U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR FISCAL YEAR ENDED: DECEMBER 31, 1999
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to __________
Commission file number: 033-01599
MONSTERDAATA.COM, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 22-2732163
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
115 STEVENS AVENUE, VALHALLA, NEW YORK 10595
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 747-9100
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act: NONE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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. Yes X No _.
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this form 10-KSB. X.
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State issuer's revenues for its most recent fiscal year. $2,488,434
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant was approximately $13,514,530 computed by
reference to the closing sales price of Registrant's common stock on February
28, 2000.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE LAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ____ No ____.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of December 31, 1999, there were 7,660,948 shares of the Registrant's common
stock, par value $0.01, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"): NONE
Transitional Small Business Disclosure Format (check one): Yes __; No X.
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MonsterDaata.com, Inc.
Index to Form 10-KSB
PART I
Page
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PSLRA Statement....................................................1
Item 1. Description of Business............................................2
Item 2. Description of Property...........................................28
Item 3. Legal Proceedings.................................................28
Item 4. Submission of Matters to a Vote of Security Holders...............28
PART II
Item 5. Market for Common Equity and Related Stockholder Matters..........28
Item 6. Management's Discussion and Analysis or Plan of Operation.........29
Item 7. Financial Statements..............................................31
Item 8. Changes In Accountants............................................31
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.................32
Item 10. Executive Compensation............................................35
Item 11. Security Ownership of Certain Beneficial Owners and Management....38
Item 12. Certain Relationships and Related Transactions....................39
Item 13. Exhibits and Reports on Form 8-K..................................40
Signatures....................................................................41
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Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995. Certain written and oral statements
made or incorporated by reference by us or our representatives in this Report
and other reports and filings with the Securities and Exchange Commission (the
"SEC"), press releases, conferences or otherwise, are "forward looking
statements", within the meaning of the Private Securities Litigation Reform Act
of 1995 ("PSLRA") and Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking
statements include, without limitation, any statement that may predict,
forecast, indicate, or imply future results, performance, targets or
achievements, and may contain the words "estimate", "project", "intend",
"forecast", "anticipate", "plan", "planning", "expect", "believe", "will", "will
likely", "should", "could", "would", "may" or words or expressions of similar
meaning. In addition, except for historical matters, we may set forth certain
other statements in this Report and elsewhere from time to time, including,
without limitation, statements regarding our Internet activities, customers, Web
site and database development activities, product offerings, licensing and
co-branding prospects, user demographics and statistics, anticipated revenue
sources, sales force expansion efforts, and availability of financial and other
resources, which are forward-looking statements within the meaning of the PSLRA.
Such forward-looking statements are based upon our current belief as to the
outcome, occurrence and timing of future events or current expectations and
plans based upon, among other things, assumptions made by, and information
currently available to management, including management's own knowledge and
assessment of our industry, competition and current regulatory environment. All
such statements involve significant risks and uncertainties.
Many important factors affect our ability to achieve the stated outcomes and to
successfully commercialize our product offerings on the Internet, including the
ability to
o (1) obtain substantial additional funds as needed to fund anticipated
continuing operating losses and further development activities,
o (2) obtain and maintain all necessary licenses, trademarks and other
intellectual property protections and contract rights and restrictions for
our business activities and data products,
o (3) compete successfully against other companies' products and services,
o (4) maintain the integrity, reputation and reliability of our data,
o (5) form strategic alliances with other Internet companies,
o (6) manage growth and recruit and retain employees, and
o (7) market our data products and services in a profitable manner.
Although we believe that our assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there also can be no assurance that the statements included in this
Report and elsewhere will prove to be accurate. In addition, such risks and
uncertainties included herein and elsewhere are not exhaustive. Other sections
of this Report and our other filings with the SEC from time to time, may include
additional factors which could adversely affect our business and other financial
performance. Moreover we operate in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible
for management to predict all such risk factors, nor can it assess the impact of
all such factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Accordingly, in light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by us or any other person that our objectives and plans will be
achieved; in fact, actual results could differ materially from those
contemplated by such forward-looking statements. Given these risks,
uncertainties and limitations, investors should not rely upon forward-looking
statements as a predictor of actual results. We do not undertake any obligation
to release publicly any revisions to these forward-looking statements or to
reflect the occurrence of unanticipated events.
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ITEM 1. DESCRIPTION OF BUSINESS
Acquisition of Taconic Data Corp.
On April 2, 1999, we acquired 99.2% of the outstanding capital stock of Taconic
Data Corp. ("TDC"), a privately-held New York corporation. TDC, which was formed
in 1992, provided real estate related database information services to
consumers, real estate professionals and other businesses primarily through
regional real estate multiple listing services ("MLSs") and, more recently, over
the Internet.
In connection with this acquisition, TDC became our majority owned subsidiary
and all of our directors and officers were replaced by TDC directors and
officers. The stockholders of TDC 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. Accordingly, a
change in control of our company occurred in connection with the TDC
acquisition, and the acquisition was deemed a "reverse acquisition" for
accounting purposes. Item 11 below sets forth current information regarding the
ownership of our shares by management and other large shareholders.
On April 5, 1999, we changed our corporate name to "MonsterDaata.com, Inc."
Effective June 15, 1999, we changed our fiscal year end date to December 31, to
conform to TDC's fiscal year, and TDC's independent auditors were appointed as
our independent auditors. A description of our company after giving effect to
the TDC acquisition is set forth below. Unless otherwise provided below, for
periods prior to April 2, 1999, the description below relates to TDC, on a
stand-alone basis, before giving effect to the TDC acquisition.
Company Overview
We provide 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 39 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
Internet data services. We currently generate most of 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 with our
users' consent we electronically match and link our users with selected
providers of services or products that we believe will be of interest to the
users) and collecting fees for providing customized information services (our
customized information services are provided primarily to regional real estate
multiple listing services, or MLSs).
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Through our licensing and co-branding activities, we provide our data 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, 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. We have also commenced work on a remote data delivery program
where our data can be delivered directly to the screen of a licensee Web site's
end user in response to a query by that end-user, and we will provide these data
delivery services to the licensee Web sites on a pay-per-use basis, under a flat
fee unlimited use license, or through a combination of these methods.
We have been successful in completing licensing agreements for our content with
a number of key Internet real estate destination Web sites, including
www.REALTOR.com, the country's leading real estate listing Web site with 1.3
million residential listings, and www.Move.com, the real estate portal created
by Cendant Corporation. Cendant Corporation is the franchisor of three of the
country's top five real estate brokerage brands (Century 21, Coldwell Banker and
ERA).
The content we currently provide (through our Web site and/or through co-brand
sites or other licensing arrangements) 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
hazards and crime risk.
Revenue Sources
We classify our five intended sources of revenues as follows:
o Licensing. We currently license our information to several real
estate destination Web sites and Internet portals (see "Major
Customers" below), and we plan to license selected data products to
additional real estate destination Web sites and Internet portals,
either by creation of co-branded sites (as we do now) or by delivery
of data directly to the screen of a licensee Web site's end user
(which we are developing).
o eCommerce. We generate revenue through the sale of over 40 types of
premium reports delivered via the Internet, including comprehensive
town, community, school, comparable sales, property tax and
environmental hazard reports. Typically, real estate professionals,
investors and consumers visiting our Web site (or third party sites
that have licensed some or all of our database offerings),
regardless of whether or not they are subscribers, will receive free
snapshot, summary or profile data reports. Viewers are then
encouraged, with regard to the data sets they are most interested
in, to purchase full eReports and/or annual eSubscriptions from our
Web site.
o Advertising Placement. We have defined the data categories in our
national databases into discrete subsections based on finely focused
geographic areas. As a result, through our content
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categories, we are able to offer advertisers a highly targeted
audience focused on goods and services typically needed in the
period six months before and six months after a real estate
transaction. This means, for example, that we can customize ad
banners to offer local businesses the ability to advertise directly
to potential home buyers researching nearby neighborhoods or ZIP
codes, and we can offer national advertisers the ability to
advertise on the higher traffic portions of our Web site or co-brand
sites, or to tailor their ads to the demographic profile of the
specific neighborhood being viewed. Given the demographics of our
Web site viewers (primarily real estate investors, brokers, sales
people and potential home buyers) and our ability to advertise (in
the manner of local businesses) directly to potential home buyers
researching specific neighborhoods and our ability to customize our
ads on a local ZIP code and neighborhood basis, we expect to be able
to sell ad space on our Web site for a premium over the general
market price per page view for untargeted national advertisements on
the Internet. Ad sales will be coordinated by our national sales
force, which we are currently in the process of recruiting and
developing.
o eLead Generation. By offering free access to some of our content and
reports, we can collect registration leads and generate revenues
through the sale of those leads, with the consent of the registered
users. In addition, we plan to develop and sell Web-based lead
generator content and products to real estate professionals and to
providers of ancillary goods and services. In connection with our
eLead generation sales efforts and ad placement sales to date, we
have identified over 40 types of businesses (by SIC code) that would
have an interest in being referred active prospects who are
researching localized real estate information on our Web site.
Examples of businesses we will be marketing eLeads to range from
real estate brokerage firms to moving companies to local retailers,
contractors, utilities, and other localized businesses and service
providers.
o Custom Information Services. Finally, we provide customized
information and data-to-Web solutions, management and operation
services to real estate MLSs. Prior to the end of 1998, almost all
of TDC's total revenues were derived from MLSs under long-term (two
to five year) custom information services contracts. Through the use
of proprietary data standardization, clean up, and matching
procedures we developed, we have been able to decrease our costs and
increase our profit margins on this source of business revenues.
Industry Overview
The Real Estate Industry
According to the United States Department of Commerce, in 1998 the U.S. real
estate industry accounted for approximately 15% of the gross domestic product of
the United States, and was therefore one of the largest sectors of the economy.
The real estate industry is commonly divided into the residential and commercial
sectors. The residential sector includes the purchase, sale, rental, remodeling
and new construction of homes and represented approximately $1.5 trillion of
commerce in 1998. The commercial sector includes the lease, resale, and new
construction of property for businesses and represented approximately $300
billion in 1998.
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The Residential Real Estate Market
Buying a home is generally regarded as the largest financial decision and one of
the most difficult and complex processes most consumers will ever undertake. An
enormous network of support services and products exists to assist consumers in
finding or building a property, renting or buying a property, moving, owning a
property and selling a property.
Home buyers require an extensive amount of information and several decision
tools to help bolster confidence during the home buying process. To make an
informed decision, consumers need access to comprehensive information and rely
upon a series of professionals, including real estate agents, and ancillary
service providers, such as mortgage brokers, title agents, escrow agents,
attorneys, inspectors and appraisers. These professionals and ancillary service
providers offer products and services, such as mortgages, title insurance,
credit reports, appraisals, neighborhood and community profiles, and inspections
that generated in excess of $49 billion in transaction fees in 1998. In
addition, real estate transactions often lead to lifestyle changes for
consumers, including changing neighborhoods, schools, shopping malls, banks,
grocers, cleaners and other retail relationships.
Growth of the Internet
International Data Corporation estimates that the number of Internet users
worldwide exceeded 95 million in 1998, and will exceed 170 million by the end of
2000 and 319 million by the end of 2002. International Data Corporation also
estimates that commerce over the Internet will increase to more than $400
billion by 2002. Growth in Internet usage has been fueled by a number of
factors, including:
o A large and growing base of personal computers in the workplace and
home;
o Advances in the performance of personal computers and modems;
o Improvements in network systems and infrastructure;
o More readily available and lower cost access to the Internet;
o Increased awareness of the Internet among businesses and consumers;
o Increased volume of information and services offered on the
Internet; and
o Reduced security risks involved in conducting transactions on the
Internet.
Growth in Internet usage is expected to continue as new technologies, such as
multimedia capabilities, are developed and adopted, as Internet access and
bandwidth increases, and as Internet content improves and becomes more
interactive.
Business to eCommerce Services
According to a recent report published by Jefferies & Company in December 1999
entitled "b-eCommerce Services Business Services For The New Economy", the
business to eCommerce services sector should experience growth rates of 50% to
60% annually for the next three years, dramatic revenue growth, and gross profit
margins in the 35% to 40% range. The report also states that 'Click and Mortar'
companies, those with
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traditional business expertise or facilities which are leveraged with
significant investments in the Internet, are particularly well positioned to
profit in this emerging sector.
The Internet and Real Estate
The emergence and acceptance of the Internet is fundamentally changing the way
that consumers and businesses communicate, obtain information, purchase goods
and services and transact business. We believe that the real estate information
industry is particularly well suited to benefit from the Internet because of its
size, fragmented nature and reliance on the exchange of information. The
Internet offers a compelling means for consumers, real estate professionals and
ancillary service providers to come together to improve the dissemination of
information and enhance communication.
Recognizing the commercial potential of the Internet, a number of residential
real estate-related Web businesses have been established, including Web sites
that aggregate data from real estate MLSs, real estate chains, and brokers of
different regions. Aggregators include Homestore.com, Microsoft's HomeAdvisor
and Yahoo. These real estate destination sites enable users to quickly access a
wide range of real estate listings to search for a home using specific criteria,
including location, size, price and neighborhood. As a result, these sites are
increasingly becoming an important part of the home buying process for many
consumers. Based on a 1999 study by the U.C. Berkeley Fisher Center for Real
Estate and Urban Economics, a significant portion of existing homes listed for
sale in the United States are listed online and the number of home buyers using
the Internet to shop for a home is increasing. A recent survey by the California
Association of Realtors showed that nearly 40% of home buyers used the Internet
as part of the home buying process.
The MonsterDaata Solution
Our business focus is currently that of a "B2B2C" (business to business to
consumer) provider of tools and data products that enhance our customers' Web
sites. We are able to work with a wide range of real estate and related Web
sites who view our content as important to enhancing "stickiness" (longer visits
or repeat usage) in their sites. We provide comprehensive real estate
transaction facilitation, due diligence and research content in one convenient
location. With our products and services, we allow our clients and users to
bypass traditional expensive, fragmented real estate information sources and
intermediaries. We allow real estate professionals, consumers and investors
immediate centralized access to a broad range of critical real estate
information from their own homes or offices. In addition, our services and
products assist real estate agents, brokers and other professionals to better
market their services, become more productive and compete more effectively
during the real estate transaction process. We believe that we are also well
positioned to provide services to ancillary service providers and consumers
buying or selling a home.
We have six primary data product and service categories that, according to our
research and experience over the past eight years, have shown to be critical
tools and services sought by professionals, and now, to a growing extent, by
consumers directly. These product and service categories are due diligence,
valuation, risk assessment, target marketing, data enhancement and ancillary
products and services. The information underlying these data products are
developed in-house or licensed and reformatted, then integrated and enhanced for
over 70 data sets and for over 61,000 communities nationwide. Such information
includes crime, school, life style characteristics, culture, town and community,
affordability, demographic, ownership information for more than 90 million
residences, over 30 million sales transactions, environmental hazards and
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new construction and permit data. This information is packaged and provided to
real estate professionals and consumers via our Web site and via Internet
destination sites, including:
o Cendant's move.com - a relocation, real estate and home-related
services Internet portal. Cendant is the franchisor of three of the
five leading real estate franchises in the country, Century 21,
Coldwell Banker and ERA;
o Homestore.com's REALTOR.com - currently the country's largest real
estate listings portal, with approximately 1.3 million listings;
o iOwn.com and MortgageIT.com - two leading mortgage and real estate
listing portals;
o Network Communications (ncinfo.net) - the largest publisher and
provider of printed and online real estate advertising in North
America;
o Signonsandiego.com - a San Diego Tribune site offering San Diego's
most comprehensive online community with seven million monthly page
views;
o CityNews.com - a City News, Inc. company offering free online
classifieds generating over seven million monthly page views; and
o Thomson Interactive Media (www.tim.com) - part of Thomson
Newspapers, one of the main operating units of The Thomson
Corporation, one of the world's leading information companies.
