<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 2000,
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DEMANDSTAR.COM, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-3590973
------------------------------- ----------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1551 SANDSPUR ROAD, SUITE B
MAITLAND, FLORIDA 32751
----------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
DEMANDSTAR.COM, INC. 1999 EMPLOYEE INCENTIVE COMPENSATION PLAN
-------------------------
(FULL TITLE OF THE PLANS)
O. F. RAMOS
CHIEF EXECUTIVE OFFICER
DEMANDSTAR.COM, INC.
1551 SANDSPUR ROAD, SUITE B
MAITLAND, FLORIDA 32751
---------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(407) 975-0000
-------------------------------------------------------------
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
SANDRA C. GORDON, ESQ.
GREENBERG TRAURIG, P.A.,
111 NORTH ORANGE AVENUE, 20TH FLOOR, ORLANDO, FLORIDA 32801
(407) 420-1000
--------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------- --------------- -------------------------- ------------------------- -------------------------
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of Registration
to be Registered Registered(1) Offering Price Per Unit Aggregate Offering Price Fee(2)
- ----------------------- --------------- ------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Common Stock, 2,270,000 $1.00(3) $2,270,000 $ 599.28(3)
$.0001 par value
- ----------------------- --------------- ------------------------- ------------------------- -------------------------
Common Stock, 1,730,000 $1.22(4) $2,110,600 $ 557.20(4)
$.0001 par value
- ----------------------- --------------- ------------------------- ------------------------- -------------------------
Total 4,000,000 $1,156.48
- ----------------------- --------------- ------------------------- ------------------------- -------------------------
</TABLE>
(1) The number of shares of common stock, par value $.0001 per share (the
"Common Stock"), stated above consists of the aggregate number of shares
which may be sold upon the exercise of options granted or which hereafter
may be granted under DemandStar.com, Inc.'s 1999 Employee Incentive
Compensation Plan (the "Plan"), which includes 1,600,000 shares for resale
upon the exercise of options granted under the Plan to certain officers and
directors. Pursuant to Rule 416 of the Securities Act of 1933, as amended
(the "Securities Act"), DemandStar.com, Inc. is also registering such
indeterminable number of shares of Common Stock that may be issuable upon
the exercise of stock options by reason of stock splits, stock dividends or
similar transactions.
(2) Calculated by multiplying the aggregate offering amount by .000264,
pursuant to Section 6(b) of the Securities Act.
(3) Estimated in accordance with Rule 457(h) solely for the purpose of
calculating the registration fee on the basis of an option exercise price
of $1.00 per share for outstanding options to purchase a total of 2,270,000
shares.
(4) Estimated in accordance with Rule 457(h) solely for the purpose of
calculating the registration fee on the basis of $1.22 per share (the
average of the bid and the ask of the Common Stock as reported on the OTC
Electronic Bulletin Board on May 23, 2000, a date within five business days
prior to the date of this registration statement) for the 1,730,000
additional shares reserved for issuance under the 1999 Employee Incentive
Compensation Plan.
<PAGE> 2
PART I
INFORMATION REQUIRED IN SECTION 10(a) PROSPECTUS
This Registration Statement includes two forms of Prospectus. The
documents constituting the prospectus under Part I of this Registration
Statement (the "Plan Prospectus") will be sent or given to participants in the
1999 Employee Incentive Compensation Plan (the "Plan") as specified by Rule
428(b)(1) under the Securities Act. The second prospectus (the "Resale
Prospectus") may be used in connection with reoffers and resales of shares of
the Common Stock of DemandStar.com, Inc. (the "Company") entitled to be
acquired pursuant to the Plan prior to the date of this Registration Statement.
The Plan Prospectus has been omitted from this Registration Statement as
permitted by Part I of Form S-8. The Resale Prospectus is filed as part of this
Registration Statement as required by Form S-8.
Upon written or oral request, the Company will provide, without
charge, the documents incorporated by reference in Item 3 of Part II of this
Registration Statement. The documents are incorporated by reference in both the
Plan Prospectus and the Resale Prospectus. The Company will also provide,
without charge, upon written or oral request, other documents required to be
delivered to employees pursuant to Rule 428(b). Requests for the
above-mentioned information should be directed to the Company, 1551 Sandspur
Road, Suite B, Maitland, Florida 32751.
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RESALE PROSPECTUS
DEMANDSTAR.COM, INC.
1,600,000 SHARES COMMON STOCK
($.0001 PAR VALUE)
ISSUED PURSUANT TO THE
DEMANDSTAR.COM, INC. 1999 EMPLOYEE INCENTIVE COMPENSATION PLAN
This Prospectus may be used by certain individuals (named under the
caption and hereafter called "Selling Shareholders") in connection with their
sales of 1,600,000 shares of common stock, $.0001 par value (the "Common
Stock"), of DemandStar.com, Inc. (the "Company" or "DemandStar") issued to them
under the DemandStar.com, Inc. 1999 Employee Incentive Compensation Plan, as
the same may be amended (the "Plan"). The Company expects that Selling
Shareholders who choose to offer and sell their shares will do so from time to
time in ordinary market transactions at then-current market prices for shares
of Common Stock, or in other transactions at negotiated prices. The Company
will pay the expenses of this Prospectus but will receive no part of the
proceeds of any such sales.
The Selling Shareholders might be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"),
in which event any discounts, concessions or commissions that they receive,
which are not expected to exceed those customary in the types of transactions
involved, may be deemed to be underwriting commissions under the Securities
Act.
The Common Stock is traded on the OTC Electronic Bulletin Board under
the symbol "DMND." On May 23, 2000, the last reported sale price for the Common
Stock was $1.062 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 HEREOF FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN
THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 25, 2000.
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<PAGE> 4
TABLE OF CONTENTS
AVAILABLE INFORMATION.........................................................1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................4
THE COMPANY...................................................................4
RISK FACTORS..................................................................6
USE OF PROCEEDS..............................................................20
SELLING SHAREHOLDERS.........................................................21
PLAN OF DISTRIBUTION.........................................................22
LIMITED LIABILITY AND INDEMNIFICATION........................................23
EXPERTS......................................................................24
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
with the Exchange Act, the Company files reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission"). The
Company has also filed with the Commission a registration statement on Form S-8
under the Securities Act with respect to the Common Stock to which this
Prospectus relates. This Prospectus does not contain all of the information set
forth in the registration statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained in this Prospectus concerning the provisions of any document are not
necessarily complete and, in each instance, reference is hereby made to the
copy of the document filed as an exhibit to the registration statement.
You can inspect and copy the registration statement described above,
its exhibits, and the reports, proxy statements, and other information that the
Company files with the Commission at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 7 World Trade Center, 13th Floor,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You can also obtain copies of such material by mail at
prescribed rates from the Commission's Public Reference Section at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. You may
also access such material at the Commission's home page or the Internet at
http:/www.sec.gov.
The Company will furnish without charge, upon written or oral request,
to any person, including any beneficial owner, to whom this Prospectus is
delivered, a copy of any information that has been incorporated in this
Prospectus by reference. Requests should be directed to Investor Relations,
DemandStar.com, Inc., 1551 Sandspur Road, Suite B, Maitland, Florida 32751,
telephone number (407) 975-0000.
This Prospectus is part of a registration statement filed with the
Commission by the Company. You should rely only on the information incorporated
by reference or provided in this Prospectus and the registration statement. The
Company has not authorized anyone to provide you with different information.
You should not assume that the information in this Prospectus is accurate as of
any date other than the date on the front of the document.
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<PAGE> 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the
Exchange Act or the Securities Act are incorporated herein by reference:
1. The Company's Registration Statement on Form S-1, File No.
333-93445, declared effective by the Commission on March 27,
2000.
2. The description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A, File Number
0-28703, declared effective by the Commission on March 27,
2000, and any reports or amendments to the foregoing filed
with the Commission for the purpose of updating such
descriptions.
3. The Company's Quarterly Report on Form 10Q for the quarter
ended March 31, 2000.
