SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1999
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission file number ____________
MONSTERDAATA.COM, INC.
(Exact name of small business issuer as specified in its charter)
(Formerly known as D-Vine, Ltd.)
Delaware 22-2732163
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
115 Stevens Avenue
Valhalla, NY 10595
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 747-9100
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. |X| Yes |_| No
As of September 30, 1999, 7,377,415 shares of the Registrant's common stock, par
value $.01 per share, were outstanding.
Documents incorporated by reference: None
Transitional Small Business Disclosure Format: |_| Yes |X| No
<PAGE>
MONSTERDAATA.COM, INC.
Table of Contents
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET -- As of September 30,
1999 (Unaudited) ..................................... Page 3
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) --
For the Three Months Ended September 30, 1998 and
September 30, 1999; for the Nine Months Ended
September 30, 1998 and September 30, 1999 ............ Page 4
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) --
For the Nine Months Ended September 30, 1998 and
September 30, 1999 ................................... Page 5
NOTES TO FINANCIAL STATEMENTS ........................... Page 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................... Page 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ........................................ Page 15
Item 2. Changes in Securities .................................... Page 15
Item 4. Submission of Matters to a Vote of Security Holders ...... Page 16
Item 6. Exhibits ................................................. Page 16
Signatures ........................................................ Page 17
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MONSTERDAATA.COM, INC.
BALANCE SHEET
(Unaudited)
ASSETS
September 30, 1999
------------------
CURRENT ASSETS
Cash 122,387
Accounts receivable 350,522
Prepaid expenses and other current assets 83,942
------------------
Total current assets 556,851
PROPERTY AND EQUIPMENT, Net 163,694
OTHER ASSETS
Purchased Database 118,500
Security Deposits 16,288
------------------
Total other assets 134,788
TOTAL ASSETS 855,332
==================
CURRENT LIABILITIES
Accounts payable and accrued expenses 713,229
Deferred revenue 855,672
Notes Payable - Stockholders 298,702
Current maturities of capital lease obligation 27,800
Total Current Liabilities 1,895,403
OTHER LIABILITIES
Capital lease obligations, less current maturities 19,045
TOTAL LIABILITIES 1,914,448
==================
STOCKHOLDERS' DEFICIENCY
Preferred Stock - $0.01 par value, 10,000,000 shares
authorized
Common stock - $0.01 par value; 50,000,000 shares
authorized, 7,377,415 issued and outstanding 73,775
Additional paid in capital 3,602,694
Options and warrant 83,531
Notes Receivable Stockholder (118,000)
Accumulated deficit (4,701,116)
------------------
TOTAL STOCKHOLDERS' DEFICIENCY (1,059,116)
TOTAL LIABILITIES AND STOCKHOLDERS - DEFICIENCY 855,332
==================
See accompanying notes to financial statements
3
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MONSTERDAATA.COM, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, 1998 September 30, 1999 September 30, 1998 September 30, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
SALES $ 427,334 $ 482,066 $ 1,406,647 $ 1,806,574
COST OF SALES 285,058 $ 169,981 851,154 561,253
------------------ ------------------ ------------------ ------------------
GROSS PROFIT 142,276 312,085 555,493 1,245,321
33% 65% 39% 69%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Product development costs -- 273,539 -- 743,117
Selling, general and
administrative expenses 399,992 784,773 1,694,083 2,078,552
------------------ ------------------ ------------------ ------------------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 399,992 1,058,312 1,694,083 2,821,669
OPERATING INCOME (LOSS) (257,716) (746,227) (1,138,590) (1,576,348)
------------------ ------------------ ------------------ ------------------
OTHER INCOME (EXPENSE)
Interest (expense) net of income (5,185) $ 4,948 (56,272) 8,339
Merger and acquisition costs (215,000)
------------------ ------------------ ------------------ ------------------
OTHER INCOME (EXPENSE) (5,185) 4,948 (56,272) (206,661)
------------------ ------------------ ------------------ ------------------