In addition, consumers require a variety of products and services throughout the
home and real estate purchase and sale cycle. The real estate transaction offers
service providers and retailers the opportunity to target consumers at a time
when they are shifting their buying patterns. Providers and retailers of
products or services that can be marketed to people who are buying property and
relocating to a new neighborhood need an effective mechanism to reach consumers
who are motivated prospects for their offerings. Ideally, these providers of
products and services would have a centralized location where they could
advertise their offerings to a target group of consumers who are engaged in a
real estate buying and relocation process. We believe that our Web site presents
such service providers and retailers with an effective medium to reach these
consumers through highly-customizable directed advertisements and through our
eLead generation business to consumer matching programs.
Our Products and Services
Our six primary data product and service categories currently include:
1. Neighborhood Place. This popular category allows consumers to see
comparative data analyses of several neighborhoods simultaneously
including crime statistics, town and community profiles, census and
demographics, neighborhood lifestyle characteristics and school reports.
Real estate professionals also use this service to prepare customized
presentation packages for their clients. The presentation packages can be
personalized with the broker's name and contact information, which
provides the broker with a useful marketing tool and a potential
competitive advantage over brokers not using our Web site offerings under
this data category.
2. Evaluate Properties (Public Records Data). This information tool is used
to research a property, discover sales prices of comparable properties,
identify potential "good buys" through listed
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foreclosures, or investigate a wide variety of publicly recorded data
about a person, property, or legal situation. Records provided, which vary
by jurisdiction, include: (i) property tax assessments; (ii) property
data; (iii) deed and mortgage recordings (property sales and financings);
(iv) comparable sales; (v) tax parcel maps (also known as assessor plat
maps); (vi) foreclosures and bank real estate offerings; (vii) Personal
Private-Eye(TM), which covers liens, judgments and court documents; and
(viii) copies of original deeds and mortgage recordings.
3. Risk Hazards Assessment. We provide a complete resource risk library with
a compendium of data designed to help the user minimize risk and reduce or
eliminate liability in a real estate or financial transaction. Depending
upon the jurisdiction, data provided includes: (i) Environmental and
Health Hazards; (ii) Crime Risk; (iii) Flood Reports; and (iv) Earthquake
Epicenter, Disclosure and Pollution Reports.
4. My Best Customers (Target Marketing). We plan to offer a national center
for customer prospecting, marketing and list fulfillment services on our
Web site that is directed primarily at real estate professionals and
ancillary service providers. This information can be used to identify
marketing prospects within a given geographic area and to provide
residential and business addresses and phone numbers of prospects. Data
and services will include the following: (i) eLead Generation Program;
(ii) Reverse Telephone Directory; (iii) Mailing List and Label Services;
and (iv) Mail House and List Fulfillment Services.
5. Make My Daata (Data Enhancement). We plan to offer value-added tools to
help business users build and enhance, correct, standardize, and clean
their own prospect lists and other databases. These tools are designed,
among other things, to transform lists such as for-sale inventory, public
record data, and internal mailing lists, into useful marketing databases.
Our data enhancement services will include: (i) Geocoding, (ii) Electronic
Street Mapping; (iii) List Clean Up, Standardization, and Postal Coding;
(iv) National Change of Address Cleansing; (v) Phone Append; (vi) Property
and Real Estate Listing Data Clean-up and Standardization; and (vii)
Postal Discounts.
6. Did You Know Daily, Other Professional Resources. We will offer a wide
variety of ancillary products and services of interest directed to real
estate professionals, including Virtual Realtor(R) Store, an online
catalogue of the principal goods and services routinely used by Realtors
in the course of their business, and daily top 10 lists, and real estate
facts and entertainment.
In addition, we currently provide the consumer and professional user with a
number of useful and entertaining features to attract and keep viewers on our
Web sites:
o Compare Neighborhoods Snapshot. Users can see a comparative snapshot
analysis of up to five neighborhoods at once containing: school
profiles, crime statistics, town and community profiles, census and
demographics, and neighborhood lifestyle characteristics.
o Evaluate Properties. Users can identify and find a specific property
and obtain a detailed description from building and other public
records data, then find up to 15 comparable sales, review the last
recorded sales price, and obtain property valuation reports for the
property.
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o Pre- and Post-Move Resource Center. This feature provides a
budgeting calculator function and moving resources, including
information about homes and apartments for sale or rent, new homes,
classified job listings, and mortgage comparison information.
o Links. The links feature permits users to link to other sites in
order to conduct checks on nannies, pre-school facilities, sex
offenders and other items of interest to people considering a new
neighborhood.
o Professional Services. We plan to add a professional services
feature to assist buyers and sellers in finding real estate
transaction-related services such as Realtors, mortgage companies,
home inspectors, title companies, insurance companies and attorneys.
o Identify Best Prospects. We plan to develop this feature for real
estate professionals in order to help them discover the best target
marketing tools available, generate qualified prospecting leads on a
daily basis, and continually purge and enhance their own prospect
databases.
o Top Ten Lists. We plan to offer new nationwide top ten lists every
two days, including information categories such as best schools,
places to live, quality of life, most expensive, least expensive,
worst and best crime areas, lifestyle characteristics, and fastest
growing communities.
Marketing and Sales Strategy
Our primary marketing objective is to grow our user base and brand, and thereby
expand our Web site traffic and our Internet related revenue sources.
Historically, our marketing activities have been generally limited to making
sales calls on MLS prospects for the customized information services we provide.
During the past several quarters, as we have refocused our business on Internet
based revenue sources, we have been recruiting and developing a proactive,
centralized marketing group responsible for positioning and repurposing our
expanded service offerings and ensuring that each of our Internet services is
competitive and appealing to these same professionals as well as to a mass
audience. If we have sufficient financial resources available to us, we intend
to commit significant additional capital to expanding our distribution through
portal and related business-to-business Internet companies, and to initiate an
advertising campaign targeted primarily at selected vertical business segments.
We plan to enhance our brand identity through a variety of marketing methods,
including: (i) brand development; (ii) publication of our domain name; (iii)
enhancement of the look, tone and attitude of our Web site; (iv) establishment
of a brand personality that appeals to our target market; (v) development of a
dialogue with customers and real estate professionals through special promotions
and affinity programs; (vi) frequent emails; (vii) customer care programs;
(viii) development of strategic alliances; (ix) direct mail and (x)
participation in trade shows.
Additional planned marketing and sales strategies include:
o Licensing and Strategic Alliances. Licensing our technology and
content solutions to potential strategic partners including popular
portals and real estate related destination Web sites.
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o Advertising and Sponsorship Opportunities. Distinguishing ourselves
from our competition through the creation of unique advertising and
sponsorship opportunities that are designed to build brand loyalty
for our corporate sponsors as well as for ourselves. We plan to
offer an assortment of advertising options to our clients, allowing
them to select the means by which they present themselves to our Web
site users.
o Expanded Sales and Marketing Force. Subject to our financial
resource limitations, we are seeking to continue with an aggressive
expansion of our sales force for our specific revenue streams. Our
Chief Executive Officer currently takes a direct role in servicing
our key national accounts, and we recently hired two national
accounts managers who operate out of our New York City sales office,
one from a Virginia sales office, and one from a Los Angeles sales
office. Several additional junior salespeople and lead generation
researchers are being hired. Sales groups will be broken into sales
specialist teams, focusing on specific industry and consumer sites
where we believe that we have the strongest sales opportunities. We
are seeking to fill positions in advertising sales, lead and list
sales, national account sales, professional sales, sales and
marketing management
o Public Relations. We plan to launch an aggressive public relations
campaign geared at real estate business and technology writers and
consumer publications specializing in real estate and personal
finance. Press releases and promotional programs will be issued and
press conferences will be held in order to expand coverage of our
activities. In addition, management will seek opportunities to
participate in Internet and real estate industry forums.
o Viral Marketing. We expect that many of our Web site users may
themselves be part of one of the 40 major business groups we have
identified with an interest in reaching consumers during the period
six months before or after a real estate transaction. We will enable
those users to purchase local and regional advertising sponsorships
online, without leaving our Web site, on a fully automated basis,
and will encourage those users to provide a link to our Web site on
any Web sites they may maintain, again on a fully automated basis.
o Foster MonsterDaata Community Affinity. We plan to develop an
affinity program with strategic partners to provide free and/or
discounted products and services for our users.
Major Customers
We provide licensed, custom applications or co-branded content to the following
customers:
o Cendant's move.com - a relocation, real estate, and home-related
services Internet portal. Cendant is the franchisor of three of the
five leading real estate franchises in the country, Century 21,
Coldwell Banker and ERA;
o Homestore.com's REALTOR.com - currently the country's leading real
estate listing Web site with 1.3 million residential listings;
o iOwn.com and MortgageIT.com - two leading Internet mortgage and real
estate listing portals;
o Network Communications, (ncinfo.net) - the largest publisher and
provider of printed and online real estate advertising in North
America;
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o Signonsandiego.com - a San Diego Tribune site, offering San Diego's
most comprehensive online community with seven million monthly page
views;
o CityNews.com - a City News, Inc. company offering free online
classifieds generating over seven million monthly page views;
o Thomson Interactive Media (www.tim.com) - part of Thomson
Newspapers, one of the main operating units of The Thomson
Corporation, one of the world's leading information companies; and
o six regional real estate MLSs, including the MLS of Long Island, NY
serving over 12,000 customers, the Greater New Jersey MLS, serving
5,000 members, and Metro Listing Service in Atlanta, serving over
11,000 users.
Our customer base is diverse enough that we would expect the loss of any one of
our major client relationships to not by itself have a material adverse effect
on our business.
Our Proprietary Databases
With over 61,000 communities under coverage, we believe that we are the nation's
largest and most sophisticated online, total solution, information system
covering real estate property and transaction due diligence information. Our
proprietary database of key ownership, sales and neighborhood information is the
product of over seven years of our research and development efforts. In
combination with other databases which we have developed or licensed the right
to use, we cover over 90% of U.S. households with approximately 30 million real
estate transactions and nearly 90 million property ownership records, as well as
neighborhood, crime, demographic, lifestyle, risk hazard, and school information
for the entire Unites States.
We have developed a robust data collection and proprietary confirmation system
supported by our trained research staff and our proven computer and
communications hardware and software systems. Many of our researchers have prior
experience in the residential real estate, fact checking, and data analysis
industries. We currently provide selected data coverage for all major property
types, including residential, commercial, office, industrial, retail, specialty,
multi-family, hotel/motel and land. These property types are further categorized
by nearly 150 specific use codes. Our software allows users to search the
database efficiently and quickly and to view specific detailed and comprehensive
data coverage of property information in all covered markets.
We also have developed expertise in the transcription and standardization of
data from microfilms of non-standardized deeds, ownership records, assessment
files, and other public records from thousands of jurisdictions nationally. We
can collect disparate data carried in multiple source hard copy and electronic
formats and convert them into a single, standardized format, and much of the
data conversion work we do follows rules and procedures we have developed for
our proprietary use. Further, we have developed our own in-house capabilities to
display data sets geographically, as points or areas on a map.
Competition
The market for Internet real estate data services is relatively new, intensely
competitive and rapidly changing. In the on-line real estate industry, the
principal competitive factors we have identified are:
o Quality and depth of the underlying databases;
o Proprietary methodologies, databases and technical resources;
o The usefulness of the data and reports that can be generated;
o Effectiveness of the provider's marketing and sales efforts;
o Customer service and support;
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o Compatibility with key customer's existing information systems;
o Reputation for reliability;
o Price;
o Timeliness; and
o Brand loyalty.
We compete directly and indirectly for customers and content providers with the
following categories of companies:
o Online services or Web sites targeted to real estate brokers, buyers
and sellers of real estate properties, insurance companies, mortgage
brokers and lenders, such as eNeighborhoods.com, Homefair.com
(recently purchased by Homestore.com), SmartHomeBuy.com,
NearMyHome.com, TheSchoolReport.com, Public Priority Systems (School
Match), 2001Beyond.com, CAP Index (Crime Check), Claritas, Inc.,
National Decision Systems, AMSHomefinder.com, HomePriceCheck.com,
HomeGain.com, RealEstate.com, Homes.com, Homestore.com,
HomeSeekers.com, Microsoft's Home Advisor and numerous specialized
sites with limited coverage and local sites.
o Public record providers such as Experian, Acxiom DataQuick, Factual
Data Corp., Baca Landata, Vista Information Solutions and
TransAmerica Intellitech.
We believe that our national comprehensive coverage, the broad range of our
integrated real estate data products, and the structure of our database-to-Web
content delivery system provide us with a competitive advantage in the
marketplace. However, many of our existing competitors, focusing on niche areas
such as school, public risk hazards and other specific subjects, as well as a
number of potential new competitors, have longer operating histories in the
Internet market, greater name recognition, larger customer bases, greater user
traffic and significantly greater financial, technical and marketing resources.
In order to gain market acceptance, we may elect to provide products at reduced
prices or at no cost. The competitors may be able to undertake more extensive
marketing campaigns, adopt more aggressive pricing policies, make more
attractive offers to potential employees, subscribers, distribution partners and
content providers and may be able to respond more quickly to new or emerging
technologies and changes in Internet user requirements.
We have identified the following potential competitive advantages of our product
offerings and Web site from which both real estate professionals and consumers
can possibly benefit:
o more precision in searching data for specific neighborhoods (rather
than simply for ZIP codes or metropolitan areas) creating a more
satisfactory and relevant user experience;
o full national or more expansive coverage of many of our available
datasets;
o timely data for the current year, as well as projections for many
datasets indicating future trends;
o visual presentations and neighborhood mapping; and
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o property valuation data.
Our Content Providers and Suppliers
Besides content which we develop ourselves, our principal supply of raw data
which we then process and integrate comes from a variety of content partners,
public record databases and deed and mortgage recordings. As we have expanded
our business over the Internet, our content supply sources have diversified to
include national demographic, culture, community, crime and school data.
Other important suppliers include:
o Applied Geographic Systems, Inc., one of the leading providers of
demographic, crime and neighborhood profile data;
o International Data Management, a value-added reseller of Lexis-Nexis
real property data with facilities in the Philippines;
o 2001 Beyond, Inc., a leading provider of public, private, parochial,
charter and magnet school data; and
o Vista Information Solutions, a leading provider of environmental and
property data reports.
Protection of Our Intellectual Property
We rely on a combination of copyrights, trademarks, trade secret laws and
contractual arrangements to protect our intellectual property rights. We do not
own or license any patents.
With respect to our databases, copyright protection is available for the
originality and creativity we use in the selection and arrangement of the data
included therein and we have obtained copyright registrations from the United
States Copyright Office for some of our databases. Copyright protection does
not, however, extend to the facts included in any of the databases.
The proprietary applications we use in connection with the compilation of our
databases are also protected by copyrights we own. Copyrights in our software
protect the source code and "look and feel" of the program from plagiarism.
Nevertheless, other programs which could perform the same functions can exist
without violating our copyrights.
We obtain some of the raw data used to compile our databases through license
agreements with third parties such as private commercial data providers and
governmental or quasi-governmental agencies. These license agreements typically
permit us to resell or re-license the information as part of a larger database.
To the extent any of these agreements impose restrictions upon resale, we will,
in turn, impose such restrictions upon our customers through contracts and the
terms of our Web site User Agreement.
We believe that our proprietary know-how in the cleanup, integration, and
display of disparate non-standardized data sets, and the technical and creative
skills of our personnel and principals, are critical factors in establishing and
maintaining our business. Therefore, we enter into confidentiality agreements
with our key employees and consultants, and seek to control access to and
distribution of our proprietary information. There can be no assurance that
these precautions will prevent misappropriation, infringement or other
violations of our intellectual property. It is also possible that third parties
who are not bound to any agreements with us will copy or otherwise use the
content on our Web sites without authorization.