All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering shall be deemed
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified shall not
be deemed to constitute a part of this Prospectus except as so modified, and
any statement so superseded shall not be deemed to constitute a part of this
Prospectus.
THE COMPANY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE.
We are a provider of Internet-based procurement systems for
governmental agencies. Our procurement systems enable government agencies to
purchase goods and services more efficiently and at lower administrative costs
while at the same time providing valuable services to businesses selling to
government agencies. By allowing government agencies to become members in our
online network for free, we accept the responsibility of distributing various
bid requests and associated documents to vendors. This reduces administrative
costs of the member agencies. It also increases an agency's efficiency because
it no longer has to manage the distribution. The vendors pay a membership fee
to get the benefit of "real time" notification of new bid opportunities. Real
time notification occurs through either email or fax broadcast, depending on
the vendor's choice. The DemandStar system handles all goods and services that
agencies acquire through a mandatory bid process. Typically, agencies use a
mandatory bid process for procurement of all goods and services above an
agency-specific dollar amount that are not an emergency or sole-source
procurement item or service, which amount is typically around $5,000, but
varies from agency to agency.
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<PAGE> 6
Our services are provided at no cost to participating governmental
agencies. Businesses that provide goods and services to agencies are provided
the opportunity to register with us as member vendors for an annual fee. These
services, which are included in a member vendor's annual fee and provided at
no-cost to governmental agencies, include the following:
o Membership management, which allows the administrator to control
which users have access, which users may view and submit bids, and
who has administrative control.
o Notification, by e-mail and/or fax, of bid/request for proposal
opportunities to member vendors.
o Web-enabled database of all procurement information from
participating agencies.
In addition to the services listed above, vendors may request a "hard
copy" of bid information. In such case, the vendor is then charged a fee which
varies with the complexity of the document requested. DemandStar began offering
services to Florida governmental agencies in May 1998. DemandStar now serves
over two dozen governmental agencies and over thirty-five hundred vendors,
primarily in Florida where we chose to concentrate our initial marketing
efforts. Our contracts with our government clients have one to five year terms,
of which three-year terms are the most typical and are non-exclusive with
respect to the information provided by the government agency. We intend to
increase our revenues by selling our existing products and services throughout
the United States to governmental agencies at the federal, state and local
levels, as well as internationally. We are also developing and intend to
deliver new products and services to our constituent governmental agencies and
vendors.
We were formed as "HTE-IOD, Inc.," a Florida corporation, on June 1,
1999. On June 18, 1999, we acquired the business and specified net assets of
our predecessor, Information On Demand, Inc., a Florida corporation formed in
June 1997. In connection with that acquisition, we changed our name to
"Information On Demand, Inc." On December 21, 1999, we changed our name to
"DemandStar.com, Inc." Our predecessor initially developed and marketed our
"fax-on-demand" system through which it delivered to vendors information on
agencies' requests for proposals (bid requests) by facsimile. Shortly
thereafter, our predecessor developed an Internet delivery system and commenced
marketing that system in June, 1998.
Our principal executive offices are located at 1551 Sandspur Road,
Suite B, Maitland, Florida 32751 and our telephone number is (407) 975-0000.
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<PAGE> 7
RISK FACTORS
IN CONSIDERING MATTERS SET FORTH IN THIS PROSPECTUS, PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AS WELL AS
OTHER INFORMATION SET FORTH AND INCORPORATED BY REFERENCE TO THIS PROSPECTUS.
RISKS PARTICULAR TO DEMANDSTAR.COM, INC.
WE ANTICIPATE INCURRING SIGNIFICANT LOSSES FOR THE FORESEEABLE FUTURE. OUR
AUDITORS HAVE QUALIFIED THEIR REPORT ON OUR FINANCIAL STATEMENTS WITH RESPECT
TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.
As noted in the Report of Independent Certified Public Accountants
included in documents incorporated herein by reference, we have experienced
significant operating losses and an accumulated deficit which raise substantial
doubt about our ability to continue as a going concern. Our financial
statements do not include any adjustments that might result from this
uncertainty. To date, we have not been profitable. We may never be profitable
or, if we become profitable, we may be unable to sustain profitability. We have
incurred significant losses since inception. Together with our predecessor, we
reported a total net loss of $1,409,201 for the year ended December 31, 1999.
We expect to continue to incur significant losses for the foreseeable future.
As of December 31, 1999, our accumulated deficit was $1,138,842. Our limited
operating history makes predicting our future operating results, including
operating expenses, difficult. Our revenues may not grow or may not even
continue at their current level.
WE RECEIVED A QUALIFIED ACCOUNTANTS' REPORT WHICH INDICATES THERE ARE DOUBTS
ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
The report of our independent accountants, in connection with our
audited financial statements for the year ended December 31, 1999, contains an
explanatory paragraph indicating factors which create doubt about our ability
to continue as a going concern. These factors include the fact that DemandStar
has generated losses since its inception and has relied on capital
contributions and loans from shareholders to fund its operations.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT MAY BE DIFFICULT TO EVALUATE
OUR BUSINESS.
We only have a limited operating history on which to base an
evaluation of our business and prospects. You must consider our business in the
light of the risks, expenses and problems frequently encountered by companies
like us. Before investing in our common stock, you should consider the risks
and difficulties we may encounter as an early-stage company in the new and
rapidly evolving e-commerce market. These risks include our ability to:
o implement our business model;
o increase the efficiency and function of our services;
o anticipate and adapt to rapid changes in our markets;
6
<PAGE> 8
o retain existing customers, attract new customers and maintain
customer satisfaction;
o introduce enhanced web sites, services, products and alliances; and
o minimize technical difficulties, system downtime and the effect of
Internet brownouts.
If we do not successfully manage these risks, our business will
suffer. We cannot assure you that we will successfully address these risks or
that our business strategy will be successful.
WE EXPECT OUR OPERATING EXPENSES TO INCREASE.
Some of our expenses are fixed, including non-cancelable agreements,
equipment leases and real estate leases. If our revenues do not increase, we
may not be able to compensate by reducing expenses in a timely manner. In
addition, we plan to increase significantly our operating expenses to:
o increase our sales and marketing operations;
o broaden our customer support capabilities; and
o develop new and enhanced products and services.
Expenses may also increase due to the potential impact of goodwill and other
charges resulting from completed and future acquisitions.
Additionally, leading Web sites, browser providers and other Internet
distribution channels may begin to charge us to provide access to our products
and services. If any of these expenses are not accompanied by increased
revenues, our business, financial condition and operating results would be
materially adversely affected.
WE MAY BE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY WHICH COULD CAUSE OUR
BUSINESS AND OPERATING RESULTS TO SUFFER.
Our growth rate may increase rapidly in response to the acceptance of
our products and services under new or existing government contracts. This
growth will place a substantial strain on our limited management, operational
and financial resources and systems. To integrate our operations and to manage
the growth of our operations will require the development and implementation of
our operational and financial systems, procedures and controls and training,
and management and expansion of our employee base. We cannot provide any
assurance that we will be able to effectively manage the expansion of our
operations or that the systems we develop and implement, or procedures or
controls that we adopt, will be adequate to support the rapid execution
necessary to exploit fully the market opportunity we have identified. If we do
not manage our growth effectively, our business and operating results will
suffer.
OUR BUSINESS PLAN DEPENDS ON ACCEPTANCE OF OUR SERVICE BY GOVERNMENTAL
AGENCIES.
In order to expand the number of vendor subscriptions for our service,
from which we anticipate deriving more than 85% of our revenue under our
business plan, our program must be accepted by governmental agencies. There are
various factors which could delay acceptance by or prevent agencies from
contracting with us for our service, including:
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<PAGE> 9
o political acceptance of the concept of governmental agencies
contracting with third parties to distribute public information,
which has been offered traditionally only by the governmental
agencies, often without charge;
o changes to state legislation authorizing government's contracting
with third parties to distribute public information;
o the high cost of implementing and maintaining Internet technology
in a budget-constrained environment;
o the risks associated with moving from older, established
technologies to rapidly evolving Internet technologies;
o the intense competition for qualified technical personnel;
o the lengthy and political appropriations process for obtaining
funds to acquire and implement new technology; and
o the concern governmental agencies may have over security and
privacy of information they view as part of the public trust.
