resources to marketing and promotional campaigns, adopt more aggressive pricing
or inventory availability policies and devote substantially more resources to
web site and systems development than us. Increased competition may result in
reduced gross margins, loss of market share and a
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diminished brand franchise. There can be no assurance that we will be able to
compete successfully against current and future competitors.
Our business is dependent on providing free real-time stock quotes and
content to our registered users. Many of our competitors, including some with
greater brand recognition, longer operating histories and a greater client base,
also provide their users with free real-time market information. Recently, both
the New York Stock Exchange and the Nasdaq Stock Market began offering free
real-time stock quotes on their web sites. This increased competition, in
particular from the stock exchanges, could result in a loss of market share,
reduced gross margins and a diminished brand franchise.
We expect that competition in the on-line financial services market
will intensify in the future. For example, as various market segments obtain
large, loyal customer bases, participants in those segments may seek to leverage
their market power to the detriment of participants in other market segments.
Competitive pressures created by any one of our competitors, or by our
competitors collectively, could result in a loss of market share, decreased
usage of our web site and diminished revenues from advertising and transactional
services.
WE WILL NEED TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS WITH OTHER WEB
SITES TO ATTRACT USERS, ADVERTISERS AND CONTENT.
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. However, increasing the number of these relationships is a key element
of our strategic plan. We may not be able to enter into such relationships on
commercially reasonable terms or at all, and even if we enter into relationships
with these web sites, we may not realize additional users or revenues from these
relationships. 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 sites or additional revenues.
WE DEPEND ON OUR RELATIONSHIPS WITH NASDAQ, THE NEW YORK STOCK EXCHANGE AND THE
AMERICAN STOCK EXCHANGE AND THESE RELATIONSHIPS COULD TERMINATE PREMATURELY,
WHICH MAY ADVERSELY AFFECT OUR BUSINESS.
Our business is dependent on providing our users with free real-time
stock quotes which represent a majority of our monthly page views. In order to
provide our users with free real-time stock quotes, we have entered into license
agreements with NASDAQ, the New York Stock Exchange and the American Stock
Exchange whereby these exchanges provide us with real-time stock quotes. We are
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. In addition, other financial information
web sites with more users and greater brand recognition provide free real-time
stock quotes which could reduce our number of users.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE AND OUR INABILITY TO DO SO
MAY PREVENT US FROM EXECUTING OUR BUSINESS STRATEGY.
We may require additional financing. Our working capital requirements
in the foreseeable future will depend on a variety of factors including our
ability to implement our business plan. There can be no assurance that we will
be able to successfully negotiate or obtain additional financing, or that such
financing will be on favorable or acceptable terms. We do not have any
commitments for additional financing. Our ability to obtain additional capital
will be dependent on market conditions, the national economy and others factors
outside our control. If adequate funds are not available or are not available at
acceptable terms, our ability to finance our expansion, develop or enhance
services or products or respond to competitive pressures could be significantly
limited. The failure to secure necessary financing could have a material adverse
effect on our business, prospects, financial condition and results of
operations.
IF WE FAIL TO PROMOTE AND MAINTAIN BRAND RECOGNITION EFFECTIVELY WE WILL BE
UNABLE TO REMAIN COMPETITIVE AND OUR BUSINESS WILL SUFFER.
We believe that establishing and maintaining the Freerealtime brand is
a critical aspect of our efforts to attract and expand our audience and that the
importance of brand recognition will increase due to the growing
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number of Internet sites and the relatively low barriers to entry. Promotion and
enhancement of the Freerealtime brand will depend largely on our success in
providing high-quality products and services and in designing and implementing
effective media promotions, which success cannot be assured. In order to attract
and retain Internet users and to promote and maintain brand recognition such as
the Freerealtime and BullSession brands in response to competitive pressures, we
believe it is necessary to substantially increase our financial commitment to
creating and maintaining a distinct brand loyalty among consumers. If we are
unable to provide high-quality products and services, design and implement
effective media promotions or otherwise fail to promote and maintain our brands,
or if we incur excessive expenses in an attempt to improve our products and
services or promote and maintain our brands, our business, operating results and
financial condition would be materially adversely affected.
WE HAVE MADE AND MAY CONTINUE TO MAKE ACQUISITIONS WHICH COULD PUT A STRAIN ON
OUR RESOURCES, CAUSE DILUTION TO OUR STOCKHOLDERS AND ADVERSELY AFFECT OUR
FINANCIAL RESULTS.
We may seek to continue to expand our current offerings by acquiring
additional businesses, technologies, product lines or service offering from
third parties. We may be unable to identify future acquisition targets and may
be unable to integrate future acquisitions successfully. We may have difficulty
in integrating our recent and any future acquisitions with our current
offerings, and any acquired features, functions or services may not achieve
market acceptance or brand loyalty. Integrating newly acquired organizations and
products and services could be expensive, time consuming and a strain on our
resources.
We cannot assure you that our expenditures and activities will rectify
any problems we encounter or that the acquired business may not be declining or
impaired in ways that have not yet become apparent in financial and operating
reports.
We paid for our acquisition of RedChip by issuing shares of our capital
stock. In the future, we may effect other large or small acquisitions by using
stock, and this will dilute our stockholders. We may need to incur debt to pay
for these acquisitions. Acquisition financing may not be available on favorable
terms or at all. In addition, we will likely be required to amortize significant
amounts of goodwill, which would materially harm our results of operations.
THE LOSS OF KEY MANAGEMENT PERSONNEL, ON WHOSE KNOWLEDGE, LEADERSHIP AND
TECHNICAL EXPERTISE WE RELY, WOULD ADVERSELY AFFECT OUR ABILITY TO EXECUTE OUR
BUSINESS PLAN.
Our success depends heavily upon the continued contributions of our key
management personnel whose knowledge, leadership and technical expertise would
be difficult to replace. In particular, we rely upon the leadership of Brad G.
Gunn, our President and Co-Chief Executive Officer, Geoffrey Moore, our Co-Chief
Executive Officer and Chairman of our board or directors and Michael Neufeld,
our Chief Financial Officer. If we were to lose the services of any of our key
personnel, the ability to execute our business plan would be adversely affected.
We have no key person insurance.
RISKS RELATED TO OUR INDUSTRY
OUR SUCCESS DEPENDS ON THE CONTINUED GROWTH OF WEB USAGE, PARTICULARLY FOR
FINANCIAL NEWS AND INFORMATION, AND THE CONTINUED RELIABILITY OF THE INTERNET.
Our ability to derive revenues from advertising, subscription, and
transaction based services is substantially dependent upon consumers continuing
or increasing their use of the Internet for obtaining news and financial
information as well as for conducting commercial transactions. Rapid growth in
the use of the Internet is a recent phenomenon. There can be no assurance that
there will be continued or increased acceptance of the Internet as an effective
medium for accomplishing financial transactions by consumers. Additionally, the
Internet may be unable to adapt to the level of growth or to meet consumer
demands for any number of reasons, such as:
- inadequacy of the network infrastructure;
- reliability concerns due to interruptions in service or other
delays occurring through the Internet;
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- security concerns;
- inconsistent quality of service; and
- availability of cost-effective, high speed service.
If our on-line services do not achieve market acceptance or if the
Internet does not become a viable marketplace, our business, results of
operations and financial condition would be materially adversely affected.
WE DEPEND ON ADVERTISERS FROM THE FINANCIAL INDUSTRY AND WE MAY NOT SUCCEED IN
ATTRACTING ADVERTISERS FROM OTHER INDUSTRIES.
Financial services companies have accounted for the substantial
majority of our advertising revenues. We will need 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 do not attract
advertisers from other industries, our business could be adversely affected.
RISKS ASSOCIATED WITH ONLINE ADVERTISING
No standards have been widely accepted to measure the effectiveness of
web advertising. If standards do not develop, existing advertisers may not
continue or increase their levels of web advertising. If standards develop and
we are unable to meet such standards, advertisers may not continue advertising
on our site. Furthermore, advertisers that have traditionally relied upon other
advertising media may be reluctant to advertise on the web. Our business,
results of operations and financial condition could be materially adversely
affected if the market for web advertising declines 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
uncertainty makes it difficult to project our future advertising rates and
revenues. We cannot assure you that we will be successful under alternative
pricing models that may emerge. 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 materially adversely
affect the commercial viability of web advertising, which could materially
adversely affect our advertising revenues.
We compete with other web sites, television, radio and print media for
a share of advertisers' total advertising budgets. If advertisers perceive the
web in general or our web site in particular to be a limited or an ineffective
advertising medium, they may be reluctant to devote a portion of their
advertising budget to online advertising or to advertising on our web site.
WE DEPEND ON OUR DIRECT SALES FORCE TO SELL ADVERTISING ON OUR WEB SITE AND ON A
THIRD PARTY TO MEASURE AD IMPRESSIONS.
Until September 30, 2000 we relied upon third parties to sell
advertisements on our web site. We are creating our own internal sales force. As
of November 14, 2000 our sales group had 11 members. We depend on our sales
force to sell advertising on our web site. This involves a number of risks:
- our sales personnel have only worked for us for a short period
of time;
- our need to further increase the size of our sales force;
- our ability to hire, retain, integrate and motivate additional
sales and sales support personnel;
- the length of time it takes new sales personnel to become
productive; and
- the competition we face from other companies in hiring and
retaining sales personnel.
Our business would be adversely affected if we do not develop and maintain an
effective sales force.
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<PAGE> 12
It is important to advertisers that we accurately measure ad
impressions and the delivery of advertisements on our web sites. We depend on a
third party, namely Ad Force, to provide a majority of these measurement and
ad-serving services. If Ad Force is unable to provide these services in the
future, we will be required to perform them ourselves or obtain them from
another provider. If we are unable to provide these services to our advertisers,
advertisers may cease to advertise on our web sites or reduce the amount they
are willing to pay for such advertising.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD
HARM US.
We are not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses in general, and there
are currently few laws or regulations directly applicable to access to or
commerce on the Internet. It is possible, however, that a number of laws and
regulations may be adopted with respect to the Internet, covering issues such as
user privacy, pricing and characteristics and quality of products and services.
The adoption of any such laws or regulations may decrease the growth of the
Internet, which in turn, could decrease the demand for our services and increase
our cost of doing business or otherwise have an material adverse effect on our
business, prospects, financial condition and results of operations. Moreover,
the applicability to the Internet or other on-line services of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. Any such new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to our
business, or the application of existing laws and regulations to the Internet or
other on-line services could have a material adverse effect on our business,
prospects, financial condition and results of operations.
WEB SECURITY CONCERNS COULD HINDER INTERNET COMMERCE.
Concern about the transmission of 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 the transmission of confidential information, such as signing up
for a paid subscription, executing stock trades or purchasing 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, results of
operations and financial condition could be materially adversely affected if
Internet users significantly reduce their use of the web because of security
concerns. We may also incur significant costs to protect ourselves against the
threat of security breaches or to alleviate problems caused by such breaches.
WE COULD FACE LIABILITY RELATED TO OUR STORAGE OF PERSONAL INFORMATION ABOUT OUR
USERS.
We have a non-disclosure policy which states that we will not willfully
disclose any individually identifiable information about any user to a third
party without the user's consent. 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 for misuses of personal information or for misappropriation of funds.
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.
OUR INTELLECTUAL PROPERTY RIGHTS MAY NOT PROVIDE MEANINGFUL COMMERCIAL
PROTECTION FOR OUR PRODUCTS, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY, OR VERY SIMILAR TECHNOLOGY, AND COULD REDUCE OUR ABILITY TO COMPETE
IN THE MARKET.
Our success is substantially dependent upon our proprietary technology.
We rely on a combination of trademark, copyright and trade secret laws, as well
as confidentiality agreements and technical measures to protect our proprietary
rights. Much of our proprietary information may not be patentable, and we do not
currently possess any patents. There can be no assurance that we will develop
proprietary products or technologies that are patentable, that any issued patent
will provide us with any competitive advantage or will not be challenged by
third parties, or that the patents of others will not have a material adverse
effect on our ability to do business. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or services or to obtain and use information that we regard as
proprietary. There can be no assurance that our means of protecting
9
<PAGE> 13
our proprietary rights will be adequate or that our competitors will not
independently develop similar technology or duplicate our products or design
around patents issued to us or other of our intellectual property rights.
There have been substantial amounts of litigation in the computer
industry regarding intellectual property rights. There can be no assurance that
third parties will not in the future claim infringement by us with respect to
current or future products, trademarks or other proprietary rights, that we will
counterclaim against any such parties in such actions or that if we make claims
against third parties with respect thereto, that any such party will not
counterclaim against us in such action. Any such claims or counterclaims could
be time-consuming and result in costly litigation, require us to redesign our
products or require us to enter into royalty or licensing agreements, any of
which could have a material adverse effect on our business, prospects, financial
condition and results of operations. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to us or at all.
IF WE ARE UNABLE TO ADAPT TO RAPID CHANGES IN MARKET CONDITIONS, CUSTOMER
DEMANDS OR THE EMERGENCE OF NEW INDUSTRY STANDARDS OUR BUSINESS WILL SUFFER.
The Internet and on-line commerce industries are characterized by rapid
technological change, changing market conditions and customer demands and the
emergence of new industry standards and practices that could render our existing
web sites and proprietary technology obsolete. Our future success will
substantially depend on our ability to enhance our existing services, develop
new services and proprietary technology and respond to technological advances in
a timely and cost-effective manner. The development of web sites and other
proprietary technology entails significant technical and business risk. There
can be no assurance that we will be successful in developing and using new
technologies or adapting our proprietary technology and systems to meet emerging
industry standards and customer requirements. If we are unable, for technical,
legal, financial, or other reasons, to adapt in a timely manner in response to
changing market conditions or customer requirements, our business, prospects,
results of operations and financial condition would be materially adversely
affected.
BECAUSE WE ARE DEPENDENT ON COMPUTER SYSTEMS, A SYSTEMS FAILURE WOULD CAUSE A
SIGNIFICANT DISRUPTION TO OUR BUSINESS.
Our success is substantially dependent upon our ability to deliver high
quality, uninterrupted Internet hosting, which requires that we protect our
computer equipment and the information stored in our servers. Our systems are
vulnerable to damage by fire, natural disaster, power loss, telecommunication
failures, unauthorized intrusion and other catastrophic events. Any substantial
interruption in our systems would have a material adverse effect on our
business, prospects, financial condition and results of operations. Although we
carry property and business interruption insurance, our coverage may not be
adequate to compensate for the losses that may occur. In addition, our systems
may be vulnerable to computer viruses, physical or electronic break-ins and
other similar disruptive events. Computer viruses, break-ins or other problems
caused by third parties could lead to interruptions, delays, loss of data or
cessation in service to users of our services. The occurrence of any of these
risks could have a material adverse effect on our business, prospects, financial
condition and results of operations.
RISKS RELATED TO THE PURCHASE OF OUR COMMON STOCK
OUR STOCK PRICE IS EXTREMELY VOLATILE, AND YOU COULD LOSE A SUBSTANTIAL PORTION
OF YOUR INVESTMENT.
The trading price of our common stock is likely to be highly volatile
and could be subject to wide fluctuations in response to a number of factors,
including:
- actual or anticipated variations in our quarterly operating
results;
- announcements of technological innovations, or new services by
us or our competitors;
- conditions or trends in the Internet and on-line commerce
industries;
- changes in the market valuations of other Internet or on-line
service companies;
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<PAGE> 14
- announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or
capital commitments;
- additions or departures of key personnel; and
- sales of our common stock in the open market.
Further, the stock markets in general, the OTC Bulletin Board and the
market for Internet-related and technology companies in particular, have
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of such companies. These broad
market and industry factors may materially adversely affect the market price of
our common stock, regardless of our operating performance. Market fluctuations,
as well as general political and economic conditions such as recession or
interest rate or currency rate fluctuations, may also adversely affect the
market price of our common stock. In the past, following periods of volatility
in the market price of a company's securities, securities class-action
litigation has often been instituted. Such litigation, if instituted, could
result in substantial costs and a diversion of management's attention and
resources, which would have a material adverse effect on our business,
prospects, results of operations and financial condition.
THE VALUE OF THE COMMON STOCK THAT YOU PURCHASE MAY BE ADVERSELY AFFECTED BY THE
DECISIONS OF OUR EXECUTIVE OFFICERS AND DIRECTORS, OVER WHICH YOU WILL HAVE NO
CONTROL.
Our executive officers, directors and principal stockholders own a
significant percentage of our stock and will be able to exercise significant
influence over our business and operations. These persons, acting together, will
have the ability to control substantially all matters submitted to our
stockholders for approval (including the election and removal of directors and
any merger, consolidation or sale of all or substantially all of our assets) and
to control our management and affairs. Accordingly, this concentration of
ownership may have the following effects, which could adversely effect the
market price of our common stock:
- delaying, deferring or preventing a change in control of us;
- impeding a merger or consolidation;
- preventing a takeover or other business combination involving
us; or
- discouraging a potential acquiror from making a tender offer
or otherwise attempting to obtain control of us.
A LARGE NUMBER OF SHARES OF OUR COMMON STOCK WILL BECOME AVAILABLE FOR SALE IN
THE FUTURE, WHICH MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
The market price of our common stock could decline as a result of sales
of a large number of shares in the market after this offering or the perception
that these sales could occur. Our common stock has a very limited trading
history on the OTC Bulletin Board. Due to this low volume of trading, the price
of our common stock is affected by large sales of our common stock. During the
month of October 2000 our average daily trading volume was 6,700. The selling
stockholders will be selling up to 4,317,867 shares under this registration
statement. Due to the number of shares being sold and our low average daily
trading volume, the sale of common stock by the selling stockholders may not
meet current demands for our common stock which would adversely affect the price
of our common stock.
ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION, OUR BYLAWS AND
DELAWARE LAW COULD DISCOURAGE A TAKEOVER, WHICH COULD LIMIT THE PRICE INVESTORS
MIGHT BE WILLING TO PAY IN THE FUTURE FOR OUR COMMON STOCK.
Delaware law, as well as our certificate of incorporation and bylaws,
contain anti-takeover provisions that could delay or prevent a change in control
of our company, even if it were beneficial to the stockholders. These provisions
could limit the price that investors might be willing to pay in the future for
shares of our common stock. These provisions:
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<PAGE> 15
- prohibit stockholder action by written consent, thereby
requiring that not all members of the board be elected at one
time;
- prohibit cumulative voting in the election of directors, which
would otherwise allow less than a majority of stockholders to
elect director candidates;
- limit the ability of stockholders to call special meetings of
stockholders; and
- establish advance notice requirements for nominations for
election to the board of directors or for proposing matters
that can be acted upon by stockholders.
In addition, Section 203 of the Delaware General Corporation Law and
the terms of our stock option plans may discourage, delay or prevent a change in
control of our company. Specifically, Section 203 prohibits a Delaware
corporation from engaging in any business combination with an interested
stockholder for three years after the date the stockholder became an interested
stockholder unless specific conditions are met.
WE DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK.
We have not declared or paid any dividends with respect to our common
stock. We do not anticipate paying any dividends in the foreseeable future.
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<PAGE> 16
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, that are based on our current expectations about our
company and our industry. We use words such as "plan," "expect," "intend,"
"believe," "anticipate," "estimate" and other similar expressions to identify
some forward-looking statements, but not all forward-looking statements include
these words. Some of these forward-looking statements relate to the development
of our financial transaction services, our market opportunities, our strategy,
our ability to enter into agreements with suppliers of content, high traffic web
sites and advertisers, our competitive position, our management's discussion and
analysis of our financial condition and results of operations and the timing and
extent of our funding needs. All of our forward-looking statements involve risks
and uncertainties. Our actual results may differ significantly from our
expectations and from the results expressed in or implied by these
forward-looking statements. The section captioned "Risk Factors" appearing in
this prospectus describes those factors that we currently consider material and
that could cause these differences. We urge you to consider these cautionary
statements carefully in evaluating our forward-looking statements. Except as
required by law, we undertake no obligation to publicly update any
forward-looking statements to reflect subsequent events and circumstances.
USE OF PROCEEDS
The common stock is being offered by the selling stockholders of their
own account, and we will not receive any of the proceeds from the sale of the
selling stockholders' common stock.