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We use and have registered with Network Solutions, Inc., the following names as
Web site addresses:
o MonsterDaata.com
o Big-Decisions-Made-Easy.com
o One-Stop-Daata-Shop.com
o Make-My-Daata.com
o Neighborhood-Place.com
o Relocation-Place.com
o Personal-Private-Eye.com
At present, all our Web site addresses automatically direct the user to our main
Web site at MonsterDaata.com. In the future, we may decide to use our other Web
site addresses for specialized Web sites, powered by our servers.
Applications have been filed in the U.S. Patent and Trademark Office to register
our rights in certain trademarks, namely, DAATA SUPERSTORE, MAKE MY DAATA,
NEIGHBORHOOD PLACE, PERSONAL PRIVATE EYE, and RELOCATION PLACE. We are preparing
to file for registration of the trademark MONSTERDAATA.COM and our slogan
"Information that really hits home" in a distinctive logo form. No assurance can
be given regarding our ability to obtain registrations for the trademarks that
are the subject of the applications we have filed (or are intending to file),
and, even if we are successful in obtaining trademark registrations, there can
be no assurance that our rights to these trademarks will be free from
challenges.
Governmental Regulations Affecting our Business
Our operations are not currently subject to direct regulation by any
governmental agency in the United States beyond the typical regulations
applicable to businesses generally. A number of legislative and regulatory
proposals under consideration by federal, state, local and foreign governmental
organizations may lead to laws or regulations concerning various aspects of the
Internet, including:
o on-line content;
o user privacy;
o taxation;
o access charges; and
o jurisdiction.
The adoption of new laws or the unfavorable application of existing laws may
decrease the use of the Internet, which would stifle our growth and decrease
anticipated demand for our services. New laws or changes in the application of
existing laws could also increase our cost of doing business or otherwise have
an adverse effect on our business and growth strategy. Such laws may address one
or more of the following:
o On-line Content and User Privacy. The growth in on-line commerce
could result in more stringent consumer protection laws and
regulations covering such topics as permissible on-line content and
user privacy, including the collection, use, retention and
transmission of personal
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information provided by on-line users. Such consumer protection laws
could result in substantial compliance costs and could interfere
with the conduct and growth of our business.
o Taxation. The tax treatment of the Internet and electronic commerce
is currently unsettled. A number of proposals have been made that
could impose taxes on the sale of goods and services and certain
other Internet activities. Previously, the Internet Tax Information
Act was signed into law placing a three-year moratorium on new state
and local taxes on Internet commerce. This moratorium is expected to
end on October 21, 2001. Nonetheless, we cannot assure you that
future laws imposing taxes or other regulations would not
substantially impair the growth of our business and our financial
condition.
o Access Charges. The Federal Communications Commission recently
characterized dial-up Internet traffic bound for Internet service
providers as jurisdictionally mixed but largely interstate in
nature. However, the Federal Communications Commission has made it
clear that its position does not affect its long-standing rule that
Internet and other information services are exempt from interstate
access charges, and it does not change the manner in which consumers
obtain and pay for access to the Internet, nor does it transform the
nature of traffic routed through Internet service providers. Certain
local telephone carriers claim that the increasing popularity of the
Internet has burdened the existing telecommunications infrastructure
and that many areas with high Internet use are experiencing
interruptions in telephone service. These carriers have petitioned
the Federal Communications Commission to impose access fees on
Internet service providers, but not consumers. If these access fees
are imposed on the Internet service providers, the cost of
communicating on the Internet could increase, which could decrease
demand for our developing Internet services.
o Jurisdiction. Our on-line services are available over the Internet
throughout the country, and as a result, we expect to sell to
numerous consumers resident in multiple states and even potentially
outside the United States. Such jurisdictions may claim in the
future that we are required to qualify to do business as a foreign
corporation in their states or obtain other qualifications in each
such states or countries. Our failure in the future to qualify as a
foreign corporation in a jurisdiction where we may be required to do
so could subject us to taxes and penalties for the failure to so
qualify, and could limit our ability to conduct litigation to
enforce our rights and protect our intellectual property in such
states. Our Internet operations could also provide a jurisdictional
basis for lawsuits against us in distant or inconvenient forums, and
it could be difficult or costly for us to defend ourselves in any
such lawsuits.
Our collection of data from primary sources is often subject to Federal Freedom
of Information Act laws and regulations and local, county and state
interpretations of that Act. A change in these laws, regulations or
interpretations, or additional laws and regulations, could have an adverse
effect on our business by limiting our ability to collect certain of our data
sets.
Certain Risk Factors Affecting Our Business
An investment in our stock involves a high degree of risk. The achievement of
our business objectives is subject to a number of market and other factors
beyond our control, and our future prospects are speculative.
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If we make any forward-looking statements or assumptions concerning our future
business activities, revenues, profits or financial condition, or if we make any
forward-looking statements concerning our industry, the economy, technological
changes or our competitors, you should recognize that our predictions and
assumptions are subject to a great deal of uncertainty. Actual results could
differ materially from our predictions and assumptions, particularly given the
highly speculative nature of our business and that of other Internet-related
businesses in our industry. If our predictions prove to be too optimistic, the
value of our business could be adversely impacted and our shareholders will
probably lose money.
Our shareholders could find that there is nobody willing to purchase their
shares when they want to sell, and it is possible that our shareholders could
lose their entire investment in our stock.
Our stock should only be purchased by speculators who understand the high level
of risk that a purchase of our stock entails and who are willing and able if
necessary to hold our stock for an extended period of time, or indefinitely, and
to risk the loss of their entire investment in our stock. If you are a suitable
investor for MonsterDaata.com, you should fully understand the following
material risk factors:
We have experienced significant net losses in the past, and currently need to
raise additional funds.
We have incurred significant net losses since transitioning to our Internet
focused business plan in 1998. As of December 31, 1999, we had an accumulated
deficit of approximately $5.7 million. We have incurred substantial costs to
expand distribution, develop new services and products, and create, introduce
and enhance our Web site. We expect operating losses and negative cash flows to
continue for the foreseeable future as we continue to incur significant
expenses. As a result, we will need future financings to fund our operations and
the failure to raise additional funds may prevent us from implementing our
business strategy. If revenues grow more slowly than anticipated, or if
operating expenses exceed expectations or cannot be adjusted in response to
slower revenue growth, it could have a material adverse effect on our business.
We need to raise additional funds in order to conduct our operations and take
advantage of acquisition and expansion opportunities. Our liquidity and capital
requirements will depend on numerous factors, including the success of our new
product offerings, the growth of our Internet-related revenues, and competing
technological and market developments. We will be required to raise additional
funds through public or private financing, strategic relationships or other
arrangements, particularly if and when our acquisition strategy matures. We
cannot assure you that such additional funding, if needed, will be available on
terms acceptable to us, or at all.
Any additional equity financing may be on terms that dilute the value of our
company for our existing shareholders. In addition, new shares that are issued
may have rights, preferences or privileges senior to those of existing
shareholders. Debt financing, if available, may involve restrictive covenants
which limit our operating flexibility. Strategic arrangements, if necessary, may
require us to relinquish our rights to some of our intellectual property or some
business opportunities.
As discussed in Note 10 to our financial statements for the fiscal year ended
December 31, 1999, we incurred a net loss of $2,829,346 during the year ended
December 31, 1999, and, as of that date, our current liabilities exceeded our
current assets by $923,046, our total liabilities exceeded our total assets by
$613,215, and there are existing uncertain conditions that we face relative to
capital raising
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activities. Accordingly, our auditors have included in their report on our
financial statements for the fiscal year ended December 31, 1999, a
qualification which raises doubts as to our ability to continue as a going
concern.
If the Internet proves not to be a viable commercial marketplace, it could have
a material adverse effect on our business.
We expect a substantial portion of our future revenue to come from the continued
development of our products and services to be distributed over the Internet. We
began offering our services via the Internet in September 1998. During the
calendar year ended December 31, 1999, 86% of our revenues were derived from our
traditional non-Internet services and products, and only 14% were from products
and services distributed via the Internet. We intend to further increase our
reliance on the Internet for delivery of our services and products. As a result,
future cash flows and future results of operations will continue to rely
increasingly upon the use of information services and transaction support
products on the Internet.
However, the business use of the Internet is still in its infancy, and it is
possible that the Internet may not prove to be a viable commercial marketplace.
Known issues in this regard include inadequate development of Internet
infrastructure to date, competing technology, delays in the development of new
standards and protocols required to handle increased Internet activity, and the
possibility of significant government regulation (locally, nationally and
internationally). Moreover, concerns over the security of Internet transactions
and the privacy of users may inhibit the growth of the Internet, particularly as
a means of conducting commercial transactions. To the extent that our activities
involve the storage and transmission of proprietary information, such as credit
card numbers, security breaches could expose us to a risk of loss or litigation
and possible liability. We cannot assure you that contractual provisions
attempting to limit our liability in such areas will be adequately implemented
or enforceable, or that other parties will accept such contractual provisions as
part of our agreements.
We have not fully resolved some other critical issues concerning our use of the
Internet, including reliability, cost, ease of deployment, administration and
quality of service. This may affect our ability to maintain our business, expand
product marketing, improve communications and increase business efficiencies.
If we do not successfully develop new and enhanced Internet services and
products, our revenues could be adversely impacted.
Business on the Internet is characterized by:
o rapid technological change;
o frequent changes in user requirements and preferences;
o frequent new product and service introductions embodying new
processes and technologies; and
o evolving industry standards and practices that could render our
information delivery practices obsolete.
Our success will depend partly on our ability to improve our existing services,
develop new product offerings, including imaging and virtual tours, use Web
technology to enhance our existing product offerings, extend our market reach,
and respond to technological advances, emerging industry standards and
competitive offerings. We cannot assure you that we will be successful in these
endeavors.
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Evolving Internet technology and standards increase the risk that system
interruptions will occur. Our Internet operations are also vulnerable to
interruption by fire, power loss, telecommunications failure and other events
beyond our control. System interruptions that result in the unavailability of
our Web site, or slower response times for users, could reduce the number of
advertisements delivered, revenues earned from advertisers, as well as the
eReport and eLead fees we collect from consumers and businesses using our
database information products over the Internet. We have experienced periodic
system interruptions in the past and such interruptions could continue to occur
from time to time in the future.
Additionally, any substantial increase in traffic on our Web site could require
us to expand and adapt our network infrastructure. However, we cannot assure you
that we will be able to expand our network infrastructure on a timely basis to
meet any increased demands.
Intense competition may render our services and products uncompetitive or
obsolete, and we expect the competition to intensify even further.
The market for Internet data services is relatively new, intensely competitive
and rapidly evolving. Our Web services compete against a variety of firms that
provide information products through one or more media, including print,
broadcast, television and the Internet. Within our currently targeted niche of
real estate information products and the Internet, we compete with Homefair.com,
recently acquired by Homestore.com, SmartHomeBuy.com, eNeighborhoods.com,
NearMyHome.com, TheSchoolReport.com, Public Priority Systems (School Match),
2001Beyond.com, CAP Index (Crime Check), Claritas, Inc., National Decision
Systems, AMSHomefinder.com, HomePriceCheck.com, HomeGain.com, RealEstate.com,
Homes.com, Homestore.com, HomeSeekers.com, Microsoft's Home Advisor and numerous
specialized sites with limited coverage and local sites. We also compete with
Baca Landata, Experian, Acxiom, DataQuick, Vista Information Solutions and
TransAmerica Intellitech. While we provide a `total solution' content program,
many of these competitors offer one or more Internet sites with information
products similar to individual items we provide over the Internet; and many of
these competitors may have significantly greater financial resources than we do.
These financial resources could be deployed to more aggressively compete on the
Internet or through more traditional media, to our disadvantage, at any time.
We expect competition to persist and intensify. Competitors using other media to
deliver information products could adapt their businesses to include the
Internet as a medium for delivering their products. Competitors could develop or
offer services that provide significant performance, price, creative or other
advantages over those offered by us, and any competitor or group of competitors
could have a material adverse effect on our business.
The accuracy, availability and integrity of our data are critical to our
business.
A substantial portion of the raw data from which we develop our databases is
obtained from third parties, including public records offices and other
governmental sources. We use a variety of proprietary techniques to enhance the
content, applications and utility of the data. Our ability to attract and retain
customers and to generate revenues is highly dependent on customer confidence in
the comprehensiveness, accuracy and timeliness of our database. Establishing and
maintaining such comprehensiveness, accuracy and timeliness will require
substantial effort and resources. Although we disclaim financial responsibility
for inaccuracies in the data on our Web site, such disclaimers may not be
effective to shield us from all possible liability. Further, our
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business is based on establishing our reputation as a trustworthy and dependable
provider of information and applications, and allegations of unreliable or
outdated data, even if unfounded, could have a material adverse effect on our
business.
We also license and use data from third-party providers, but we cannot assure
you that our license agreements will continue to allow us to do so, nor can we
assure you that, in cases where these providers can no longer serve us,
alternative sources of comparable data will be available at comparable cost.
Many of our licensing and other agreements are short-term and expose us to
termination and non-renewal risks. We are dependent on our relationships with
many of these contracting parties.
We are currently a party to a limited number of revenue producing licensing
agreements or comparable agreements with third parties. One of these agreements
terminates in March 2000, three expire on or before August 2000, three expire on
or before March 2001, two expire on or before March 2002, and two expire on or
before June 2003. About half of these agreements are currently with MLSs, rather
than Web site operators or other Internet related businesses, and the agreements
with MLSs currently account for a significant majority of our revenues. In
general, the expiring contracts will automatically renew for successive terms if
we do not give or receive a notice of non-renewal within a specified period
ranging from 30 days to six months before the scheduled termination date. While
we believe that such relatively short-term agreements are typical in our
industry, our ability to maintain and grow our business depends significantly
upon our ability to enter into and maintain licensing and comparable
relationships. There is no guarantee that we will be able to renew or extend
these agreements upon their expiration at all or on terms as favorable to us as
we currently enjoy. In fact, we expect our recurring revenues from existing
agreements with MLSs to decline as these agreements expire and we make our data
available to more users, including MLSs and their clients, at substantially
lower costs over the Internet.
We are party to a licensing agreement with Homestore.com, under which our data
is currently made available on the REALTOR.com Web site, a Web site operated by
Homestore.com. The agreement is scheduled to terminate in July 2000, and will
automatically renew for a two-year period unless a written notice of termination
is received in January 2000. As of March 1, 2000, we had not received any such
notice of termination, and accordingly the agreement was extended to July 2002
in accordance with its terms. Homestore.com recently acquired Homebuyer's Fair,
Inc., owners of Homefair.com, which is one of our direct competitors. There can
be no assurance that Homestore.com will not seek to renegotiate the agreement
they have with us. On a licensed basis that identifies MonsterDaata.com as the
source of the data, we provide data to the REALTOR.com Web site that currently
powers their popular "Find a Neighborhood" feature. According to Homestore.com,
approximately one-fourth of all visitors to the REALTOR.com Web site click
through to our licensed data in the "Find a Neighborhood" section. The exposure
to Internet users that we gain through our relationships with key Web site
operators like Homestore.com is important and material to our Internet
transition strategy.
We need to develop further strategic alliances with others.
Our business strategy is dependent on strategic alliances with other Internet
companies. We have signed agreements and are currently in negotiation for more
co-branding ventures and other strategic opportunities; however, we do not have
any present commitment or agreement with respect to any material strategic
alliances or related efforts. Any future strategic alliances or related efforts
will be accompanied by risks such as:
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o the difficulty of identifying appropriate joint venture parties or
opportunities;
o the time our senior management must spend negotiating agreements and
monitoring joint venture activities;
o the possibility that some or all of our Internet joint venture
activities never become profitable;
o the possibility that our management may fail to capitalize on the
growth opportunities presented by some or all of our joint ventures;
and
o the possible future insolvency of Internet companies we select as
our Internet joint venturers.