Delays in the approval process, or failure to obtain such approvals, from
government agencies could harm our business, operating results and financial
condition.
BECAUSE WE HAVE SERVICE CONTRACTS WITH A LIMITED NUMBER OF GOVERNMENTAL BODIES,
THE TERMINATION OF ANY OF THESE CONTRACTS MAY HARM OUR BUSINESS.
Currently, we have contracts with over two dozen governmental
entities. These contracts have terms ranging from one to three years. Contracts
are cancelable by either party upon 30 days' notice. The decision by one or
more governments not to renew an existing contract or any termination of one or
more of these contracts will result in significant revenue shortfalls. Revenue
shortfalls would result because vendor agreements are cancelable by either
party upon 30 days' notice. DemandStar will notify appropriate vendors if a
government terminates or fails to renew an agreement. The vendor could then
choose to cancel its vendor agreement. If these revenue shortfalls occur, our
business and financial condition would be harmed. We cannot be certain if, when
or to what extent governments might fail to renew or terminate any or all of
their contracts with us.
WE MAY BE UNABLE TO OBTAIN FUTURE CONTRACTS THROUGH THE REQUEST FOR PROPOSAL
PROCESS.
Once a government decides to utilize our services, it often involves a
selection process that operates under special rules that apply to government
purchasing. These rules typically require open bidding by possible service
providers like us against a list of requirements established by governments
under existing or specially-created procedures. To respond successfully to
these requests for proposals, we must estimate the time and costs required to
establish operations for the proposed client and the likely terms of any other
proposals submitted. We also must assemble and submit a large volume of
information within the strict time schedule mandated by a request for proposal.
Whether or not we are able to respond successfully to requests for proposals in
the future will significantly impact our business. We cannot guarantee that we
will win any bids in the future through the request for proposal process.
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<PAGE> 10
We also cannot guarantee that any winning bids will ultimately result in
contracts because after the winning bid is identified, negotiations then occur
between the winning party and the agency. Typically, these negotiations are
over legal terms and conditions of the agreement, not price or delivery time.
We cannot guarantee the success of those negotiations. If negotiations fail,
the agency is free to negotiate with other bidders, or restart the request for
proposal process. Our business, financial condition and operating results would
be harmed if we fail to obtain profitable future contracts through the request
for proposal process.
IF DEMAND FOR OUR SINGLE CORE SERVICE WERE TO WEAKEN, OUR BUSINESS AND
FINANCIAL CONDITION WOULD BE HARMED.
We obtain substantially all of our revenues from a single core
service. Subscription-based fees charged for access to governmental procurement
information accounted for approximately 85% of our revenues for the year ended
December 31, 1999, and are expected to continue to account for a significant
portion of our revenue in the near future. Regulatory changes or the
development of alternative information sources could materially reduce our
revenues from this core service.
BECAUSE WE RELY ON A CONTRACTUAL BIDDING PROCESS WHOSE PARAMETERS ARE
ESTABLISHED BY GOVERNMENTS, THE LENGTH OF OUR SALES CYCLES IS UNCERTAIN AND CAN
LEAD TO REVENUE SHORTFALLS.
Our having to rely on a bidding process to initiate new projects, the
parameters of which are established by governments, results in uncertainty in
our sales cycles because the duration and the procedures for each bidding
process vary significantly according to each government entity's policies and
procedures. The time between the date of initial contact with a government for
a bid and the award of the bid may range from as little as 30 days to up to 180
days. The bidding process is subject to factors over which we have little or no
control, including:
o the internal review process by the government agencies for bid
acceptance;
o changes to the bidding procedure by the government agencies;
o changes in government administrations;
o the budgetary restrictions of government entities;
o the competition generated by the bidding process; and
o the possibility of cancellation or delay by the government
entities.
Any delay in the bidding process, changes to the bidding practices and
policies, the failure to receive the bid or the failure to execute a contract
may disrupt our financial results for a particular period and harm our business
and financial condition.
OUR CONTRACTS WITH GOVERNMENTAL ENTITIES COULD BE VOIDED.
Our contracts may be cancelled by either party upon 30 days' notice.
Further, our competitors or other third parties could bring lawsuits, seek
legislation or in other ways attempt to have our contracts voided by alleging
incorrect procurement processes or otherwise protesting our contracts. This
would harm our business, results of operations and financial condition.
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<PAGE> 11
ENTRANCE OF POTENTIAL COMPETITORS INTO THE MARKETPLACE COULD HARM OUR ABILITY
TO MAINTAIN OR IMPROVE OUR POSITION IN THE MARKET.
We operate in a very competitive business environment. The market for
online information services is rapidly evolving and intensely competitive, with
few barriers to entry. Many companies exist that provide one or more parts of
the products and services we offer. Moreover, government entities providing
data to us are not subject to exclusive agreements with us. Thus data included
in our products and services also may be included in those of our potential
competitors. Many of our existing and potential competitors are national or
international in scope, may have greater resources, and may devote a
significantly greater amount of resources to development of their products and
services than we do. These resources could enable our competitors to initiate
price cuts or take other measures in an effort to gain market share.
Additionally, in some geographic areas, we may face competition from smaller
consulting firms with established reputations and political relationships with
potential government clients. There can be no assurances that we will be able
to successfully compete with new or existing competitors. If we do not compete
effectively or if we experience any pricing pressures, reduced margins or loss
of market share resulting from increased competition, our business and
financial condition may be harmed.
THE UNPREDICTABILITY OF OUR QUARTER-TO-QUARTER RESULTS MAY HARM THE TRADING
PRICE OF OUR COMMON STOCK AND AFFECT OUR LONG-TERM VIABILITY.
Our future revenues and operating results may vary significantly from
quarter to quarter due to a number of factors, any of which may harm our
business. Many of these factors are outside our control and include:
o the commencement, completion or termination of contracts during any
particular quarter;
o the introduction of new electronic government products and services
by our competitors;
o technical difficulties or system downtime affecting the Internet
generally or the operation of our electronic government products
and services; and
o general economic and market conditions and economic conditions
specific to the Internet and e-commerce.
Because we have a limited operating history, it is difficult to forecast the
impact of these factors on our future revenues. Our long-term viability depends
on, among other things, a favorable impact of many of these factors on us. Due
to the factors noted above, our revenues in a particular quarter may be lower
than we anticipate and if we are unable to reduce spending in that quarter, our
operating results for that quarter may be harmed. You should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of
future performance. It is possible that in some future periods our results of
operations may be below your expectations. If this occurs, the price of our
common stock may decline.
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<PAGE> 12
WE MAY LOSE THE RIGHT TO THE CONTENT DISTRIBUTED BY US, WHICH IS PROVIDED TO US
ENTIRELY BY GOVERNMENT ENTITIES.
We do not own or create the governmental content distributed to our
vendors. We do not have an exclusive right to this content. We cannot assure
you that these data sources will continue to be available in the future.
Government entities could terminate their contracts to provide data. The loss
or the unavailability of our data sources in the future, or the loss of our
right to distribute some of the data sources, would harm our business,
operating results and financial condition.
WE RELY ON THE TIMELINESS AND ACCURACY OF CONTENT PROVIDED TO US BY GOVERNMENT
ENTITIES.
We depend on the governments with which we contract to supply
information and data feeds to us on a timely basis to allow businesses and
citizens to complete transactions and obtain government information. In
addition, we are dependent upon the accuracy and reliability of government
computer systems and data collection for the content of our systems. If the
information provided to us is not timely, accurate or complete for any reason,
our business, operating results and financial condition would be harmed.
WE MAY BE UNABLE TO HIRE, INTEGRATE OR RETAIN QUALIFIED PERSONNEL.