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<PAGE> 17
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock and we
do not expect to pay any cash dividends for the foreseeable future. We currently
intend to retain future earnings, if any, to finance the expansion of our
business. Any determination to pay cash dividends in the future will be at the
discretion of our board of directors and will depend upon our results of
operations, financial condition, contractual restrictions and any other factors
deemed relevant at that time by our board of directors.
PRICE RANGE OF COMMON STOCK
Our common stock has been quoted and traded in the over-the-counter
market on the OTC Bulletin Board system under the symbol "FRTI" since September
1998. The following table indicates high and 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>
COMMON STOCK
PRICE
--------------------------
FISCAL PERIOD HIGH LOW
------------- ---- ---
<S> <C> <C>
FISCAL YEAR ENDED MARCH 31, 1999
Second Quarter............................................. $ 7.188 $ 5.938
Third Quarter.............................................. $ 9.500 $ 4.000
Fourth Quarter............................................. $ 20.000 $ 4.750
FISCAL YEAR ENDED MARCH 31, 2000
First Quarter.............................................. $ 10.125 $ 6.625
Second Quarter............................................. $ 10.125 $ 5.000
Third Quarter.............................................. $ 8.625 $ 4.750
Fourth Quarter............................................. $ 14.250 $ 5.875
FISCAL YEAR ENDED MARCH 31, 2001
First Quarter.............................................. $ 8.500 $ 2.875
Second Quarter............................................. $ 5.750 $ 3.375
</TABLE>
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<PAGE> 18
CAPITALIZATION
The following table sets forth our actual capitalization at September
30, 2000. You should read this information in conjunction with "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
and the notes relating to those statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Actual
----------------------
(Dollars in thousands)
(Unaudited)
<S> <C>
Cash and cash equivalents......................................................... $ 5,609
=======
Short-term debt (including current portion of long-term debt)..................... 154
Long-term debt (excluding current portion)........................................ 78
-------
Total Debt.................................................................. 232
Stockholders' equity:
Preferred stock, $0.01 par value per share: 5,000,000 shares authorized;
no shares issued and outstanding......................................... --
Common stock, $0.01 par value per share: 50,000,000 shares authorized,
15,215,818 shares issued and outstanding................................. 33,210
Accumulated other comprehensive loss.............................................. (9,846)
Unearned compensation............................................................. (32)
-------
Total stockholders' equity.................................................. 23,332
Total capitalization........................................................ $23,564
=======
</TABLE>
----------
Our capitalization at September 30, 2000 set forth above excludes:
- 2,256,331 shares issuable upon exercise of stock options issued, outstanding
and exercisable at a weighted average exercise price of $3.00, plus an
additional 920,669 shares issuable upon exercise of stock options issued and
outstanding at a weighted average exercise price of $5.35.
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<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial
data for the periods indicated. You should read this information together with
our consolidated financial statements and the related notes to those statements
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------------------------------------------
1997 1998 1999 2000 1999 2000
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED STATEMENTS OF (INCEPTION) (UNAUDITED)
OPERATIONS DATA: (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Total Revenues.......................... $ 0 $ 55 $ 1,396 $ 7,198 $ 2,840 $ 5,779
Net loss................................ (125) (161) (2,521) (4,380) (2,216) (2,659)
Basic and diluted net loss per share.... (0.03) (0.04) (0.45) (0.69) (0.37) (0.29)
========= ========= ========= ========= ========= =========
Shares used to compute basic and
diluted net loss per share ........... 4,176,066 4,447,635 5,601,073 6,392,543 5,946,468 9,323,100
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF SEPTEMBER 30,
-------------------------------------------------------------------------------------
1997 1998 1999 2000 1999 2000
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED BALANCE SHEET DATA: (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Total assets............................ 51 99 1,132 5,606 5,569 29,394
Long term obligations................... 22 48 58 37 51 78
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with the financial statements
and the related notes to those statements appearing elsewhere in this
prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. Please see "Risk Factors - This prospectus contains
forward-looking statements that may not be accurate indicators of our future
performance."
OVERVIEW
We are a Web-centric financial media and investment services company
whose free and subscription based financial products and services are designed
to provide sophisticated on-line home and office based (or "SOHO") investors
with real-time actionable insight into the financial marketplace, and to provide
opportunities to this same audience to execute financial transactions on-line.
Paramount to achieving this mission is to deliver effective solutions to media
and corporate advertisers and to our content and service partners. We currently
use the following mediums to distribute our proprietary and allied content: the
Web through our FreeRealTime.com, RedChip.com, BullSession.com, and soon to be
launched DigitalOffering.com Web site; Print, with our RedChip Review, RedChip
Gold, and other RedChip publications; and Radio, with our RedChip radio program
broadcast regionally in the Pacific Northwest. As a media company, we generate
the majority of our revenues from the sale of advertising on FreeRealTime.com
and through email marketing programs, while subscription, service, and
transaction based revenues continue to become a larger part of our revenue
stream.
On August 18, 2000, we completed our acquisition of RedChip.com, Inc., a
Delaware corporation ("RedChip"), the award winning investment research and
information firm devoted to "discovering tomorrow's Blue Chips today", whereby
RedChip became a wholly owned subsidiary of FreeRealTime.com. We believe that
over the long term, the merger with RedChip will, among other things, expand
FreeRealTime.com's content offering, enabling us to provide our audience with
broad based financial information including proprietary, institutional quality
independent research on publicly traded companies, as well as access to
information about and transaction opportunities with emerging growth companies
through our affiliate, Digital Offering, Inc. Additionally, the merger will
offer opportunities to expand our overall suite of subscription and
transaction-based services offered to both retail and institutional investors,
and will add new opportunities in providing "business to business" services to
publicly traded companies through our RedChip Partners program ("Partners").
Partners is primarily an investor awareness program whereby public companies
sign up with Partners entitling these companies to present at several investor
conferences held by RedChip throughout the year across the country. These
Partner companies also receive webcasts of their management presentations and
road shows on the RedChip.com Web site. Partners currently has approximately 70
companies currently under contract. The RedChip Review is a series of print
on-line publications containing proprietary research and analysis on emerging
growth and small capitalization public companies, and is produced by RedChip's
staff of financial analysts. These publications currently have approximately
1,600 subscribers, comprised of retail and institutional investors.
Through our FreeRealTime.com site, we strive to provide comprehensive
real-time financial information by offering free real-time stock quotes and
value-added content, including news, market commentary, public company research,
and analytical tools such as charting and portfolio stock tracking. We completed
our second quarter ended September 30, 2000 with approximately 1.34 million
registered users on our FreeRealTime.com site, an increase of 77% over the same
period in the prior year when we had approximately 759,000 users as of the close
of the second quarter ended September 30, 1999. We served approximately 139
million page-views on our FreeRealTime.com Web site during the month of
September 2000. This represented an increase of 22% over the same month in the
prior year when we served approximately 114 million page-views. A majority of
our page views are real-time quote pages, though the Freerealtime.com site also
provides market news, research, commentary, message boards, and other
information. The Freerealtime.com Web site is offered free of charge to our
registered users, and the sale of advertising currently represents our largest
source of revenue from this Web site. In addition to selling advertising on
FreeRealTime.com to media buyers and advertisers, the Company will also
distribute third party advertising inventory through its recently launched
Perfect Circle Media ("PCM") division, currently a startup venture. No revenue
has been recognized yet from the PCM venture.
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<PAGE> 21
Users may also access several proprietary and allied subscription based
products and services through the FreeRealTime.com site, from which the Company
generates revenues. Our proprietary BullSession.com service, where we offer
active investors a subscription service of "streaming" real-time quotes and
dynamically updating stock portfolios, currently generates the largest portion
of our monthly subscription revenue. BullSession.com completed the second
quarter ended September 30, 2000 with approximately 4,900 subscribers to
BullSession.com and to a private labeled version thereof, as compared to
approximately 4,800 as of September 30, 1999, a 2% increase. We believe this
modest growth to be mainly attributable to the widespread pull-back of the stock
market, along with reduced trading activity, which began in April 2000. Our
gross margins are significantly higher than the same period last year on
BullSession.com subscription sales (and for the company as a whole) primarily
due to significant reductions in our stock exchange fees paid by the Company for
real time market data, as well as overall economies of scale which have been
achieved. We will continue to explore new opportunities to enhance the
BullSession.com Web site, and also plan to introduce new subscription products
and services in order to pursue continued growth in this segment of our
business. Our source of revenue from the BullSession.com Web site is the sale of
subscriptions at monthly prices ranging from $26 to $50. We also share in
subscription revenues generated from the sale of third party products and
services through our FreeRealTime.com site.
On August 15, 2000, the Company raised approximately $10 million in cash (less
expenses of $1,053,000) through a private placement of its common stock. Los
Angeles based Jefferies and Company, Inc. ("Jefferies"), a national
institutional brokerage and investment banking firm, was the lead investor. Roth
Capital Partners, an investment banking firm based in Southern California and a
major stockholder in RedChip prior to its acquisition by the Company, was also
an investor in the financing. The Company will use the proceeds from this
financing primarily for general working capital purposes, as well as to fund
integration efforts and new businesses for the newly combined FreeRealTime.com
and RedChip entities. The Company also entered into a wide-ranging strategic
alliance
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<PAGE> 22
with Jefferies, pursuant to a signed Letter of Intent (LOI). Under terms of the
LOI, FreeRealTime.com and Jefferies plan a broad-based alliance to provide
Web-based financial transaction services and to jointly market investment
information services, including the distribution of public and private
securities by Jefferies and DigitalOffering.com, FreeRealTime.com's online
distribution portal for these types of transactions. The proposed alliance
contemplates the issuance of additional common stock to Jefferies in exchange
for its contribution of technology resources, including licenses of existing
trading systems as well as ongoing development resources for co-developed
trading tools and execution services. Additionally, the proposed alliance
includes certain joint marketing and selling arrangements for FreeRealTime.com
products and services. The parties will share revenues and fees generated in
future periods from the alliance activities, and the proposed arrangements
provide that Jefferies may receive its share of revenues in shares of
FreeRealTime.com common stock in lieu of cash.
During the previous quarter ended June 30, 2000, the Company formed and
purchased 4 thousand shares of Series A Convertible Preferred Stock in Digital
Offering, Inc., a newly formed Delaware corporation ("Digital Offering"). During
the quarter ended September 30, 2000, the Company elected to convert all of its
preferred stock in Digital Offering into 4,000 shares of common stock, and
purchased an additional 500 shares of common stock in Digital Offering. The
Company plans to operate the transaction services segment of its business
through Digital Offering, including providing access for retail and
institutional investors to on-line private placements and public offerings of
equity securities, market trading in fixed-income securities, and institutional
order execution for the purchase and sale of equity securities. Digital Offering
has filed an application with the National Association of Securities Dealers to
obtain a license that will allow it to participate in fee sharing arrangements
associated with these transactions. Digital Offering made significant progress
in setting up its business operations during the quarter ended September 30,
2000, and continues to work toward launching its business in the coming months.
During the quarter ended September 30, 2000, the Company continued its trend
of producing strong growth in revenue and gross profit over the same period in
the prior year, while our overall net operating loss grew primarily as a result
of significant increases in total selling, general, and administrative expenses
associated with the acquisition of RedChip, as well as in the ongoing businesses
of the Company. As reported in the previous quarter ended June 30, 2000 with
respect to the then pending RedChip acquisition, we have and continue to expect
to incur operating losses, as well as negative cash flow from operations, until
the combined companies achieve the revenue and cost synergies that we believe
will be realized over time. Our spending during the quarter has been focused
largely on the acquisition and integration of the RedChip businesses, as well as
adding compelling content to FreeRealTime.com and launching a new version of
this site, enhancing the performance of our Web sites, building the organization
in all areas, and developing brand awareness. These increased costs centered
primarily around increased payroll and consulting costs with the hiring of
additional members of management, sales and marketing staff, accounting
personnel, customer support personnel, administrative personnel, and by engaging
key consultants, primarily in the software development area. Although we enjoyed
marked growth in revenue and gross profit during this quarter over the same
period last year, there can be no assurance that we will continue to realize
similar growth in the future, nor that we will achieve improved financial
results in the future. We plan to substantially increase our operating and
capital expenditures in order to continue building site traffic and brand
awareness, and in launching new business initiatives.
Our management efforts and strategies are oriented to enhancing our existing
revenues, as well as developing new revenue opportunities for our core
businesses, subsidiaries, and affiliate companies. These efforts include (i)
adding compelling proprietary and allied content to our suite of products and
services, (ii) expanding our mediums for distributing this content from
historically Web only to other traditional mediums including print, radio, and
investor conferences, (iii) continually improving our Web sites so that they
exhibit more robust functionality, additional content, and greater ease-of-use,
(iv) building our in-house direct ad sales force to increase our media sales
revenues, (v) pursuing higher prices, CPM, for our ad impressions through
greater use of user "targeting" ad serving technology and the addition of
non-quote content pages, (iv) developing new open media platforms so that
publicly traded companies and SOHO investors can reach each other, (v) focusing
on additional revenue sources including the sale of access to our registered
user base for advertisers through targeted e-mail marketing campaigns, and new
co-branding alliances with other Web sites involving content and revenue
sharing, (vi) adding new subscription-based products and services, and (vii)
pursuing opportunities to share in revenues generated from on-line transactions.
We also have strategies to drive growth in our subscriber base, and thereby
increase our subscription fees, by enhancing our current subscription products,
and adding new subscription-based tools and content services. Though we expect
to incur 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 cannot give any assurances as to achieving
this objective.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED MARCH 31, 1999 COMPARED TO THE
FISCAL YEAR ENDED MARCH 31, 2000 REVENUES
For Fiscal 1999, total net revenue amounted to $1,396,000 as compared
to $7,198,000 in Fiscal 2000, representing a 416% increase in total net revenue.
The Fiscal 1999 revenues consisted primarily of the sale of on-line banner ads
and sponsorships on FreeRealTime.com (collectively 45% of total revenue, versus
66% in Fiscal 2000) and subscriptions sold on BullSession.com (42% of total
revenue, versus 25% in Fiscal 2000). Additional net revenue was derived from
Web-Hosting and Co-Branding ventures (13% of total revenue in Fiscal 1999,
versus 9% in Fiscal 2000).
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REVENUE FROM ADVERTISING
Revenue from advertising on FreeRealTime.com. Total advertising revenue
for Fiscal 1999 was $631,000, as compared to $4,751,000 in Fiscal 2000,
reflecting growth of 653%. This growth was primarily due to the substantial
increase in the number of users, page views, and ad impressions on the
FreeRealTime.com web site during the fiscal year, as well as from the sale of
e-mail marketing campaigns to advertisers during the fiscal year. 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 2000.
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, CPM,
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. Our average gross ad CPM increased to approximately $2.35
per page view during the fiscal year, an increase of 96% from $1.20 CPM in the
prior year. We are continually making efforts to increase our CPM. 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 CPM is likely to increase, although there can be no assurance that we
will be successful in realizing an increase in CPM 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
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. We also began selling e-mail
marketing campaigns to advertisers during the third quarter of Fiscal 2000.
These campaigns are a more targeted means of advertising to a particular type of
audience that an advertiser is trying to reach. There are two types of e-mail
marketing campaigns that we sell: "direct" and "sponsored." Direct e-mail
campaigns are full e-mail ads by advertisers, whereas a sponsored e-mail is a
FreeRealTime.com content piece with a brief sponsorship by the advertiser noted
at the bottom of the e-mail. Direct e-mail campaigns command as much as
$100-$200 CPM, and sponsored e-mail campaigns command as much as $20-$30 CPM.
Total e-mail marketing revenues were $-0- in Fiscal 1999, as compared to
$323,000 in Fiscal 2000, and represented 7% of total advertising revenue. During
Fiscal 2000 we relied primarily on third party ad sales firms and networks to
sell the substantial majority of our ad impressions and e-mail campaigns. We did
expand our in-house ad sales force during and subsequent to Fiscal 2000 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 ad impressions
or e-mail opportunities to the advertiser. To the extent minimum guaranteed ad
impressions or e-mail opportunities are not met, we have no contractual
obligation to the advertiser to compensate them for un-filled ad impressions or
e-mail opportunities, nor does the advertiser have an obligation to pay for
those un-filled ad impressions or e-mail opportunities. We defer revenue
recognition with respect to un-filled ad impressions and e-mail campaigns until
they are filled, if at all. If we were paid for un-filled impressions or
campaign, we would either return such payment to the advertiser or issue credit
to the advertiser against future impressions or campaigns.
REVENUE FROM SUBSCRIPTIONS SOLD ON BULLSESSION.COM
For Fiscal 2000, we experienced growth over the prior year in both the
number of subscribers to BullSession.com and total subscription revenue. Total
subscription revenue for Fiscal 1999 was $586,000 as compared to $1,788,000 for
Fiscal 2000, representing growth of 205%. Total subscribers to BullSession.com
numbered 3,500 at the end of Fiscal 1999, as compared to 5,200 at the end of
Fiscal 2000, representing growth of 49%. This growth in the number of
subscribers and subscription revenue was primarily attributable to 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
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<PAGE> 24
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 $659,000 in Fiscal 2000,
reflecting growth of 268%. Our web-hosting relationships with Infospace.com and
Zacks.com amounted to $553,000 of the Fiscal 2000 revenues, or 84%. Pursuant to
agreements that will expire, if not renewed, during Fiscal 2001, 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 Go2Net's
SiliconInvestor.com, BigCharts.com, Marketguide.com, WWQuote.com, Amazon.com,
and IPO.com resulted in $106,000 in total revenue for Fiscal 2000, primarily
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 ad impressions on these page views and both parties
share, on a negotiated basis, the ad revenue generated on the co-branded page
views. Subsequent to the end of Fiscal 2000, 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 $5,507,000, or 77% of
revenues, representing an increase of 115% for Fiscal 2000. As such, we improved
from a negative gross margin of 84% in Fiscal 1999 to a positive gross margin
for Fiscal 2000 of 23%. 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, as compared to $3,586,000, or 65%, of total cost of revenues in Fiscal
2000. This improvement in our gross margin, as well as the reduction in the
percentage of total cost of sales attributable to stock exchange fees, is
primarily the result of significant reductions during Fiscal 2000 in the
exchange fees charged for real time market data by the Nasdaq, and the New York
and American Stock Exchanges. In addition, during Fiscal 2000 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 users
and page views on our web sites. Prior to the renegotiation of the datafeed
contract, we paid fees 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 approximately a 90% reduction in our per page-view datafeed costs
for the month of March 1999 as compared to the month of March 2000. We 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. We currently utilize a total of approximately 150 to 200
megabits of bandwidth, but this number can change on a daily basis.
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<PAGE> 25
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 $1,525,000 (21% of revenues)
for Fiscal 2000. The increase in Fiscal 2000 sales and marketing expense
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, amounts paid to a marketing consulting firm engaged to manage our
advertising sales function for a portion of the year, and compensation to sales
and marketing personnel responsible for selling banner ads, buttons, and
sponsorships and managing ad serving and collateral production for
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 2001. 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 $2,835,000, (39% of revenues) for Fiscal 2000,
representing growth in the current period of approximately 414%. 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 web site
operations, technical support, legal, accounting, and administrative support
during Fiscal 2001. 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, project managers, and quality assurance
personnel, as well as fees paid to third party developers and systems
consultants. These individuals are located primarily in Calgary, Alberta. Total
current period growth Product Development expense for Fiscal 1999 was $60,000
(4% of revenues) as compared to Fiscal 2000 which was $357,000 (5% of revenues),
representing 495% growth in the current period. This primarily 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 Director of Software Development, a Product Architect, an
Information Architect, two Senior Project Managers, several developers and
programmers, quality assurance personnel, and office support staff. These
individuals, along with third party consultants, have developed our web sites
during Fiscal 2000. To date, all internal product development costs have been
expensed as incurred. Up until the fourth quarter of fiscal 2000, our software
development team (employees and consultants) was very limited in size and no
amounts were eligible for capitalization. The product and content development
team was expanded substantially during our fourth quarter of fiscal 2000 in
anticipation of expanded development activities. Through the end of fiscal 2000,
none of those activities have qualified for capitalization. It is expected
however, that certain of these expenditures may qualify for capitalization
beginning in fiscal 2001. 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.
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 $1,547,000 for Fiscal
2000 and amortized $316,000 as a non-cash charge during Fiscal 1999, as
compared to $1,425,000 during Fiscal 2000. The deferred compensation is being
amortized to compensation expense over the vesting period of the options. See
Note 6 of Notes to Consolidated Financial Statements.