No assurance can be given that we will be successful in overcoming these risks
or any other problems encountered with such strategic alliances or related
efforts. In addition, there can be no assurance that significant spending on
these relationships will increase our revenues substantially or at all, or that
online companies with which we may have a strategic alliance will be able to
deliver a sufficient number of customer visits or page views to make the
relationships profitable.
We need to retain and recruit key managers, employees and outsource vendors, and
to manage our growth effectively.
Our success depends heavily on the continued service of our executive officers
and our managers. Should one or more of these individuals leave before
acceptable replacements are found, that could have a material adverse effect on
our business. We do not presently have employment agreements or maintain key-man
life insurance on any of our key executives or employees, although we intend to
complete employment agreements with our executive officers during the second
quarter of 2000.
We believe that further expansion of our operations will be required in order
for us to address potential market opportunities and produce meaningful profits.
Such expansion may place a significant strain on our management, operations and
financial resources. An increase in the number of our employees, our market
penetration and our product and service development activities would result in
increased responsibility for our management. Our management will be required to
successfully maintain relationships with various data and advertising customers,
other Internet sites and services, Internet service providers and other third
parties and to maintain control over our strategic direction in a rapidly
changing environment. There can be no assurance that our current personnel,
systems, procedures and controls will be adequate to support our future
operations, that management will be able to identify, hire, train, motivate or
manage required personnel or that management will be able to successfully
identify and exploit existing and potential market opportunities. Our failure to
effectively manage growth and address these growth related issues could have a
material adverse effect on our business.
We also depend on outsource vendors, including the services of a data entry and
data conversion facility in the Philippines, a CD-ROM software company, and
Internet site development and hosting companies. Should the services of those
facilities become unavailable or unreasonably priced, we may experience an
interruption in some of our business activities until we identify other suitable
outsource vendors.
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Our intellectual property rights may be difficult to protect and we may find
that we infringe on the intellectual property rights of others.
It is uncertain how intellectual property laws will apply to the Internet, and
we cannot assure you that existing laws will provide adequate protection for our
proprietary database offerings or our Internet domain names. Our success and
ability to compete partly depends on the protection of our proprietary database
offerings on the Internet and on the goodwill associated with our trademarks,
trade names, and Internet domain names.
We rely on copyright laws to protect the original content that we develop for
the Internet, and we rely on contract restrictions and copyright laws to protect
the proprietary technologies that we have developed to manage and improve our
Web site and database offerings. We cannot assure you, however, that these laws
will sufficiently protect us, that others will not develop technologies similar
or superior ours, or that others will not obtain or use our technologies without
our authorization. With respect to our databases, copyright protection is
available for the originality and creativity in the selection and arrangement of
the data included therein and we have obtained copyright registrations from the
United States Copyright Office for some of our databases. Copyright protection
does not, however, extend to the facts included in any of the databases.
In addition, we rely on certain technology licensed from others, and we may be
required to license additional technology, for use in managing our Web site and
providing related services to users and advertising customers. Our ability to
generate revenues from Internet commerce may also depend on data encryption and
authentication technologies that we may be required to license from others. We
cannot assure you that these third party technology licenses will be available
to us on acceptable commercial terms, or at all. The inability to enter into and
maintain any of these technology licenses could have a material adverse effect
on our business.
We also cannot assure you that others will not bring claims of copyright or
trademark infringement against us or claim that our use of certain technologies
or data violates the intellectual property rights of others. Any claims of
infringement could be time consuming to defend, result in costly litigation,
divert management attention, require us to enter into costly royalty or
licensing arrangements or prevent us from using important technologies or data.
Any of these could have a material adverse effect on our business. If we cease
to use certain intellectual property as a result of third party claims, we may
not be able to develop or acquire alternative technologies or obtain such
licenses on commercially acceptable terms.
We have not yet obtained registrations for any of our trademarks, including our
name MonsterDaata.com. In view of the number of other users of the word
"monster" in their names or trademarks, including companies doing business on
the Internet, there can be no assurance that our attempt to register the mark
"MonsterDaata.com" will be successful or that our use of this mark will not be
challenged by another user. Although we believe that we have a reasonable
position in favor of our right to use and register the mark, defending such
rights may be costly and an adverse determination or settlement could require
that we change our name.
We have a limited number of principal customers.
Our business could be materially and adversely affected if we lost a number of
our large MLS customers, or failed to connect them to our Web services before we
more fully complete the transition of our business to the Internet. Our top five
MLS customers accounted for more than 80% of our total revenues in 1998. In
1999, our top six MLS customers accounted for more than 80% of our total
revenues.
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If we are unable to identify suitable acquisition targets or if we do not
successfully integrate acquired businesses with our business, it could have a
material adverse effect on our business.
We intend to explore the possible acquisition of businesses complementary to
ours in order to expand our services, diversify our business and participate in
the consolidation trend among Internet information products providers; however,
at this time we have not identified any material acquisition candidates that
have expressed an interest in a business combination with us beyond the
preliminary negotiations stage, and we do not have any present commitment or
agreement with respect to any material acquisitions. We cannot assure you that
we will be able to make any acquisitions in the future on favorable terms or
that such acquisitions will ultimately prove advantageous to us. We may
encounter substantial costs, delays or other problems as we integrate any
acquisitions. Such costs could include severance payments to employees of
acquired companies, systems integration costs, restructuring charges and other
expenses associated with a change of control, as well as non-recurring
acquisition costs including accounting, legal and investment banking fees and
transaction-related obligations.
Increased competition for the finite number of suitable acquisition candidates
may develop in our targeted industries, in which case there may be fewer
acquisition opportunities available to us and higher acquisition costs for the
opportunities that are available. Moreover, it is possible that neither our
management nor management of any of the acquired companies will have the
necessary skills to manage a company with substantial internal growth
opportunities and plans for further growth through acquisitions or strategic
alliances. We may seek to recruit additional managers to supplement the
management of the acquired companies, but we may not have the ability to recruit
additional managers with the skills necessary to enhance the management of the
acquired companies.
Changes in government regulation could decrease our revenues and increase our
costs.
Laws and regulations directly applicable to Internet communications, commerce
and advertising are becoming more prevalent, and new laws and regulations are
under consideration by the United States Congress and state legislatures. This
legislation could dampen the growth in use of the Web generally and decrease the
acceptance of the Web as a communications, commercial and advertising medium.
The governments of other states or foreign countries might attempt to regulate
our transmissions or levy sales or other taxes relating to our activities. The
laws governing the Internet, however, remain largely unsettled, even in areas
where there has been some legislative action. It may take years to determine
whether and how existing laws such as those governing intellectual property,
privacy, libel and taxation apply to the Internet and Internet advertising. In
addition, the growth and development of the market for Internet commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on companies conducting
business over the Internet. Our business, results of operations and financial
condition could be adversely affected by the adoption or modification of laws or
regulations relating to the Internet.
Changes in laws relating to privacy of Internet users and other individuals
could harm our business.
The US. federal and various state governments have recently proposed limitations
on the collection and use of information regarding Internet users. Since many of
the limitations are still in the proposal stage, we cannot yet determine the
full impact of these regulations on our business.
In addition, growing concern about privacy and the collection, distribution and
use of information about
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individuals has led to self-regulation of such practices by the direct market
industry and to increased federal and state regulation. We are also subject to
various federal and state regulations concerning the collection, distribution
and use of information regarding individuals. Although our compliance with the
applicable federal and state regulations has not had a material adverse effect
on us, we cannot assure you that more burdensome federal or state laws or
regulations (including antitrust and consumer privacy laws) will not be enacted
or applied to us or our clients, which may have a material adverse effect on our
business, financial condition and results of operations.
Changing requirements for fair information collection practices and potentially
heightened scrutiny of our products and services could require adverse changes
in the way we conduct or plan to conduct our business.
There has been public debate about how fair information collection practices
should be formulated for the online and offline collection, distribution and use
of information about a consumer. Some of the discussion has focused on the fair
information collection practices that should apply when information about an
individual that is collected in the offline environment is associated with
information that is collected over the Internet about that individual. As a
consequence of governmental legislation or regulation or evolving standards of
fair information collection practices, we may be required to make changes to our
products or services in ways that could diminish the effectiveness of the
product or service or its attractiveness to potential customers, which could
materially and adversely affect our business, financial condition or results of
operations.
Adoption of new laws and government regulations relating to the Internet or
Internet domain names could harm our business.
Due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet or other online services. These laws would cover
issues such as user privacy, freedom of expression, content, copyrights,
distribution, quality and pricing of products and services, taxation,
advertising, intellectual property rights, information security and the
convergence of traditional communication services with Internet communications.
Furthermore, the growth and development of the market for online commerce may
prompt more stringent consumer protection laws that may impose additional
burdens on those companies conducting business online. The adoption of any
additional laws or regulations may decrease the growth of the Internet or other
online services, which could, in turn, decrease the demand for our products and
services and increase our cost of doing business, or otherwise have an adverse
effect on our business.
Moreover, the applicability to the Internet and other online services of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes and personal privacy is uncertain and may take
years to resolve. In addition, as we begin to sell to numerous consumers
residing in such states and foreign countries, such jurisdictions may claim that
we are required to qualify to do business as a foreign corporation in each such
state and foreign country. Our failure to qualify as a foreign corporation in a
jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to qualify. Any such new legislation or regulation,
the application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could have a material
adverse effect on our business.
In addition, we currently hold various Web domain names, including
www.MonsterDaata.com relating to our brand and sites. The acquisition and
maintenance of domain names generally is regulated by governmental
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agencies and their designees. For example, in the United States, the National
Science Foundation has appointed Network Solutions, Inc. as a registrar for the
".com," ".net" and ".org" generic top-level domains and our arrangements for our
important domain names with Network Solutions, are believed to be satisfactory
and secure. However, the regulation of domain names in the United States and in
foreign countries is subject to change. Governing bodies may establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, there can be no
assurance that we will be able to acquire or maintain relevant domain names in
all countries in which we may wish to conduct our business.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. We,
therefore, may be unable to prevent third parties from acquiring domain names
that are similar to, or infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights. Any such inability could have a
material adverse effect on our business.
Shares eligible for future sale could reduce the market price of our stock.
As of December 31, 1999, 7,660,948 shares of our common stock were issued and
outstanding. Of these shares, 6,385,175 are "restricted securities" which under
certain circumstances may be sold in compliance with Rule 144 or other
exemptions under the Securities Act. Assuming that Rule 144 is available, we
believe that, subject to certain volume limitations and "manner of sale"
requirements, 6,000,000 of these "restricted securities" would become eligible
for resale in April 2000. Of these 6,000,000 shares, 4,657,719 are held by our
officers and directors and sales will be subject to the volume limitations
contained in Rule 144.
We also have 1,320,921 shares of common stock subject to options outstanding as
of December 31, 1999 under our option plan (exercisable at prices ranging from
$1.00 to $4.00 per share). Of these options, 825,000 have been granted to
directors and executive officers, and 495,921 have been granted to other
employees and consultants. The common stock that is delivered when options are
exercised by directors and executive officers will be "restricted securities";
however, when options are exercised by other employees or consultants, the
common stock we deliver upon exercise will be freely tradable. Most of the
options we have granted under our option plan are subject to vesting over a
three year period, and prior to vesting the options are not exercisable. Of the
232,348 outstanding options that are currently exercisable, 165,000 are held by
directors or executive officers and 67,348 are held by other employees or
consultants.
On March 31, 1999, in consideration for the modification of the exercise price
of a previously issued warrant and the completion of a $223,000 capital
contribution by our former stockholders, we issued to Ocean Strategic Holdings
Limited a warrant to purchase 500,000 shares of our common stock at an exercise
price of $3.00 per share. The warrant expires on March 31, 2004, and is
exercisable as of March 31, 2000. Shares of our common stock issuable upon the
exercise of this warrant will be "restricted securities."
No prediction can be made regarding the effect that the availability of these
"restricted securities" will have on the market prices of our shares from time
to time. The possibility that substantial amounts of our shares may be sold in
the public market may adversely effect the prevailing market prices for shares
and could impair our ability to raise capital in the future by selling new
shares.
During the last two months of 1999, we issued a total of 1,561.23 shares of
preferred stock and related warrants to purchase shares of our common stock at a
warrant exercise price of $3.75 per share, subject to adjustment. As of December
31, 1999, warrants to purchase up to 193,894 shares of our common stock that
were issued in
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connection with the sale of our preferred stock were outstanding. Each share of
our outstanding preferred stock is convertible into 450 shares of common stock.
In accordance with our obligations to the purchasers of these shares, we
undertook to file a registration statement with the SEC to make the common
shares issuable upon conversion of the preferred stock and upon exercise of the
warrants eligible for public resale.
An investment in our common stock may be very illiquid, and we have never paid
cash dividends.
Although our shares trade on the Over-The-Counter Bulletin Board (the "OTC
Bulletin Board") of the National Association of Securities Dealers ("NASD"),
there is currently no broadly followed "established trading market" for our
shares, and we cannot assure you that any such market will ever develop or be
maintained. The absence of an active trading market would reduce the liquidity
of an investment in our shares.
To the extent that brokerage firms act as market makers for our shares on the
OTC Bulletin Board, they may be a dominating influence in any market that might
develop, and the degree of participation by such firms may significantly affect
the price and liquidity of our shares. These firms may discontinue their market
making activities at any time. The prices at which our shares are traded in the
market will be determined by these firms and by the purchasers and sellers of
our shares, but such prices may not necessarily relate to our assets, book
value, results of operations or other established and quantifiable criteria of
value.
Any market price for our shares is likely to be very volatile, and numerous
factors beyond our control may have a significant adverse effect on prices.
We have never paid cash dividends on our capital stock and do not anticipate
paying any cash dividends for the foreseeable future.
The application of the "penny stock" rules could adversely affect the market for
our stock.
The Securities and Exchange Act of 1934 requires additional disclosure relating
to the market for "penny stocks." A penny stock is generally defined to be any
equity security not listed on NASDAQ or a national securities exchange that has
a market price of less than $5.00 per share, subject to certain exceptions.
Among these exceptions are shares issued by companies that have:
o net tangible assets of at least $2 million, if the issuer has been
in continuous operation for three years;
o net tangible assets of at least $5 million, if the issuer has been
in continuous operation for less than three years; or
o average annual revenue of at least $6 million for each of the last
three years.
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We do not currently meet the requirements of these exceptions and, therefore,
our shares would be deemed penny stocks for purposes of the Exchange Act if and
at any time while our common stock trades below $5.00 per share. In such case,
trading in our shares would be regulated pursuant to Rules 15-g-1 through 15-g-6
and 15-g-9 of the Exchange Act. Under these rules, brokers or dealers
recommending our shares to prospective buyers would be required, unless an
exemption is available, to:
o deliver a lengthy disclosure statement in a form designated by the
SEC relating to the penny stock market to any potential buyers, and
obtain a written acknowledgement from each buyer that such
disclosure statement has been received by the buyer prior to any
transaction involving our shares;
o provide detailed written disclosure to buyers of current price
quotations for our shares, and of any sales commissions or other
compensation payable to any broker or dealer, or any other related
person, involved in the transaction;
o send monthly statements to buyers disclosing updated price
information for any penny stocks held in their accounts, and these
monthly statements must include specified information on the limited
market for penny stocks.
In addition, if we are subject to the penny stock rules, all brokers or dealers
involved in a transaction in which our shares are sold to any buyer, other than
an established customer or "accredited investor," must make a special written
determination that our shares would be a suitable investment for the buyer, and
the brokers or dealers must receive the buyer's written agreement to purchase
our shares, as well as the buyer's written acknowledgement that the suitability
determination made by the broker or dealer accurately reflects the buyer's
financial situation, investment experience and investment objectives, prior to
completing any transaction in our shares.