The recent growth in our business has resulted in an increase in the
responsibilities for both existing and new management personnel. The loss of
any of our executives or key employees, particularly O. F. Ramos, our Chief
Executive Officer and President, Edward Jordan, our Chief Operating Officer,
and William Knox North, our Chief Technology Officer, would likely harm our
business. We do not currently maintain any key-man life insurance on our
executives or key employees.
In addition, we expect that we will need to hire additional personnel
in all areas in 2000. Competition for personnel in the Internet industry is
intense. We may not be able to retain our current key employees or attract,
integrate or retain other qualified employees in the future. If we do not
succeed in attracting new personnel or integrating, retaining and motivating
our current personnel, our business could be harmed. In addition, new employees
generally require substantial training in the presentation, policies and
positioning of our products and services. This training will require
substantial resources and management attention.
TO BE SUCCESSFUL, WE MUST DEVELOP AND MARKET COMPREHENSIVE, EFFICIENT,
COST-EFFECTIVE AND SECURE ELECTRONIC ACCESS TO PUBLIC INFORMATION AND NEW
PRODUCTS AND SERVICES.
Our success depends in part upon our ability to rapidly establish our
own goods and services in all the principal governmental bodies in the United
States. In order to increase revenues in the future, we must continue to
develop products and services that businesses and citizens will find valuable,
and there is no guarantee that we will be able to do so. If we are unable to
develop products and services that allow us to attract, retain and expand our
current user base, our revenues and future operating results may be harmed. We
cannot assure you that the products and services we offer will appeal to a
sufficient number of Internet users to generate continued revenue growth.
11
<PAGE> 13
DEFICIENCIES IN OUR PERFORMANCE UNDER A GOVERNMENT CONTRACT COULD RESULT IN
CONTRACT TERMINATION, REPUTATIONAL DAMAGE AND FINANCIAL LIABILITY.
Each government entity with which we contract has the authority to
review our performance. We cannot assure you that a future review will not find
any material performance deficiencies that would lead to contract termination
and possible liability for subscription refunds. Moreover, the consequent
negative publicity could harm our reputation among other governments with which
we would like to contract. All of these factors could harm our business,
results of operations and financial condition.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.
We rely on a combination of nondisclosure and other contractual
arrangements with governments, our employees and third parties, and privacy and
trade secret laws to protect and limit the distribution of the proprietary
applications, documentation and processes we have developed in connection with
the electronic government products and services we offer. If we fail to
adequately protect our intellectual property rights and proprietary information
or if we become involved in litigation relating to our intellectual property
rights and proprietary technology, our business could be harmed. Any actions we
take may not be adequate to protect our proprietary rights and other companies
may develop technologies that are similar or superior to our proprietary
technology.
Additionally, it is possible that in the future we could become
subject to claims alleging infringement of third party intellectual property
rights. Any claims could subject us to costly litigation, and may require us to
pay damages and develop non-infringing intellectual property or acquire
licenses to the intellectual property that is the subject of the alleged
infringement. Additionally, licenses may not be available on acceptable terms
or at all.
WE MAY NOT BE ABLE TO OBTAIN ADEQUATE ADDITIONAL CAPITAL ON ACCEPTABLE TERMS.
It may be necessary to raise additional capital through further debt
and/or equity financings for our operations. If adequate funds are not
available on acceptable terms, our ability to continue as a going concern will
be adversely affected.
Further, we subsequently may need to raise additional capital to do
the following:
o support our expansion into other states, cities, municipalities,
federal agencies and internationally;
o respond to competitive pressures; and
o acquire complementary businesses or technologies, should such
opportunities arise.
We cannot assure you that such additional funding, if needed, will be
available on terms acceptable to us, or at all. If adequate funds are not
available on acceptable terms, our ability to develop or enhance our products
and services, to take advantage of future opportunities or respond to
competitive pressures
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<PAGE> 14
would be significantly limited. This limitation could harm our business,
operating results and financial condition.
OUR INABILITY TO MAINTAIN OR OBTAIN UPGRADES TO THE PRODUCTS AND SERVICES
SUPPLIED BY OUR THIRD-PARTY TECHNOLOGY AND SERVICE PROVIDERS MAY CAUSE, AMONG
OTHER THINGS, A DECLINE IN THE QUALITY OF SUCH PRODUCTS AND SERVICES.
Our products and services are made possible by computer software, the
Internet and telephony services provided by third parties. Our loss of, or
inability to maintain or obtain, upgrades to the technology licenses or
hardware systems deployed in our operating infrastructure by us or third
parties could result in delays, which would adversely effect our ability to
operate our business. This would cause our business and operating results to
suffer until equivalent technology could be identified and implemented. If we
are unable to maintain satisfactory relationships with third parties who
provide services or products necessary to operate our network on acceptable
commercial terms, or the quality of products and services provided by these
third parties falls below a satisfactory standard, we could experience a
disruption in the delivery of products and services, which could have a
negative impact on our business and, hence, our business and operating results.
WE MAY BE UNABLE TO INTEGRATE NEW TECHNOLOGIES AND INDUSTRY STANDARDS
EFFECTIVELY.
Our future success will depend on our ability to enhance and improve
the responsiveness, functionality and features of our products and services in
accordance with industry standards and to address the increasingly
sophisticated technological needs of our customers on a cost-effective and
timely basis. Our ability to remain competitive will depend, in part, on our
ability to:
o enhance and improve the responsiveness, functionality and other
features of the products and services we offer;
o continue to develop our technical expertise;
o develop and introduce new services, applications and technology to
meet changing customer needs and preferences; and
o influence and respond to emerging industry standards and other
technological changes in a timely and cost-effective manner.
We cannot assure you that we will be successful in responding to the
above technological and industry challenges in a timely and cost-effective
manner. If we are unable to integrate new technologies and industry standards
effectively, our results of operations could be harmed.
WE MAY HAVE DIFFICULTY INTEGRATING BUSINESSES INVOLVING OR GENERATING
ACCEPTABLE RETURNS FROM FUTURE ACQUISITIONS OR INVESTMENTS.
We may in the future make selective acquisitions or strategic
investments in complementary businesses, products, services or technologies. If
we buy a company, we could have difficulty in integrating and assimilating that
company's operations, technologies, products and personnel. In addition, the
key personnel of the acquired company may decide not to work for us, leaving us
without any experience in a new market. These difficulties could disrupt our
ongoing business and distract our management and employees. We may not
successfully overcome these and other problems encountered
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<PAGE> 15
in connection with potential acquisitions or strategic investments. In
addition, an acquisition could materially impair our operating results by
diluting our shareholders' equity, causing us to incur additional debt or
requiring us to amortize acquisition expenses and acquired assets.
RISKS TYPICAL OF THE INTERNET INDUSTRY.
IF THE INTERNET INFRASTRUCTURE FAILS TO DEVELOP OR BE ADEQUATELY MAINTAINED,
OUR BUSINESS WOULD BE HARMED BECAUSE USERS MAY NOT BE ABLE TO ACCESS OUR
GOVERNMENT PORTALS.
Our success depends on the increase in Internet usage generally and in
particular as a means to access public information electronically. This in part
requires the development and maintenance of the Internet infrastructure. If
this infrastructure fails to develop or be adequately maintained, our business
would be harmed because users may not be able to access our systems. Among
other things, this development and maintenance will require a reliable network
backbone with the necessary speed, data capacity, security and timely
development of complementary products for providing reliable Internet access
and services. If our customers cannot access our website because of network
failures at or near their location or because of more global failures or even
slowdowns in the Internet, our business would be adversely affected because of
their perception of a problem at our site. If the failure were at or near our
site, our business would be adversely affected. We have not experienced a
global failure. Some customers have reported temporary outages of a short
duration probably due to their own Internet connections. To date, our Internet
connection has not experienced significant disruption.
The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic. If
the Web continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements, the Internet infrastructure may not be able
to support these increased demands or perform reliably. The Internet has
experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure, and could face such outages and delays in the
future. These outages and delays could reduce the level of Internet usage and
traffic on our systems. In addition, the Internet could lose its viability due
to delays in the development or adoption of new standards and protocols to
handle increased levels of activity or due to increased governmental
regulation. If the Internet infrastructure is not adequately developed or
maintained, use of our products and services may be reduced.