NET INCOME (LOSS) BEFORE INCOME TAXES (262,901) (741,279) (1,194,862) (1,783,009)
INCOME TAXES -- -- -- --
------------------ ------------------ ------------------ ------------------
NET (LOSS) $ (262,901) $ (741,279) $ (1,194,862) $ (1,783,009)
================== ================== ================== ==================
Weighted Average Number of Shares Outstanding 6,024,773 7,239,455 6,024,773 6,762,826
================== ================== ================== ==================
Net Loss Per Share, Basic and Diluted $ (0.04) $ (0.10) $ (0.20) $ (0.26)
================== ================== ================== ==================
</TABLE>
See accompanying notes to financial statements
4
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MONSTERDAATA.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine For the nine
months ended months ended
September 30, 1998 September 30, 1999
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (1,194,862) $ (1,783,009)
------------------ ------------------
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation 86,584 78,312
Accrued interest 49,480 --
Stock compensation 211,800 --
Stock issued for services -- 248,821
Decrease (increase) in accounts receivable (377,008) 308,419
Decrease (increase) in prepaids & other current assets 45 (8,942)
(Increase) in database cost -- (118,500)
(Increase) in security deposits -- (7,955)
Increase in accounts payable and accrued expenses 672,318 561,302
Decrease (increase) in deferred revenue 323,815 (228,039)
------------------ ------------------
TOTAL ADJUSTMENTS 967,034 833,418
------------------ ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES (227,828) (949,592)
------------------ ------------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
Capital expenditures (41,147) (949,592)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds from issuance of common stock -- 1,003,423
Proceeds from contributed capital -- 223,000
Proceeds from notes payable, related parties 350,000 --
Proceeds from notes payable, stockholders 20,000 --
Repayments of notes payable, stockholders (29,195) (21,833)
Repayments of notes payable -- (62,232)
Principal repayments of capital lease obligations (66,738) (68,261)
------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 274,067 1,074,097
------------------ ------------------
NET INCREASE (DECREASE) IN CASH 5,092 66,795
CASH - Beginning 33,570 55,592
------------------ ------------------
CASH - Ending $ 38,662 $ 122,387
================== ==================
</TABLE>
5
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NON CASH ACTIVITIES
Stock was issued during the nine months ended September 30, 1999 for payment of
officers' bonuses in the amount of $131,350. Stock options were issued during
the nine months ended September 30, 1999 for services rendered in the amount of
$90,625. Stock warrants were issued during the nine months ended September 30,
1999 to purchase up to 500,000 shares of common stock at $3.00 per share. These
warrants were valued at $0.17 per warrant under the Black-Scholes option
valuation method.
A capital contribution was made during the nine months ended September 30, 1999
in the amount of $243,075, of which $223,075 was in cash and $20,000 was
converted from Accounts Payable.
During the nine months ended September 30, 1999 the company issued 82,142 shares
of common stock as payment of web development costs in the amount of $230,000.
During the nine months ended September 30, 1999 the company acquired equipment
through a capital lease in the amount of $51,935.00.
During the nine months ended September 30,1999 the company issued 270,500 shares
of common stock (related to the exercise of options) for which $77,500 was
received in cash, and for which the company holds notes receivable for the
balance of $193,000. In October 1999, $75,000 of notes receivable were
paid.
See accompanying notes to financial statements
6
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MONSTERDAATA.COM, INC.
Notes to the Financial Statements
September 30, 1999
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION
The Company
MonsterDaata.com, Inc. was incorporated in Delaware on July 22, 1985 under the
corporate name "Trans West, Inc." For eight years prior to September 27, 1995,
we were an inactive corporation. On September 27, 1995, we revived our corporate
charter in Delaware and were reactivated, although we had no material assets or
capital, and no operations or income. On February 13, 1996, we changed our
corporate name to "D-Vine, Ltd."