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INTEREST INCOME (EXPENSE), NET
Net interest income (expense) of ($18,000) for Fiscal 1999 and $71,000
for Fiscal 2000 resulted from interest income earned on our cash balances,
offset by interest expense incurred on debt obligations, including a bank loan,
capital leases, and loans from an officer and director.
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 2000. Deferred tax assets for the year ended March 31,
2000 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.
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 March 31, 2000, approximately $2.5
million in cash and cash equivalents was on hand.
OPERATING ACTIVITIES
We used net cash in our operating activities in the amount of $374,000
during Fiscal 1999, compared to $1,515,000 during Fiscal 2000, which was
primarily the result of our net losses for these periods, and an increase in
accounts receivable, partially offset by an increase in accounts payable and
accrued liabilities. Our operating activities for Fiscal 1999 and Fiscal 2000
are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1999 YEAR ENDED MARCH 31, 2000
--------------------------------------------------------------------------------------------------------
<S> <C>
- Net loss of approximately $2,521,000; - Net loss of approximately $4,380,000;
--------------------------------------------------------------------------------------------------------
- An increase in accounts receivable of - An increase in accounts receivable of
approximately $424,000; approximately $1,116,000;
--------------------------------------------------------------------------------------------------------
- An increase in accounts payable and accrued - An increase in accounts payable and accrued
expenses of approximately $2,078,000; expenses of approximately $2,750,000;
--------------------------------------------------------------------------------------------------------
- Depreciation of approximately $47,000; - Depreciation of approximately $122,000;
--------------------------------------------------------------------------------------------------------
- Provision for doubtful accounts of - Provision for doubtful accounts of
approximately $66,000; and approximately $150,000; and
--------------------------------------------------------------------------------------------------------
- Non-cash charges-stock option grants of - Non-cash charges-stock option grants of
approximately $316,000. approximately $1,425,000.
--------------------------------------------------------------------------------------------------------
</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 2000.
This increase in accounts payable primarily reflects amounts due to our major
suppliers of market data. 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
experienced material collection difficulties, but have recorded certain
write-offs of bad debts, as well as an allowance for uncollectible accounts
primarily associated with one account.
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INVESTING ACTIVITIES
Cash used in investing activities was approximately $246,000 during
Fiscal 1999 compared to $743,000 in Fiscal 2000, 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 $4,266,000 in Fiscal 2000. Cash
used in financing activities was approximately $157,000 during Fiscal 1999
compared to approximately $867,000 during Fiscal 2000. The Fiscal 2000 financing
activities consisted of payments of debt obligations and stock issuance costs.
Cash provided by financing activities was approximately $1,215,000 during Fiscal
1999 as compared to $5,133,000 during Fiscal 2000. Fiscal 2000 cash provided by
financing consisted primarily of proceeds from the sale of common stock.
We have no material financial commitments other than obligations under
our bank loan agreements, and to one 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; and
- 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 2001 we
plan to spend up to $2,000,000 for additional computer hardware, software,
office equipment, and tenant improvements, cash flow permitting. We lease our
Irvine, California facility under a noncancelable operating lease that expires
on November 30, 2000. We lease our Calgary, Alberta facility under a cancelable
operating lease which expires on December 31, 2004. We do not currently intend
to renew our Irvine lease, but intend to relocate our Irvine facility to a
larger facility in Aliso Viejo, California. We will incur additional costs
related to the relocation of the Irvine 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 to fund our current growth plans and to take advantage of unanticipated
opportunities, develop or enhance our web
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<PAGE> 28
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 2000 of $171,206, 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 2001. As noted above, we
have engaged Jefferies & Company, Inc., an investment bank, as our financial
advisor and our lead placement agent in connection with the sale of up to $20
million of our equity 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. covering certain of each other's web-based products and services.
Telescan purchased $3,000,000 of the shares of our common stock sold in the
private equity financing. During Fiscal 2000, 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 (less stock issuance costs of $522,000). For a more
detailed discussion see "Market for Common Equity and Related Stockholder
Matters -- Recent Sales of Unregistered Securities."
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1999
REVENUES
Revenues, which include ad sales, subscription fees, service fees, and
web-hosting/co-brand revenue, increased by 110% to $2,801,000 in the three
months ended September 30, 2000 from $1,335,000 in the three months ended
September 30, 1999. The
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<PAGE> 29
increase in total revenue was primarily the result of an increase in ad
revenues, new service revenues from the RedChip Partners program, new
subscription revenues from sales of the RedChip Review, and revenues generated
from software development services provided by the Company to a third party. Ad
revenues increased primarily due to the substantial increase from period to
period in the number of users, page views, and ad impressions on the
Freerealtime.com Web site, as well as from the sale of email marketing campaigns
to advertisers during the quarter.
Revenue from advertising on Freerealtime.com increased by 108% to
$1,612,000 in the three months ended September 30, 2000 from $776,000 in the
three months ended September 30, 1999. Revenue from subscriptions increased by
41% to $619,000 in the three months ended September 30, 2000 from $440,000 in
the three months ended September 30, 1999, primarily resulting from growth in
the number of BullSession subscribers as well as new subscription revenue from
sales of the RedChip Review. Service revenue increased to $494,000 in the three
months ended September 30, 2000 from $-0- in the three months ended September
30, 1999. This was the result of new service revenue from the RedChip Partners
program totaling $223,000, and from software development services, totaling
$271,000, provided by the Company to Imperial Capital, LLC ("IC"), to develop a
fixed-income securities information and trading Web site for IC. Revenue from
web-hosting and co-branding ventures decreased by 36% to $76,000 in the three
months ended September 30, 2000 from $119,000 in the three months ended
September 30, 1999, primarily due to the termination by the Company of a
co-branded partner contract as well as decreased traffic on co-branded Web
sites.
COST OF REVENUES
Cost of revenues increased by 17% to $1,422,000 in the three months ended
September 30, 2000 from $1,213,000 in the three months ended September 30, 1999.
This increase was primarily the result of adding new costs associated with the
production of the RedChip Review series of print and on-line publications,
partially offset by reduced rates paid for real-time market data and overall
economies of scale associated with higher volumes of traffic and revenues from
our FreeRealTime.com Web site. Cost of revenues as a percent of revenues
decreased to 51% in the three months ended September 30, 2000 from 91.1% in the
three months ended September 30, 1999.
OPERATING EXPENSES
SALES AND MARKETING. Sales and Marketing expense increased by 371% to
$1,054,0000 in the three months ended September 30, 2000 from $224,000 in the
three months ended September 30, 1999. Sales and Marketing expense as a percent
of revenues increased to 38% in the three months ended September 30, 2000 from
17% in the three months ended September 30, 1999. The period to period increase
in Sales and Marketing expense was primarily the result of increased advertising
sales commissions paid to third party ad sales firms as a result of higher ad
revenues, salaries, commissions, and benefits related to additional sales and
marketing personnel hired to manage our advertising sales function and to direct
the overall marketing efforts of the Company, and other marketing and
advertising expenditures.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased by
162% to $1,788,000 in the three months ended September 30, 2000 from $683,000
in the three months ended September 30, 1999. General and administrative expense
as a percent of revenues increased to 64% in the three months ended September
30, 2000 from 51% in the three months ended September 30, 1999. The period to
period increase was primarily the result of increased costs associated with
growth in the Company's operations, in addition to new costs associated with the
RedChip businesses, including additional personnel in the areas of executive
management, operations, administration, customer care, accounting, and corporate
development, as well as consulting and other professional fees, as well as
greater occupancy costs, legal and accounting fees, insurance costs,
telecommunications costs, and other overhead costs associated with managing the
growth in our various businesses.
PRODUCT DEVELOPMENT. Product development expense increased by 150% to
$267,000 in the three months ended September 30, 2000 from $107,000 in the three
months ended September 30, 1999. Product development expense as a percent of
revenues increased slightly to 10% in the three months ended September 30, 2000
from 8% in the three months ended September 30, 1999. The period-to-period
increase in product development expense 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.
MERGER EXPENSES. Merger Expenses were $114,000 in the three months ended
September 30, 2000, and $-0- in the three months ended September 30, 1999. These
represented additional costs associated with the acquisition of RedChip.com,
Inc. subsequent to the closing of the acquisition.
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NON-CASH CHARGES-STOCK OPTION GRANTS. For the three months ended September
30, 2000, $34,000 was amortized to expense as a non-cash charge from unearned
compensation recorded as the result of vested stock options granted during this
as well as previous periods, as compared to $105,000 for the three months ended
September 30, 1999. As the unearned compensation is amortized based on the
vesting period of the stock options granted, 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.
GOODWILL AMORTIZATION. For the three months ended September 30, 2000, we
recorded amortization of goodwill resulting from the acquisition of RedChip.com,
Inc. of $760,000 (see Footnote 3 to the unaudited financials statements
incorporated herein), as compared to no goodwill amortization for the three
months ended September 30, 1999. Goodwill is amortized over three years.
INTEREST INCOME (EXPENSE), NET
Net interest income was $55,000 in the three months ended September 30,
2000, compared to net interest expense of $6,000 incurred in the three months
ended September 30, 1999. Interest income during the three months ended
September 30, 2000 was earned on money market investments and certificates of
deposit primarily from the proceeds raised from the sale of the Company's common
stock.
INCOME TAXES
We have incurred losses since inception and again during the three months
ended September 30, 2000, and anticipate losses for the foreseeable future. We
have therefore recorded no provision for income taxes during these periods.
Deferred tax assets for the three months ended September 30, 2000 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, or a current or deferred
tax liability as appropriate, over future periods.
SIX MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1999
REVENUES
Revenues, which include ad sales, subscription fees, service fees, and
web-hosting/co-brand revenue, increased by 103% to $5,779,000 in the six months
ended September 30, 2000 from $2,840,000 in the six months ended September 30,
1999. The increase in total revenue was primarily the result of an increase in
ad revenues, new service revenues from the RedChip Partners program, new
subscription revenues from sales of the RedChip Review, and revenues generated
from software development services provided by the Company to a third party. Ad
revenues increased primarily due to the substantial increase from period to
period in the number of users, page views, and ad impressions on the
Freerealtime.com Web site, as well as from the sale of email marketing campaigns
to advertisers during the quarter.
Revenue from advertising on Freerealtime.com increased by 121% to $3,679,000
in the six months ended September 30, 2000 from $1,661,000 in the six months
ended September 30, 1999. Revenue from subscriptions increased by 21% to
$1,073,000 in the six months ended September 30, 2000 from $885,000 in the six
months ended September 30, 1999, primarily resulting from growth in the number
of BullSession subscribers as well as new subscription revenue from sales of the
RedChip Review. Service revenue increased to $731,000 in the six months ended
September 30, 2000 from $-0- in the six months ended September 30, 1999. This
was the result of new service revenue from the RedChip Partners program totaling
$223,000, and from software development services, totaling $508,000, provided by
the Company to Imperial Capital, LLC ("IC"), to develop a fixed-income
securities information and trading Web site for IC. Revenue from web-hosting and
co-branding ventures remained relatively flat, increasing by less than 1% to
$296,000 in the six months ended September 30, 2000 from $294,000 in the six
months ended September 30, 1999.
COST OF REVENUES
Cost of revenues decreased by 19% to $2,306,000 in the six months ended
September 30, 2000 from $2,830,000 in the six months
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ended September 30, 1999. This decrease was primarily the result of reduced
rates paid for real-time market data and overall economies of scale associated
with higher volumes of traffic and revenues from our FreeRealTime.com Web site,
partially offset by new costs associated with the production of the RedChip
Review series of print and on-line publications. Cost of revenues as a percent
of revenues decreased to 40% in the six months ended September 30, 2000 from
100% in the six months ended September 30, 1999.
OPERATING EXPENSES
SALES AND MARKETING. Sales and Marketing expense increased by 236% to
$1,785,000 in the six months ended September 30, 2000 from $532,000 in the six
months ended September 30, 1999. Sales and Marketing expense as a percent of
revenues increased to 31% in the six months ended September 30, 2000 from 19% in
the six months ended September 30, 1999. The period to period increase in sales
and marketing expense was primarily the result of increased advertising sales
commissions paid to third party ad sales firms as a result of higher ad
revenues, salaries, commissions, and benefits related to additional sales and
marketing personnel hired to manage our advertising sales function and to direct
the overall marketing efforts of the Company, and other marketing and
advertising expenditures.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased by
162% to $2,827,000 in the six months ended September 30, 2000 from $1,081,000 in
the six months ended September 30, 1999. General and administrative expense as a
percent of revenues increased to 49% in the six months ended September 30, 2000
from 38% in the six months ended September 30, 1999. The period to period
increase was primarily the result of increased costs associated with growth in
the Company's operations, in addition to new costs associated with the RedChip
businesses, including additional personnel in the areas of executive management,
operations, administration, customer care, accounting, and corporate
development, as well as consulting and other professional fees, as well as
greater occupancy costs, legal and accounting fees, insurance costs,
telecommunications costs, and other overhead costs associated with managing the
growth in our various businesses.
PRODUCT DEVELOPMENT. Product development expense increased by 777% to
$535,000 in the six months ended September 30, 2000 from $61,000 in the six
months ended September 30, 1999. Product development expense as a percent of
revenues increased to 9% in the six months ended September 30, 2000 from 2% in
the six months ended September 30, 1999. The period-to-period increase in
product development expense 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.
MERGER EXPENSES. Merger expenses were $114,000 in the six months ended
September 30, 2000, and $-0- in the six months ended September 30, 1999. These
represented additional costs associated with the acquisition of RedChip.com,
Inc. subsequent to the closing of the acquisition.
NON-CASH CHARGES-STOCK OPTION GRANTS. For the six months ended September 30,
2000, $193,000 was amortized to expense as a non-cash charge from unearned
compensation recorded as the result of vested stock options granted during this
as well as previous periods, as compared to $543,000 for the six months ended
September 30, 1999. As the unearned compensation is amortized based on the
vesting period of the stock options granted, 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.
GOODWILL AMORTIZATION. For the six months ended September 30, 2000, we
recorded amortization of goodwill resulting from the acquisition of RedChip.com,
Inc. of $760,000 (see Footnote 3 to the unaudited financials statements
incorporated herein), as compared to no goodwill amortization for the three
months ended September 30, 1999. Goodwill is amortized over three years.
INTEREST INCOME (EXPENSE), NET
Net interest income was $82,000 in the six months ended September 30, 2000,
compared to net interest expense of $9,000 incurred in the six months ended
September 30, 1999. Interest income during the six months ended September 30,
2000 was earned on money market investments and certificates of deposit
primarily from the proceeds raised from the sale of the Company's common stock.
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INCOME TAXES
We have incurred losses since inception and again during the six months ended
September 30, 2000, and anticipate losses for the foreseeable future. We have
therefore recorded no provision for income taxes during these periods. Deferred
tax assets for the six months ended September 30, 2000 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, 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, from loans from stockholders, directors, and
other outside parties, and from capital lease arrangements. As of September 30,
2000, approximately $5.6 million in cash and cash equivalents was on hand.
OPERATING ACTIVITIES
We used net cash in our operating activities in the amount of $4,177,000
during the six months ended September 30, 2000, as compared to $186,000 during
the six months ended September 30, 1999. Net cash used in operating activities
in the six months ended September 30, 2000 was primarily the result of our net
loss for the period, an increase in accounts receivable and prepaid expenses,
and a decrease in accounts payable, accrued expenses and deferred revenue. Net
cash used in operating activities in the six months ended September 30, 1999 was
primarily the result of our net loss for the period, and an increase in accounts
receivable and prepaid expenses, partially offset by an increase in accounts
payable, accrued liabilities, and deferred revenue:
SIX MONTHS ENDED SEPTEMBER 30, 2000 SIX MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------- -----------------------------------
- Net loss of approximately - Net loss of
$2,659,000; approximately $2,216,000;
- An increase in accounts - An increase in
receivable of accounts receivable of
approximately $388,000; approximately $572,000;
- An increase in prepaid - An increase in
and other assets of prepaid expenses and other
approximately $340,000; assets of $690,000;
- A decrease in accounts - An increase in
payable and accrued accounts payable and accrued
expenses of expenses of
approximately $1,717,000; approximately $2,121,000;
- Depreciation of - Depreciation of
approximately $177,000; approximately $51,000;
- Goodwill Amortization of - Non-cash
approximately $760,000 charges-stock option grants
of approximately
- Non-cash charges-stock $543,000; and
option grants of
approximately - An increase in
$193,000; and deferred revenue of
approximately
- A decrease in deferred $523,000.
revenue of approximately
$463,000.
The amount of our accounts receivable at each period-end varies, primarily due
to the timing of our advertising and sponsorship campaigns, and the growth in
our subscription revenue, transaction based revenue, and web host/co-brand
revenue. During the quarter, we experienced material collection difficulties
with several customer accounts, and have recorded an allowance for uncollectible
accounts accordingly for these accounts as well as a percentage of other
outstanding receivables.
INVESTING ACTIVITIES
Cash used in investing activities was approximately $1,394,000 during the six
months ended September 30, 2000, compared to $127,000 during the six months
ended September 30, 1999, and consisted of $700,000 of cash paid, net of cash
received, in acquiring RedChip.com, Inc. (i.e. cash acquisition costs) during
the six months ended September 30, 2000, as well as additional expenditures for
property and equipment in both periods.
FINANCING ACTIVITIES
Net cash provided by financing activities was approximately $8,679,000 during
the six months ended September 30, 2000 compared to approximately $3,422,000
during the six months ended September 30, 1999. Cash used in financing
activities during the six months ended September 30, 2000, was approximately
$1,788,000, as compared to $757,000 during the six months ended September 30,
1999, and consisted of payments of debt obligations and stock issuance costs.
Cash provided by financing activities during these same periods was
approximately $10,467,000 and $4,179,000, respectively, which consisted
primarily of gross proceeds from the sale of
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common stock and the exercise of stock options.
We have no material financial commitments other than 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,
RedChip.com, BullSession.com, DigitalOffering.com, and
PerfectCircleMedia.com, including functionality, content, and back-end
systems;
- computer servers and other computer equipment to support growth in
site traffic;
- software developers, computer programmers, and other technical staff;
bandwidth and networking equipment and infrastructure;
- information systems and furniture and fixtures for new employees and
facilities expansion;
- additional personnel in the areas of content production, sales,
marketing, business development, customer support, accounting, and
administration;
- increased promotional activities, advertising, and other branding
efforts, and
- other content production and development costs.
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 six 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 2001 (i.e. the
year ended March 31, 2001) we plan to spend up to $3,500,000 for computer
hardware, software, office equipment, and tenant improvements. We lease our
Irvine, California facility under a noncancelable operating lease that expires
on December 31, 2000. We will relocate our Irvine operations to a new facility
in Aliso Viejo, California in December 2000 pursuant to a 5 year non-cancelable
operating lease. We will incur additional costs related to the relocation of the
Irvine operations and may have to pay rent on two leases for a period of time.
We recently moved our Calgary office into a larger facility in January 2000,
under a cancelable operating lease which expires on January 1, 2005.
RedChip.com, Inc.'s main facility is located in Portland, Oregon, pursuant to a
noncancelable sublease between RedChip.com and Roth Capital Partners, a related
party stockholder in the Company, that expires on June 30, 2005. RedChip.com
also maintains small offices in San Francisco, California and Minneapolis,
Minnesota, both of which are sub-leased on a month-to-month basis from Roth
Capital Partners. The Company also sub-leases a small office in New York City on
a month-to-month basis from Jefferies and Company, a related party stockholder
in the Company. 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 to fund our current growth plans and to take advantage of
unanticipated opportunities, to develop or enhance our Web sites, or otherwise
to respond to competitive pressures, could be significantly limited. Based on
net proceeds received from the sale of equity securities during fiscal 2001, and
management contingency plans to curtail growth 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 2001. We have
engaged Jefferies & Company, Inc., an investment bank, as our financial advisor
and our lead placement agent in connection with the sale of up to $20 million of
our equity securities, of which approximately $10 million has been raised
pursuant to this engagement as noted above.