WE MAY BE HELD LIABLE FOR CONTENT THAT WE OBTAIN FROM THIRD PARTIES, INCLUDING
GOVERNMENT AGENCIES.
Because we aggregate and distribute sometimes private and sensitive
public information over the Internet, we may face potential liability for
defamation, negligence, invasion of privacy and other claims based on the
nature and content of the material that is published on our network. Most of
the agreements through which we obtain consent to disseminate this information
do not contain indemnity provisions in our favor. These types of claims have
been brought, sometimes successfully, against online services and Web sites in
the past. In addition, some of the content provided on our network is drawn
from data compiled by other parties, including governmental and commercial
sources. This data may have errors. If our content is improperly used or we
supply incorrect information, it could result in unexpected liability.
CONCERNS OVER TRANSACTIONAL SECURITY MAY HINDER THE GROWTH OF OUR BUSINESS.
A significant barrier to electronic commerce is the secure
transmission of confidential information over public networks. Any breach in
our security could expose us to a risk of loss or litigation and
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<PAGE> 16
possible liability. We rely on encryption and authentication technology
licensed from third parties to provide secure transmission of confidential
information. As a result of advances in computer capabilities, new discoveries
in the field of cryptography or other developments, a compromise or breach of
the algorithms we use to protect customer transaction data may occur. Because
we provide information released from various government entities, we may
represent an attractive target for security breaches.
A compromise of our security, whether real or perceived, could
severely harm our business. A party who is able to circumvent our security
measures could misappropriate proprietary information, including customer
credit card information, or cause interruptions or incur direct damage to our
business. Also, should hackers obtain sensitive data and information, or create
bugs or viruses in an attempt to sabotage the functionality of our products and
services, we may receive negative publicity, incur liability to our customers
or lose the confidence of the governments with which we contract, any of which
may cause the termination or modification of our government contracts.
We may be required to expend significant capital and other resources
to protect against the threat of security breaches or to alleviate problems
caused by these breaches. However, protection may not be available at a
reasonable price or at all. We are not aware of any past or current breaches in
our security, nor are we aware of any attempts to breach our security.
GOVERNMENTAL REGULATION OF THE INTERNET MAY RESTRICT THE OPERATION AND GROWTH
OF OUR BUSINESS.
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future, however, that address these issues including user privacy,
pricing, and the characteristics and quality of products and services. An
increase in regulation or the application of existing laws to the Internet
could significantly increase our cost of operations and harm our business. For
example, the Federal Communications Commission may, in the future, reconsider
its ruling that Internet access service is not "telecommunications" and may
decide that Internet service providers must pay a percentage of their gross
revenues as a "universal service contribution." If the Federal Communications
Commission were to require universal service contributions from providers of
Internet access or Internet backbone services, our costs of doing business may
increase, and we may not be able to recover these costs from our customers. As
a result, our business and financial condition could be harmed.
OUR BUSINESS MAY BE AFFECTED NEGATIVELY BY YEAR 2000 ISSUES.
We cannot assure you that the software systems that we use for systems
management, network monitoring, quality assurance, applications and information
and transaction processing do not contain undetected errors or defects
associated with Year 2000 data functions. Further, we cannot assure you that
our network systems acquired from third parties do not contain undetected
errors or defects. If any such errors or defects do exist, we may incur
material costs to resolve them.
Because our products and services depend significantly on information
provided by and transactions conducted with our government clients, our ability
to deliver services and transactions properly to our customers depends on these
government clients being Year 2000 ready. We cannot assure you that our
government clients are Year 2000 ready. If they are not, their information
systems may be disrupted and our ability to provide services and transactions
curtailed. Our business, results of operations and financial condition would be
harmed as a result.
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<PAGE> 17
In addition, the software and systems of financial institutions,
utility companies, Internet access companies, third-party service providers and
others outside of our control may not be Year 2000 ready. If these entities are
not Year 2000 ready, a systemic failure beyond our control could result,
including a prolonged Internet, telecommunications or general electrical
failure. This type of failure would make it difficult or impossible to use the
Internet or access our network. If a prolonged failure of this type occurs, our
business and financial condition would be harmed.
OUR SYSTEMS MAY FAIL OR LIMIT USER TRAFFIC.
We cannot assure you that during the occurrence of fire, floods,
earthquakes, power loss, telecommunications failures, break-ins and similar
events that the modem banks and direct dial-up connections we have to serve as
back-up systems will not prevent damage to our systems or cause interruptions
to our services. Computer viruses, electronic break-ins or other similar
disruptive problems could cause users to stop visiting our network and could
cause our clients to terminate agreements with us. If any of these
circumstances occurred, our business could be harmed.
Our systems must accommodate a high volume of traffic and deliver
frequently updated information. These systems may experience interruptions due
to any failure or delay by government agencies in the transmission or receipt of
this information. In addition, our users depend on Internet service providers,
online service providers and other Web site operators for access to our systems.
Many of these providers and operators have experienced significant outages in
the past due to system failures unrelated to our systems, holidays and heavy
user traffic, and could experience the same outages, delays and other
difficulties in the future. Any of these system failures could harm our
business, results of operations and financial condition.
RISKS PARTICULAR TO THIS OFFERING.
HTE'S VOTING CONTROL FOR THE FORSEEABLE FUTURE COULD PREVENT A CHANGE OF
CONTROL.
Our Series A preferred stock and common stock generally vote as one
class on all matters presented to shareholders for consideration. On each
shareholder vote, our common stock is entitled to one vote and our Series A
preferred stock is entitled to vote a percentage of our votes generally ranging
from 19.9% to 50%. All outstanding shares of our Series A preferred stock are
issued to H.T.E., Inc., a majority shareholder of DemandStar ("HTE"). Thus, as
a result of ownership of our capital stock by HTE and by four of our directors
who are also directors of HTE, HTE will have effective voting control of
DemandStar. As a result, HTE's directors and officers will be able to control
the outcome of substantially all matters submitted to our shareholders for
approval, including the election of directors and any proposed merger,
liquidation, transfer or encumbrance of a substantial portion of its assets, or
amendment to our charter to change our authorized capitalization or otherwise.
This concentration of voting power may also have the effect of delaying or
preventing a change in control of DemandStar even if it would be beneficial to
our shareholders. So long as HTE holds all of the outstanding shares of Series
A preferred stock, its minimum percentage of voting control will be 19.9%.
Assuming 19.9% constitutes effective control, then HTE will always maintain
effective control. Further, if any of DemandStar's shareholders, individually
or as a voting group, hold 10% or more of DemandStar's outstanding common stock
and HTE holds all of the Series A preferred stock, the Series A preferred stock
will provide HTE with additional voting power equal to the greater of 19.9% or
the voting percentage held by each such 10% shareholder or 10% voting group,
plus 10,000 votes. However, that additional voting power cannot exceed 50%
after taking into account all of HTE's voting stock.
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<PAGE> 18
THE PRESENCE OF INTERLOCKING DIRECTORS AND OFFICERS BETWEEN HTE AND DEMANDSTAR
WILL CREATE POTENTIAL CONFLICTS OF INTEREST.
Some of our directors and officers also are directors, officers or
employees of HTE and, in most cases, either own, or hold an option to purchase,
equity securities of HTE. As a result, these executive officers have inherent
conflicts of interest when making decisions related to transactions between us
and HTE. HTE's ability to control matters listed above together with the
potential conflicts of interest of its directors and executive officers who
also serve as directors and executive officers of DemandStar, could adversely
affect the trading price and liquidity of our common stock. These factors could
limit the price that investors might be willing to pay for our common stock in
the future.
MANAGEMENT PERSONNEL SERVING BOTH HTE AND DEMANDSTAR MAY SUFFER COMPETING
CLAIMS ON THEIR TIME WHICH MAY PLACE DEMANDS ON DEMANDSTAR'S RESOURCES.
Personnel serving as both our officers and key employees and those of
HTE have committed to devote varying amounts of their business time to us.