On April 2, 1999, we acquired 99.2% of the outstanding capital stock of Taconic
Data Corp. ("Taconic"), a provider of database development and management
services to the real estate industry. Taconic was incorporated in New York in
1992. In connection with this acquisition, Taconic became our majority-owned
subsidiary and all of our directors and officers were replaced by Taconic
directors and officers. The stockholders of Taconic were issued 6,000,000 of our
shares of common stock in exchange for their shares, or approximately 85% of our
total outstanding common shares after giving effect to the acquisition (and the
exercise of certain warrants referenced in Note 3 below). Accordingly, a change
in control of our company occurred in connection with the acquisition, and the
acquisition was deemed a "reverse acquisition" for accounting purposes.
Our accompanying unaudited financial statements represent a consolidation of our
business with that of Taconic, and the consolidation has been prepared assuming
that we owned 100% of Taconic after the acquisition. Subsequent to the
acquisition, we changed our fiscal year end from September 30 to December 31 to
correspond with the fiscal year end of Taconic. On April 5, 1999, we changed our
corporate name to "MonsterDaata.com, Inc."
Minority Interest
The minority interest referred to above is held by an entity which owns 0.8% of
Taconic. This entity's interest in the net assets of Taconic has been reduced to
zero on the Consolidated Balance Sheet portion of our accompanying unaudited
financial statements. Therefore, in accordance with Generally Accepted
Accounting Principles, the entity's minority interest in the losses for the six
month and three month periods ended September 30, 1999 has not been recorded on
our accompanying unaudited financial statements. This minority interest in
losses will remain unrecognized in our future financial statements unless and
until they are fully offset, in the aggregate, by the entity's minority interest
in future profits of Taconic.
Basis of Presentation
Our accompanying unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
of the interim periods presented. All such adjustments are of a normal recurring
nature. The financial statements should be read in conjunction with the notes to
the financial statements and in conjunction with our audited financial
statements contained in our Form 10-KSB (filed on March 23, 1999) and with the
audited financial statements of Taconic contained in our Form 8-K/A (filed on
June 15, 1999).
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NOTE 2 - INCOME TAXES
We provide for the tax effects of transactions reported in the financial
statements. The provision, if any, consists of taxes currently due plus deferred
taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of September 30, 1999, we had no
material current tax liability, deferred tax assets, or liabilities impacting
our financial position because the deferred tax asset related to our net
operating loss carryforward and was fully offset by a valuation allowance.
At September 30, 1999, we have net operating loss carry forwards for income tax
purposes of approximately $3.1 million. This carryforward is available to offset
future taxable income, if any, and expires in the year 2010. Our utilization of
this carryforward against future taxable income may become subject to an annual
limitation due to a cumulative change in our ownership of more than 50 percent.
The components of the net deferred tax asset as of September 30, 1999, are as
follows:
Deferred tax asset:
Net operating loss carry forward $1,265,000
Valuation allowance $(1,265,000)
------------
Net deferred tax asset $-0-
============
We recognized no income tax benefit for the loss generated in the period from
reorganization, October 1, 1995, to September 30, 1999. SFAS No. 109 requires
that a valuation allowance be provided if it is more likely than not that some
portion or all of a deferred tax asset will not be realized. Our ability to
realize benefit of our deferred tax asset will depend on the generation of
future taxable income. Because we have yet to recognize any significant profits
from operations, we have provided for a full valuation allowance against our
deferred tax asset.
NOTE 3 - COMMON STOCK PURCHASE WARRANTS
In August, 1997, we sold to Ocean Strategic Holdings Limited, a Guernsey
corporation ("OSHL"), for an aggregate consideration of $50,000, a warrant to
purchase 1,000,000 shares of our common stock at $0.01 per share (the "1997
Warrant"). The 1997 Warrant was exercisable beginning August 1, 1998 until
August 1, 2001. On March 31, 1999, the exercise price of the 1997 Warrant was
increased from $0.01 per share to $1.00 per share and, in connection with such
increase, we issued to OSHL an additional warrant to purchase 500,000 shares of
our common stock at $3.00 per share (the "1999 Warrant"). The 1997 Warrant was
exercised on April 2, 1999, and we issued 1,000,000 shares of our common stock
thereunder to OSHL upon receipt of the $1,000,000 exercise price.