During the six months ended September 30, 2000 we completed two private
equity financings in which we sold an aggregate of 3,850,635 shares of Common
Stock for total gross proceeds of approximately $10,183,000.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Investors are cautioned that certain statements contained in this Prospectus
as well as some of our statements in periodic press
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releases and some oral statements of our officials during presentations about
the company are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include
statements that are predictive in nature, which depend upon or refer to future
events or conditions, which include words such as "believes," "anticipates,"
"estimates," "expects" or similar expressions. In addition, any statements
concerning future financial performance, ongoing business strategies or
prospects, and possible future actions, which may be provided by our management,
are also forward-looking statements. Forward-looking statements are based on
current expectations and projections about future events and are subject to
risks, uncertainties, and assumptions about our company, economic and market
factors and the industry in which we do business, among other things. These
statements are not guaranties of future performance and we have no specific
intention to update these statements.
Actual events and results may differ materially from those expressed or
forecasted in forward-looking statements due to a number of factors. The
principal important risk factors that could cause our actual performance and
future events and actions to differ materially from such forward-looking
statements, include, but are not limited to, those set forth below:
- our limited operating history,
- intense competition for Web-based business and financial content,
- need to establish and maintain strategic relationships with other
Web-sites,
- our dependence on the various Exchanges for real-time stock quotes,
- inability to attract advertisers to our site,
- our reliance on a third party advertising sales force,
- changes in government regulation and legal uncertainties pertaining to
the Web, and
- disruptions and interruptions in service due to Web-site failure.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, which arise during the normal course of
business from changes in foreign exchange rates and interest rates. A discussion
of our primary market risks associated with our foreign currency transactions,
short-term investments, and long-term debt exposures is presented below.
INTEREST RATE SENSITIVITY
The primary objective of our investment activities is to preserve
principal while at the same time maximizing the income we receive from our
investments without significantly increasing risk. Some of the securities that
we have invested in may be subject to market risk. This means that a change in
prevailing interest rates may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing market rate and the prevailing interest
rate later rises, the principal amount of our investment will probably decline.
To minimize this risk, we maintain our portfolio of cash equivalents in money
market funds. In general, money market funds are not subject to market risk
because the interest paid on such funds fluctuates with the prevailing interest
rate. As of September 30, 2000, all of our investments mature in three months or
less.
RECENTLY ADOPTED ACCOUNTING STANDARDS
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes new standards for
reporting derivative and hedging information. The standard is effective for
periods beginning after June 15, 2000 and will be adopted by us by April 1,
2001. We have not assessed the impact that the adoption of this standard will
have on our consolidated financial statements.
In December 1999, the SEC staff issued Staff Accounting Bulletin No.
101 ("SAB 101"), "Revenue Recognition in Financial Statements" as amended by
Staff Accounting Bulletins No. 101 A and 101 B. These bulletins summarize
certain of the staff's views about applying generally accepted accounting
principles to revenue recognition in financial statements. The Company will
be required to follow the guidance in SAB101 no later than its fourth quarter
of 2001, with restatement of earlier quarters in 2001 required, if necessary.
The SEC has recently issued further guidance with respect to adoption of
specific issues addressed by SAB 101. The Company is currently assessing the
impact, if any, SAB101 may have on its consolidated financial position or
results of operations.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation - an interpretation of APB
Opinion No. 25 ("FIN 44"). This Interpretation clarifies the definition of
employee for purposes of applying Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employee ("APB 25"), the criteria for determining
whether a plan qualifies as a noncompensatory plan, the accounting consequence
of various modifications to the terms of a previously fixed stock option or
award, and the accounting for an exchange of stock compensation awards in a
business combination. This Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after either
December 15, 1998, or January 12, 2000. We adopted FIN 44 during the quarter
ended September 30, 2000. This adoption did not have a material effect on our
consolidated financial position or results of operations.
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BUSINESS
We are a Web-centric financial media and investment services company,
empowering independent investors with real-time actionable insight, including
market data, research and tools, in order to make knowledgeable investing
decisions. We provide investment information services to a wide range of
individual and institutional investors, with an emphasis on an audience that we
refer to as Sophisticated Online Home and Office ("SOHO") investors, which
include independent investors, smaller institutional investors, and investment
professionals such as executives, managers, and brokers and their clients. In
excess of 1.3 million investors have registered for our online services,
including www.FreeRealtime.com, www.RedChip.com, and the Red Chip Review and
related research services. We estimate that by publishing and distributing
investment information we reach our investor audience several million times
every month and, during the month of September 2000, our investor audience
viewed in excess of 140 million pages of investment information on our various
services.
We produce and distribute a broad range of investment information
services, with a focus on "real-time actionable insight" by offering free,
real-time stock quotes and value-added content, including news, market
commentary, company research, and analytical tools such as charting and
portfolio stock tracking. We publish value-added content from a number of allied
content partners as well as from our own proprietary research group, the Red
Chip Review. In proprietary content our strategy is to provide value discovery
and insight for our investors with in-depth coverage on sectors and companies
that are largely overlooked by traditional Wall Street investment banks. Our
award-winning Red Chip Review, including our professional staff of approximately
30 analysts, editors and reporters, concentrate on "discovering tomorrow's blue
chips today" with independent research on over 300 companies, financial analysis
and commentary created every trading day, and investment profiles on over 5000
publicly traded companies. We deliver our information services across an
integrated platform of various media including Websites, e-mail, print
publications, investor conferences, webcasts, teleconferences and certain
broadcast media, and we characterize ourselves as "web-centric" because we
strive to have the best practices and capabilities of the Web - such as real
timeliness, interactivity and customer targeting - influence the quality and
delivery of our information over these media.
Our investment information services are offered on a "tiered" basis
with a substantial amount of free content, centered around our FreeRealtime.com
Web site, and certain premium research and tools available on a pay or
subscription basis. Our free services are supported through the sale of
advertising to media advertisers, corporate advertisers, and sponsors and
partners. We have a "demographically attractive" audience for our advertisers
because, based on customer survey and research, our investor audience has
income, wealth, education and consumption attributes significantly above those
of the average U.S. consumer. We also offer subscription services from both
allied service providers as well as services that we own and operate, including
our BullSession web site, a subscription service of "streaming" real-time stock
quotes and dynamically updating stock portfolios, and the Red Chip Review
research service. Our various subscription services have prices ranging from $99
to $25,000 per year.
While our service strategy remains focused on being a leading
"independent knowledge source for investors," in response to requests from our
investor audience we are developing "one click" away securities trading and
transaction services, which will be offered through allied partners and
affiliates. In May 2000, we formed Digital Offering, Inc., a Delaware
corporation ("Digital Offering"), which owns www.DigitalOffering.com. Currently
we own in excess of 80% of the capital stock of Digital Offering and certain of
our executive officers serve as members of management and of the board of
directors of Digital Offering. We plan to operate the transaction services
segment of our business model through Digital Offering, including providing
access for retail and institutional investors to online private placements and
public offerings of equity securities as well as retail and institutional order
execution for the trading of equity securities. We have recently received the
necessary regulatory approval to operate as a registered broker/dealer, which
will allow Digital Offering to realize commissions from securities transactions
and to participate in fee sharing arrangements associated with transactions
conducted through third party allies. Currently, as many of our information
services are offered free of charge to our registered users, the sale of
advertising represents our major source of revenue; however, if we develop
our "long term business model," then subscription and services sales and
transaction fees and commissions are expected to represent the majority of our
sales.
In recent years, there has been substantial growth in the ownership of
securities, as well as a related increase in securities trading volumes. For
every securities transaction, investors typically engage in multiple
"information transactions," including price quotes, research, financial news and
portfolio review and tracking and, therefore, the growth in ownership and
associated trading activity has created substantial demand by investors for more
market data, investment research, news and commentary. The development of the
Web as both a robust communications medium and an efficient commerce marketplace
is also rapidly changing the markets for securities transactions and investment
information services. Consequently, individual investors -- with easy access to
Web-based information previously available generally only to investment
professionals and to faster, cheaper and more convenient online trading -- have
been taking greater control of their investments. Increasingly, this growing
group of self-directed investors is seeking timely, independent and insightful
market data, investment research and financial news and commentary that can help
them make knowledgeable investing decisions.
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On August 18, 2000, we merged with RedChip.com, Inc., a Delaware
corporation ("RedChip"). RedChip is now a wholly-owned subsidiary of
Freerealtime.com, Inc. In connection with the merger with RedChip, we issued an
aggregate of 3,999,925 shares of our common stock for all of the outstanding
capital stock, including stock options, of RedChip, of which 10% shares are
subject to an escrow to secure the indemnification obligations of the principal
stockholders of RedChip. RedChip is an independent research firm with an online
vertical portal, www.redchip.com, which provides proprietary research and
targeted information on emerging growth companies with a strategy of
"discovering tomorrow's blue chips today." In addition to research, news and
commentary, the RedChip web site also provides investors with trading
information, investment tools, community features and education.
In conjunction with a significant purchase by Jefferies & Co., Inc.
of our common stock, we have entered into a non-binding letter of intent with
Jefferies regarding a wide-ranging strategic alliance to provide online
financial transaction services and to jointly market investment information
services. The proposed alliance includes the contribution by Jefferies of
certain technology resources, including licenses for existing trading systems
and programming and development resources for co-developed trading and execution
products and services, in exchange for shares of our common stock, which shares
may be valued at prices equal to or higher than the offering price described
herein. Additionally, the proposed alliance contemplates certain joint marketing
and selling arrangements, with respect to which the parties will share any
revenues and fees generated in future periods by such co-marketing arrangements.
The proposed alliance will provide that Jefferies may receive its share of
revenues in shares of our common stock, in lieu of cash. As a result of these
proposed arrangements, we may issue significant additional shares of common
stock to Jefferies that may result in significant dilution to our stockholders.
We have commenced negotiations on definitive agreements; however, there can be
no assurance that we will be able to enter into such definitive agreements or,
if we do, what, if any, benefits will result from the strategic alliance with
Jefferies.
STRATEGY
Expand Compelling Content to Maintain and Increase Our Large Investor
Audience. Our primary strategy is to develop a large and loyal audience of
investors by offering "real time actionable insight" through our various
investment information services, including the Freerealtime and Red Chip Web
sites. We intend to maintain and grow our investor audience by continuing to
provide the financial content, tools and services that we believe investors
desire, such as real-time market data and real-time news, proprietary company
research, profiles, and analysis, portfolio management tools, market commentary,
community message boards and by seeking to provide additional features including
sophisticated stock screening and trading tools and access to transaction
services that enable "one click" away trading of equity and fixed income
securities. We also intend to enhance the quality of our online research, news
and investment products with "rich media" and broadband intensive content such
as webcast conferences and company presentations. Red Chip also plans to create
the Red Chip Index, an index of small-cap stocks, in agreement with fund manager
ICM Asset Management. We believe that the suite of financial products and
services that we offer encourages our current registered investors, as well as
new investors to our services who register each market day, to utilize our
investment information services often and for long periods of time. We intend to
begin allocating a portion of available resources to advertising our Web sites
and other information services for the first time beginning in the fiscal year
ended March 31, 2001, ("Fiscal 2001"), in order to increase our investor
audience reach.
Develop "Co-Brand," Web-Hosting and Other Marketing Programs. We
continue to pursue "co-branded" contractual relationships with other high
quality and high traffic Web sites, pursuant to which we produce and market a
co-branded page where we share content and tools with the co-brand partner, and
share revenues generated from advertising on these pages as well as from
subscriptions to these co-marketed services. Such relationships build users,
site traffic and brand awareness for both parties, while also generating revenue
through ad sales and fee sharing arrangements. Additionally, the number of our
registered users and subscribers allows us to generate additional revenues by
marketing our co-brand partners' (and other advertisers') products and services
directly to a targeted base of these users and subscribers each month through
e-mail marketing campaigns. Currently, we have co-brand agreements with various
web sites, including MarketGuide.com, JAGNotes.com, Telescan.com,
WallstreetCity.com, INVESTools.com, Go2Net.com, IPO.com, InvestmentHouse.com and
mPower.com.
Capitalize on Attractive Audience Demographics. We believe our
information services attract investors who, as a group, have higher incomes,
more wealth and are better educated than the average users of the Web and other
mass media, and therefore present an attractive medium for companies that
advertise and engage in commerce over the Internet. Through data gathered from
users who register with our services and from periodic surveys and customer
research, we have knowledge of and track user activity on our Web sites 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 investor audience. We believe this strategy helps attract new advertisers
and increase the sales prices we receive for our advertising, marketing and
corporate awareness campaigns.
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Upsell Investor Audience to Subscription Services. We also market both
owned and allied subscription-based tools and services to our investor audience.
To increase our subscription base we attempt to "upsell" the large community of
users on our free services, including our Freerealtime web site, to the multiple
subscription services of the Red Chip Review and our BullSession portfolio tool
as well as to other subscription services with which we are allied. In addition
to our owned subscription services, we have entered into co-marketing agreements
with various companies, such as Telescan.com, JagNotes.com and
InvestmentHouse.com, wherein we market these parties' subscription services to
the users on our Freerealtime web site and share in the resulting revenues.
Provide On-Line Financial Transaction Services. We believe that our
customers often use our free and subscription-based content and services as
decision-making tools for "actionable insight," leading them to enter into
various online and offline transactions such as the purchase or sale of equity
and fixed income securities and the purchase of other financial products and
services. We believe the fees realized by third parties from transactions with
our customers are substantial. Accordingly, we have formed Digital Offering and
recently received the necessary regulatory approval to operate as a registered
broker/dealer, which will allow our Digital Offering subsidiary to realize
commissions from securities transactions and to participate in fee sharing
arrangements associated with transactions conducted through third party allies.
We are pursuing transaction alliances to direct or network our investor
audience's transaction activity to particular third party providers in exchange
for a participation in the resulting transaction fees. In particular, we have
entered into a letter of intent to enter into a definitive agreement with
Jefferies regarding a wide-ranging strategic alliance to provide online
financial transaction services. We also plan for Digital Offering to operate as
an online co-managing underwriter and co-private placement agent to provide our
retail and institutional investors with online private placements and public
offerings of equity securities. There can be no assurance that we will be able
to develop Digital Offering as online broker-dealer or enter into definitive
agreements for these transaction alliances, including the one with Jefferies, or
that if we do, what benefits we will realize from such arrangements or
developments.
INFORMATION SERVICE & PRODUCTS
Our Free Information Services: The Freerealtime and Red Chip Web Sites.
The Freerealtime web site provides unlimited, free, real-time stock quotes, as
well as business and company news, market statistics and commentary, fundamental
company information and research, and free analytical tools such as charting,
portfolio management and message boards. The RedChip Web site operates as a free
community portal designed to educate and attract investor awareness in the
emerging growth market sector with an emphasis on "discovering tomorrow's blue
chips today." RedChip provides such services as RedChip Reporter, which provides
financial news and commentary, RedChip Radar, which tracks and highlights
prominent discovery stocks, RedChip Profiles, which provides proprietary
investment profiles on various Red Chip-type companies, and RedChip Events,
which provides online webcasts of investor conferences, company conference calls
and presentations, interviews and other relevant topics. We believe that
offering comprehensive market data, research, business news, financial
programming and analytical 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.
Our free Web sites provide stock quotes from all major U.S. stock
markets (the "Exchanges"). These quotes are offered in real time for free to
users on our FreeRealtime Web site. 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 research 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, our
Web sites also provide information as to various market and industry indices as
well as commodity, options and currency markets. Our Web sites aggregate
numerous news feeds from around the world, sort and organize articles according
to industry, company and type of news. Our news feeds include BusinessWire,
PRNewswire, Reuters, Associated Press and United Press International. In
addition to substantial news and commentary created and produced by our staff at
the Red Chip Review, our news and market commentary partners include Comtex
News, Reuters, RealtimeTraders.com, StreetAdvisor.com, Zacks Investment
Research, JAGNotes.com and INVESTools.com and such information is updated
throughout the trading day.
Our Subscription Services. While most of the programming available on
our Freerealtime and Red Chip Web sites 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 allied
and owned services.
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<PAGE> 39
The RedChip Review is a publication that provides individual and
institutional based investors with value-added and independent research coverage
as well as analytic tools for evaluating such coverage. The RedChip Review
provides fundamental research coverage on over 300 companies and investment
profiles on approximately 5,000 companies. This is a subscriber based service
that is available both online and in print. Our BullSession web site is a
subscription-based service that provides a portfolio management tool featuring
"streaming" real-time, ticker-tape quotes and dynamically updating stock
portfolios. The central feature of the BullSession service is the sophisticated
TickerTracker(TM) which allows a subscriber to monitor a custom set of
portfolios consisting of stocks and indexes. Currently, our owned subscription
services have in excess of 5,000 individual and institutional subscribers, with
yearly subscriptions ranging from $99 to $25,000.
In addition to our owned subscription services, we have entered into
co-marketing agreements with various companies, such as Telescan.com,
InvesTools.com, JagNotes.com and InvestmentHouse.com, wherein we market these
parties' subscription services to our investor audience and share in the
resulting subscription revenues.
BUSINESS MODEL
Our mission is to empower our audience of Sophisticated Online Home and
Office, or SOHO investors with real-time actionable insight in order to make
knowledgeable investing decisions. We have product and service strategies
designed to produce such compelling and insightful content, and thereby attract
a large, demographically attractive audience. Our business model to "monetize"
or deliver value to our constituents from this investor audience is based on
four primary revenue or business units.
Perfect Circle Media. We produce and distribute substantial amounts of
free investment information, which we support through the sale of advertising
and marketing campaigns to media advertisers, corporate advertisers, and
sponsors and partners. We have recently established a media sales group, Perfect
Circle Media, which consists of twelve professionals who represent and sell the
advertising inventory on our various media to advertisers, agencies and media
buyers. Perfect Circle Media pursues an integrated marketing solutions approach
which offers marketing solutions across our various media, including our own Web
sites, e-mail database, print publications, investor conferences, Webcasts,
teleconferences and certain broadcast media. In addition to the sale of our own
media inventory, Perfect Circle Media has begun to represent and sell the
advertising inventory of certain Web-based financial services companies. We
receive a share of the media sales from representing such companies and we
believe that, by diversifying and expanding our collective investor audience, we
have improved marketing solutions for our media advertisers.
RedChip Partners. RedChip Partners is a business-to-business service
designed to enhance the awareness and appeal of publicly traded Red Chip-type
companies to the investment community, including our substantial investor
audience. RedChip Partners operates an Investor Awareness Program that allows
the RedChip company executives to make presentations at our RedChip Review
investment conferences, including our co-sponsored Roth Capital Partners and Red
Chip Growth Stock Conference, and to broadcast their conference calls online and
webcast their roadshows and management presentations. Through the Investor
Awareness Program, RedChip Partners also creates in-depth investment profiles
and other company-specific information that present the operating history and
management of the Partner companies. Our RedChip Partners has a sales and
service fulfillment organization of approximately ten professionals and we sell
this service through a personal sales approach to Partner company executives or
to their outside Corporate Communications firms. Currently, approximately 65
companies participate in the RedChip Partner's Investor Awareness Program with
annual revenues from the program ranging from $9,000 to $36,000 per company.
Subscription & Service Sales. We operate a "tiered" content strategy
through which we offer premium investment research, information and tools on a
pay or subscription basis. We have certain subscription services that we own and
operate, including our BullSession web site, a "streaming" portfolio management
tool, and our proprietary research service, the Red Chip Review, as well as
allied subscription services for investment newsletters and research, stock
screening tools, and market commentary and analysis from which we share a
portion of the subscription fees. Depending on the particular service, our
subscriptions are sold to both individual and institutional investors, and on an
enterprise-wide basis. Our various subscriptions services have prices ranging
from $99 to $25,000 per year and we utilize marketing programs to reach
individual investors and a direct sales force to sell our services to
institutions and corporate enterprises. In addition to subscriptions, we also
syndicate certain of our information, including our real time market data
services and our proprietary research, directly to other Web-based financial
information and services providers, for which we realize sales on an ad sales
sharing, pay-per-view, bulk rate basis.
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<PAGE> 40
Digital Offering Transaction Services. We recently formed Digital
Offering with a plan to operate the transaction services segment of our business
model through Digital Offering, including providing access for retail and
institutional investors to online private placements and public offerings of
equity securities as well as retail and institutional order execution for the
trading of equity securities. We have received the necessary regulatory approval
to operate as a registered broker/dealer, which will allow Digital Offering to
realize commissions from securities transactions and to participate in fee
sharing arrangements associated with transactions conducted through third party
allies. In addition to securities offerings and trading, we expect to utilize
Digital Offering to receive payment for certain research sales to institutional
investors and financial institutions. We are developing our transaction services
through Digital Offering and have yet to realize any revenues in our
broker-dealer subsidiary and there can be no assurance that we will be able to
develop Digital Offering as an online broker-dealer or enter into definitive
agreements for transaction alliances, including the one with Jefferies, or that
if we do, what benefits we will realize from such arrangements or developments.