Messrs. Gornto and Markey are the only officers of DemandStar who are also
officers of HTE. Mr. Gornto devotes all of his business time to HTE and
DemandStar, dividing the time equally between the two companies. Mr. Markey
spends approximately 1 to 4 days a month of his business time on DemandStar
matters and 1 to 2 days a month of his business time on HTE matters. In
addition, Susan Falotico, an officer of HTE, currently devotes approximately
70% of her business time to HTE and approximately 30% of her business time to
DemandStar; however, in the near future, the amount of business time she will
devote to DemandStar is expected to decrease to approximately 10% of her total
time. The competing claims upon each officer's time and energies could divert
his attention from our affairs, placing additional demands on our resources.
The efforts of all or any of these individuals may be insufficient to meet both
our needs and those of HTE. If we were deprived of access to key members of our
management team or other personnel, or lose access to such services altogether,
our business, prospects, results of operations and financial condition could be
materially adversely affected.
THE TERMS OF THE HTE-DEMANDSTAR INTERCOMPANY AGREEMENTS WERE NEGOTIATED IN THE
CONTEXT OF A PARENT-SUBSIDIARY RELATIONSHIP AND MAY NOT BE ON AS FAVORABLE
TERMS AS THIRD-PARTY AGREEMENTS.
We have entered into intercompany agreements with HTE, including an
investment distribution agreement, a tax sharing and indemnity agreement, a
services agreement and a registration rights agreement, for the purpose of
defining our on-going relationship with HTE following our recent rights
offering. We cannot assure you that the terms of these agreements, or the
related transactions, will be effected on terms at least as favorable to us as
could have been obtained from unaffiliated third parties.
WE MAY HAVE LIABILITIES IF WE ARE DEEMED A MEMBER OF HTE'S CONSOLIDATED TAX
GROUP.
We may be deemed a member of HTE's consolidated tax group under
federal income tax law until the DemandStar securities held by HTE do not
constitute either 80% of the voting power or the market value of DemandStar's
outstanding stock. Each member of a consolidated group for federal income tax
purposes is severally liable for the federal income tax liability of each other
member of the consolidated group. Similar rules may apply under state income
tax laws. If HTE or members of its consolidated tax group, other than us and
our subsidiaries, fail to pay tax liabilities arising prior to the time that we
are no longer a member of HTE's consolidated tax group, we could be required to
make payments in respect of these tax liabilities. Such payments could
materially adversely affect our financial condition.
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YOU ARE UNLIKELY TO RECEIVE DIVIDENDS FOR THE FORESEEABLE FUTURE.
We have not paid dividends on our common stock and we cannot assure
you that we will achieve sufficient earnings to pay cash dividends on our
common stock in the near future. Further, we intend to retain any future
earnings to fund the development and expansion of our operations. Therefore, we
do not anticipate paying any cash dividends on our common stock in the
foreseeable future. It is unlikely that an investor in our common stock will
derive current income from dividends resulting from ownership of our common
stock. This means that your potential for economic gain from ownership of our
common stock depends on an appreciation in value of our common stock and will
only be realized upon a sale of the stock at a price higher than your purchase
price.
IT IS DIFFICULT TO PREDICT WHETHER A MARKET FOR OUR STOCK WILL BE SUSTAINED,
AND THE MARKET PRICE OF OUR STOCK WILL LIKELY BE VOLATILE.
Prior to the closing of our recent rights offering, you could not
purchase DemandStar common stock publicly. Our common stock is initially being
traded on the NASD OTC Electronic Bulletin Board, or quoted on what is commonly
known as the "pink sheets," and there can be no assurance that it will be
sustained. As a result, an investor may find it more difficult to dispose of,
or obtain accurate quotations as to the price of our common stock.
We cannot assure you that investors will develop an interest in our
common stock so that an active trading market develops or whether it will be
sustained. A number of specific factors that may affect the price and liquidity
of our securities, include:
o actual or anticipated fluctuations in our quarterly operating
results;
o announcements of new contracts or applications;
o operating results that vary from investors' expectations as to our
future financial performance or changes in financial estimates;
o announcements of technological innovations or new services by us or
our competitors;
o announcements by us or our competitors of significant contracts,
acquisitions, joint ventures, capital commitments, the results of
the rights offering and the status size of our network;
o announcements by third parties of significant claims or proceedings
against us;
o future sales or issuances of equity by us;
o change in the status of our intellectual property rights; and
o the operating and stock price performance of other comparable
companies.
In addition, the stock market in general has experienced extreme price
and volume volatility that has especially affected the market prices of
securities of many Internet-related companies. Stock prices for
Internet-related companies are often influenced by rapidly changing perceptions
about the future of the Internet or the results of other Internet or technology
companies, rather than specific developments relating to the issuer of that
particular stock. If our stock price is volatile, a securities class action may
be
18
<PAGE> 20
brought against us. Class action litigation could result in substantial costs
and divert our management's attention and resources.
IT MAY BE DIFFICULT FOR INVESTORS TO SELL OUR COMMON STOCK IF OUR COMMON STOCK
IS NOT LISTED ON NASDAQ.
An investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of our common stock. Our common
stock is currently traded on the OTC Electronic Bulletin Board. If we meet the
initial listing criteria, we intend to file an application to Nasdaq for
quotation of our common stock on the Nasdaq SmallCap Market or the Nasdaq
National Market System. If our application is approved, the continued trading
of our common stock on Nasdaq will be conditioned upon DemandStar meeting
Nasdaq's criteria for continued listing.
OUR STOCK MAY BE DEEMED "PENNY STOCK" WHICH MAY REDUCE TRADING ACTIVITY IN THE
SECONDARY MARKET.
If the trading market for the common stock that subsequently develops
is below $5.00 per share, and the common stock is not quoted on the Nasdaq
system, the common stock will be subject to the penny stock rules and
purchasers of shares may find it more difficult to sell their shares.
Securities deemed "penny stocks" are subject to additional informational
requirements in connection with any trades made in the penny stock. The
Commission has adopted rules that regulate broker-dealer practices in
connection with transactions in penny stocks. Penny stocks generally are equity
securities with a price of less than $5.00, other than securities registered on
national securities exchanges or quoted on the Nasdaq system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from those rules, to deliver a standardized risk disclosure document prepared
by the Commission, which specifies information about penny stocks and the
nature and significance of risks of the penny stock market. The broker-dealer
also must provide the customer with bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
those rules the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the trading activity in the secondary market
for a stock that becomes subject to the penny stock rules.
INVESTORS WILL EXPERIENCE DILUTION UPON THE CONVERSION OF PREFERRED STOCK AND
THE EXERCISE OF OPTIONS AND WARRANTS.
We currently intend to finance a significant amount of the growth in
the DemandStar network with shares of our common stock or other securities,
cash or a combination of these items. We currently have 100,000,000 authorized
shares of common stock. Upon the conclusion of our recent rights offering, we
have, as of May 23, 2000, 7,638,280 shares of common stock outstanding. We
initially have 4,000,000 shares of common stock reserved for options awarded or
to be awarded under DemandStar's 1999 Employee Incentive Compensation Plan. In
addition, we have 1,000,000 shares reserved for the exercise of warrants issued
to HTE and DemandStar officers and directors, and 750,000 shares reserved for
issuance upon the conversion of the Series A preferred stock. We will be able
to finance our growth or acquisitions by issuing significant amounts of
additional shares of common stock without obtaining shareholder approval of
such issuances provided we comply with any applicable Nasdaq rules and
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regulations. To the extent we use common stock for all or a portion of the
consideration to be paid for future acquisitions, dilution may be experienced
by existing shareholders.
IF THE SHARES OF COMMON STOCK HELD BY HTE ARE DILUTED BELOW 35% OF THE
OUTSTANDING, INVESTORS MAY EXPERIENCE FURTHER DILUTION BECAUSE HTE WILL
CONTINUE TO BE ENTITLED TO 35% OF THE TOTAL DIVIDENDS PAID TO SHAREHOLDERS AND
35% OF THE TOTAL NET ASSETS DISTRIBUTED UPON LIQUIDATION.