The 1999 Warrant is not exercisable until March 31, 2000, and it expires on
March 31, 2004. The holder of the 1999 Warrant is entitled to an adjustment in
the kind and number of shares of stock receivable upon exercise of the warrant
upon certain events, including reclassification of common stock, capital
reorganization, stock dividend or other change in outstanding shares of common
stock, certain consolidations or mergers and certain sales of our property. The
exercise price and the number of shares issuable upon exercise of the 1999
Warrant, however, shall remain unchanged in the event we complete a "reverse
split" of our shares into a smaller number of outstanding shares. The warrant
holder may not
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<PAGE>
exercise any portion of the 1999 Warrant which would give it and its affiliates
a beneficial ownership of 5.0% or more of the outstanding shares of our common
stock at the time of such exercise without at least 61 days prior written notice
to us.
As of September 30, 1999, 500,000 shares of common stock were reserved for
potential issuance upon the conversion of the 1999 Warrant.
NOTE 4 - 1999 STOCK OPTION PLAN
On June 15, 1999, we adopted the MonsterDaata.com, Inc. 1999 Stock Option Plan.
Under the option plan, we may issue to our employees, officers, directors and
consultants options to purchase shares of our common stock. All incentive stock
options granted under the plan will have an exercise price of not less than the
fair market value of our common stock at the time of grant, and all
non-incentive stock options granted under the plan will have an exercise price
of not less than 85% of the fair market value of our common stock at the time of
grant. Our board of directors (or any duly appointed committee thereof)
determines the vesting period of the options upon the granting of the options.
The total number of shares of common stock for which options may be granted
under the plan is 1,750,000. No grant of a stock option under the plan may be
made after June 15, 2009.
On July 26, 1999, an employee exercised his option to purchase 123,000 shares of
common stock (Par Value $0.01) at the exercise price of $1.00 per share. The
option was paid with $5,000 cash and a promissory note issued to the company by
the employee for $118,000 bearing interest of 6% per annum. Repayment is due on
demand.
NOTE 5 - NET LOSS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No.
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share exclude any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously required fully diluted earnings per share. All earnings per share
amounts for all periods have been presented in accordance with SFAS No. 128
requirements. Net loss per share is based on net loss divided by weighted
average number of shares of common stock outstanding during the respective
periods.
NOTE 6 - DATABASE
In August of 1999, we entered into a database development and acquisition
agreement with a leading provider of national public and private school
information. We anticipate completion and delivery of the database to be at or
around December 31, 1999. Upon delivery the database will be amortized over its
useful life.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The statements contained in this Report on Form 10-QSB that are not historical
facts are forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) that involve risks and uncertainties.
Such forward-looking statements may be identified by, among other things, the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involve risks and
uncertainties. From time to time, we or our representatives have made or may
make forward-looking statements, orally or in writing. Such forward-looking
statements may be included in our various filings with the Securities and
Exchange Commission (the "SEC"), or press releases or oral statements made by or
with the approval of our authorized executive officer.
These forward-looking statements, such as statements regarding anticipated
future revenues, capital expenditures and other statements regarding matters
that are not historical facts, involve predictions. Our actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements. We do not undertake any
obligation to publicly release any revisions to these forward-looking statements
or to reflect the occurrence of unanticipated events. Many important factors
affect our ability to achieve its objectives, including, among other things,
technological and other developments in the Internet field, intense and evolving
competition, the lack of an "established trading market" for our shares, and our
ability to obtain additional financing, as well as other risks detailed from
time to time in our public disclosure filings with the Securities and Exchange
Commission.
Overview of Operations
We are a leading provider of integrated real estate transaction facilitation,
due diligence and research content over the Internet. We currently develop,
license, co-brand, reformat, integrate, and enhance over 70 proprietary
databases that include real estate related business-to-business and consumer
information. Business information includes real estate transaction due
diligence, risk assessment and valuation information. Consumer services consist
of data products covering over 61,000 communities in the United States, and
neighborhood profiles containing school, town and community, crime, culture,
affordability, environmental hazard, property ownership, tax, demographic and
lifestyle characteristic data. We currently employ 35 full-time officers, data
managers, Web site developers, salespeople and support personnel.