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
The data center and network operations for our Web sites are currently
outsourced to third party "co-location" firms, Exodus Communications, Inc. and
Quest Internet Solutions, Inc., which operate data centers for us in three
locations: Jersey City, New Jersey, Irvine, California and Sterling, Virginia.
We utilize multiple web servers running Sun Microsystems Solaris 2.8 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 our Web sites are powered by multiple uninterruptible power
supplies backed up with multiple diesel power generators. Full FreeRealtime Web
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. 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 parts of our services; for example, Telescan, Inc.
currently provides our charting capability.
Apart from proprietary content we create produce at Red Chip, we obtain
most of the allied content and other 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 contracts with our datafeed and news programming suppliers generally
provide for fixed monthly charges for these services, whereas our contracts with
the stock exchanges generally provide for payments based on the volume of
traffic on our web sites, as determined by the number of users or the volume of
real-time quotes. During Fiscal 2000, certain of these data and operations costs
decreased substantially on a per-page view basis. In the first quarter of Fiscal
2000, the NASDAQ reduced its market data fees by approximately 50%, and the New
York and American Stock Exchanges announced significant fee reductions in the
third quarter of Fiscal 2000. Additionally, we renegotiated and amended our
datafeed and co-location provider contracts with S&P Comstock and Exodus
Communications, respectively, 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 in the aggregate
over the foreseeable future if we continue to realize growth in the users and
page views on our Web sites and other information services. As of the date
hereof, we believe we have satisfactory relationships with all our suppliers of
market data and financial programming, although we have an outstanding issue
with the American Stock Exchange concerning the amount of past due obligations
which we are currently in discussions to resolve. For a discussion, see "Risk
Factors -- Need to Maintain and Renew Key Supplier Relationships."
Our market is characterized by rapidly changing technology, evolving
industry standards and frequent new product announcements. These conditions 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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<PAGE> 41
MANAGEMENT
OFFICERS AND DIRECTORS
The following table sets forth, as of November 1, 2000, the name, age
and position of our directors, executive officers and other key employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Geoffrey T. Moore 43 Chairman of the Board and Co-Chief Executive Officer
Brad G. Gunn 30 Co-Chief Executive Officer, President and Founder
Michael B. Neufeld 34 Executive Vice President, Chief Financial Officer and Secretary
David Armitage 40 Senior Vice President of Advertising Sales & Marketing
Brian Probolsky 30 Senior Vice President, Digital Financial Services
Scott L. Brown 36 Vice President of Corporate Development and Director
Robert E. Harris 53 Vice President of Member Care
M'Liss Jones Kane 47 Vice President, General Counsel and Assistant Secretary
Gordon Rix 40 Vice President Interactive Marketing
Ari R. Engelberg (2) 28 Director
David Gale (1)(2) 41 Director
Stephen N. Livingston 48 Director
Jonathan Mork 37 Director
Marcus W. Robins 46 Director
Byron C. Roth 37 Director
Robert M. Werle (1) 44 Director
Ronald P. (Clancy) Woods (1)(2) 44 Director
</TABLE>
----------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Geoffrey T. Moore. Mr. Moore has been the Chairman of our board of
directors and our Chief Executive Officer since January 28, 2000. Mr. Moore has
more than 15 years of management experience within the financial services
industry. From 1992 to 1998, Mr. Moore served as Managing Director and General
Partner in the Shamrock Group, the primary investment vehicle for the Roy E.
Disney Family and Shamrock executives. Prior to his work at Shamrock, from
September 1985 until March of 1992, Mr. Moore was a First Vice President with
PaineWebber Investment Banking in both New York and Los Angeles.
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<PAGE> 42
Brad G. Gunn. Mr. Gunn is our President, Co-Chief Executive Officer and
one of our founders. He has operated in this capacity since 1996. As a
co-founder, Mr. Gunn has spent the last two years with us involved in strategic
planning, overseeing the development teams, market research and revenue
initiatives, raising financing, acting as a subscriber liaison, developing new
products and 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 our
board of directors and has served as such since 1996.
Michael B. Neufeld. Mr. Neufeld became our Executive Vice President and
Chief Financial Officer on January 28, 2000. Mr. Neufeld is a Certified Public
Accountant with over 12 years of experience in accounting and finance. Prior to
his election as an officer of Freerealtime.com, Mr. Neufeld rendered advisory
services to us during the period of April 1999 to January 2000. From June 1994
until March 1999, Mr. Neufeld was the Chief Financial Officer and Chief
Operating Officer of Rand Technology, Inc., a semiconductor distributor based in
Irvine, California. Mr. Neufeld was a Business Manger with Breslauer, Jacobson,
Rutman & Sherman in Los Angeles from September 1991 through November 1992 and an
Assistant Vice President in the Tax and Regulatory Reporting Group of Banker
Trust Company. Mr. Neufeld spent the early part of his career as a public
accountant with Arthur Anderson & Co. from January 1988 to August 1991.
David Armitage. Mr. Armitage became our Senior Vice President, Sales
and Marketing, on March 1, 2000. Prior to joining us, he held several positions
with Peterson Publications. From February 1995 to 1998, he was Group Advertising
Director with Peterson. From May 1987 to March 1989, he was a Senior Advertising
Executive with Peterson.
Brian Probolsky. Mr. Probolsky became our Senior Vice President of
Digital Formation Services on November 8, 1999. Prior to joining us, Mr.
Probolsky co-founded Securities Systems Integration & Consulting (SSIC) in 1991,
a provider of high-end financial information and execution systems. Mr.
Probolsky sold SSIC to Computer Clearing Services in 1996 and continued with
SSIC as a Senior Vice President until leaving to join us in 1999.
Scott L. Brown. Mr. Brown became our Senior Vice President of Corporate
Development and a member of our board of directors on January 28, 2000. Mr.
Brown has more than 13 years of sales, marketing and senior management
experience. Mr. Brown was President of the acquisition division of Asset Growth
Corporation from 1997 to 1999 and the President of Telebuild, L.C., a subsidiary
of Telescan, Inc. from 1996 to 1997. Prior to becoming the President at
Telebuild, Mr. Brown was Vice President of Sales and Senior Vice President of
Operations for Telescan, Inc.
Robert E. Harris. Mr. Harris became our Vice President of Customer Care
on January 17, 2000. From October 1997 to January 2000 Mr. Harris served as Vice
President of Operations at Pinnacle Micro, Inc. Mr. Harris joined Pinnacle in
November of 1993, and prior to becoming Vice President of Operations, held
various positions in information systems, manufacturing, procurement and
customer care.
M'Liss Jones Kane. Ms. Kane became our Vice President General Counsel
in June 2000. Prior to joining us, Ms. Kane served as Senior Vice President,
General Counsel and Corporate Secretary of Fidelity National Financial, Inc.,
and served in various capacities at Fidelity and its affiliates since April
1995. Prior to her work at Fidelity, Ms. Kane was with the ICN Pharmaceuticals,
Inc. group of companies. Ms. Kane started off at ICN Pharmaceuticals in March of
1990 as the Vice President, General Counsel and Secretary of ICN Biomedicals,
Inc., and subsequently became Vice President, General Counsel and Secretary of
ICN Pharmaceuticals, Inc.
Gordon Rix. Mr. Rix has been with us since April 1999, initially as
Vice President Producer and subsequently as Vice President of Interactive
Marketing. Prior to joining us, from January 1999 to March 1999, Mr. Rix was
President and Chief Operating Officer for NetX America. From 1990 through 1995,
Mr. Rix ran Cogent CO.
Ari R. Engelberg. Mr. Engelberg became a member of our board of
directors on January 28, 2000. Mr. Engelberg is the founder and a Vice President
of Archive, Inc. Prior to founding Archive in 2000, Mr. Engelberg was a
co-founder of Stamps.com, Inc., holding several top-level management positions
with Stamps.com in the areas of business development, product marketing,
management and web operations from September of 1996
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<PAGE> 43
through December of 1999. Before his work at Stamps.com, Mr. Engelberg was the
founding editor of the UCLA Bulletin of Law and Technology. Mr. Engelberg
graduated from UCLA with a JD and MBA in June 1999.
David Gale. Mr. Gale joined our board of directors on January 28, 2000.
Mr. Gale has over 19 years of financial services' experience. Mr. Gale is
currently President of the Delta Dividend Group, Inc., and has held that
position since December 1992. Mr. Gale was a Managing Director of Lehman
Brothers in New York from January 1990 to January 1992, and a Principal with
Morgan Stanley from February of 1983 until January 1990. Currently, Mr. Gale is
a member of the board of directors of Preferred Income Fund, Preferred Income
Opportunity Fund and Stone Container Corporation. Mr. Gale received his M.B.A.
from Harvard University and attended the Director's College at Stanford Law
School.
Stephen N. Livingston. Mr. Livingston became a member of our board of
directors on January 28, 2000. Mr. Livingston has over 25 years of high-tech
operational and management experience and is currently a candidate for a Juris
Doctor Degree from Whittier Law School. Prior to attending Whittier Law School,
Mr. Livingston was the Director of Management Information Systems for America
Online West Coast. Prior to AOL, Mr. Livingston was a founder and Director with
Johnson-Grace Company, which was purchased by AOL in 1996. Early in his career,
Mr. Livingston spent 10 years with IBM in various positions, including Systems
Engineering Manager and Senior Marketing Representative, managing computer
professionals responsible for providing consulting services to IBM clients. Mr.
Livingston holds a B.S. Degree in Business Management from the University of
Maryland and a M.S. Degree in System Management from the University of Southern
California.
Ronald P. (Clancy) Woods. Mr. Woods became a member of our board of
directors on January 28, 2000. Mr. Woods has over 20 years of marketing and
top-level management experience within the broadcasting industry. Mr. Woods was
appointed Executive Vice President and Market Manager for AMFM, Inc. in February
of 1999. Prior to joining AMFM in August of 1999, Mr. Woods was appointed Chief
Executive Officer for Lobo Media Group. Mr. Woods currently holds these
positions at AMFM and at Lobo Media Group. From September of 1998 until August
of 1999, Mr. Woods was the President and Chief Operating Officer of Radio
Marketing Group. Mr. Woods also served as Vice President of Radio of Nationwide
Communications Inc., from January of 1996 until August of 1998, and he served as
Vice President/General Manager with WHTZ Radio/New York, Shamrock Broadcasting
Nationwide Communications from December 1994 until January 1996. Mr. Woods was
the Vice President and General Manager of WFOX Atlanta, Shamrock Broadcasting
from October 1993 until December 1994.
Marcus W. Robins. Mr. Robins became a member of our board of directors
in August of 2000 as a result of our acquisition of RedChip.com. Mr. Robins
founded the RedChip Review in 1993 and continues as President of RedChip's
direct research and publishing activities. Mr. Robins was a founder of Crown
Point Publishing, Inc., a predecessor of RedChip, and was appointed President
and Chief Executive Officer of Crown Point Publishing in August 1993. Prior to
founding Crown Point Publishing, Mr. Robins was a founder and Vice President for
Crown Point Group Ltd. Mr. Robins was member of CP Management until August 1999,
and remains as a shareholder of that company.
Byron C. Roth. Mr. Roth became a member of our board of directors in
August 2000 as a result of our acquisition of RedChip.com. Mr. Roth is currently
the Chief Executive Officer, President and Chairman of the board of directors
for Roth Capital Partners. Mr. Roth has served as Chairman and Chief Executive
Officer of Roth Capital Partners since 1998, and as President since 1993. Prior
to his present positions at Roth Capital, Mr. Roth was Director of Corporate
Finance from 1992 to 1993. Mr. Roth serves on the boards of Summa Industries and
the University of California Irvine Graduate School of Management.
Jonathan Mork. Mr. Mork become a member of our board of directors in
August 2000 as a result of our acquisition of RedChip.com. Mr. Mork is the
managing partner of Millennium Group, Inc., a private investment and strategy
advisory firm. From 1995 to Spring of 1999, Mr. Mork served as Vice President of
Strategy for China Internet and assisted in the development of its subsidiary,
China.com.
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<PAGE> 44
BOARD COMPOSITION
Our board of directors is currently comprised of eleven directors.
Members of our board of directors hold office and serve until our next annual
meeting of stockholders, or until their respective successors have been elected.
Our certificate of incorporation provides that the authorized number of
directors will be designated by our bylaws. Any vacancies on the board of
directors are filled by a majority of the directors then in office, or by a sole
remaining director. Our directors may be removed, with or without cause, by our
board of directors or by an affirmative vote of the holders of a majority of the
shares entitled to vote at an election of directors. There are no family
relationships among any of our directors and executive officers.
BOARD COMMITTEES
We have an audit committee and a compensation committee of our board of
directors. The members of the audit committee are Messrs. Engelberg, Gale and
Woods. The audit committee is responsible for recommending to the board of
directors the engagement of our outside auditors and reviewing our accounting
controls and the results and scope of audits and other services provided by our
auditors. The compensation committee consists of Messrs. Gale, Werle and Woods.
The compensation committee determines the salaries, benefits and stock option
grants for our employees, consultants and directors and oversees the
administration of our employee stock option plans.
DIRECTOR COMPENSATION
Directors who are not our employees receive a meeting fee of $2,000 for
every meeting of the board of directors they attend in person, and $500 for
every meeting they attend via the telephone, plus reimbursement of reasonable
expenses. Members of our audit and compensation committees receive a fee of
$1,000 for each committee meeting they attend in person and $250 for each
meeting they attend via the telephone. However, if a committee meeting is
scheduled on the same day as a meeting of the board of directors, members of our
audit and compensation committees will receive only the directors meeting fee.
Directors who also serve as our employees do not receive any compensation for
acting as directors, except for reimbursement of any reasonable expenses they
incur in order to attend a board meeting.
EMPLOYMENT, SEVERANCE AND OTHER AGREEMENTS
All of our executive officers are appointed annually and serve at the
discretion of the board of directors. We do not have employment or severance
agreements with any of our employees.
COMPENSATION COMMITTEE INTERLOCKS
None of our compensation committee members is an employee of, or ever
was an employee of Freerealtime. None of our executive officers serve on the
board of directors or compensation committee of any other company that has one
or more executive officers serving as a member of our board or compensation
committee.
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<PAGE> 45
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by
or paid to our Chief Executive Officer and our only other most highly
compensated executive officer whose annual salary and bonus exceeded $100,000
in 2000 (the "Named Executive Officers") for services rendered in all capacities
to us during our 2000 fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Fiscal Annual Compensation Shares Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation(1)
-------------------------------- ------ --------- -------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Geoffrey Moore 1998 --
Co-Chief Executive Officer 1999 --
2000 $ 10,000 -- -- $ 110,000
Brad G. Gunn 1998 -- -- 118,901 --
Co-Chief Executive Officer 1999 -- -- 237,802 --
2000 $ 133,278 -- -- --
</TABLE>
----------
(1) All other compensation includes imputed income in connection with
payments under auto allowances, financial planning services, club
expenses, life insurance and executive retirement plan values for the
named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
There were no stock options or stock appreciation rights awarded to our
executive officers as of March 31, 2000. The following table sets forth certain
information with respect to exercisable and unexercisable options held by our
Executive Officers as of March 31, 2000.
OPTION VALUES FOR THE LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
Number of Shares
Underlying Exercise
Unexercised Unexercisable Price Expiration
Name Options Options ($/share) Market Price Date
--------------- ---------------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Geoffrey Moore 525,000 -- --
Brad G. Gunn 237,802/118,901 -- --
</TABLE>
(1) There were no options exercised in Fiscal 2000 by our Executive
Officers.
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<PAGE> 46
STOCK OPTION PLANS
1999 EQUITY INCENTIVE PLAN
Our 1999 equity incentive plan provides for awards of up to 2,500,000
shares of our common stock. The authorized number of shares is subject to
adjustment in the event of stock splits, stock dividends or certain other
similar changes in our capital structure. The 1999 plan allows us to grant:
- incentive stock options (as defined in Section 422 of the
Internal Revenue Code);
- nonqualified stock options; and
- stock purchase rights.
Incentive stock options and nonqualified stock options may be granted to our
employees and employees of our affiliated companies, non-employee directors and
officers, consultants and other service providers; provided, however, that no
such nonqualified stock options granted to prospective employees shall vest
before the employee first performs services for us or for our affiliated
companies. All of our employees and non-employee directors are eligible to
participate in the 1999 plan.
The 1999 plan is administered by our compensation committee, which is
currently comprised of three members of our board of directors. Our compensation
committee selects the recipients of options or awards, determines the terms of
the options or other awards granted, including when they vest or may be
exercised, the exercise price, the number of shares subject to each option or
award, and the forms of payment permitted upon exercise. Our compensation
committee may amend, suspend or terminate the 1999 plan, except that no action
may affect any of the common stock previously issued and sold or any option
previously granted under the 1999 plan without the holder's consent. In
addition, stockholder approval is generally required for the board of directors
to increase the number of shares that may be issued under the 1999 plan.
However, no stockholder approval is required under the 1999 plan in case of
merger, recapitalization, spin-off, stock split, dissolution, disposition of
substantially all of our assets, or other transactions or events involving a
change in our capital structure. In these cases, the board also has discretion
to adjust the exercise price of any option or stock purchase right, as well as
to adjust the number and kind of shares for which options or stock purchase
rights may be granted or which are subject to outstanding options, stock
purchase rights or restricted stock.
The term of options may not exceed 10 years from the date of grant. The
option exercise price for each share granted pursuant to an incentive stock
option may not be less than 100% of the fair market value of a share of common
stock at the time such option is granted (110% of fair market value in the case
of an incentive stock option granted to a person who owns more than 10% of the
combined voting power of all classes of stock of the company). The maximum
number of shares for which options may be granted to any one person during any
one calendar year under the 1999 plan is 250,000 and in no event shall the
aggregate number of shares subject to incentive stock options granted under the
1999 plan exceed 2,500,000. The aggregate fair market value of the common stock
(determined as of the date of grant) with respect to which incentive stock
options granted under the 1999 plan or any other stock option plan of the
company become exercisable for the first time by any optionee during any
calendar year may not exceed $100,000.
The option price of an incentive stock option or nonqualified stock
option is payable in full upon exercise; whereas the purchase price of stock
purchased pursuant to a purchase right must be paid in full upon the acceptance
of the purchase right. Payment of the option price upon exercise of a stock
option, or for shares purchased pursuant to a purchase right, may be made by any
of the following methods:
- by cash,
- by check,
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<PAGE> 47
- by shares of common stock (valued at their fair market value
as of the date of the exercise of an option or Purchase
Right);
- by delivery to the compensation committee of the optionee's or
purchaser's promissory note in a form and on terms acceptable
to the compensation committee;
- by the cancellation of our indebtedness to the optionee or
purchaser;
- by the waiver of compensation due or accrued to the optionee
or purchaser for services rendered; or
- by any combination of the foregoing methods of payment.
Except as otherwise provided by the compensation committee, options
granted under the 1999 plan may not be transferred other than by will or by the
laws of descent and distribution.
GENERAL FEDERAL INCOME TAX CONSEQUENCES
In general, under current federal laws, participants in the 1999 plan
who receive nonqualified stock options, restricted stock, deferred stock and
stock payments are taxable upon receipt of common stock or cash with respect to
those awards or grants.