The Series A preferred stock held by HTE may in the future also result
in additional dilution to the common shareholders. If at the time of a common
stock dividend the shares of DemandStar common stock owned by HTE have been
diluted below 35% of DemandStar's total outstanding shares of common stock as
of the record date for the dividend, then so long as all of our Series A
preferred stock is owned by HTE, HTE will be entitled to receive a dividend
amount, which, when added to the dividends to be received by HTE with respect
to its common stock, will equal 35% of the total dividend amount paid to all
holders of DemandStar Series A preferred stock and common stock. In the event
of a liquidation, if the shares of common stock held by HTE are diluted below
35% of DemandStar's total outstanding shares of common stock, then so long as
all of our Series A preferred stock is owned by HTE, HTE will be entitled to
receive liquidating distributions which, when added to the liquidating
distribution to be received by HTE with respect to its common stock, will
constitute 35% of the total net assets distributed to all holders of DemandStar
Series A preferred stock and common stock. The 35% figure will be
proportionately adjusted if at anytime following the closing of the rights
offering HTE sells common stock which reduces its DemandStar common
shareholdings below 35% of DemandStar's outstanding common stock.
THE ANTI-TAKEOVER PROVISIONS IN OUR CORPORATE DOCUMENTS MAY HAVE AN ADVERSE
EFFECT ON THE MARKET PRICE OF OUR COMMON STOCK.
If HTE were ever to lose voting control over us, provisions within our
charter and by-laws could make it more difficult for a third party to gain
control of us, even if a change in control might be beneficial to our
shareholders. This could adversely affect the market price of our common stock.
These provisions include, without limitation:
o the elimination of the right to act by written consent by
shareholders other than HTE so long as it holds a controlling
interest in us;
o the elimination of the right to call special meetings of the
shareholders by shareholders other than holders of not less than
50% of the votes entitled to be cast at a special meeting;
o the creation of a staggered board of directors; and
o the ability of the board of directors to designate and issue
preferred stock without shareholder consent.
USE OF PROCEEDS
This Prospectus relates to shares of Common Stock being offered and
sold for the accounts of the Selling Shareholders. The Company will not receive
any proceeds from the sale of the Common Stock but will pay all expenses
related to the registration of the shares.
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<PAGE> 22
SELLING SHAREHOLDERS
The Selling Shareholders whose shares of Common Stock are covered by
this Prospectus ("Selling Shareholders") are current officers of the Company.
The following table shows the names of the Selling Shareholders and the
positions each has held with the Company during the past three years, the
number of shares of the Company's Common Stock that each beneficially owns as
of May 23, 2000, the number of shares covered by this Prospectus, and the
number of shares each Selling Shareholder will hold if he or she sells all of
the shares offered by this Prospectus.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP OF SHARES SHARES PERCENT
SHARES OF AVAILABLE FOR OWNED OWNED
SELLING POSITION WITH COMMON STOCK SALE IN THE AFTER THE AFTER THE
SHAREHOLDER THE COMPANY BEFORE OFFERING(1) OFFERING(2) OFFERING(3) OFFERING
- --------------------- ------------------- ------------------ ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
O. F. Ramos Chief Executive 526,924(4) 1,000,000 352,424 4.6%
Officer, President
and Director
Bernard B. Markey Charmin of the Board 270,800(5) 100,000 238,300 3.1%
and Director
L. A. Gornto, Jr. Chief Financial 501,700(6) 100,000 469,200 6.0%
Officer, Executive
Vice President,
Secretary and
Director
Edward S. Jordan Chief Operating 250,000(7) 150,000 250,000 3.3%
Officer and Vice
President
William Knox North Chief Technology 355,273(8) 150,000 355,273 4.7%
Officer and Vice
President
Edward A. Moses Director 173,333(9) 100,000 140,833 1.8%
</TABLE>
- ------------------------
(1) Includes shares of Common Stock issuable upon exercise of options and
warrants that are currently exercisable or will become exercisable within
60 days of May 23, 2000. Options have been granted to the Selling
Shareholders which are not currently exercisable or are not exercisable
within 60 days of May 23, 2000.
(2) Assumes all shares of Common Stock issuable upon the exercise of options
granted under the Plan are sold pursuant to this offering. Selling
Shareholders, however, may choose to exercise only a portion or none of
their options and may not sell any or all of the shares of Common Stock
issued upon exercise of their options. There are currently no agreements,
arrangements or understandings with respect to the exercise of any options
or the sale of any of the shares received upon such exercise.
(3) The number of shares of Common Stock owned by each person after the
offering assumes that such person exercised all of his options and sells
all of his shares underlying such options. As of May 23, 2000,
approximately 7,638,280 shares were outstanding.
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(4) Includes 227,424 restricted shares of Common Stock, 174,500 shares of
Common Stock subject to options either currently exercisable or exercisable
within 60 days of May 23, 2000, and 125,000 shares of Common Stock issuable
upon the exercise of currently exercisable common stock purchase warrants.
(5) Includes 113,300 restricted shares of Common Stock, 32,500 shares of Common
Stock subject to options either currently exercisable or exercisable within
60 days of May 23, 2000, and 125,000 shares of Common Stock issuable upon
the exercise of currently exercisable common stock purchase warrants.
(6) Includes 344,200 restricted shares of Common Stock, 32,500 shares of Common
Stock subject to options either currently exercisable or exercisable within
60 days of May 23, 2000, and 125,000 shares of Common Stock issuable upon
the exercise of currently exercisable common stock purchase warrants.
(7) Includes 250,000 restricted shares of Common Stock.
(8) Includes 355,273 restricted shares of Common Stock.
(9) Includes 15,833 restricted shares of Common Stock, 32,500 shares of Common
Stock subject to options either currently exercisable or exercisable within
60 days of May 23, 2000, and 125,000 shares of Common Stock issuable upon
the exercise of currently exercisable common stock purchase warrants.
PLAN OF DISTRIBUTION
Since the Selling Shareholders may offer all or part of the shares of
Common Stock which they may hold upon exercise of options, and since this
offering is not being underwritten on a firm commitment basis, no estimate can
be given as to the amount of shares of Common Stock to be offered for sale by
the Selling Shareholders.
The Selling Shareholders may sell or distribute some or all of the
shares of Common Stock offered by this Prospectus from time to time through
underwriters or dealers or brokers or other agents or directly to one or more
purchasers, including pledgees, in transactions (which may involve block
transactions) on one or more exchanges, the Nasdaq NMS, privately negotiated
transactions (including sales pursuant to pledges) or in the over-the-counter
market, or in a combination of such transactions. Such transactions may be
effected by the Selling Shareholders at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices,
or at fixed prices, which may be changed. Brokers, dealers, agents or
underwriters participating in such transactions as agents may receive
compensation in the form of discounts, concessions or commissions from the
Selling Shareholders (and, if they act as agent for the purchaser of such
shares, from such purchaser). Such discounts, concessions or commissions as to
a particular broker, dealer, agent or underwriter might be in excess of those
customary in the type of transaction involved. This Prospectus also may be
used, with the Company's consent, by donees of the Selling Shareholders, or by
other persons acquiring shares and who wish to offer and sell such shares under
circumstances requiring or making desirable its use. In addition, any
securities covered by this Prospectus which qualify for sale pursuant to Rule
144 of the Securities Act, may be sold under Rule 144 rather than pursuant to
this Prospectus.
The amount of securities sold under this Prospectus by any Selling
Shareholder, acting individually or together with other Selling Shareholders,
may not exceed, during any three month period, certain volume limitations
imposed under Rule 144.