We believe that our Internet Web site and related co-branded Web sites have the
potential to become key destination sites for low cost real estate due diligence
information, and that we can create and capture value for our business and
shareholders by linking real estate professionals - including brokers, lenders,
appraisers and insurers - with consumers, businesses and investors through our
Web site. We generated our revenues from licensing our content to other Internet
sites, and we expect to generate further revenues from selling eReports and
subscriptions on our Web site, selling national and local advertising,
collecting fees for eLeads (in which we electronically match and link our users
with selected providers of services or products that we believe will be of
interest to the users) and collecting fees for providing customized information
services (our customized information services are provided primarily to regional
real estate multiple listing services).
Through our Web site we provide summary reports consisting of selected real
estate information to customers free of charge, and more detailed reports are
available on our Web sites for a small charge per report or on an annual
subscription basis. In addition to distributing our products and services
through our own Web site at www.MonsterDaata.com, we license portions of our
content databases to selected Internet portals and real estate destination Web
sites, including www.REALTOR.com, the country's leading real estate
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listing Web site with 1.3 million residential listings. Our "Neighborhood
Place," a content database of demographic, lifestyle characteristic, crime and
local area information, and a school report database, is currently licensed to
REALTOR.com and powers their popular "Find a Neighborhood" feature. Our
information allows REALTOR.com users to research and locate a neighborhood with
desired characteristics anywhere in the U.S. based on their specified search
criteria.
We also provide licensed or co-branded content to other popular Internet Web
sites, many of which provide links back to our Web site through their Web sites.
If users on these licensed or co-branded sites desire further information beyond
the summary or snapshot data we license or co-brand, they may obtain detailed
customized reports from our Web site, again for a small charge per report or
on an annual subscription basis (and we share the revenues we earn from the
sales of these detailed eReports with the referring Web site owner).
The content we currently provide on our Web site includes (i) "Neighborhood
Place", which allows users to generate comparative data analyses of several
neighborhoods including crime statistics, town and community profiles, census
and demographic information, neighborhood lifestyle characteristics and school
reports; (ii) "Relocation Place," which provides a pre and post move resource
center to help users plan and estimate the cost of their relocation; (iii)
public records property data, which allows users to research properties for
sale, foreclosures, comparable sales and many other types of information; and
(iv) risk hazard assessment data, which allows users to obtain data regarding
environmental hazard and crime risk.
Our financial condition and results for periods prior to April 2, 1999 are
almost entirely attributable to the historical results of Taconic Data Corp.
("Taconic"), which was deemed the acquiror for accounting purposes in our
business combination with Taconic that was completed on April 2, 1999.
Results of operations for the nine months ended September 30, 1999 as compared
to the nine months ended September 30, 1998
Our total revenues for the nine month period ended September 30, 1999, were
$1,806,574 compared to $1,406,647 for the nine month period ended September 30,
1998. This 28% increase in revenue is partially attributable to two new
licensing and co-brand agreements with real estate related Internet sites, but
the majority of the increase is attributable to non-recurring revenue recognized
in the second quarter of 1999 on existing agreements and to the recognition of
deferred revenue on previously prepaid licensing agreements. We believe the
increase in total revenue, particularly to the extent attributable to the new
Internet-related agreements, reflects a trend that will continue in future
periods as we continue to transition our business revenue sources to the
Internet and the effects of our development of a national sales force are
realized. As part of this trend, we anticipate that within the next few
quarters, we will begin to receive material revenues from new sources, namely
Internet advertising, Web site subscriptions, sales of eReports and eLeads, as
well as from further licensing of our content to real estate related Internet
sites. At the same time, our recurring revenues from existing agreements with
multiple listing services will continue to decline as these agreements expire
and we make our data available to more users, including multiple listing
services and their clients, at a much lower cost over the Internet.