Incentive Stock Options. An employee will not realize taxable income on
an incentive stock option when that option is granted or when that option is
exercised; however, the amount by which the fair market value of the stock at
the time of exercise exceeds the option price generally will be included in the
employee's alternative minimum taxable income on the date of exercise. If stock
received on exercise of an incentive stock option is disposed of in the same
year the option was exercised, and the amount realized is less than the stock's
fair market value at the time of exercise, the amount includable in alternative
minimum taxable income will be the amount realized upon the sale or exchange of
the stock, less the taxpayer's basis in the stock. Gain or loss realized by an
optionee on the sale of the stock issued upon exercise of an incentive stock
options is taxable as long-term capital gain or loss, and no tax deduction is
available to the us, unless the optionee disposes of the stock in a
"disqualifying disposition." A disqualifying disposition of the stock includes
any sale, exchange, gift or other transfer of the stock within two years after
the date of grant of the option or within one year after the date of exercise,
except that it does not include transfers pursuant to certain tax-free
reorganizations and exchanges, transfers between spouses or incident to divorce,
transfers into the name of the optionee and another person as joint tenants,
transfers from a decedent to an estate, transfers by will or inheritance upon
the optionee's death, or a mere pledge or hypothecation of the stock. Upon a
disqualifying disposition of the stock, the optionee will realize ordinary
income in an amount equal to the difference between the option exercise price
and the lesser of (i) the fair market value of the stock on the date of
exercise, or (ii) the amount realized on a sale or exchange of the stock.
Subject to Section 162(m) of the Code (which limits the deductibility of
compensation in excess of $1,000,000 for certain executive officers), we will be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee, provided certain reporting requirements are met. Additionally, if the
amount realized on a sale or exchange of the stock is greater than or less than
the fair market value of the stock on the date of exercise, the difference will
be taxed as capital gain or loss.
Nonqualified Stock Options. For federal income tax purposes,
participants will not realize taxable income on a nonqualified stock options
when that option is granted, nor will we be entitled to any deduction.
Generally, on exercise of nonqualified stock options optionees will recognize
ordinary income, and we will be entitled to a deduction, in an amount equal to
the difference between the option exercise price and the fair market value of
the common stock on the date of exercise. An optionee's basis for the stock for
purposes of determining gain or loss on subsequent any disposition of such
shares generally will be the fair market value of the common stock on the date
you exercise the option. Any subsequent gain or loss will be generally taxable
as capital gains or losses.
INCOME TAX WITHHOLDING
The 1999 plan grants us the power to withhold, or require a participant
to remit to us, an amount sufficient to satisfy Federal, state and local tax
withholding requirements with respect to any options exercised or restricted
stock issued under the 1999 plan. To the extent permissible under applicable
tax, securities, and other laws, the
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compensation committee may, in its sole discretion, permit a participant to
satisfy an obligation to pay any such tax, in whole or in part, up to an amount
determined on the basis of the highest marginal tax rate applicable to such
participant, by (i) directing us to apply shares of common stock to which the
participant is entitled as a result of the exercise of an option or as a result
of the lapse of restrictions on restricted stock, or (ii) delivering to us
shares of common stock owned by the participant.
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TRANSACTIONS WITH DIRECTORS, OFFICERS AND 5% STOCKHOLDERS
TRANSACTIONS WITH 5% STOCKHOLDERS
In August 2000 we entered into a non-binding letter of intent with
Jefferies & Co., Inc., a national institutional brokerage and investment banking
firm, regarding a wide-ranging strategic alliance to provide online financial
services. The proposed alliance contemplates issuance of additional shares of
our common stock to Jefferies in exchange for its contribution of technology
resources, including licenses of existing trading systems as well as ongoing
development resources for co-developed trading tools and execution services. The
parties will share any revenues and fees generated in future periods from the
alliance activities, and the proposed arrangement provides that Jefferies may
receive its share of revenues in shares of our common stock in lieu of cash.
Jefferies is currently our largest corporate stockholder holding approximately
1,904,762 shares of our stock. We are currently negotiating definitive
documentation to govern our alliance with Jefferies. To date, we have not
performed any services under this proposed alliance; we expect this alliance to
commence in November 2000.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
NOTES RECEIVABLE FROM REDCHIP OFFICERS.
Prior to its acquisition by Freerealtime.com, Inc., three RedChip
officers and stockholders delivered notes to RedChip in connection with their
purchase of shares of RedChip common stock on July 20, 1999. Marcus Robins,
Thomas Petersen and Douglas Sherk each delivered RedChip a note as consideration
for the purchase of such shares in the respective amounts of $900,000, $75,000
and $35,000. In connection with our acquisition of RedChip, each of these
RedChip officers and stockholders repaid their notes in full with interest at 7%
from the date of the note through September 1, 2000 by delivering us shares of
our common stock which they acquired in the merger. Mr. Robins delivered 210,535
shares of our common stock, Mr. Peterson delivered 17,544 shares of our common
stock, and Mr. Sherk delivered 7,017 shares of our common stock, in full
satisfaction of the note. These note stockholders also entered into contingent
payment agreements which provided that upon the earlier of March 30, 2001 or at
the time we participate in an underwritten public offering, a contingent amount
of shares of our common stock will be delivered on March 31, 2000 as follows:
(i) if the shares of our stock which were delivered in satisfaction of the notes
are valued (based on a 10 day trading average ending on March 30, 2001) at more
than the amount of the respective note we will return to the note stockholders
any shares which exceed the note amount, (ii) if the shares of our stock which
were delivered to satisfy the note are valued (based on a 10 day trading average
ending on March 30, 2001) at less than the amount of the respective notes, the
holders of the notes will deliver additional shares in an amount equal to the
shortfall, notwithstanding that the shares delivered to us will not exceed the
aggregate number of shares of our stock which were delivered to the note
stockholders at the closing of the RedChip merger.
Marcus Robins has an additional note issued pursuant to an employment
agreement entered into on July 20, 1999. The principal amount outstanding under
the note at the time of the merger, including accrued interest, was $170,000.
The note bears interest at a rate of 7%.
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<PAGE> 50
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, as of September 30, 2000, and as
adjusted to reflect the sale of shares of common stock offered by the selling
stockholders pursuant to this prospectus, information regarding the beneficial
ownership of our common stock by:
- all persons known by us to own beneficially 5% or more of our
common stock;
- each of our directors;
- the executive officers listed in the summary compensation
table;
- all directors and executive officers and 5% stockholders as a
group; and
- the selling stockholders.
Unless otherwise indicated the address of each stockholder on this
table is c/o Freerealtime.com, Inc, 3333 Michelson Drive, Suite 430, Irvine,
California 92612. A person has beneficial ownership of the shares if he has the
power to vote or dispose of the shares. This power can be exclusive or shared,
direct or indirect. In addition, a person is considered by SEC rules to
beneficially own shares underlying options that are presently exercisable or
will be become exercisable within 60 days.
As of November 14, 2000, there were 15,215,818 shares of our common
stock outstanding. To calculate a stockholder's percentage of beneficial
ownership, we must include in the numerator and denominator those shares
underlying options held by other stockholders, however, are disregarded in this
calculation. Therefore, the denominator used in calculating beneficial ownership
among our stockholders may differ.
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<PAGE> 51
<TABLE>
<CAPTION>
NUMBER OF SHARES SHARES BENEFICIALLY OWNED
SHARES BENEFICIALLY OWNED BEING OFFERED AFTER THE OFFERING
----------------------------- ------------- ------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT SHARES PERCENT
------------------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS:
Brad G. Gunn (1) 2,913,353 19.0 0 2,913,353 19.0
Geoffrey Moore (2) 525,000 3.0 0 525,000 3.0
Scott L. Brown (3) 131,976 1.0 0 131,976 1.0
DIRECTORS:
Ari R. Engelberg (4) 3,058 * 0 3,058 *
David Gale (5) 3,780 * 0 3,780 *
Stephen N. Livingston (6) 204,780 1.0 0 204,780 1.0
Jonathan Mork (7) 435,451 3.0 0 435,451 3.0
Marcus W. Robins (8) 534,840 4.0 0 534,840 4.0
Byron C. Roth (9) 2,396,938 16.0 0 2,396,938 16.0
Robert M. Werle (10) 2,166,667 14.0 0 2,166,667 14.0
Ronald P. (Clancy) Woods (11) 2,780 * 0 2,780 *
5% STOCKHOLDERS:
Stuart Robson (12) 777,786 5.1 0 777,786 5.0
Jefferies & Co. 1,904,762 12.5 0 1,904,762 0
Roth Capital 2,130,211 14.0 0 1,368,306 9.0
All Directors, Executive Officers And 5%
Stockholders As A Group (16 Persons) (13): 12,143,617 80.0 0 9,476,950 62.3
NAME OF SELLING STOCKHOLDER:
Reggie Del Ponte 12,500 * 12,500 0 *
Sheldon Drobny 19,047 * 19,047 0 *
Estate Planning LP 20,000 * 20,000 0 *
Millenium Hansen 299,122 2.0 190,476 108,646 *
Milton Honek 9,523 * 9,523 0 *
Gregory Huston 9,523 * 9,523 0 *
Phillip Hylander 95,238 * 95,238 0 *
Jefferies & Co. 1,904,762 12.5 1,904,762 0 *
Livingston Family Trust 75,000 * 75,000 *
Martin Karlen Trust 50,000 * 50,000 0 *
Thompson Kernaghan 476,190 3.1 476,190 0 *
Simon Luk 30,000 * 30,000 0 *
David Maslen 95,238 * 95,238 0 *
Dominic Man-Kit Lam 28,571 * 28,571 0 *
Gordon McBean 6,250 * 6,250 0 *
Neuropa Limited 19,047 * 19,047 0 *
Pacific Challenge 100,000 * 100,000 0 *
Pete Pallone 325,000 2.1 325,000 0 *
Paradigm Group 19,047 * 19,047 0 *
Mark Pierrepont 12,500 * 12,500 0 *
Scott Richards 6,250 * 6,250 0 *
Roth Capital 2,130,211 14.0 761,905 1,368,306 9.0
Taifair Securities 32,000 * 32,000 0 *
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF SHARES SHARES BENEFICIALLY OWNED
SHARES BENEFICIALLY OWNED BEING OFFERED AFTER THE OFFERING
------------------------- ------------- ------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT SHARES PERCENT
------------------------------------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Ann & Edward Weston 7,800 * 7,800 0 *
Wilber Investments 12,000 * 12,000 0 *
TOTAL SHARES OFFERED: 5,794,819 4,317,867
</TABLE>
(1) This amount includes 237,802 currently exercisable stock options.
(2) This amount reflects the number of shares Mr. Moore currently has the
right to acquire pursuant to stock options, which are fully vested.
(3) This amount includes 31,976 shares of common stock which are owned by
Mr. Brown as well as vested options to purchase 100,000 shares of
common stock.
(4) This amount reflects the number of shares Mr. Engelberg currently has
the right to acquire pursuant to vested stock options and also includes
556 shares which Mr. Engelberg has the right to acquire within sixty
days.
(5) This amount includes 1,000 shares of common stock owned by Mr. Gale as
well as 2,224 shares which Mr. Livingston currently has the right to
acquire pursuant to currently exercisable stock options and 556 shares
which Mr. Gale has the right to acquire within 60 days.
(6) This amount includes 127,000 shares held by the Livingston Trust,
warrants to purchase 75,000 shares of common stock held by the
Livingston Trust, 2,224 shares which Mr. Livingston currently has the
right to acquire pursuant to currently exercisable stock options and
556 shares which Mr. Livingston has the right to acquire within 60
days.
(7) This amount reflects 82,807 shares owned by Mr. Mork, 108,646 shares
owned by Millennium Hansen Internet Partners, 12,071 shares owned by
Millennium Group, Inc., and 36,846 shares, which Mr. Mork currently has
the right to acquire pursuant to vested stock options.
(8) Marcus Robins owns 458,170 shares directly, 2616 are held for the
benefit of his three children and 55,055 shares. Mr. Robins currently
has the right to acquire pursuant to vested stock options.
(9) This amount reflects 204,550 shares owned by the Roth Living Trust,
761,905 shares by Roth Capital Partners, 1,368,306 shares held by CR
Financial Holdings, Inc., and 27,634 shares Mr. Roth currently has the
right to acquire pursuant to vested stock options.
(10) This amount reflects 1,904,762 shares held by Jefferies and Company and
261,905 warrants to purchase shares of common stock.
(11) This amount reflects the number of shares Mr. Woods currently has the
right to acquire pursuant to 2,224 vested stock options and 556 shares
which Mr. Woods has the right to acquire within 60 days.
(12) The address for Stuart Robson is 1710-1171 W. Hastings Street,
Vancouver, B.C. V6E2L3.
(13) This number includes 1,444,617 currently exercisable stock options for
all directors and named executive officers of the Company and 270,238
warrants to purchase common stock.
*Less than 1%
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<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our
certificate of incorporation and our bylaws are summaries and are qualified by
reference to the provisions of our certificate and our bylaws. Copies of these
documents have been filed with the Securities and Exchange Commission, or SEC.
Our certificate of incorporation provides that we are authorized to
issue 50,000,000 million shares of common stock, par value $.01 per share. As of
November 14, 2000, there were 15,215,818 shares of common stock outstanding and
held of record by approximately 248 stockholders. We are also authorized to
issue 5,000,000 shares of preferred stock, par value $0.01 per share. No shares
of preferred stock are currently issued and outstanding.
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 our 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.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to exceptions, Section 203 of the Delaware General
Corporation Law prohibits a publicly-held Delaware corporation from engaging in
a "business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained that status with the
approval of the board of directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes, among other
things, a merger or consolidation involving us and an interested stockholder and
the sale of more than 10% of our assets. Although there are limited exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% of our voting stock. This
statute could prohibit or delay the accomplishment of mergers or other takeover
or change in control attempts with respect to us and, accordingly, may
discourage attempts to acquire us. A Delaware corporation may opt out of the
anti-takeover law with an express provision in its original certificate of
incorporation or an express provision in its certificate of incorporation or
bylaws resulting from amendments approved by the holders of at least a majority
of the corporation's outstanding voting shares. We have [not] opted out of this
provision of the anti-takeover law.
CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS
Certain provisions of our certificate of incorporation, bylaws and
Delaware corporate law could make the following more difficult:
- the acquisition of us by means of a tender offer;
- acquisition of us by means of a proxy content or otherwise; or
- the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids. These provision are
also designed to encourage person seeking to acquire control of us to first
negotiate with our board of directors. We believe that the benefits of increased
protection of the potential ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging such proposals because negotiation of such
proposals could increase their terms.
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Removal of Directors. Any member of our board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of a director.
Filling of Vacancies on the Board of Directors. Our bylaws provide that
newly created directorships resulting from any increase in the number of
directors and any vacancies on the board resulting from death, resignation,
disqualification, removal or other cause will be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum of the board, and not by the stockholders. Any director elected in
accordance with the preceding sentence will hold office for the remainder of the
full term of the class of directors in which the new directorship was created or
the vacancy occurred and until such director's successor shall have been duly
elected and qualified. No decrease in the number of directors constituting the
board will shorten the term of any incumbent director. This may deter a
stockholder from removing incumbent directors and simultaneously gaining control
of our board of directors by filling the vacancies created by that removal with
its own nominees.
Special Stockholders' Meetings. Our bylaws provide that a special
meeting of stockholders may be called by the President or the Secretary at the
request in writing of a majority of our board of directors. A special meeting or
our stockholders may also be called by our stockholders, provided that it is
done in writing by stockholders owning a majority of our capital stock issued
and outstanding, and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Right to Act By Written Consent. The business permitted to be conducted
at any special meeting of stockholders is limited to the business discussed in
the notice of the special meeting which we send to our stockholders. Moreover,
our certificate provides that any action taken by the stockholders must be
effected at an annual or special meeting of stockholders and may not be taken by
written consent in lieu of a meeting. The provisions of our certificate and
bylaws prohibiting stockholder action by written consent may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting.
These provisions would also prevent the holders of a majority of the voting
stock from unilaterally using the written consent procedure to take stockholder
action. Furthermore, a stockholder could not force stockholder consideration of
a proposal over the opposition of the our board by calling a special meeting of
stockholders prior to the time the board believes such consideration to be
appropriate.
Notice of Stockholder Meetings. Our bylaws require that whenever
stockholders are required or permitted to take an action at a meeting a written
notice of the meeting shall be given to each stockholder not less than ten nor
more than sixty days before the date of the meeting. Such notice must 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.
Amendment of the Certificate and Bylaws. The certificate provides that
any provisions of the certificate may be amended, altered, changed or repealed
by an affirmative vote of the board or the stockholders, except an affirmative
vote of the holders of at least 66 2/3% of the outstanding voting stock is
required for the provisions which address the following actions:
- amending or altering the bylaws;
- stockholder actions; and
- amending or altering the certificate.
In addition, the certificate provides that stockholders may amend or
repeal a provision of the bylaws, at either a regular or special meeting of the
stockholders, with an affirmative vote of the holders of at least 66 2/3% of the
outstanding voting stock. The certificate and the bylaws also invest the board
of directors with the power to alter, amend or repeal the bylaws at any regular
or special meeting of the board. In order to amend the bylaws at a special
meeting of the board or the stockholders, the bylaws require that the notice of
the special meeting contains a description of the proposed alteration to the
bylaws.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation provides that, except to the extent
prohibited by the Delaware General Corporation Law, our directors shall not be
personally liable to us or our stockholders for monetary damages for any
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<PAGE> 55
breach of fiduciary duty as our directors. Under the Delaware General
Corporation Law, our directors have a fiduciary duty to us that is not
eliminated by this provision of our certificate of incorporation and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under the Delaware General Corporation Law
for breach of the director's duty of loyalty to us or our stockholders, for acts
or omissions which are found by a court of competent jurisdiction to be not in
good faith or that involve intentional misconduct, or knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
prohibited by the Delaware General Corporation Law. This provision also does not
affect the directors' responsibilities under any other laws, such as the Federal
securities laws or state or Federal environmental laws.
The Delaware General Corporation Law provides further that any
indemnification will not be deemed exclusive of any other rights to which the
directors and officers may be entitled under a corporation's bylaws, any
agreement, a vote of stockholders or otherwise. Our certificate of incorporation
eliminates the personal liability of directors to the fullest extent permitted
by Section 102(b)(7) of the Delaware General Corporation Law and provides that
we may fully 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) by reason of the fact
that such person is or was a director or officer of ours or is or was serving at
our request as a director or officer of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding.
We have entered into agreements to indemnify our directors and
executive officers, in addition to the indemnification provided for in our
bylaws. We believe that these provisions and agreements are necessary to attract
and retain qualified directors and executive officers. Our bylaws also permit us
to secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions, regardless of whether the
Delaware General Corporation Law would permit indemnification. We have liability
insurance for our officers and directors.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under our certificate of incorporation. We are not aware
of any threatened litigation or proceeding that may result in a claim for such
indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust.
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of common stock in the public market
following the sale of shares by the selling stockholders under this registration
statement could adversely affect the market price of the common stock and
adversely effect our ability or raise capital at a time and on terms favorable
to us.
Of the 15,215,818 shares outstanding as of November 14, 2000 the shares
sold by the selling stockholders under this registration statement, along with
the other shares already freely trading on the OTC Bulletin Board, will be
freely tradable without restriction in the public market unless such shares are
held by "affiliates," as that term is defined in Rule 144(a) under the
securities Act. For purposes of Rule 144 an "affiliate" of an issuer is a person
that, directly or indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with, such issuer. The remaining shares
of our common stock to be sold in the public market upon expiration of specified
holding period under Rule 144, subject to the volume, manner of sale and other
limitations of Rule 144.
Holders of approximately 4,317,867 million shares of common stock are
entitled to registration rights with respect to such shares for resale under the
Securities Act. If such holders, by exercising their registration rights, cause
a large number of shares to be registered and sold in the public market, these
sales could have an adverse effect on the market price for the common stock.
LOCK-UP ARRANGEMENTS
In connection with our acquisition of RedChip, certain of our executive
officers and directors and certain other stockholders have agreed not to sell or
otherwise dispose of any shares of common stock for a period 360 days after
August 18, 2000 without our prior written consent.
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<PAGE> 57
PLAN OF DISTRIBUTION
The shares of common stock offered by the selling stockholders may be
sold from time to time to purchasers directly by any of the selling stockholders
acting as principal for its own account in one or more transactions at a fixed
price, which may be changed, or at varying prices determined at the time of sale
or at negotiated prices. Alternatively any of the selling stockholders may from
time to time offer the common stock through underwriters, dealers or agents who
may receive compensation the form of underwriting discounts, commissions or
concessions from the selling stockholders and/or the purchasers of shares for
whom they may act as agent. Sales may be made on the OTC Bulletin Board or in
private transactions. In addition to the sale of common stock pursuant to the
registration statement of which this prospectus is a part, the selling
stockholders may sell such common stock in compliance with Rule 144 promulgated
under the Securities Act of 1933.