The Selling Shareholders and any such underwriters, brokers, dealers
or agents that participate in such distribution may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
commissions or concessions received by any such underwriters, brokers, dealers
or agents
22
<PAGE> 24
might be deemed to be underwriting discounts and commissions under the
Securities Act. Neither the Company nor the Selling Shareholders can presently
estimate the amount of such compensation. The Company knows of no existing
arrangements between any Selling Shareholders and any other Selling
Shareholder, underwriter, broker, dealer or other agent relating to the sale or
distribution of the shares.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of any of the shares may not simultaneously
engage in market activities with respect to the Common Stock for a period of
five business days prior to the commencement of such distribution. In addition
and without limiting the foregoing, the Selling Shareholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which provisions may limit the timing of
purchases and sales of any of the shares by the Selling Shareholders. All of
the foregoing may affect the marketing of the Common Stock.
The Company will pay substantially all of the expenses incident to
this offering of the shares by the Selling Shareholders to the public other
than commissions and discounts of underwriters, brokers, dealers or agents.
Each Selling Shareholder may indemnify any broker, dealer, agent or underwriter
that participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.
In order to comply with certain states' securities laws, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless the Common Stock has been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
The Company will receive no portion of the proceeds from the sale of
the shares of Common Stock and will bear all expenses related to the
registration of this offering of the shares of Common Stock.
LIMITED LIABILITY AND INDEMNIFICATION
Under the Florida Business Corporation Act, a director is not
personally liable for monetary damages to the corporation or any other person
for any statement, vote, decision, or failure to act unless (i) the director
breached or failed to perform his duties as a director and (ii) a director's
breach of, or failure to perform, those duties constitutes (1) a violation of
the criminal law, unless the director had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful, (2) a transaction from which the director derived an improper
personal benefit, either directly or indirectly, (3) a circumstance under which
an unlawful distribution is made, (4) in a derivative proceeding, conscious
disregard for the best interest of the corporation or willful misconduct, or
(5) in a non-derivative proceeding, recklessness or an act or omission which
was committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety, or property. A
corporation may purchase and maintain insurance on behalf of any director of
officer against any liability asserted against him and incurred by him in his
capacity or arising out of his status as a director, whether or not the
corporation would have the power to indemnify him against such liability under
the Florida Business Corporation Act.
The Amended Articles of the Company provide that the Company shall, to
the fullest extent permitted by applicable law, as amended from time to time,
indemnify all directors of the Company, as well as any officers or employees of
the Company to whom the Company has agreed to grant indemnification.
23
<PAGE> 25
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
EXPERTS
The validity of the Common Stock offered hereby will be passed upon
for the Company by Greenberg Traurig, P.A., 111 N. Orange Avenue, 20th Floor,
Orlando, Florida 32801.
The financial statements and schedules incorporated by reference in
this Prospectus and elsewhere in this Registration Statement have been audited
by Arthur Andersen LLP, independent certified public accountants, to the extent
and for the periods indicated in their report, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving such reports. Reference is made to said report, which includes an
explanatory paragraph with respect to the uncertainty regarding the Company's
ability to continue as a going concern as discussed in Note 1 to the financial
statements.
24
<PAGE> 26
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The Registrant hereby incorporates by reference into this Registration
Statement the following documents or portions thereof as indicated:
1. The Company's Registration Statement on Form S-1, File No.
333-93445, declared effective by the Commission on March 27,
2000.
2. The description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A, File Number
0-28703, declared effective by the Commission on March 27,
2000, and any reports or amendments to the foregoing filed
with the Commission for the purpose of updating such
descriptions.
3. The Company's Quarterly Report on Form 10Q for the quarter
ended March 31, 2000.
In addition, all documents subsequently filed by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated herein by reference and to
be a part hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Incorporated herein by reference from the Company's Registration
Statement on Form S-1, File No. 333-93445.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Incorporated herein by reference from the Company's Registration
Statement on Form S-1, File No. 333-93445.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The securities being resold pursuant to the Resale Prospectus
contained in this Registration Statement were issued in reliance on the
exemption from registration under Rule 701 of the Securities Act.
II-1
<PAGE> 27
ITEM 8. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------
4.1 1999 Employee Incentive Compensation Plan.*
5.1 Opinion of Greenberg, Traurig, P.A.
23.1 Consent of Greenberg, Traurig, P.A. (contained in its opinion filed as
Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included on signature page).
* Previously filed as Exhibit No. 10.1 to Registration Statement of the
Registrant on Form S-1, File No. 333-93445.
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high and of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) shall not apply if the registration
statement is on Form S-3, Form S-8
II-2
<PAGE> 28
or Form F-3, and the information required to be
included in a post-effective amendment by those
paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act that are incorporated by
reference in the 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 post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each
filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated
by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act 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 Commission such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Maitland, State of Florida on May 25, 2000.
DemandStar.com, Inc.
By: /s/ O. F. Ramos
----------------------------------
O. F. Ramos
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Each person in so signing also makes, constitutes and appoints O. F.
Ramos and L. A. Gornto, Jr., and each of them acting alone, his true and lawful
attorney-in-fact, with full power of substitution, to execute and cause to be
filed with the Securities and Exchange Commission pursuant to the requirements
of the Securities Act, any and all amendments and post-effective amendments to
this Registration Statement, and including any Registration Statement for the
same offering that is to be effective upon filing pursuant to Rule 462(b) under
the Securities Act, with exhibits thereto and other documents in connection
therewith, and hereby ratifies and confirms all that said attorney-in-fact or
his substitute or substitutes may do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ O. F. Ramos Chief Executive Officer, President and May 25, 2000
- -------------------------- Director (Principal Executive Officer)
O. F. Ramos
/s/ Bernard B. Markey Chairman of the Board and Director May 25, 2000
- --------------------------
Bernard B. Markey
/s/ L. A. Gornto, Jr. Executive Vice President, Chief Financial May 25, 2000
- -------------------------- Officer, Secretary, General Counsel and
L. A. Gornto, Jr. Director (Principal Financial Officer)
/s/ Edward S. Jordan Chief Operating Officer and Vice President May 25, 2000
- --------------------------
Edward S. Jordan
/s/ William Knox North Chief Technology Officer and Vice May 25, 2000
- -------------------------- President
William Knox North
/s/ Edward A. Moses Director May 25, 2000
- --------------------------
Edward A. Moses
</TABLE>
II-4
<PAGE> 30
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------
4.1 1999 Employee Incentive Compensation Plan.*
5.1 Opinion of Greenberg, Traurig, P.A.
23.1 Consent of Greenberg, Traurig, P.A. (contained in its opinion filed as
Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included on signature page).
* Previously filed as Exhibit No. 10.1 to Registration Statement of the
Registrant on Form S-1, File No. 333-93445.
<PAGE> 1
EXHIBIT 5.1
OPINION AND CONSENT OF GREENBERG TRAURIG, P.A.
May 25, 2000
DemandStar.com, Inc.
1551 Sandspur Road, Suite B
Maitland, Florida 32751
Gentlemen:
You have requested our opinion in connection with the Registration
Statement on Form S-8 (the "Registration Statement") of DemandStar.com, Inc., a
Florida corporation (the "Company"), relating to the registration of up to
4,000,000 shares (the "Shares") of common stock, par value $.0001 per share, of
the Company. The Shares are to be purchased from the Company by holders of
options granted under the Company's 1999 Employee Incentive Compensation Plan
(the "Plan"), or to be reoffered for sale to the public by holders of Shares
acquired upon exercise of options granted to them under the Plan.
We have made such examination of the corporate records and proceedings
of the Company and have taken such further action as we deemed necessary or
appropriate to the rendering of our opinion herein.
Based on the foregoing, we are of the opinion that the Shares, when
issued and sold as contemplated in the Registration Statement, will be validly
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement and to the
reference to our firm under the heading "Experts" therein. In giving such
consent, we do not admit that we come within the category of persons whose
consent is required by Section 7 of the Securities Act or the rules and
regulations promulgated thereunder.
Sincerely,
/s/ GREENBERG TRAURIG, P.A.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this registration statement on Form S-8 of our
report dated February 4, 2000, included in DemandStar.com, Inc.'s Registration
Statement on Form S-1, File No. 333-93445, and to all references to our firm
included in this registration statement.
Orlando, Florida,
May 25, 2000 /s/ Arthur Andersen LLP