These Exchange Act rules may limit the ability or willingness of brokers and
other market participants to make a market in our shares and may limit the
ability of our shareholders to sell in the secondary market, through brokers,
dealers or otherwise. We also understand that many brokerage firms will
discourage their customers from trading in shares falling within the "penny
stock" definition due to the added regulatory and disclosure burdens imposed by
these Exchange Act rules.
The SEC from time to time may propose and implement even more stringent
regulatory or disclosure requirements on shares not listed on NASDAQ or on a
national securities exchange. The adoption of the proposed changes that may be
made in the future could have an adverse effect on the trading market for our
shares.
You may not be able to recover damages from our directors and officers for
actions taken by them not in your best interest.
Our certificate of incorporation includes provisions which eliminate the
personal liability of directors of our company to the extent permitted by
applicable law. As a result, stockholders may be unable to recover damages
against our directors for actions taken by them which constitute negligence or a
violation of certain of their fiduciary duties.
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We are controlled by our principal stockholders, and there are other reasons
that we may be unattractive to potential acquirors. Our principal stockholders
could also approve a sale of our entire company to a potential acquiror on terms
that you believe to be unattractive.
As of December 31, 1999, Mitchell Deutsch, together with his children, owned
about 40.9% of our outstanding common stock, and James Garfinkel, together with
his child, owned about 16.9% of our outstanding common stock. As a result,
Mitchell Deutsch, James Garfinkel and their families together are able to elect
a majority of our board of directors and otherwise continue to influence our
policies and any other matter requiring shareholder approval (including mergers,
consolidations and the sale of all or substantially all of our assets). They can
also, together or with others, prevent or cause a change in control in our
company.
We were recently engaged in discussions regarding a possible sale of the company
to a larger real estate related Web site operator, and we anticipate from time
to time in the future that similar inquiries could be received and entertained
by us or our principal stockholders; however, these inquiries or discussions may
never progress beyond preliminary stages (and have not done so to date). On the
other hand, our stockholders should recognize that it is possible for the
principal stockholders of the company to accept an offer for the company at a
price below the price the company or its other stockholders would accept, and by
reason of the large number of shares controlled by our principal stockholders,
it is possible that the company (or at least a controlling interest in the
company) could be sold on terms that you may find to be unattractive. As a
general matter, as well, our principal stockholders could sell their shares (and
control of the company) without including our other shareholders in such
transaction (or giving them the opportunity to sell their shares on the same
terms).
Our certificate of incorporation authorizes the issuance of up to 10,000,000
shares of "blank check" preferred stock with designation, rights and preferences
as may be determined from time to time by our board of directors. Accordingly,
our board of directors is empowered, without stockholder approval, to issue a
new series of preferred stock with dividend, liquidation, conversion, voting or
other rights which could hamper the voting power of our common stockholders. The
issuance of a new series of preferred stock could be used in certain
circumstances as a method of discouraging, delaying or preventing a change in
control in our company. Although we do not presently intend to issue any
additional shares of preferred stock, we cannot assure you that we will not do
so in the future.
We are subject to Section 203 of the General Corporation Law of the State of
Delaware. Subject to certain exceptions, Section 203 prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder unless the proposed business combination was
approved by our board of directors before the stockholder became an interested
stockholder. In general, Section 203 defines an interested stockholder as any
shareholder directly or indirectly owning 15% or more of the outstanding voting
stock of a Delaware corporation. Section 203 could have the effect of
discouraging others from making tender offers for our shares, and also may have
the effect of preventing changes in our management.
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ITEM 2. DESCRIPTION OF PROPERTY
We lease office space at 115 Stevens Avenue Valhalla, NY 10595, under a five
year noncancelable lease expiring December 31, 2000. We pay property taxes,
insurance, and other related expenses to the leased properties. Our rent expense
was $91,908 and $87,575 for the years ended December 31, 1999 and 1998,
respectively. Additionally, we signed a lease for our New York City office this
year, which houses our sales, marketing, and Web development and Web site
management operations. The New York City lease expires June 30, 2004, and
provides for an annual aggregate rent of $37,178.
ITEM 3. 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
our business.
We are currently involved in litigation with a stockholder of Taconic involving
a note payable in the amount of $298,702. The outcome of this litigation cannot
be determined at this time. We have asserted affirmative defenses and
counterclaims in this litigation, and we believe that no additional material
liabilities will result from this suit. We have classified the note as currently
due in our 1999 financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
No matter was submitted to a vote of security holders through the solicitation
of proxies or otherwise during the fourth quarter of the fiscal year covered by
this report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock has traded on the OTC Bulletin Board since July 29, 1999, under
the symbol "MDDC." The range of high and low bid quotations for our common stock
since July 29, 1999 is shown below. Prices are inter-dealer quotations as
reported by the NASD and do not necessarily reflect retail markups, mark downs
or commissions.
Quarter ended: High Low
------------- ---- ---
December 31, 1999 $5.625 $2.875
September 30, 1999 $8.00 $3.00
Prior to July 29, 1999 N/A N/A
The last reported sale price of our common stock on the OTC Bulletin Board on
March 15, 2000 was $5.50 per share. At December 31, 1999, there were 7,660,948
shares of common stock outstanding, which were held by approximately 490
stockholders of record. We have not paid any cash dividends on our common stock
since our formation. The payment of dividends, if any, in the future, is within
the discretion of our board of directors and will depend on our earnings,
capital requirements, financial condition and other relevant factors. Our board
of directors does not presently intend to declare any dividends on our common
stock in the foreseeable future.
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We anticipate that all of our earnings and other resources, if any, will be
retained by us for investment in our business. We are not subject to any
material contractual restrictions limiting, or that are likely to limit, our
ability to pay dividends on our common stock.
We sold 781.12, 240.66 and 539.45 shares of Series A Cumulative Convertible
Preferred Shares (the "Series A Preferred Shares") on November 1, 1999, November
5, 1999 and November 30, 1999, respectively, and 473,670, 36,108 and 80,952
Common Stock Purchase warrants (the "Warrants") on November 1, 1999, November 5,
1999 and November 30, 1999, respectively. These securities were sold to
accredited investors in an offering exempt from registration under Rule 506 of
Regulation D under the Securities Act. The total offering price for these
securities was $1,472,000 and the proceeds less expenses were used for general
corporate purposes.
Each share of Series A Cumulative Convertible Preferred Stock is convertible, at
any time at the option of the holder thereof, into 450 validly issued, fully
paid and nonassessable shares of common stock.
Series A Preferred Stock holders are entitled to an adjustment in the conversion
ratio upon specified events, including a subdivision or combination of our
outstanding common stock, certain dividends and distributions, reclassifications
or recapitalization.
The Warrants may be exercised by paying the exercise price in cash or by
tendering warrants with a cash value equal to the exercise price, as determined
from the closing price of our common stock on the day of exercise as reported on
the OTC Bulletin Board or other national market system.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in this section 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 SEC, or press
releases or oral statements made by or with the approval of our authorized
executive officers.
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 SEC.
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Our financial condition and results for periods prior to April 2, 1999 are
almost entirely attributable to the historical results of TDC, which was deemed
the acquiror for accounting purposes in our business combination with TDC that
was completed on April 2, 1999.
RESULT OF OPERATIONS FOR FISCAL YEARS ENDED 1999 AND 1998
Our total revenues for the fiscal year ended December 31, 1999, were $2,488,434
compared to $1,966,713 for the fiscal year ended December 31, 1998. $874,218 of
revenues in 1999 were attributable to non-recurring income received in the
second quarter of 1999 on existing agreements and to the recognition of deferred
revenue on a previously prepaid licensing agreement. 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. 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 fiscal year 1999, these revenue sources provided only
14.1% of our total revenues. Our revenue from Internet related sources during
1998 was negligible.
Our cost of sales for the fiscal year ended December 31, 1999 was $753,013
compared to $1,182,158 for the fiscal year ended December 31, 1998. Our cost of
sales fell in 1999 primarily as a 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 improvements, and our increased Internet related revenues, our gross
margin averaged 70% of total revenues during the fiscal year ended December 31,
1999, compared to 40% of total revenues during the fiscal year ended December
31, 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 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.
Operating expenses increased from $2,352,893 for the fiscal year ended on
December 31, 1998 to $4,573,958 for the fiscal year ended December 31, 1999.
This increase is largely attributable to our Web site development expenses of
approximately $880,433 incurred during 1999. Prior to the commencement of the
transition of our business to the Internet, we had no Web site development
expenses and, accordingly, our Web site development expenses during the fiscal
year ended on December 31, 1998 were negligible. Our $880,433 of Web site
development expenses during 1999 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, primarily sales staff, also grew significantly in the 1999 fiscal
year over the 1998 fiscal year. A substantial portion of our payroll expense
increases are attributable to non-cash charges arising from increased
stock-based compensation provided to new hires and existing staff members. 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 net loss increased from $1,646,795 for the fiscal year ended December 31,
1998 to $2,829,346 for the fiscal year ended December 31, 1999. In other
income/expense, we recorded $215,000 of legal and accounting
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expenses incurred in connection with our acquisition of TDC in 1999. During
these periods for 1998 and 1999, our net loss per share increased from $0.27 to
$0.41.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, our cash balance was $619,546 and we had a working
capital deficit (excluding deferred revenue) of $474,904. For the fiscal year
ended December 31, 1999, our net cash used in operating activities was
$1,244,102. Of this $1,244,102, we used $215,000 for non-recurring merger and
acquisition expenses relating to our purchase of TDC.
Total cash flows from financing activities increased from $199,038 for the
fiscal year ended on December 31, 1998 to $2,111,013 for fiscal year ended
December 31, 1999.
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. We are seeking to raise up to $15 million of
additional capital from private investors and institutional money managers prior
to May, 2000, but there can be no assurance that we will be successful in doing
so. If we are not successful in raising any of this additional capital, our
current cash resources are expected to be sufficient to fund our current
operations only into the second quarter of 2000. We intend to accelerate our
development and infrastructure spending in the coming calendar quarters if we
have sufficient capital resources available to do so, however, our ability to do
so is highly uncertain at this time. Our independent auditors have noted in
their report on our 1999 financial statements that there are existing uncertain
conditions that we face relative to our capital raising activities, and these
conditions raise substantial doubt as to our ability to continue as a going
concern.
ITEM 7. FINANCIAL STATEMENTS
The information required by this item is incorporated by reference to the
Financial Statements set forth on pages F-1 through F-20 hereof.
ITEM 8. CHANGES IN ACCOUNTANTS
Effective June 15, 1999, Thomas P. Monahan, our independent auditor for the
fiscal year ended September 30, 1998, was dismissed by us as part of our
transition activities following the completion of our acquisition of TDC.
Effective June 15, 1999, our board of directors appointed Marcum & Kliegman LLP,
the independent auditors for TDC, as our new independent auditors.
31
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT DIRECTORS AND EXECUTIVE OFFICERS
Our Directors and Executive Officers
The following table sets forth certain information regarding the members of our
board of directors and our executive officers:
NAME AGE POSITION
---- --- --------
Mitchell F. Deutsch........ 43 Chief Executive Officer and President,
Chairman of the Board
John Evans................. 39 Chief Financial Officer and Executive
Vice-President - Corporate Development
Mark Nathan................ 34 Chief Technical Officer
Sarah Ferguson............. 41 Chief Sales Officer
James Garfinkel............ 42 Secretary, Treasurer, Vice President,
Director
Thomas Ingegneri........... 55 Director
MITCHELL DEUTSCH has been a member of our board of directors and our Chief
Executive Officer and President since April 2, 1999. He assumed these positions
in connection with our acquisition of TDC. Mr. Deutsch is also the Chairman of
the Board of Directors and the President and Chief Executive Officer of TDC,
positions which he held since 1992. Mr. Deutsch has developed and marketed
information products and services to the real estate industry since 1987, when
he was a partner in Real Estate Resources Corp. and responsible for new business
development, sales and marketing. In this position Mr. Deutsch sold database
products and services to the commercial and residential real estate markets. Mr.
Deutsch's background in technology and information began in 1980 at Sony Corp.
where as Advertising Director for the Consumer Audio Division, he introduced the
Sony Walkman and over 100 other consumer audio products to the U.S. market. In
1983 Mr. Deutsch wrote "Doing Business With the Japanese" published by New
American Library in five languages. Between 1983 and 1987, Mr. Deutsch
co-developed Warner Audio Publishing, a large books on tape company which was
subsequently sold to Warner Communications. Mr. Deutsch is a graduate of Rutgers
College, with a Bachelor of Arts degree in Communications.
JOHN EVANS was promoted November 30, 1999, to Chief Financial Officer and
Executive Vice President - Corporate Development. He previously served as our
Senior Vice President - Corporate Development, Finance and Mergers and
Acquisitions since April 1999. Prior to joining us, Mr. Evans was President of
Asia Media Inc., a management consulting firm founded in 1993 that supported
Asian and U.S. new media, broadcasting
32
<PAGE>
and cable communications companies with their expansion needs in areas that
included mergers, acquisitions, direct investments, financial planning, joint
ventures, licensing and royalty agreements, and strategic alliances. Clients
included NBC, China Online, and Landmark Communications. Prior to 1993, Mr.
Evans served as a Vice President for The Bank of New York. Mr. Evans is a
graduate of The University of Michigan with a bachelor of arts degree in
International Relations and English Literature. Mr. Evans is also a Strauss
Fellow and earned a masters degree in international banking, business and
finance from Columbia University's School of International and Public Affairs.
MARK NATHAN has been our Chief Technical Officer since March, 2000. From 1997
until joining us, he was Director of Professional Services for the Enterprise
Division of Apple, where he was responsible for overseeing the entire division's
technical and project staff for large scale e-commerce development projects.
Prior to Apple, Mr. Nathan served as a Technical Architect for NeXT Software
(1995 to 1997) where he was responsible for the initial launch of Disney.com and
the 3 subsequent launches. In his role as Technical Architect, Mr. Nathan
created re-usable frameworks for searching the Family.com databases, engineered,
implemented and deployed all intranet applications for Family.com and supervised
all editors, authors, production managers, and technology staff throughout the
lifespan of the project. From 1993 to 1995 he served as a Project Manager at SHL
Systemhouse where he built and managed a team of 14 developers on a Commercial
Accounting System throughout the two year life cycle for the Integrated
Commodity Trading System (ICTS) at Phibro Energy, a division of Salomon
Brothers, Inc. Mr. Nathan received his bachelor of arts degree in Electrical and
Computer Engineering at the University of Colorado, Boulder in 1991 and
completed masters of science coursework in Electrical and Computer Engineering
at the University of Colorado, Boulder through 1993, with an emphasis in Control
Systems, Software Engineering, Robotics and Geotechnical Engineering.
SARAH FERGUSON has been our Chief Sales Officer since March, 2000. Ms. Ferguson
was, from 1997 until joining us, Senior Vice President, Sales and Services for
Insurance Services Office, Inc., a $350 million provider of statistical,
actuarial, underwriting and claims information to the property/casualty
insurance industry, where she led the planning and direction of sales, service
and marketing operations for Internet/E-Commerce based products and services
worldwide. From 1989 to 1996, she was Vice President, Sales and Service for the
Standard & Poor's subsidiary of McGraw-Hill, where she was responsible for
developing a sales and service operation that increased new sales to $30 million
in electronically delivered ratings information while maintaining the existing
renewal business of $300 million. Ms. Ferguson received her bachelor of arts
degree in Business and History from Portland State University, an MBA in Finance
from the Fordham University School of Business Administration and attended
Officers Candidate School, TBS for Officers, Officers School for Intelligence
Operations.