We are registering the shares of common stock on behalf of the selling
stockholders. From time to time one or more of the selling stockholders may
transfer, pledge, donate or assign such selling stockholders' shares of common
stock to lenders or others and each of such persons will be deemed to be a
"selling stockholders" for purposes of this prospectus. The number of selling
stockholders' shares of common stock beneficially owned by those selling
stockholders who so transfer, pledge, donate or assign shares of common stock
will decrease as and when they take such actions. The plan of distribution for
selling stockholders' shares of common stock sold hereunder will otherwise
remain unchanged, except that the transferees, pledgees, donees or other
successors will be a selling stockholder under this prospectus.
The selling stockholders and any agents, broker-dealers or underwriters
that participate in the distribution of the common stock offered hereby may be
deemed underwriters within the meaning of the Securities Act of 1933, and any
discounts, commission or concessions received by them and any profit on the
resale of the common stock purchased by them might be deemed to be underwriting
discounts and commissions under the Securities Act of 1933.
Under the Securities Exchange Act of 1934, any person engaged in a
distribution of the common stock may simultaneously engage in market-making
activities with respect to the common stock for five business days prior to the
start of the distribution. In addition, each selling stockholder and any other
person participating in a distribution will be subject to the Securities
Exchange Act of 1934 which may limit the timing of the purchases and sales of
common stock by the selling stockholders or any such other person. These factors
may affect the marketability of the common stock and the ability of brokers or
dealers to engage in market-making activities.
We will pay substantially all of the expenses incident to the offering
and sale of the common stock to the public, other than commissions, concessions
and discounts of underwriters, dealers or agents.
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ABOUT THIS PROSPECTUS
References in this prospectus to "Freerealtime" "FRTI," "we," "our" and
"us" are to Freerealtime.com, Inc., a Delaware corporation, and its consolidated
subsidiaries. The name Freerealtime and the FRTI logo are trademarks that belong
to us. This prospectus also contains the names of other entities which are the
property of their respective owners.
We are the surviving entity of a merger that took place in September of
1998 between Pub Singin', a Colorado corporation and First International
Financial Corporation, a Delaware corporation. Immediately prior to the merger,
Pub Singin' changed its name to "Freerealtime.com, Inc." Pub Singin' was
incorporated in Colorado in May of 1989. We reincorporated in Delaware in
November of 1999.
Our principal executive offices are located at 3333 Michelson Drive,
Suite 430, Irvine, 92612. Our telephone number is (949) 833-2959. Our internet
address is www.freerealtime.com. This internet address is provided for
information purposes only and is not intended to be useable as a hyperlink. The
information at this internet address is not part of this prospectus.
You should rely only on the information contained in this prospectus.
We have not authorized any other person to provide you with different
information. This prospectus is not an offer to sell, nor is it an offer to buy
these securities in any state where the offer or sale is not permitted. The
information in this prospectus is complete and accurate as of the date on the
front cover. Our business, financial condition, results of operations and
prospects may have changed since that date.
LEGAL MATTERS
The validity of the issuance of the shares of common stock to be sold
by the selling stockholders pursuant to this registration statement will be
passed upon for us by Latham & Watkins, Costa Mesa, California.
EXPERTS
Our consolidated financial statements as of March 31, 2000 and 1999,
and each of the years in the three year period ended March 31, 2000, included
herein and in the registration statement in reliance on the report of KPMG LLP,
independent accountants, appearing elsewhere herein, and upon the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under
the Securities Act of 1933, as amended, with respect to the shares of common
stock to be sold by the selling stockholders under this registration statement.
This prospectus does not contain all the information set forth in the
registration statement. For further information regarding our company and the
shares of common stock to be sold by the selling stockholders under this
registration statement, please refer to the registration statement. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to are not necessarily complete, and in each instance
reference is made to the copy of the contract, agreement or other document filed
as an exhibit to the registration statement, each statement being qualified in
all respects by the reference.
You may read and copy all or any portion of the registration statement
or any other information that we file at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
SEC located at Seven World Trade Center, Suite 1300, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. You can request copies of these documents, upon payment of a duplicating
fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings,
including the registration statement, are also available to you on the SEC's web
site (http://www.sec.gov). We also file periodic reports, proxy statements and
other information with the SEC.
55
<PAGE> 59
FREEREALTIME.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of KPMG LLP................................................... F-2
Balance Sheets....................................................... F-3
Statements of Operations............................................. F-4
Statements of Stockholders' Equity................................... F-5
Statements of Cash Flows............................................. F-6
Notes to Financial Statements........................................ F-7
</TABLE>
F-1
<PAGE> 60
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
2000 and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the years in the three-year period then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 2000 and the
results of their operations and their cash flows for each of the years in the
three-year period then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
Orange County, California
June 8, 2000
F-2
<PAGE> 61
FREEREALTIME.COM, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 2000 2000
---- ---- ----
UNAUDITED
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 493 $ 2,501 $ 5,609
Accounts receivable, net of allowance for doubtful
accounts of $66, $166, and $478 at March 31,
1999 and 2000 and September 30, 2000, respectively 358 1,322 1,673
Prepaid expenses and other current assets 8 564 680
------- ------- -------
Total current assets 859 4,387 7,962
Property, plant and equipment, net 265 886 2,242
Goodwill, net of Amortization -- -- 18,572
Other assets, net 8 333 618
------- ------- -------
$ 1,132 $ 5,606 $29,394
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of note payable to bank 70 15 --
Current installments of loan payable to shareholders 3 -- 134
Current portion of capital lease obligations 11 26 20
Trade accounts payable 2,078 4,815 4,567
Advances payable 250 -- --
Accrued expenses 44 24 562
Deferred revenue - short term 79 494 701
------- ------- -------
Total current liabilities 2,535 5,374 5,984
------- ------- -------
Deferred revenue - long term
Note payable to bank, excluding current portion 12 -- --
Notes payable to stockholders, excluding current portion 38 12 --
Capital lease obligations, net of current portion 8 25 78
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,
7,213,670 and 15,450,914 (unaudited) issued and outstanding at
March 31, 1999 and 2000 and September 30, 2000, respectively 1,550 7,708 34,295
Treasury stock, 235,096 common shares at September 30, 2000 -- -- (1,085)
Accumulated deficit (2,807) (7,187) (9,846)
Unearned Compensation (204) (326) (32)
------- ------- -------
Total Stockholders' Equity (deficit) (1,461) 195 23,332
------- ------- -------
Commitments and contingencies $ 1,132 $ 5,606 $29,394
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 62
FREEREALTIME.COM, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
MARCH 31, MARCH 31, MARCH 31, ---------------------
1998 1999 2000 1999 2000
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Advertising revenue............................ $ 25 $ 631 $ 4,751 $ 1,284 $ 3,679
Subscription revenue........................... 30 586 1,788 1,192 1,073
Web host and co-brand revenue.................. -- 179 659 364 296
Service revenue................................ -- -- -- -- 731
---------- ---------- ---------- ---------- ----------
Total revenues.................................... 55 $ 1,396 $ 7,198 2,840 $ 5,779
Cost of revenues.................................. 37 2,567 5,507 2,830 2,306
---------- ---------- ---------- ---------- ----------
Gross profit (loss)...................... 18 (1,171) 1,691 10 3,473
---------- ---------- ---------- ---------- ----------
General, administrative, selling and development
expenses....................................... 168 1,016 4,717 1,674 5,147
Non-cash charge -- stock option grants............ -- 316 1,425 543 193
Amortization of Goodwill.......................... -- -- -- -- 760
Merger Expenses................................... -- -- -- -- 114
---------- ---------- ---------- ---------- ----------
Total general, administrative, selling and
development expenses................... 168 1,332 6,142 2,217 6,214
---------- ---------- ---------- ---------- ----------
Operating loss........................... (150) (2,503) (4,451) (2,207) (2,741)
Interest income................................... -- 4 91
Interest expense.................................. 11 (22) (20) 9 (82)
---------- ---------- ---------- ---------- ----------
Net loss................................. $ (161) $ (2,521) $ (4,380) $ (2,216) $ (2,659)
========== ========== ========== ========== ==========
Basic and diluted loss per common share........... $ (0.04) $ (0.45) $ (0.69) $ (0.37) $ (0.29)
========== ========== ========== ========== ==========
Common shares used in computing basic and diluted
per share amounts.............................. 4,447,635 5,601,073 6,392,543 5,946,468 9,323,100
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 63
FREEREALTIME.COM, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON
SHARES COMMON ACCUMULATED TREASURY UNEARNED
OUTSTANDING STOCK DEFICIT STOCK COMPENSATION TOTAL
----------- ------- ----------- -------- ------------ ---------
<S> <C> <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)
Stock offering, net of issuance costs of
$522 1,035,934 4,392 -- -- -- 4,392
Cancellation of shares (773,992) -- -- -- -- --
Exercise of options 413,738 219 -- -- -- 219
Issuance of options as compensation, net
of amortization -- 1,547 -- -- (122) 1,425
Net loss (4,380) -- -- (4,380)
---------- ------- --------- ------- ----- --------
Balance at March 31, 2000 (unaudited
September 2000 quarter) 7,213,670 7,708 (7,187) -- (326) 195
Stock offerings, net of issuance costs of
$1,764 3,850,635 8,419 -- 8,419
Exercise of options 386,684 112 112
Acquisition of RedChip.com, Inc. 3,999,925 17,200 -- 17,200
Extinguishment of Shareholder Notes Receivable (235,096) (1,085) (1,085)
Options and warrants issued in acquisition 252 252
Issuance of options as compensation, net
of amortization -- 604 294 898
Net loss -- (2,659) -- (2,659)
---------- ------- --------- ------- ---- --------
Balance at September 30, 2000 (unaudited) 15,215,818 $34,295 $ (9,846) $(1,085) $(32) $ 23,332
========== ======= ========= ======= ==== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 64
FREEREALTIME.COM, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS END MARCH 31, SEPTEMBER 30,
----------------------------- ------------------
1998 1999 2000 1999 2000
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (161) $ (2,521) $ (4,380) $ (2,216) $ (2,659)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 7 47 122 51 177
Provision for doubtful accounts -- 66 150 54 260
Non-cash charge - stock options -- 316 1,425 543 193
Receivables 13 (424) (1,116) (572) (388)
Prepaid expenses and other assets -- (15) (881) (690) (340)
Amortization of goodwill
Trade accounts payable and accrued liabilities 6 2,078 2,750 2,121 760
Unearned revenue -- 79 415 523 (1,717)
--------- -------- -------- -------- (463)
Net cash used by operating activities (135) (374) (1,515) (186) --------
--------- -------- -------- -------- (4,177)
Cash flows from investing activities: --------
Cash paid on acquisition, net of goodwill -- -- -- -- (700)
Capital expenditures (24) (246) (743) (127) (694)
--------- -------- -------- -------- --------
Net cash used in investing activities (24) (246) (743) (127) (1,394)
--------- -------- -------- -------- --------
Cash flows from financing activities:
Advances payable -- 250 (250) (250) --
Repayments of long-term debt 144 (75) (72) (33) (21)
Prepayments of short-term debt
Proceeds from issuance of common stock 36 965 5,133 (446) 10,295
Stock issuance costs -- (75) (522) (28) (1,058)
Increase (decrease) in note payable to shareholder 27 (7) (23) 4,179 (709)
--------- -------- -------- -------- 172
Net cash provided by financing activities 207 1,058 4,266 3,422 --------
--------- -------- -------- -------- 8,679
Net increase in cash 48 438 2,088 3,109 --------
Cash at beginning of year 7 55 493 493
--------- -------- -------- -------- 3,108
Cash at end of year $ 55 $ 493 $ 2,501 $ 3,602
========= ======== ======== ======== 2,501
Supplemental disclosure of cash flow information: --------
Cash paid during the year for:
Interest $ -- $ 18 $ 17 $ 11 $ 5,609
========= ======== ======== ======== ========
Supplemental disclosure of noncash investing and financing
activities:
Borrowings related to the acquisition of assets $ -- $ 22 $ 51 $ 44 $ 17
========= ======== ======== ======== ========
Unearned compensation related to stock options -- 520 1,547 76 --
========= ======== ======== ======== ========
Common stock issued to pay for stock issuance fees -0- 500 84 (3)
========= ======== ======== ======== ========
Stock issued to acquire company -- -- -- -- 17,200
========= ======== ======== ======== ========
Stock returned to extinguish notes receivable -- -- -- -- 1,085
========= ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 65
FREEREALTIME.COM, INC.
AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 2000
(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 analytical
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, from the sale of email marketing campaigns and from
the collection of subscription and transaction fees.
FreeRealTime.com. Inc., is the result of a merger in September 1998
between our predecessor company, FIFC-Delaware and FreeRealTime.com, Inc., a
public company located in the State of Colorado ("FreeRealTime -- Colorado")
(previously incorporated as Pub Singin', Inc. on May 3, 1989). 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. 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 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 April 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.
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.
(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 a 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 the 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 consolidated 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
F-7
<PAGE> 66
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 and were
minor in 1998, 1999 and 2000.
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. Co-Branding and web hosting revenues are recognized during
the period the related advertising is displayed, at the time the real-time
quotes are served, or on a straight-line basis over the subscription period.
Sales commissions earned by a third party agent on advertising sales are charged
to selling expense and totaled $1,217,486 in fiscal 2000.
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 $13, $12 and $0 for the
years ended March 31, 1998, 1999 and 2000, respectively.
SOFTWARE DEVELOPMENT COSTS FOR INTERNAL USE SOFTWARE
Commencing on April 1, 1999, the Company began applying the provisions
of AICPA Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." No software or web-site
development costs qualified for capitalization in fiscal 1999 or fiscal 2000.
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.
F-8
<PAGE> 67
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.
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 adopted
SOP 98-1 effective April 1, 1999. The adoption of SOP 98-1 required the Company
to modify its method of accounting for software. The Company believes the impact
of SOP 98-1 to be minor.
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. The Company adopted SOP 98-5
effective April 1, 1999. Based on information currently available, the Company
does not expect the adoption of SOP 98-5 did not have a significant impact on
the Company's financial position or results of operations.
In December 1999, the SEC staff issued Staff Accounting Bulletin No.
101 ("SAB 101"), "Revenue Recognition in Financial Statements" as amended by
Staff Accounting Bulletins No. 101 A and 101 B. These bulletins summarize
certain of the staff's views about applying generally accepted accounting
principles to revenue recognition in financial statements. The Company will
be required to follow the guidance in SAB101 no later than its fourth quarter
of 2001, with restatement of earlier quarters in 2001 required, if necessary.
The SEC has recently issued further guidance with respect to adoption of
specific issues addressed by SAB 101. The Company is currently assessing the
impact, if any, SAB101 may have on its consolidated financial position or
results of operations.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation - an interpretation of APB
Opinion No. 25 ("FIN 44"). This Interpretation clarifies the definition of
employee for purposes of applying Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employee ("APB 25"), the criteria for determining
whether a plan qualifies as a noncompensatory plan, the accounting consequence
of various modifications to the terms of a previously fixed stock option or
award, and the accounting for an exchange of stock compensation awards in a
business combination. This Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after either
December 15, 1998, or January 12, 2000. We adopted FIN 44 during the quarter
ended September 30, 2000. This adoption did not have a material effect on our
consolidated financial position or results of operations.
F-9
<PAGE> 68
(3) PROPERTY, PLANT AND EQUIPMENT
A summary of the Company's property, plant and equipment follows:
<TABLE>
<CAPTION>
September 30,
1999 2000 2000
----- ------ -------------
(unaudited)
<S> <C> <C> <C>
Computer hardware and software..... $ 323 $1,018 $2,342
Office equipment................... 10 33 50
Furniture and fixtures............. -- 25 377
------ ------ ------
333 1,076
Less accumulated depreciation
and amortization.............. (68) (190) (527)
------ ------ ------
$ 265 $ 886 $2,242
====== ====== ======
</TABLE>
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
1999 2000 2000
---- ---- -------------
(unaudited)
<S> <C> <C> <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 $6 plus interest monthly for 36 months......................... $ 82 $ 12 $-0-
Unsecured shareholder loan, bearing interest at the rate of
10%. Interest only payments until maturity. Matures on
April 24, 2001.................................................... 41 15 -0-
Capital Lease Obligations........................................... 19 51 98
---- ---- ----
Total long-term debt...................................... 142 78 98
Less current installments of long-term debt......................... 84 41 20
---- ---- ----
Long-term debt, excluding current installments...................... $ 58 $ 37 $ 78
==== ==== ====
</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, 2000 and 1999.
Annual maturities of long-term debt for the next five years for the
period ended March 31 are as follows:
<TABLE>
<CAPTION>
2000
----
<S> <C>
2001............................. $ 15
2002............................. 12
2003............................. 0
2004............................. 0
2005............................. 0
-----
$ 27
=====
</TABLE>
(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 and $2,799, respectively, for the years ended March 31, 1999
and 2000, 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 and 2000, respectively, the Company
has net operating loss carryforwards of approximately $2.5 and $.273 million and
$1.7 and $.273 million for both Federal and state income tax reporting purposes
which begin to expire in 2011 and 2004, respectively. The Company also has
Canadian net operating loss carryforwards of $3.2 million which expire between
2004 and 2007. 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 2000
----- -------
<S> <C>
Net operating loss carryforwards.... $ 273 $ 2,475
Deferred compensation............... -- 451
Other............................... -- 146
----- -------
273 3,072
Valuation allowance................. (273) (3,072)
----- -------
Net deferred tax assets............. $ -- $ --
===== =======
</TABLE>
F-10
<PAGE> 69
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 and 2000. 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 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.
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). 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 offset by a reduction in
capital to consider the nil value of the assets acquired. 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.
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.
In June and July 1999, the Company offered at $4.00 per unit a total of
1,250,000 units consisting of one share of common stock and one warrant to
purchase and additional share of common stock at $4.75. Seven investors elected
to participate and 182,500 units were sold for a total of $730,000 (less
issuance costs of $96,000 paid in cash). 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.
In September and October 1999, the Company offered a total of 1,200,000
shares of common stock at $5 per share. Twenty-one investors purchased 836,700
shares for a total purchase price of $4,183,500 (less costs incurred of
$426,000, a portion of which was paid with 16,734 shares of common stock in lieu
of cash). Of the total proceeds raised, $3,449,000 (689,800 shares) was raised
in September and $734,500 (146,900 shares) was raised in October. We relied on
the registration exemption in Section 4(2) of the 1933 Act to issue these
shares. No underwriters were involved in this offering.
In November 1999, the Company entered into an agreement with certain
stockholders for the resolution of outstanding matters pursuant to which the
stockholders returned an aggregate of 773,992 shares of common stock for
cancellation.
F-11
<PAGE> 70
STOCK OPTION PLAN
As of March 31, 1999 and 2000, the Company had the 1999 Equity
Incentive Plan and an individual Non-Qualified Stock Option Plan for each
employee and consultant who was granted Non-Qualified options outside 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 36
months. Compensation expense, related to stock options granted with exercise
prices below fair market value, are amortized over the option vesting period.
Options expire at varying rates of up to 36 months from the date of grant. The
total number of options exercisable as of March 31, 1999 and 2000 was 300,000
and 1,932,000, respectively, with a weighted average exercise price of $1.06 and
$2.02.
Option compensation expense in fiscal 1999 for consultants and
employees/directors was $1 and $315, respectively. Compensation expense in
fiscal 2000 for consultants and employees/directors was $552 and $872,
respectively. Compensation for consultants in 2000 was calculated using a risk
free interest rate of 5.05%, no stock dividend yield, an expected life of 28 to
36 months and an expected volatility of 20% for options granted before the
Company commenced public reporting and an expected volatility of 74% after
public reporting commenced.