We expect, but can not guarantee, that for calendar year 2000, more than half
our revenue will be derived from these new Internet related sources, whereas for
the first nine months of calendar year 1999, these revenue sources provided only
12% of our total revenues to date. Our percentage of revenue from Internet
related sources has grown by a significant amount during each quarter of this
year, from 5.8% through March 31, to 9.8% for the April 1 through June 30
period and 25% for the July 1 through September 30 period.
Our cost of sales for the nine month period ended September 30, 1999 was
$561,253, compared to $851,154 for the nine month period ended September 30,
1998. Our cost of sales fell in 1999 primarily as a
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result of the reassignment of many of our data acquisition employees to Web site
development functions as part of the transition of our business to the Internet.
Primarily as a result of our cost of sales reductions, our gross margin was 69%
of total revenues during the nine month period ended September 30, 1999,
compared to 39% of total revenues during the nine month period ended September
30, 1998. We anticipate that our gross margins in future periods could continue
to improve, but at a much more modest rate, based on our belief that our total
revenues will increase faster than our related costs of sales as we move the
primary means of distributing our data products to the Internet and we expand
our revenue sources to include the new Internet related sources described above
which can be derived by us with very little in the way of incremental costs
beyond the fixed Internet development costs that we have already invested or
have budgeted for future periods. Our cost of goods sold includes referral and
revenue sharing payments that we will be required to make to third party Web
site operators for certain types of Internet related revenues under our
agreements with such operators. To date, these payments have not been
significant, but we expect that as our Internet related revenues grow these
payments to third party Web site operators will grow as well.
Selling, general and administrative expenses increased from $1,694,083 for the
nine month period ended on September 30, 1998 to $2,821,669 for the nine month
period ended September 30, 1999. This increase is largely attributable to our
Web site development expenses of approximately $743,117 incurred during the
first nine months of 1999. Prior to the commencement of the transition of our
business to the Internet, we had no Web site development expenses during the
nine month period ended on September 30, 1998. Our $743,117 of Web site
development expenses includes our payroll expenses for all our new hires and
internal transferees assigned to Web site development activities. Our payroll
expenses for other new hires not assigned to Web site development activities
also grew significantly in the 1999 nine month period over the 1998 nine month
period. We expect payroll expenses to increase in future periods, as well, as we
continue to build out our management team and a national sales force.
Our operating loss increased from $1,194,862 for the nine month period ended
September 30, 1998 to $1,783,009 for the nine month period ended September 30,
1999. In other income/expense, we recorded $215,000 of legal and accounting
expenses incurred in connection with our acquisition of Taconic in 1999. Due to
these non-recurring expenses arising out of our acquisition of Taconic in 1999,
our net loss of $1,783,009 during the nine month period ended September 30, 1999
represents an even greater increase from our net loss of 1,194,862 for the
corresponding period of 1998. During these periods for 1998 and 1999, our net
loss per share increased from $.20 to $.26.
Liquidity and capital resources
As of September 30, 1999, our cash balance was $122,387 and we had a working
capital deficit (excluding deferred revenue) of $482,880. For the nine months
ended September 30, 1999, our net cash used in operating activities was
$949,592. Of this $949,592, we used $215,000 for non-recurring merger and
acquisition expenses relating to our purchase of Taconic.
Total cash flows from financing activities increased from $274,067 for the nine
month period ended on September 30, 1998 to $1,074,097 for the nine month period
ended September 30, 1999. As set forth in the next paragraph, we received
additional cash proceeds after September 30, 1999 from the sale of equity to
private investors.
Our working capital requirements depend upon numerous factors, including,
without limitation, levels of resources that we devote to the further
development of our Web site and marketing capabilities, technological advances,
status of competitors and our ability to establish collaborative arrangements
with other organizations. After September 30, 1999, we received approximately $1
million from private investors purchasing shares of our Series A Cumulative
Convertible Preferred Stock and associated Common Stock purchase warrants. We
are seeking to raise up to $15 million of additional capital from private
investors and institutional money managers prior to the end of 1999, and have
retained a financial
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advisor to assist us with these fundraising activities, but there can be no
assurance that we will be successful in doing so. Even if we are not successful
in raising any of this additional capital, our current cash resources should be
sufficient to fund our current operations into the second quarter of 2000 if our
development spending were to continue at its current pace. We intend to
accelerate our development and infrastructure spending in the coming calendar
quarters if we have sufficient capital resources available to do so.