JAMES GARFINKEL has been a member of our board of directors and our Secretary,
Treasurer and a Vice-President since April 2, 1999. He assumed these positions
in connection with our acquisition of TDC. Mr. Garfinkel is also a Director and
the Secretary, Treasurer and Vice President of Product Development at TDC,
positions which he has held since 1992. From 1987 to 1990, Mr. Garfinkel was a
manager in Real Estate Resources Corp. Mr. Garfinkel began his business career
as a commodity futures trading desk manager at PaineWebber and Merrill Lynch in
New York. Mr. Garfinkel is a graduate of Hamilton College, with a bachelor of
arts degree in Economics.
33
<PAGE>
THOMAS INGEGNERI has been a member of our board of directors since April 2,
1999. He assumed this position in connection with our acquisition of TDC. Mr.
Ingegneri is also a Director of TDC, a position which he held since 1995. Since
1990, Mr. Ingegneri has been the senior partner at Thomas & Associates,
providing consulting services to publishing and information companies. Mr.
Ingegneri has previously served in a number of senior management positions in
publishing and information companies, including H.W. Wilson, Springer-Verlag,
and McGraw-Hill. Mr. Ingegneri is a graduate of Franklin & Marshall College,
with a bachelor of arts degree in Business.
Our board of directors is elected at each annual meeting of our stockholders.
Each director holds office until his or her successor is duly elected and
qualified or until his or her earlier resignation or removal, with or without
cause, at any duly noticed special meeting of our stockholders by the
affirmative vote of the holders of a majority of the shares of our common stock
present in person or represented by proxy and entitled to vote at an election of
directors.
Under our bylaws, officers are elected annually by our board of directors at the
first meeting of our board of directors following the annual meeting of our
stockholders. Each officer holds office until his or her successor has been
chosen and qualified.
None of our executive officers or directors is a director of any other company
with a class of equity securities registered pursuant to Section 12 of the
Exchange Act, or subject to the requirements of Section 15(d) of the Exchange
Act or any company registered as an investment company under the Investment
Company Act of 1940.
34
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation earned by
the persons who served as our chief executive officer during the last completed
fiscal year and our two most highly compensated officers other than the chief
executive officer for services rendered in all capacities for each of the last
three completed fiscal years.
Annual Compensation
<TABLE>
<CAPTION>
Securities
Other Annual Underlying All Other
Year Salary Bonus Compensation Options/SARs Compensation
Name and Principal Position $ $ $ $ # $
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mitchell F. Deutsch(1)................ 1999 $212,893 $11,200 $55,667 $490,000 $0
President, Chief Executive Officer 1998 $64,487 $0 $371,163 $0 $0
and Chairman of the Board 1997 $237,500 $0 $0 $0 $0
Edward J. Tobin(2).................... 1999 $0 $0 $0 $0 $0
Former Chief Executive Officer, 1998 $0 $0 $0 $0 $0
President and Director 1997 $0 $0 $0 $0 $0
James Garfinkel(1).................... 1999 $62,668 $4,800 $0 $210,000 $0
Secretary, Treasurer and 1998 $57,645 $0 $25,455 $0 $0
Vice-President 1997 $35,000 $0 $0 $0 $0
John Evans 1999 $80,099 $39,500 $0 $228,000 $0
Chief Financial Officer and 1998 $0 $0 $0 $0 $0
Executive Vice President - 1997 $0 $0 $0 $0 $0
Corporate Development
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The salary information, prior to April 2, 1999, relates to their
employment with Taconic Data.
(2) Mr. Tobin resigned as an executive officer and director on April 2, 1999
in connection with our acquisition of TDC.
35
<PAGE>
Option/SAR Grants in Last Fiscal Year (Individual Grants)
The following table contains information concerning the stock option grants made
to the following executive officers for the fiscal year ended December 31, 1999.
No stock appreciation rights were granted to these individuals during such year.
<TABLE>
<CAPTION>
Number of Percent of total
Securities options/SARs
Underlying granted to
Options/SARs employees in Exercise or Expiration
Name and Principal Position granted fiscal year(1) Base Price Date
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mitchell Deutsch 490,000 37.1% $1.10 June 20, 2004
President, Chief Executive Officer
and Chairman of the Board
James Garfinkel 210,000 15.9% $1.10 June 20, 2004
Secretary, Treasurer and Vice-
President
John Evans 128,000 9.7% $1.00 June 21, 2009
Chief Financial Officer and Executive Vice 100,000 7.6% $3.02 Oct. 11, 2009
President - Corporate Development
</TABLE>
Aggregate Option Exercises In Last Fiscal Year And Fiscal Year-End Option Values
The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1999. No stock
appreciation rights were exercised during such year or were outstanding at the
end of that year.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Shares Unexercised Options at FY-End In The Money Options at FY-End(2)
Acquired on (#)
Name Exercise(#) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mitchell Deustch 0 98,000 392,000 $259,700 $1,038,800
James Garfinkel 0 42,000 168,000 $111,300 $ 445,200
John Evans 123,000 38,334 66,666 $ 38,083 $ 48,666
</TABLE>
- ----------
(1) Percentage based on 1,320,921 options outstanding at the end of the fiscal
year ending December 31, 1999.
(2) Based on the fair market value of the Common Stock at year-end, $3.75 per
share, less the exercise price payable for such shares.
36
<PAGE>
Stock Option Plan
A total of 1,750,000 shares of Common Stock have been reserved for issuance
under our 1999 Stock Option Plan (the "Plan"). Our Plan was adopted by the Board
of Directors in June 1999 and approved by our stockholders in July 1999. The
Plan will continue in effect until the earlier of its termination by the Board
or the date on which all of the shares of Common Stock available for issuance
under the Plan have been issued and all restrictions on such shares under the
terms of the Plan and agreements evidencing options granted under the Plan have
lapsed. However, all options shall be granted, if at all, within 10 years from
the date the Plan was adopted by the Board or the date the Plan is duly approved
by our shareholders. Employees, directors and consultants are eligible to
receive options under the Plan.
The Plan provides for the grant of "incentive stock options," within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended, and the grant
of nonstatutory stock options (the "Options"). Incentive stock options may be
granted only to employees. The Plan is administered by our Compensation
Committee or other duly appointed committee of our board of directors, if
appointed, which determines the terms of the options granted, including the
exercise price, the number of shares subject to the option, and the schedule on
which the option becomes exercisable.
The Plan requires that the exercise price for each Option shall be established
in the sole discretion of the Compensation Committee; provided, however, that
the exercise price per share for an incentive option shall be not less than the
fair market value of a Share on the effective date of grant of the option, the
exercise price per share for a nonstatutory option shall be not less than 85% of
the fair market value of a share on the effective date of grant of the option,
and no option granted to an officer, director or greater than 10% shareholder
shall have an exercise price per share less than 110% of the Fair Market Value
of a Share on the effective date of grant of the Option. The maximum term of
options granted under the Plan is 10 years.
Generally, any vested option held by a recipient who ceases to be employed or
retained by us may be exercised by such recipient within thirty days after such
recipient ceases to be employed or retained by us, or within one year after an
individual recipient ceases to be employed or retained in the case of death or
disability, respectively.
Pursuant to the Plan, as of December 31, 1999, options to purchase 1,320,921
shares of Common Stock were outstanding, with exercise prices between $1.00 and
$4.00 per share, and 232,348 of the options were vested and exercisable at that
time.
Options issued under our 1999 Stock Option Plan do not confer upon recipients
thereof any voting or any other rights of stockholders.
Changes-In-Control under the Deutsch and Garfinkel Option Agreements
Upon any change in control of our company, occurring after June 21, 1999, that
is reported under Item 1 of any Current Report on Form 8-K that is filed by us
with the Securities and Exchange Commission, Mitchell Deutsch and James
Garfinkel shall immediately acquire a vested interest in any of their remaining
unvested Options.
37
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 15, 2000,
regarding the beneficial ownership of our common stock. The table includes:
o each person or entity known by us to be the beneficial owner of more than
5% of our common stock;
o each of our directors who beneficially owns any shares of our common
stock;
o each of our named executive officers set forth in the Summary Compensation
Table above who beneficially owns any shares of our common stock; and
o all of our directors and named executive officers as a group.
For purposes of this table, information as to the shares of common stock is
calculated based on 7,660,948 shares of common stock outstanding on December 31,
1999.
Name Amount(2) Percent
- ---- --------- -------
Directors
Mitchell Deutsch(3) 3,262,174 42.6%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
John Evans 135,800 1.8%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
James Garfinkel(4) 1,335,781 17.4%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
- ----------
(2) For purposes of this table, "beneficial ownership" is determined in
accordance with the Instructions to Item 403 of Regulation S-B under the
Securities Act of 1933, pursuant to which a person or group of persons is
deemed to have "beneficial ownership" of any shares of common stock that
such person has the right to acquire within 60 days. For purposes of
computing the percentage of outstanding shares of common stock held by
each person or group of persons named above, any shares which such person
or persons have the right to acquire within 60 days after the date of this
prospectus are deemed to be outstanding and beneficially owned by such
person or persons but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(3) Includes 103,104 shares owned by Mitchell Deutsch's dependent children and
98,000 shares issuable under options exercisable within 60 days. Also
includes 23,100 shares issuable within 60 days upon the conversion of
51.33 shares of Series A Cumulative Convertible Preferred Stock jointly
owned with his wife Eve Silverman, as well as 7,700 shares issuable upon
exercise within 60 days of outstanding warrants. These 30,800 shares are
registered for sale. Does not include 154,000 shares issuable upon
conversion within 60 days of Series A Cumulative Convertible Preferred
Stock or upon exercise of outstanding warrants owned by pension accounts
managed for the benefit of Eve Silverman.
(4) Includes 23,040 shares owned by James Garfinkel's dependent child and
42,000 shares issuable under options exercisable within 60 days.
38
<PAGE>
Thomas Ingegneri(5) 119,764 1.6%
54 South Main St.
Cranbury, NJ 08512
Directors and named executive
officers as a group 4,853,519 63.4%
5% Shareholders
Marc Siden(6) 476,129 6.2%
200 Mercer St., #2D
New York, NY 10003
Barry Garfinkel(7) 421,722 5.5%
919 Third Ave.
New York, NY 10022
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth herein briefly describes transactions and proposed
transactions over the past 2 years in which we were or are to be a party, in
which one of our directors, officers or 5% stockholders, or an immediate family
member of one of those parties, had or is to have a material interest.
On July 21, 1999, we provided to Mr. John Evans, Chief Financial Officer and
Executive Vice President - Corporate Development, a $118,000 secured loan at 6%
interest. The full amount of the loan was used to exercise options for 118,000
shares of MonsterDaata's stock with an exercise price of $1.00 per share, which
shares secure the loan. The entire principal amount of the loan and any accrued
interest is fully payable upon demand by MonsterDaata. During December 1999,
$25,000 of this note was repaid.
On December 31, 1997 our notes payable to related parties were to Mitchell
Deutsch and James Garfinkel, totaling $472,459 (including accrued interest of
$22,459). On June 8, 1998 the notes were converted to equity.
- ----------
(5) These shares are held in the name of Thomas Associates.
(6) These shares are held in the name of What About Me, Inc., an entity owned
by Marc Siden. Marc Siden has been working with us since April 1999 as a
sales consultant with the title "Senior Vice-President - Business
Development." In 1998, Mr. Siden served as President of New Beginnings
Venture Group, a venture capital firm that provided bridge funding to TDC.
In 1993, Mr. Siden was employed as a Managing Director of Biltmore
Securities, a small regional brokerage firm. In August 1997, Mr. Siden
consented to the entry of an order by the SEC in connection with his prior
association with Biltmore Securities, without admitting or denying the
facts or findings contained in such order, which suspended him from
associating with any broker, dealer, municipal securities dealer,
investment company or investment advisor for a period of 12 months and
ordered him to cease and desist from engaging in specified violations of
U.S. federal securities laws.
(7) Includes 46,200 shares of common stock issuable within 60 days upon the
conversion of 102.67 shares of Series A Cumulative Convertible Preferred
Stock held by Barry Garfinkel, as well as 15,400 shares issuable upon
exercise within 60 days of outstanding warrants. These 61,600 shares are
registered for sale. Barry Garfinkel is James Garfinkel's father.
39
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. Description
----------- -----------
2.1 Acquisition Agreement and Plan of Reorganization, dated
March 26, 1999, between the registrant (formerly known as
D-Vine, Ltd.), certain stockholders of registrant, TDC and
certain stockholders of TDC (incorporated by reference to
our Current Report on Form 8-K filed with the SEC April 16,
1999, Exhibit (c)(1), file No. 033-01599).
3.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to our amendment to our Annual
Report filed on Form 10-KSB/A with the SEC on December 7,
1999).
3.2 Amended and Restated By-laws (incorporated by reference
to our amendment to our Annual Report filed on Form
10-K/A with the SEC on December 7, 1999).
4.1 Certificate of Designations, Preferences and Rights for the
Series A Cumulative Convertible Preferred Stock
(incorporated by reference to our amendment to our Annual
Report filed on Form 10-KSB/A with the SEC on December 7,
1999).
4.2 Certificate of Designations, Preference and Rights of
Series B Cumulative Convertible Preferred Stock.
10.1 1999 MonsterDaata.com, Inc. Stock Option Plan (incorporated
by reference to our Registration Statement on Form S-8
filed with the SEC June 18, 1999, Exhibit 99.1, file No.
333-81097).
11.1 Statement re: computation of per share earnings.
21.1 List of our subsidiaries (incorporated by reference to our
Registration Statement on Form SB-2 filed with the SEC on
December 21, 1999).
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
N/A
40
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this amended report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MONSTERDAATA.COM, INC.
By: /s/ Mitchell F. Deutsch
-------------------------------------
Mitchell F. Deutsch
President and Chief Executive Officer
Pursuant to the requirements of section 13 or 15(d) of the Exchange Act, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Mitchell Deutsch President and Chief Executive March 29, 2000
- ------------------------ Officer, Director
Mitchell Deutsch (Principal Executive Officer)
/s/ John Evans Chief Financial Officer and March 29, 2000
- ------------------------ Executive Vice President - Corporate
John Evans Development (Principal Accounting
and Financial Officer)
/s/ James Garfinkel Secretary, Treasurer, Vice-President, March 29, 2000
- ------------------------ Director
James Garfinkel
/s/ Thomas Ingegneri Director March 29, 2000
- ------------------------
Thomas Ingegneri
41
<PAGE>
MONSTERDAATA.COM, INC.
CONTENTS
- --------------------------------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
Balance Sheet as of December 31, 1999 F-2 - F3
Statements of Operations for the Years Ended December 31,
1999 and 1998 F-4
Statement of Changes in Stockholders' Deficiency for Years
Ended December 31, 1999 and 1998 F-5 -F-6
Statements of Cash Flows for the Years Ended December 31,
1999 and 1998 F-7 - F-8
NOTES TO FINANCIAL STATEMENTS F-9 - F22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
MonsterDaata.com, Inc.
We have audited the accompanying balance sheet of MonsterDaata.com, Inc. as of
December 31, 1999 and the related statements of operations, changes in
stockholders' deficiency and cash flows for the years ended December 31, 1999
and 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MonsterDaata.com, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
years ended December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company incurred a net loss of $2,829,346 during the
year ended December 31, 1999, and, as of that date, the Company's current
liabilities exceeded its current assets by $923,046, and its total liabilities
exceeded its total assets by $613,215, and there are existing uncertain
conditions that the Company faces relative to capital raising activities. These
conditions raise substantial doubt about its ability to continue as a going
concern. Management's plans regarding those matters also are described in Note
10. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ Marcum & Kliegman LLP
February 18, 2000
New York, New York
F-1
<PAGE>
MONSTERDAATA.COM, INC.
BALANCE SHEET
December 31, 1999
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 619,546
Accounts receivable, net of allowance for doubtful
accounts of $35,000 297,516
Prepaid expenses 37,534
---------
Total Current Assets $ 954,596
PROPERTY AND EQUIPMENT, Net 380,710
OTHER ASSETS
Security Deposits 16,588
----------
Total Assets $1,351,894
==========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
MONSTERDAATA.COM, INC.