The following tables summarize the Company's option activity:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
NUMBER OF EXERCISE PRICE
OPTIONS PER OPTION
----------- ----------------
<S> <C> <C>
Outstanding at March 31, 1998.............. -- --
Granted.................................. 1,436,000 $ 1.02
-----------
Outstanding at March 31, 1999.............. 1,436,000 1.02
Granted.................................. 1,745,000 4.11
Exercised................................ (414,000) 0.34
Forfeited................................ (117,000) 5.96
-----------
Outstanding at March 31, 2000.............. 2,650,000 $ 2.90
Granted (unaudited)...................... 1,197,000 4.76
Exercised (unaudited).................... (402,000) 0.41
Forfeited (unaudited).................... (268,000) 5.70
----------- ------
Outstanding at September 30, 2000
(unaudited)............................... 3,177,000 $ 3.68
=========== ======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- -----------------------------
NUMBER WEIGHTED-AVERAGE WEIGHTED- WEIGHTED-
RANGE OF OUTSTANDING AT REMAINING AVERAGE NUMBER OF AVERAGE
EXERCISE PRICES MARCH 31, 2000 CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
----------------- --------------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ .10 -- 1.25 1,070,000 1.08 $0.79 1,010,000 $0.78
2.00 -- 3.00 584,000 2.18 2.55 524,000 2.50
3.20 -- 4.50 550,000 1.97 4.00 284,000 3.93
5.00 -- 7.50 315,000 2.12 6.53 114,000 6.00
8.00 --12.00 131,000 1.84 8.17 -0- 8.00
--------- ---------
Total 2,650,000 1.67 $2.90 1,932,000 $2.02
========= =========
</TABLE>
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 MARCH 31, 2000
-------------- --------------
<S> <C> <C>
Net loss:
As reported $(2,521) $(4,380)
Assumed stock compensation cost (5) (148)
------- -------
Pro forma, adjusted $(2,526) $(4,528)
======= =======
Net loss per share:
Basic and diluted loss per share as reported (0.45) (0.69)
Basic and diluted loss per share on a pro forma
basis (0.45) (0.71)
======= =======
</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% in 1999 and
ranging from 5.5% to 6.5% in 2000; no stock dividend yield; expected lives of 6
months in 1999 and approximately 18 to 48 months in 2000, and a volatility of 0%
in 1999 and 67% in 2000. The average fair value of options granted amounted to
$0.02 and $0.06 per option granted in 1999 and 2000, respectively.
F-12
<PAGE> 71
(7) COMMITMENTS AND CONTINGENCIES
LEASES
The Company is obligated under various capital leases for computer
hardware that expire at various dates during the next two years. At March 31,
2000, the gross amount of computer hardware and related accumulated amortization
recorded under capital leases are as follows:
<TABLE>
<CAPTION>
2000
----
<S> <C>
Computer hardware.......................... $ 93
Less accumulated amortization.............. (40)
------
$ 53
======
</TABLE>
Amortization of assets held under capital leases is included with
depreciation expense.
The Company also has two noncancelable operating leases for buildings,
one that expires in 2000 and another that expires in 2005. 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, 2000 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ ------
<S> <C> <C>
2001.............................................. $ 34 $ 75
2002.............................................. 29 63
2003.............................................. 63
2004.............................................. 63
2005.............................................. 41
----- ------
Total minimum lease payments............ 63 $ 305
===== ======
Less amount representing.......................... 12
-----
Present value of net minimum capital
lease payments........................ 51
Less current installments of obligations under
capital leases.................................. 26
-----
$ 25
=====
</TABLE>
Total rental expense, including month-to-month rentals, approximated
$34 and $119 in 1999 and 2000 and $99 for the six months ended September 30,
2000 (unaudited).
CONTINGENT LIABILITY
As of this date, the Company has an outstanding issue with the American
Stock Exchange as to the amount of past due obligations of the Company. The
Company believes that it has accrued the proper amount of expense in these
financial statements pertaining to its obligations pursuant to this vendor
relationship. However, this issue may result in an additional liability that the
Company believes will not exceed $300,000 above and beyond what has already been
accrued.
(8) SUBSEQUENT EVENTS
In June 2000, the Company had one offering of its common stock. In the
offering, the Company offered 59,603 shares of its common stock at $4.50 per
share. Eleven investors purchased 40,268 shares for a total purchase price of
$181,206 (less estimated costs incurred of $10,000). The Company relied on an
exemption from registration in Section 5 of the United States Securities Act of
1933 to issue these shares.
On June 6, 2000, the Company entered into an Agreement and Plan of
Merger with RedChip.com, Inc, a privately owned stock research company
headquartered in Portland, Oregon.
F-13
<PAGE> 72
(9) Subsequent Events (unaudited)
On August 18, 2000, RedChip.com, Inc. was merged with a wholly-owned subsidiary
of the Company. Following the merger, RedChip.com, Inc. survived as a
wholly-owned subsidiary of the Company.
Upon consummation of the merger, each outstanding share of common stock of
RedChip.com, Inc. was converted into the right to receive .3935408 shares of
common stock, $0.01 par value per share, of FreeRealtime.com, Inc. Approximately
4 million shares and certain cash amounts in lieu of fractional shares of
Company common stock were issued upon conversion of outstanding shares of
RedChip.com, Inc. common stock.
Of the total shares issued, 235,000 shares were returned to the Company to
extinguish certain notes receivable from shareholders held by RedChip.com, Inc.
The total consideration, as measured based on the fair value of the Company's
common stock at the date the combination was entered into is summarized below:
Common stock issued $17,200
Value attributed Company stock options
granted to retire RedChip.com, Inc.
stock options 252
Acquisition costs 739
-------
Total consideration 18,191
Net fair value of liabilities acquired 1,141
-------
Goodwill $19,332
=======
The acquisition was accounted for using the purchase method of accounting. The
Company's financial statements included the results of RedChip.com, Inc. from
the date of acquisition forward. Goodwill is amortized over three years.
Summarized are certain pro forma operating results as if the combination had
been consummated on April 1, 1999:
Year ended Six months ended
March 31, 2000 September 30, 2000
-------------- ------------------
Revenue $ 8,630 7,288
Net income (13,831) (9,077)
Basic and diluted loss
per share (0.99) (0.61)
The pro forma results for the year ended March 31, 2000 were compiled by
combining the results of the Company for the year ended March 31, 2000 with the
results of RedChip.com, Inc. for the year ended December 31, 1999. The unaudited
loss for RedChip.com, Inc. for the three months ended March 31, 2000 was
$2,228.
On August 15, 2000, the Company issued 3,810,367 shares of common stock in a
private placement which raised $8,949 of cash, net of $1,053 in cash expenses.
F-14
<PAGE> 73
4,317,867 SHARES
[FREEREALTIME LOGO]
COMMON STOCK
-----------------------
P R O S P E C T U S
-----------------------
, 2000
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
the common stock being registered. All amounts are estimates except the SEC
registration fee.
<TABLE>
<CAPTION>
Amount to
Be Paid
---------
<S> <C>
SEC registration fee........................................................... $ 2,565
Legal fees and expenses........................................................
Accounting fees and expenses...................................................
Printing and engraving.........................................................
Blue sky fees and expenses (including legal fees)..............................
Transfer agent fees............................................................
Miscellaneous..................................................................
Total..................................................................
=========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such person under certain circumstances
(including reimbursement for expenses incurred) arising under the Securities
Act. Our certificate of incorporation and our bylaws provide for the
indemnification of our directors, officers, employees and other agents to the
extent permitted by Delaware General Corporation Law. We have also entered into
agreements with our directors and executive officers that require us, among
other things, to indemnify them against certain liabilities that may arise by
reason of their status or service as directors and to maintain officers
liability insurance, which provides coverage against certain liabilities
including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Issuance of Shares of Common Stock. Freerealtime.com, Inc. (the
"Company") 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, Inc. (the "Name Change.")
FIFC DELAWARE ISSUANCES. Prior to the Merger, FIFC-Delaware
had completed two issuances of its common stock.
(i) On July 31, 1998, pursuant to the acquisition of
FIFC-Alberta by FIFC-Delaware, 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. No underwriters were
involved in this transaction. 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.
(ii) In August of 1998 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
II-1
<PAGE> 75
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 ISSUANCES. Prior to the Merger and the Name Change
Pub Singin had completed one issuance of unregistered securities.
(iii) In September 1997, Pub Singin issued 5,680,000 shares of
its 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. No
underwriters were involved in the sale of these securities. 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.
FREEREALTIME ISSUANCES.
(iv) In October 1998, the Company 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). The Company 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.
(v) During June and July 1999, the Company 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). The Company 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.
(vi) During September and October 1999, 836,700 shares of
common stock were issued and sold to twenty-one investors, for a total
purchase price of $4,183,500 (less costs incurred of approximately
$426,000, a portion of which was paid with 16,734 shares of common
stock in lieu of cash). Of the total proceeds raised, $3,449,000
(689,800 shares) was raised in September and $734,500 (146,900 shares)
was raised in October. The Company relied on the registration exemption
under Section 4(2) of the Securities Act to issue these shares without
registering the underlying securities. No underwriters were involved in
this offering.
(vii) On August 15, 2000 the Company issued and sold 3,810,367
shares of our common stock to nineteen accredited investors for an
aggregate purchase price of $9,999,693. This issuance was deemed to be
exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act or Regulation D promulgated
thereunder as a sale by an issuer not involving a public offering. No
underwriters were involved in this offering.
(viii) On August 18, 2000 the Company acquired RedChip.com,
Inc., a Delaware corporation. As consideration for this acquisition the
Company issued 3,999,925 shares of our common stock to the stockholders
of RedChip in reliance on Section 3(a)(10) of the Securities Act. In
order to comply with Section 3(a)(10) of the Securities Act, the
California Department of Corporations held a fairness hearing on August
1, 2000 and issued a permit for the issuance of the 4,000,000 shares of
our common stock to the RedChip stockholders. In order to satisfy
indemnification obligations RedChip may owe us pursuant to the merger
agreement, ten percent (10%) of the shares that would otherwise be
issued by the Company were automatically deposited into an escrow
account. If no claims are made on the escrow fund after June 6, 2001
these shares will be distributed to the RedChip stockholders in the
amounts otherwise due. No underwriter was involved in this transaction.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
II-2
<PAGE> 76
Number Description
------ -----------
3.1* Certificate of Incorporation filed with the Secretary
of State of the State of Delaware on November 22,
1999
3.2* Bylaws
3.3* Agreement and Plan of Merger by and between
the Registrant and Freerealtime.com, Inc., a Colorado
corporation, dated November 23, 1999
4.1* Reference is made to Exhibits 3.1 and 3.2
4.2* Stockholders Agreement and Warrant Agreement between
the Registrant and the Stockholders listed in
Schedule 1 attached thereto, dated July 2, 1999
4.3* Investors Rights Agreement between the Registrant and
the Investors listed in Schedule 1 attached thereto,
dated August 15, 2000
5.1+ Opinion of Latham & Watkins
10.1* Agreement for Receipt and Use of Market Data between
First International Financial Corporation and the New
York Stock Exchange, Inc., dated December 23, 1997
10.2* NQDS Information Vendor Agreement between The Nasdaq
Stock Market, Inc. and First International
Corporation (Alberta), dated March 25, 1997
10.2.1* Amendment to Attachment A - System Description of
NQDS Information Vendor Agreement, dated April 25,
1997
10.2.2* Addendum to the Vendor Agreements for Level 1 Service
and Last Sale Service of The Nasdaq Stock Market,
Inc., between The Nasdaq Stock Market, Inc, and First
International Financial Corporation (Alberta), dated
May 20, 1999
10.3* S&P Comstock Information Distribution License
Agreement between S&P Comstock, Inc., and First
International Financial Corporation (Alberta), dated
June 13, 1997
10.3.1* Addendum to Exhibit C of License Agreement by and
between S&P Comstock, Inc. and First International
Financial Corporation (Alberta), dated July 18, 1997
10.4* 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
10.4.1* Electronic Contracting Vendor Agreement/Rider,
between First International Corporation and the AMEX,
Chicago Board of Options Exchange Incorporated NYSE,
Pacific Exchange Incorporated and Philadelphia Stock
Exchange, Inc., dated October 28, 1999
10.5* Representation Agreement between 2CAN media, Inc. and
the Registrant, dated March 10, 1999
10.5.1* Amendment #1 to Marketing and License Agreement dated
September 30, 1999 by and between Adsmart Corporation
(successor in interest to 2CAN Media, Inc.) and
the Registrant, dated December 1, 1992
10.6* Marketing and License Agreement between the
Registrant and Telescan, Inc., dated September 30,
1999
10.6.1* Amendment #1 to Marketing and License Agreement by
and between the Registrant and Telescan, Inc. dated
September 30, 1999
10.7* Equipment Lease between Balboa Capital Corporation
and the Registrant, dated March 25, 1999
10.8* Master Services Agreement between Exodus
Communications, Inc. and the Registrant, dated August
6, 1999
10.8.1* Order Form/Addendum to Master Services Agreement by
and between Exodus Communications, Inc. and
the Registrant, dated December 21, 1999
10.9* Web Hosting and Internet Access Service Agreement
between Qwest Internet Solutions, Inc., a Delaware
corporation and the Registrant, dated May 1, 2000
10.10* Lease between Certus Developments, Inc. and
the Registrant, dated October 25, 1999
10.10.1* Specific Assignment of Leases between Marco
Investments Ltd. and Royal Trust Corporation of
Canada, dated December 23, 1999
<PAGE> 77
10.11* License Agreement between Jamboree LLC and the
Registrant, dated May 15, 2000
10.12* 1999 Equity Incentive Plan
10.13* Website Development, Hosting and License Agreement
between Imperial Capital LLC and the Registrant,
Inc. dated February 22, 2000
10.14* Agreement and Plan of Merger by and Among the
Registrant and RedChip.com, Inc. dated June 6, 2000
10.15* Letter Agreement from Jefferies & Company, Inc. to
the Registrant, regarding the RedChip.com transaction
dated May 25, 2000
21.1* Subsidiaries of the Registrant
23.1+ Consent of KPMG LLP
23.2+ Consent of Latham & Watkins (included in Exhibit 5.1)
24.1* Powers of Attorney (see Signature Pages on Pages S-1
and S-2)
27.1* Financial Data Schedule
-----------------
* Previously filed
+ Filed herewith
(b) Financial Statement Schedules.
ITEM 17. UNDERTAKINGS
(a) Rule 415 Offering. The undersigned registrant hereby
undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
this Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in their
formation set forth in this Registration
Statement;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in this Registration
Statement or any material change to such
information in this Registration Statement;
provided, however, that paragraphs 1(i) and 1(ii) do
not apply if the information required to be included
in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant
pursuant to Section 13 or section 15(d) of the
Securities Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a
spot-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) Request for Acceleration of Effective Date.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the SEC such indemnification is against
II-4
<PAGE> 78
public policy as expressed in the Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Irvine, State of California, on this 13th day of
December, 2000.
Freerealtime.com, Inc.
By: /s/ GEOFFREY T. MOORE
------------------------------------
Name: Geoffrey T. Moore
Title: Chairman of the Board and
Co-Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Geoffrey Moore and Michael Neufeld each of them individually, as
attorney-in-fact, with the power of substitution, for him or her in any and all
capacities, to sign any amendment to this Registration Statement (including
post-effective amendments and registration statements filed pursuant to Rule 462
and otherwise), and to file the same, with exhibits thereto and other documents
in connection therewith, with the SEC, granting to said attorneys-in-fact, and
each of them individually, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact or each of them
individually, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons on December 13, 2000, in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President, Co-Chief Executive Officer and Director
------------------------------------------ (Principal Executive Officer)
Brad G. Gunn
/s/ GEOFFREY MOORE Chairman of the Board and Co-Chief Executive Officer
------------------------------------------
Geoffrey Moore
/s/ MICHAEL B. NEUFELD Executive Vice President, Chief Financial Officer and
------------------------------------------ Secretary (Principal Financial and Accounting Officer)
Michael B. Neufeld
* Director
------------------------------------------
Scott L. Brown
* Director
------------------------------------------
Ari R. Engelberg
* Director
------------------------------------------
David Gale
* Director
------------------------------------------
Stephen N. Livingston
* Director
------------------------------------------
Jonathan Mork
</TABLE>
S-1
<PAGE> 80
<TABLE>
<S> <C>
* Director
------------------------------------------
Marcus W. Robins
* Director
------------------------------------------
Byron C. Roth
* Director
------------------------------------------
Robert M. Werle
* Director
------------------------------------------
Ronald P. Woods
*By: /s/ GEOFFREY T. MOORE
------------------------------------------
Geoffrey T. Moore
Attorney-in-Fact
*By: /s/ MICHAEL NEUFELD
------------------------------------------
Michael Neufeld
Attorney-in-Fact
</TABLE>
S-2
<PAGE> 81
EXHIBIT INDEX
Number Description
------ -----------
3.1* Certificate of Incorporation filed with the Secretary
of State of the State of Delaware on November 22,
1999
3.2* Bylaws
3.3* Agreement and Plan of Merger by and between
the Registrant and Freerealtime.com, Inc., a Colorado
corporation, dated November 23, 1999
4.1* Reference is made to Exhibits 3.1 and 3.2
4.2* Stockholders Agreement and Warrant Agreement between
the Registrant and the Stockholders listed in
Schedule 1 attached thereto, dated July 2, 1999
4.3* Investors Rights Agreement between the Registrant and
the Investors listed in Schedule 1 attached thereto,
dated August 15, 2000
5.1+ Opinion of Latham & Watkins
10.1* Agreement for Receipt and Use of Market Data between
First International Financial Corporation and the New
York Stock Exchange, Inc., dated December 23, 1997
10.2* NQDS Information Vendor Agreement between The Nasdaq
Stock Market, Inc. and First International
Corporation (Alberta), dated March 25, 1997
10.2.1* Amendment to Attachment A - System Description of
NQDS Information Vendor Agreement, dated April 25,
1997
10.2.2* Addendum to the Vendor Agreements for Level 1 Service
and Last Sale Service of The Nasdaq Stock Market,
Inc., between The Nasdaq Stock Market, Inc, and First
International Financial Corporation (Alberta), dated
May 20, 1999
10.3* S&P Comstock Information Distribution License
Agreement between S&P Comstock, Inc., and First
International Financial Corporation (Alberta), dated
June 13, 1997
10.3.1* Addendum to Exhibit C of License Agreement by and
between S&P Comstock, Inc. and First International
Financial Corporation (Alberta), dated July 18, 1997
10.4* 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
10.4.1* Electronic Contracting Vendor Agreement/Rider,
between First International Corporation and the AMEX,
Chicago Board of Options Exchange Incorporated NYSE,
Pacific Exchange Incorporated and Philadelphia Stock
Exchange, Inc., dated October 28, 1999
10.5* Representation Agreement between 2CAN media, Inc. and
the Registrant, dated March 10, 1999
10.5.1* Amendment #1 to Marketing and License Agreement dated
September 30, 1999 by and between Adsmart Corporation
(successor in interest to 2CAN Media, Inc.) and
the Registrant, dated December 1, 1992
10.6* Marketing and License Agreement between the
Registrant and Telescan, Inc., dated September 30,
1999
10.6.1* Amendment #1 to Marketing and License Agreement by
and between the Registrant and Telescan, Inc. dated
September 30, 1999
10.7* Equipment Lease between Balboa Capital Corporation
and the Registrant, dated March 25, 1999
10.8* Master Services Agreement between Exodus
Communications, Inc. and the Registrant, dated August
6, 1999
10.8.1* Order Form/Addendum to Master Services Agreement by
and between Exodus Communications, Inc. and
the Registrant, dated December 21, 1999
10.9* Web Hosting and Internet Access Service Agreement
between Qwest Internet Solutions, Inc., a Delaware
corporation and the Registrant, dated May 1, 2000
10.10* Lease between Certus Developments, Inc. and
the Registrant, dated October 25, 1999
10.10.1* Specific Assignment of Leases between Marco
Investments Ltd. and Royal Trust Corporation of
Canada, dated December 23, 1999
<PAGE> 82
10.11* License Agreement between Jamboree LLC and the
Registrant, dated May 15, 2000
10.12* 1999 Equity Incentive Plan
10.13* Website Development, Hosting and License Agreement
between Imperial Capital LLC and the Registrant,
Inc. dated February 22, 2000
10.14* Agreement and Plan of Merger by and Among the
Registrant and RedChip.com, Inc. dated June 6, 2000
10.15* Letter Agreement from Jefferies & Company, Inc. to
the Registrant, regarding the RedChip.com transaction
dated May 25, 2000
21.1* Subsidiaries of the Registrant
23.1+ Consent of KPMG LLP
23.2+ Consent of Latham & Watkins (included in Exhibit 5.1)
24.1* Powers of Attorney (see Signature Pages on Pages S-1
and S-2)
27.1* Financial Data Schedule
-----------------
* Previously filed
+ Filed herewith