Impact of the Year 2000
The computer systems and software programs of many companies and governmental
agencies are currently coded to accept or recognize only two digit entries in
the date code field. These systems may recognize a date using "00" as the year
1900 rather than the year 2000. As a result, these computer systems and/or
software programs may need to be upgraded to comply with such year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
State Of Readiness
We have made an assessment of the year 2000 readiness of our information
technology systems, including the hardware and software that operate our Web
site and our non-information technology systems. We have been informed by many
of our vendors of material hardware and software components of our information
technology systems that all or substantially all of the products we use are
currently year 2000 compliant. We will request that the remaining vendors of the
material hardware and software components of our information technology and
non-information technology systems provide us with assurances of their year 2000
compliance. We plan to complete this process during the second half of 1999.
Until such testing is complete and such vendors and providers are contacted, we
will not be able to completely evaluate to what extent our information
technology systems or non-information technology systems will need to be revised
or replaced. If our efforts to address year 2000 risks are not successful, or if
suppliers or other third parties with whom we conduct business do not
successfully address such risks, it could have a material adverse effect on our
business.
Costs
We upgraded or replaced approximately $85,000 in capital equipment and software
to be year 2000 compliant. In July 1999 we entered into a $65,000 lease for
computer hardware that is year 2000 compliant, and we intend to expend an
additional $20,000 for year 2000 compliant software before the end of 1999.
Risks
We are not currently aware of any year 2000 compliance problems relating to our
proprietary software or our information technology or non-information technology
systems that would have a material adverse effect on our business. We cannot
assure that we will not discover year 2000 compliance problems in our
proprietary software that will require substantial revisions. In addition, we
cannot assure you that third-party software, hardware or services incorporated
into our material information technology and non-information technology systems
will not need to be revised or replaced, all of which could be time consuming
and expensive. Our failure to fix our proprietary software or to fix or replace
third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, the loss of customers and other
business interruptions, any of which could have a material adverse effect on our
business. Moreover, the failure to adequately address year 2000 compliance
issues in our proprietary
13
<PAGE>
software and our information technology and non-information technology systems
could result in claims of mismanagement, misrepresentation or breach of contract
and related litigation, which could be costly and time-consuming to defend.
In addition, we cannot assure you that governmental agencies, utility companies,
Internet access companies, third-party service providers and others outside our
control will be year 2000 compliant. The failure by such entities to be year
2000 compliant could result in a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, which could
prevent us from delivering our Web site, could decrease the use of the Internet
or prevent users from accessing our Web site, which could have a material
adverse effect on our business.
Contingency Plan
We attempt to identify and maintain relationships with alternative suppliers of
services and products in order to mitigate the risks associated with suppliers
who are not year 2000 compliant. A change in suppliers on short notice if
necessary, however, may nonetheless result in a material disruption to our
business.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are a party to litigation arising in the ordinary course
of our business. We are not currently a party to any litigation that, if
determined adversely to us, we believe would have a material adverse effect on
us.
Item 2. Changes in Securities
On August 1, 1997, we issued to Ocean Strategic Holdings, Ltd. ("OSHL") a
warrant for the purchase of 1,000,000 shares of our common stock for cash
consideration of $50,000 (the "1997 Warrant"). The 1997 Warrant was issued
pursuant to the provisions of Regulation S of the Securities Act. The exercise
price of the 1997 Warrant, which was originally $.01 per share, was increased to
$1.00 per share in connection with the issuance of the New Warrant to OSHL
(described below).
On March 31, 1999, in consideration for the modification of the exercise price
(from $0.01 per share to $1.00 per share) of the 1997 Warrant, we issued to OSHL
a new warrant to purchase 500,000 shares of our common stock at an exercise
price of $3.00 per share (the "1999 Warrant"). The 1999 Warrant expires on March
31, 2004, and is not exercisable until March 31, 2000. The 1999 Warrant was
issued pursuant to the provisions of Regulation S.