BALANCE SHEET
December 31, 1999
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,074,464
Deferred revenue-current 448,142
Current maturities of capital lease obligation 56,334
Note payable, stockholder 298,702
-----------
Total Current Liabilities $1,877,642
OTHER LIABILITIES
Capital lease obligations 14,548
Deferred revenue-noncurrent 72,919
-----------
Total Other Liabilities 87,467
---------
TOTAL LIABILITIES 1,965,109
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.01 par value; 10,000,000
shares authorized:
Series A cumulative convertible preferred stock,
$0.01 par value; $1,000 stated value; 2,000
shares authorized, 1,561.23 shares issued and
outstanding; 20.53 shares subscribed 1,581,760
Common stock, $0.01 par value; 50,000,000 shares
authorized, 7,660,948 issued and outstanding 76,609
Additional paid-in capital 3,036,154
Options and warrants 535,665
Note receivable, stockholder (95,950)
Accumulated deficit (5,747,453)
-----------
TOTAL STOCKHOLDERS' DEFICIENCY (613,215)
----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $1,351,894
==========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MONSTERDAATA.COM, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
---------------------------
SALES $ 2,488,434 $ 1,966,713
COST OF SALES 753,013 1,182,158
----------- -----------
GROSS PROFIT 1,735,421 784,555
----------- -----------
OPERATING EXPENSES
Website development costs 880,433 --
Selling, general and administrative expenses 3,693,525 2,352,893
----------- -----------
TOTAL OPERATING EXPENSES 4,573,958 2,352,893
----------- -----------
OPERATING LOSS (2,838,537) (1,568,338)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income (expense), net 9,599 (78,156)
Other income 342 24
----------- -----------
TOTAL OTHER INCOME (EXPENSE) 9,941 (78,132)
----------- -----------
LOSS BEFORE INCOME TAXES (2,828,596) (1,646,470)
INCOME TAXES 750 325
----------- -----------
NET LOSS $(2,829,346) $(1,646,795)
=========== ===========
Weighted average number of shares outstanding 6,956,929 6,024,773
=========== ===========
Net loss per share
Basic and Diluted $ (0.41) $ (0.27)
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
MONSTERDAATA.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock
---------------------------- Common
Shares Stock Additional Options
------------------ Par Value Par Value Paid-in and Note Accumulated
Subscribed Issued $0.01 Shares $0.01 Capital Warrants Receivable Deficit Total
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - January 1, 1998 -- -- $-- 2,803,750 $28,038 $ (26,038) $-- $-- $(1,271,312) $(1,269,312)
Stock transaction
among Stockholders 140,330 140,330
Conversion of accounts
payable 162,143 1,621 225,379 227,000
Conversion of debt 758,158 7,582 962,836 970,418
Capital contribution 228,562 228,562
Stock-based
compensation 51,050 511 70,959 71,470
Issuance of stock for
services 110,340 1,103 379,144 380,247
Reorganization 2,139,332 21,393 (21,393) --
Net loss -- -- -- -- -- -- -- -- (1,646,795) (1,646,795)
--- --- --- ---------- ------- ---------- --- --- ----------- ----------
BALANCE - December 31,
1998 (Forward) -- -- $-- 6,024,773 $60,248 $1,959,779 $-- $-- $(2,918,107) $(898,080)
=== === === ========= ======= ========== === === =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MONSTERDAATA.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY, Continued
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock
---------------------------------- Common
Shares Stock Additional Options
------------------ Par Value Par Value Paid-in and Note
Subscribed Issued $0.01 Shares $0.01 Capital Warrants Receivable
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - December 31,
1998 (Forward) -- -- $-- 6,024,773 $60,248 $1,959,779 $ -- $ --
Exercise D-Vine warrant
and issuance of new
warrants 1,000,000 10,000 1,070,509 83,531
Options granted under
stock option plan 215,355
Issuance of options 42,000 33,000
Exercise of stock
options by employees
and consultants 270,500 2,705 316,420 (48,625) (118,000)
Conversion of accounts
payable 113,142 1,131 228,869 82,500
Issuance of preferred
stock and warrants 1,561.23 1,561,230 (1,165,685) 757,221
Exercise of warrants on
a cashless basis 252,533 2,525 584,792 (587,317)
Preferred stock
subscripted 20.53 -- 20,530 -- -- (530) -- --
Payments received on
note receivable,
net of accrued
interest of $2,950 22,050
Net loss -- -- -- -- -- -- -- --
----- --------- ---------- --------- ------- ----------- -------- --------
Balance - December 31,
1999 20.53 1,561.23 $1,581,760 7,660,948 $76,609 $ 3,036,154 $535,665 $(95,950)
===== ========= ========== ========= ======= =========== ======== ========
<CAPTION>
Accumulated
Deficit Total
-------------------------
<S> <C> <C>
BALANCE - December 31,
1998 (Forward) $(2,918,107) $ (898,080)
Exercise D-Vine warrant
and issuance of new
warrants 1,164,040
Options granted under
stock option plan 215,355
Issuance of options 75,000
Exercise of stock
options by employees
and consultants 152,500
Conversion of accounts
payable 312,500
Issuance of preferred
stock and warrants 1,152,766
Exercise of warrants on
a cashless basis --
Preferred stock
subscripted -- 20,000
Payments received on
note receivable,
net of accrued
interest of $2,950 22,050
Net loss (2,829,346) (2,829,346)
----------- ----------
Balance - December 31,
1999 $(5,747,453) $ (613,215)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MONSTERDAATA.COM, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,829,346) $(1,646,795)
----------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 106,542 124,185
Stock-based compensation 531,051 211,800
Accrued interest on (receivable) payable (2,950) 49,980
Decrease (increase) in accounts receivable 361,426 (341,276)
(Increase) decrease in prepaid expense
and other current assets (37,534) 45
Increase in security deposits (8,255) --
Increase in accounts payable and accrued
expenses 1,197,614 714,601
(Decrease) increase in deferred revenue (562,650) 766,205
----------- -----------
TOTAL ADJUSTMENTS 1,585,244 1,525,540
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,244,102) (121,255)
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of property and equipment (302,957) (55,761)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of preferred stock 897,766 --
Net proceeds from issuance of common stock 1,093,540 --
Net proceeds from issuance of warrants 223,000 --
(Repayments of) proceeds from notes payable (62,236) 350,000
Repayments of notes payable, related parties (21,833) --
Proceeds from notes payable, stockholders -- 20,000
Principal repayments of note payable, stockholders -- (59,104)
Payments received on note receivable, stockholder 25,000 --
Principal repayments of capital lease obligations (44,224) (111,858)
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES $ 2,111,013 $ 199,038
----------- -----------
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
MONSTERDAATA.COM, INC.
STATEMENTS OF CASH FLOWS, Continued
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
-------------------------
NET INCREASE IN CASH AND CASH $ 563,954 $ 22,022
EQUIVALENT
CASH AND CASH EQUIVALENT - Beginning 55,592 33,570
---------- ----------
CASH AND CASH EQUIVALENT - Ending $ 619,546 $ 55,592
========== ==========
SUPPLEMENTARAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the years for:
Interest $ 1,957 $ 21,081
Noncash investing and financing activities:
Purchase of equipment through capital leases $ 51,935 $ 31,802
Issuance of warrants 757,221 --
Exercise of warrants on a cashless basis 587,317 --
Exercise of options for a note 118,000 --
Conversion of accounts payable to options 82,500 --
Conversion of accounts payable to notes -- 296,666
Conversion of accounts payable to preferred
stock 275,000
Conversion of accounts payable to common stock 230,000 227,000
Conversion of notes payable to equity -- 477,498
Conversion of notes payable, related parties
to equity -- 490,920
Forgiveness of debt recorded as contributed
capital -- 228,562
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies
Business Combination
D-Vine, Ltd. ("D-Vine") was originally incorporated on July 22, 1985 as an
inactive company and reactived its corporate charter on September 27, 1995
in the state of Delaware. On April 2, 1999, D-Vine, a public shell,
acquired 99.2% of Taconic Data Corp.'s ("Taconic") common stock in exchange
for 6,000,000 shares of D-Vine's common stock (the "Acquisition"). This
Acquisition, which has been treated as a capital transaction in substance,
rather than a business combination, was deemed a "reverse acquisition" for
accounting purposes. Accordingly, Taconic was deemed accounting acquirer
and the historical financial statements prior to April 2, 1999 were those
of Taconic. In the accompanying financial statements, the capital structure
and earnings (losses) per share of Taconic have been retroactively restated
to reflect the Acquisition as if it occurred at the beginning of the
periods. On April 5, 1999, D-Vine changed its name to MonsterDaata.com,
Inc. (the "Company").
Nature of Business
The Company is a professional business information company with a specialty
in real estate and public records data. It develops and manages complex
real estate and marketing information databases via Internet licensing
agreements and under long-term service contracts to multiple listing
services, realtor associations, and other information companies located
primarily in the eastern United States.
Minority Interest
The minority interest 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.
Therefore, in accordance with generally accepted accounting principles, the
minority interest in Taconic's net losses has not been recorded in the
accompanying financial statements.
Change of Year End
Subsequent to the Acquisition the Company changed its fiscal year end from
September 30th to December 31st.
Revenue Recognition
Licensing Fees
The Company recognizes licensing fees on a straight-line basis over the
term of the respective agreements, which range from one (1) to three (3)
years.
Long Term Data Base Contracts
The Company utilizes long-term contracts and recognizes revenue for
financial statement purposes under the percentage of completion method and,
therefore, takes into account the costs, estimated earnings and
revenue-to-date on contracts not yet completed.
F-9
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Revenue Recognition, continued
Long Term Data Base Contracts, continued
The amount of revenue recognized at the financial statement date is the
portion of the total contract price that the costs expended to date bears
to the anticipated total costs, based on current estimates of costs to
complete. Contract costs include all direct labor and benefits, materials
unique to or installed in the project, subcontract costs and allocated
indirect costs.
Revisions in estimates of costs and earnings during the life of the
contracts are reflected in the accounting period in which such revisions
become known.
At the time a loss on a contract becomes known, the entire amount of the
estimated loss is recognized in the financial statements.
Deferred Revenue
The deferred revenue represents billings in excess of costs and estimated
earnings on uncompleted contracts in the amount of $58,561 and unamortized
licensing fees in the amount of $462,500 at December 31, 1999.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term investments with an original maturity of three months or less to
be cash equivalents.
The Company has cash balances in banks in excess of the maximum amount
insured by the FDIC as of December 31, 1999.
Property and Equipment and Depreciation
Property and equipment is stated at cost and is depreciated using
accelerated methods over the estimated useful lives of the respective
assets. Routine maintenance, repairs and replacement costs are expensed as
incurred and improvements that extend the useful life of the assets are
capitalized. When property and equipment is sold or otherwise disposed of,
the cost and related accumulated depreciation are eliminated from the
accounts and any resulting gain or loss is recognized in income.
Income Taxes
The Company with the consent of their stockholders, had elected under the
Internal Revenue Code to be an "S" corporation. In lieu of corporate income
taxes, the stockholders of an "S" corporation are taxed on their
proportionate share of the corporation's taxable income. Accordingly, no
provision for federal and state income taxes has been included in the
accompanying financial statements. Effective June 8, 1998, the Company
became a "C" corporation under the Internal Revenue Code (see Note 6).
F-10
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Advertising Costs and Website Development Costs
Advertising costs and website development costs are expensed as incurred.
Total advertising costs and website development costs amounted to $911,901
and $25,147 for the years ended December 31, 1999 and 1998, respectively.
Reclassifications
Certain accounts in the prior year financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current year financial statements. These reclassifications have no
effect on previously reported income.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent asset and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Net Income (Loss) Per Share
The Company adopted the provision of SFAS No. 128, "Earnings per Share".
SFAS No. 128 eliminates the presentation of primary and fully dilutive
earnings per share ("EPS") and requires presentation of basic and diluted
EPS. Basic EPS is computed by dividing income (loss) available to common
stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS is based on the weighted-average number of
shares of common stock and common stock equivalents outstanding at
year-end. All prior periods' EPS have been restated.
Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes accounting and reporting standards
for all stock-based compensation plans, including employee stock options,
restricted stock, employee stock purchase plans and stock appreciation
rights. SFAS No. 123 requires compensation expense to be recorded (i) using
the new fair value method or (ii) using the existing accounting rules
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related interpretations with pro
forma disclosure of what net income and earnings per share would have been
had the Company adopted the new fair value method. The Company intends to
continue to account for its stock based compensation plans in accordance
with the provisions of APB 25.
Fair Value of Financial Instruments
The financial instruments of the Company are reported in the statement of
financial condition at market or fair values, or at carrying amounts that
approximate fair values because of the short maturity of the instruments.
F-11
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Impairment of Long-Lived Assets
Equipment is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If
the sum of the expected undiscounted cash flows is less than the carrying
value of the related asset or group of assets, a loss is recognized for the
difference between the fair value and carrying value of the asset or group
of assets.
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", effective for fiscal years beginning after December 15, 1997, with
reclassification of earlier periods required for comparative purposes. SFAS
No. 130 establishes standards for the reporting and presentation of
comprehensive income and its components in the financial statements. The
Company adopted this standard in 1998 and the implementation of this
standard did not have any impact on its financial statements.
Reporting of Segments
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", effective for fiscal years
beginning after December 15, 1997, with reclassification of earlier periods
required for comparative purposes. SFAS No. 131 establishes the criteria
for determining an operating segment and establishes the disclosure
requirements for reporting information about operating segments. The
Company has determined that under SFAS No. 131, it operates in one segment
of service and its customers and operations are within the United States.
Pensions and Other Benefit Plans
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits", effective for fiscal
years beginning after December 15, 1997, with restatement of disclosures
for earlier periods required for comparative purposes. SFAS No. 132 revises
certain employers' disclosures about pension and other post-retirement
benefit plans. The Company adopted this standard in 1998 and the
implementation of this standard did not have any impact on its financial
statements.
Computer Software Costs
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("ASEC of AICPA") issued
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use", effective for
fiscal years beginning after December 15, 1998. SOP No. 98-1 requires that
certain costs of computer software developed or obtained for internal use
be continued capitalized and amortized over the useful life of the related
software. The Company adopted this standard in 1999 and the implement of
this standard did not have a material impact on its financial statements.
F-12
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - Summary of Significant Accounting Policies, continued
Start-up Activities Costs
In April 1998, the ASEC of AICPA issued SOP No. 98-5, "Reporting on the
Costs of Start-up Activities", and effective for fiscal years beginning
after December 15, 1998. SOP 98-5 requires the costs of start-up activities
and organization costs to be expensed as incurred. The Company adopted this
standard in 1999 and the implement of this standard did not have a material
impact on its financial statements.
Accounting Developments
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning
after June 15, 1999, which has been deferred to June 15, 2000 by publishing
of SFAS No. 137. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. This Statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial condition and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative
instrument depends on its intended use and the resulting designation. The
Company does not expect that the adoption of this standard will have a
material impact on its financial statements.
NOTE 2 - Property and Equipment
Property and equipment at December 31, 1999 and 1998 consist of the
following:
Estimated
Useful
Amount Lives
----------------------------
Furniture and fixtures $ 103,247 5-7 years
Computer equipment and software 965,619 3-5 years
----------
1,068,866
Less: accumulated depreciation (688,156)
----------
Property and Equipment, Net $ 380,710
==========
Depreciation expense for the years ended December 31, 1999 and 1998 was
$106,542 and $124,185, respectively.