In April 2, 1999 we issued 6,000,000 of our shares of common stock to 18
shareholders of Taconic, in exchange for their shares of Taconic. Our shares of
common stock were issued solely for shares of Taconic. These shares were issued
in a transaction that did not involve any public offering of our shares within
the meaning of Section 4(2) of the Securities Act and Rule 506 of Regulation D.
Also on April 2, 1999, OSHL exercised its rights under the 1997 Warrant to
purchase 1,000,000 shares of our common stock for $1,000,000. The 1,000,000
shares issued upon exercise of the 1997 Warrant were issued pursuant to the
provisions of Regulation S, and the funds received were used for general
corporate purposes.
On August 23, 1999, pursuant to a development and consulting agreement with
X-Ceed, Inc., we issued to X-Ceed, Inc. 82,142 shares of our common stock. These
shares were issued in a transaction that did not involve any public offering of
our shares within the meaning of Section 4(2) of the Securities Act and Rule 506
of Regulation D.
In closings that occurred during the first two weeks of November, 1999, we
issued 1,068 shares of Series A Cumulative Convertible Preferred Stock and
related warrants to purchase common stock to private investors for an aggregate
offering amount of $982,000. These shares were issued in a transaction that did
not involve any public offering of our shares within the meaning of Section 4(2)
of the Securities Act and Rule 506 of Regulation D.
Item 3. Defaults Upon Senior Securities
None
15
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On June 15, 1999, our board of directors (i) adopted the 1999 MonsterDaata.com,
Inc. Stock Option Plan and (ii) approved the filing of an amended and restated
certificate of incorporation (the "Amended and Restated Charter"), with the
office of the Secretary of State of the State of Delaware on August 24, 1999,
which consolidated into one document all of our previously filed Charter
instruments and which gave effect to the following amendments:
o amending Article III of the Charter by deleting specific purposes of
the corporation and including only the general purpose of pursuing
any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware; and
o amending Article IX of the Charter by adding that, to the fullest
extent legally permissible, no director of the corporation shall be
personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, further
stating that any repeal or modification of Article IX by the
stockholders of the corporation shall not adversely affect any right
or protection of a director of the corporation existing at the time
of such repeal or modification and changing the heading of Article
IX from "Indemnification of Officers and Directors" to read
"Protection of Officers and Directors."
On July 1, 1999, our stock option plan and the Amended and Restated Charter were
approved by holders of 79.9% of our issued and outstanding common stock,
pursuant to a shareholder written consent. A notice of corporate action was sent
to the holders of the remaining 20.1% of our issued and outstanding stock
pursuant to Delaware General Corporation Law ss. 228(d).
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule (for electronic filers).
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MONSTERDAATA.COM, INC.
(Registrant)
Date: November 12, 1999 /s/ Mitchell Deutsch
--------------------------------------------
Mitchell Deutsch
President and Chief Executive Officer
Date: November 12, 1999 /s/ James Garfinkel
--------------------------------------------
James Garfinkel
Treasurer, Secretary and Vice President
(Principal Financial and Accounting Officer)
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's statement of fincome for the nine mo0nths ended September 30, 1999 and
balance sheet a and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 122,387
<SECURITIES> 0
<RECEIVABLES> 350,522
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 556,851
<PP&E> 153,851
<DEPRECIATION> 153,694
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 855,332
<BONDS> 1,895,403
0
0
<COMMON> 0
<OTHER-SE> 73,775
<TOTAL-LIABILITY-AND-EQUITY> (1,133,891)
<SALES> 855,332
<TOTAL-REVENUES> 1,806,574
<CGS> 1,806,574
<TOTAL-COSTS> 561,253
<OTHER-EXPENSES> 2,821,559
<LOSS-PROVISION> (206,551)
<INTEREST-EXPENSE> 8,339
<INCOME-PRETAX> (1,783,009)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,783,009)
<EPS-BASIC> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