F-13
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 - Capitalized Lease Obligations
The Company is the lessee of equipment under certain capital leases
expiring through the year 2001. The assets and liabilities are recorded at
fair-market value. The assets are being depreciated over their estimated
useful lives. Depreciation of assets under capital leases amounted to
$57,582 and $77,720, respectively. The following is a summary of property
held under capital leases included in equipment:
Equipment $ 407,255
Less: accumulated depreciation (342,249)
---------
$ 65,006
=========
Minimum future lease payments under capital leases as of December 31, 1999
for each of the next two years, and in the aggregate, are as follows:
For the Year Ending
December 31, Amount
-----------------------------------------------------
2000 $59,632
2001 20,780
-------
Total minimum lease
payments 80,412
Less: amount representing
interest (9,530)
-------
Present value of net minimum
lease payments 70,882
Less: Current portion 56,334
-------
Long-term portion $14,548
=======
Interest rates on capitalized leases vary from 5.43% to 17.43% and are
imputed based on the lessors' implicit rate of return.
F-14
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - Note Payable, Stockholder
Note payable to a stockholder of Taconic is payable in 36 monthly
installments of $12,902 including interest of 9.71% per annum. At December
31, 1999, the Company is in default of this note whereby the entire balance
is due and interest is accruing at the annual rate of 18% since the default
date. Accordingly, the Company has classified the entire balance including
accrued interest of the note as current liability. The Company is
contesting the validity of the note in its entirety and is engaged in
litigation with the holder (see Note 7).
NOTE 5 - Stockholders' Equity
Activities Prior to the Acquisition
Stock Transaction Among Stockholders
On January 2, 1998, a stockholder of Taconic transferred 584,710 shares
(valued at $0.24 per share) of common stock to an officer/stockholder for
no consideration. The transferred shares have been recalculated to give
retroactive effect of the stock split (see below). By transferring the
shares the stockholder intended to enhance the value of his investment and
improve the performance of the officer/stockholder who received the shares,
which is both beneficial to the stockholder and Taconic. Therefore, Taconic
recorded compensation expense of $140,330 in connection with this
transaction.
Conversion of Accounts Payable
On June 3, 1998, Taconic converted certain accounts payables in the amount
of $227,000 to common stock. Each $1.40 of trade accounts payable was
converted into one (1) share of common stock, par value $.01. The total
shares issued for this conversion was 162,143.
Conversion of Debt
On June 8, 1998, Taconic converted certain notes payable including accrued
interest in the amount of $970,418 to 758,158 shares of common stock.
Contributed Capital
On June 8, 1998, notes payable, stockholders including accrued interest of
$228,562 were forgiven and treated as contributed capital.
Stock-Based Compensation
On June 12, 1998, Taconic issued 51,050 shares ($1.40 per share) of common
stock to two officer/stockholders for services performed which amounted to
$71,470.
Issuance of Stock for Services
On March 22, 1999, Taconic issued 110,340 shares of common stock to certain
employees and consultants for services provided which amounted to $380,247.
F-15
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - Stockholders' Equity, continued
Activities Prior to the Acquisition, continued
Stock Split
On June 12, 1998, the Board of Directors of Taconic authorized a 14,018.75
for 1 stock split, thereby increasing the number of issued and outstanding
shares to 2,803,750, and increasing par value to $.01 per share. In
addition, the Board of Directors amended the certificate of incorporation
to increase the number of common shares authorized to 6,000,000, par value
$.01. All prior period financial statements of Taconic are restated to give
retroactive effect of this stock split.
Activities After the Acquisition
Warrant
On April 2, 1999, an existing warrant issued by D-Vine in August 1997 to
purchase 1,000,000 shares of common stock was exercised, in connection with
the Acquisition, with an increase in exercise price from $0.01 per share to
$1.00 per share. In consideration of such increase, the Company issued to
the holder an additional warrant to purchase 500,000 shares of its common
stock with an exercise price of $3.00 per share for $223,000. The newly
issued warrant, with an estimated fair value of $83,531 using the
Black-Scholes option-pricing model, expires on March 31, 2004. An aggregate
of 500,000 shares of common stock have been reserved for issuance under
this warrant. In addition, the Company incurred direct expense of $58,960
in connection with this transaction.
Conversion of Accounts Payable
During the year ended December 31, 1999, the Company converted accounts
payable in the amount of $312,500 to 113,142 shares of common stock and
options to purchase 25,000 shares of common stock. The options were valued
at $82,500 under the Black-Scholes option-price model.
Series A Cumulative Convertible Preferred Stock
On November 1, 1999, November 5, 1999 and November 30, 1999, the Company
issued 781.12 shares, 240.66 shares and 539.45 shares, respectively, of its
Series A Cumulative Convertible Preferred Stock (the "Series A Preferred")
to investors, resulting in cash proceeds in the aggregate of $1,152,766,
net of direct expenses of $319,234. In connection with the issuance, the
Company authorized the designation of 2,000 shares of Series A Preferred.
Holders of the Series A Preferred are entitled to a quarterly cumulative
dividend equal to 1.5% of the then applicable liquidation preference, as
defined.
Each share of the Series A Preferred is convertible into 300 shares of
common stock, at the option of the holder, subject to certain adjustments
and conditions. The Series A Preferred will automatically convert into
shares of common stock upon occurrence of the special events, as defined.
In addition, the Company has filed a registration statement with the
Securities Exchange Commission to register the common share issuable upon
conversion of the Preferred Stock. As of February 28, 2000, the Company has
not met certain conversion conditions; accordingly, the conversation rate
is changed from 1:300 to 1:450.
F-16
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - Stockholders' Equity, continued
Activities After the Acquisition, continued
Series A Cumulative Convertible Preferred Stock, continued
The Company also issued warrants to purchase 473,670 shares, 36,108 shares
and 80,952 shares of its common stock at an exercise price of $3.75 per
share, subject to adjustment, to the Series A Preferred holders for the
November 1, 1999, November 5, 1999 and November 30, 1999 issuances,
respectively. Of these warrants to purchase a total of 590,730 shares of
common stock, warrants to purchase 473,670 shares, with an estimated fair
value of $700,816 using the Black-Scholes option-pricing model, expire in
November 2000, with the remaining warrants to purchase 117,060 shares, with
an estimated fair value of $56,405 using the Black-Scholes option-pricing
model, expiring in November 2004. On December 1, 1999, warrants to purchase
396,836 shares of common stock with an adjusted exercise price of $2.00 per
share were exercised, on a cashless basis, when the market value of the
common stock was $5.50 per share. 252,533 shares of the common stock were
issued in connection with the exercise of such warrants.
On January 6, 2000, the Company issued 20.53 shares of its Series A
Preferred to an investor, resulting in cash proceeds of $20,000 which was
received by the Company on December 9, 1999. In connection therewith, the
Company issued to the investor warrants for the purchase of 3,080 shares
of its common stock at an exercise price of $3.75 per share.
NOTE 6 - Income Taxes
As discussed in Note 1 effective June 8, 1998 the Company has become a "C"
Corporation under the Internal Revenue Code. For the period January 1, 1998
through June 7, 1998 the Company was taxed as an "S" corporation. The
provision for income taxes for the years ended December 31, 1999 and 1998
consists of the following:
1999 1998
------------------------
State and Local
Current $ 750 $325
Deferred -- --
------- -----
Total $ 750 $325
======= ====
Reconciliation from Federal statutory rate:
1999 1998
-------------------------
Federal tax at 34% $ (961,978) $(559,910)
State and local taxes, net of federal benefit 750 325
Deferred revenue (230,687) 314,144
Expenses not deductible for tax purpose 76,193 20,678
Reserve for net operating loss 1,116,472 32,650
S corporation - pass through to stockholders -- 192,438
---------- ---------
Total $ 750 $ 325
========== =========
F-17
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6 - Income Taxes, continued
The components of deferred tax assets and liabilities at December 31, 1999
and 1998 consists of the following:
Deferred tax assets
Deferred Revenue $ 214,000
Depreciation and amortization 54,000
Net operating loss carryforwards 1,375,000
-----------
1,643,000
Less: Valuation Allowance (1,643,000)
-----------
Total Deferred Tax Assets $ --
===========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets for financial reporting purposes and
the amounts used for income tax purposes. A valuation allowance is required
if, based on the weight of available evidence, it is more likely than not
that some portion of all of the deferred tax assets will not be realized.
Management concluded a valuation allowance was appropriate at December 31,
1998 due to operating losses incurred. The Company estimated the available
net operating loss carryforwards to be approximately $3,438,000, which will
expire on various dates through 2019.
NOTE 7 - Commitments and Contingencies
Office Lease
The Company leases its offices under two noncancelable leases expiring
December 31, 2000 and June 30, 2004, respectively. The Company pays its
portion of property taxes, insurance, and other related expenses to the
leased properties. Rent expense was $111,952 and $87,575 for the years
ended December 31, 1999 and 1998, respectively.
Future minimum rental payments required under the above non-cancelable
operating leases at December 31, 1999 are as follows:
For the Year Ending
December 31, Amount
----------------------------------
2000 $113,220
2001 37,822
2002 38,956
2003 40,125
2004 34,373
---------
Total $264,496
========
F-18
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - Commitments and Contingencies, continued
Computer Lease
The Company leases Computer under a two (2) year operating lease expiring
in October 2001.
Future minimum rental payments under the above noncancelable operating
lease as of December 31, 1999 are as follows:
For the
Year Ending
December 31, Amount
-------------------------------------
2000 $12,247
2001 19,890
-------
Total $32,137
=======
License Agreement
The Company is obligated to pay a license fee for the use of software and
the maintenance of the software through October 2001. The future commitment
at December 31, 1999 is as follows:
For the Year Ending
December 31, Amount
-----------------------------------
2000 $29,627
2001 24,689
-------
Total $54,316
=======
Litigation
The Company is involved in litigation through the normal course of
business. The Company believes that the resolution of these matters will
not have a material adverse effect on the financial position of the
Company.
In addition, as discussed in Note 4, note payable in the amount of $298,702
to the minority stockholder is in default. The Company is currently
involved in a litigation with this stockholder. The outcome of this suit
can not be determined at this time. However management believes that no
additional material liabilities will result from this suit.
Related Party Transaction
During the year ended December 31, 1999, the Company incurred legal and
consulting fees to a stockholder which amounted to $743,891.
F-19
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8 - Major Customers
The Company sells a substantial portion (greater than 10% of sales) of its
product to four major customers. During the years ended December 31, 1999
and 1998, sales to these customers totaled $1,814,403 (75%) and $1,408,647
(73%), respectively. As of December 31, 1999 and 1998, the amounts due from
these customers included in accounts receivable were $86,445 and $161,588,
respectively.
NOTE 9 - Stock Option Plan
On June 15, 1999, the Company adopted a stock option plan (the "Plan"). The
Plan provides that options may be granted to employees, officers, directors
and consultants to purchase shares of its common stock. All incentive stock
options granted under the Plan will have an exercise price of not less than
the fair market value of the underlying common stock at the time of grant,
and all non-incentive stock options granted under the Plan will have an
exercise price of not less than 85% of the fair market value of the common
stock at the time of grant. The board of directors (or any duly appointed
committee thereof) determines the vesting period of the options upon the
granting of the options. The total number of shares of common stock for
which options may be granted under the Plan is 1,750,000. No stock option
may be granted under the Plan after June 15, 2009.
During the year ended December 31, 1999, the Company granted 1,424,921 and
186,500 options to its employees and consultants, respectively, with
exercise prices ranging from $1.00 to $4.00. Of the 186,500 options, 75,000
options were issued for $75,000. As of December 31, 1999, 1,320,921 options
are outstanding of which 232,348 options are exercisable.
On July 26, 1999, an employee exercised his option to purchase 123,000
shares of common stock 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. Principal is
due on demand and is secured by the underlying common stock. During
December 1999, $25,000 of this note was repaid. In addition, 147,500
options were exercised at $1.00 per share by certain employees and
consultants during the year ended December 31, 1999.
Activities under the Plan are as follows:
Number Weighted Weighted
Of Average Average
Options Exercise Price Remaining Life
-------------------------------------------
Balance - December 31, 1998 --
Options granted 1,611,421 $1.78 9.5 years
Options cancelled (20,000) 1.00
Options exercised (270,500) 1.00
---------
Balance - December 31, 1999 1,320,921
---------
F-20
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9 - Stock Option Plan, continued
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
SFAS 123. The fair market value for these options was estimated at the date
of grant using a Black-Scholes option-pricing model was ranging from $0.25
to $4.32 per share with the following weighted-average assumptions for the
year ended December 31, 1999.
Assumptions
---------------------------------------------------------------------------
Risk-free rate 5.9% - 6.45%
Dividend yield --%
Volatility factor of the expected market
price of the Company's common stock .10
Average life 10 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options. The
Company's pro forma information for the year ended December 31, 1999 is as
follows:
Pro forma net loss $(3,123,831)
===========
Pro forma net loss per share
- basic and diluted $(0.45)
======
NOTE 10 - Going Concern Uncertainty
As shown in the accompanying financial statements, the Company incurred a
net loss of $2,829,346 during the year ended December 31, 1999, and, as of
that date, the Company's current liabilities exceeded its current assets by
$923,046, and its total liabilities exceeded its total assets by $613,215.
These factors, as well as the uncertain conditions that the Company faces
relative to capital raising activities, create an uncertainty as to the
Company's ability to continue as a going concern. The Company is in
preliminary
F-21
<PAGE>
MONSTERDAATA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10 - Going Concern Uncertainty, continued
discussions with an investment bank to place a secondary public offering to
raise approximately $15,000,000. The ability of the Company to continue as
a going concern is dependent upon the success of the offering or
alternative financing arrangements. The financial statements do not include
any adjustments to the financial statements that might be necessary should
the Company be unable to continue as a going concern.
NOTE 11 - Subsequent events (Unaudited)
Consulting Agreement
On February 23, 2000, the Company entered into a six month agreement with
a consulting firm to provide services for management consulting, business
advisory, shareholder information and public relations services. The
Company may choose to pay the consulting fees in cash or with 100,000
shares of its common stock.
Preferred Stock Conversion
On March 1, 2000, 11.11 shares of Series A Preferred were converted to
5,000 shares of common stock by an investor.
Exercise of Warrants and Options
In February 2000, warrants to purchase 7,334 shares of common stock with an
adjusted exercise price of $2.00 per share were exercised, on a cashless
basis, with the market value of the common stock ranging from $4.125 to
$4.375 per share. 3,848 shares of the common stock were issued in
connection with the exercise of these warrants.
On March 1, 2000, warrants to purchase 1,666 shares of common stock with an
adjusted exercise price of $0.50 per share were exercised for $834.
On March 2, 2000, options to purchase 5,000 shares of common stock with an
exercise price of $1.00 per share were exercised for $5,000.
On March 4, 2000 and March 7, 2000, options to purchase 20,000 and 24,000
shares of common stock with an exercise price of $3.02 and $4.00 per share
were exercised, on a cashless basis, when the market value of the common
stock was $7.125 and $7.00 per share, respectively. 11,523 and 10,286
shares of the common stock were issued in connection with the exercise of
these options, respectively.
F-22
MONSTERDAATA.COM, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
MONSTERDAATA.COM, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), does hereby certify that,
pursuant to the authority conferred on the Board of Directors of the Corporation
by the Certificate of Incorporation of the Corporation and in accordance with
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Corporation adopted the following resolution establishing a
series of Preferred Stock of the Corporation designated as "Series B Cumulative
Convertible Preferred Stock":
RESOLVED, that pursuant to the authority conferred on the Board of
Directors of this Corporation by the Certificate of Incorporation,
as amended, a series of Preferred Stock, par value $.01 per share,
of the Corporation is hereby established and created, and that the
designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications,
limitations and restrictions thereof are as follows:
Series B Convertible Preferred Stock
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series B Cumulative Convertible Preferred Stock" (the "Series
B Preferred Stock") and the number of shares constituting such series shall be
2,000.
Section 2. Issuance of Additional Shares. The number of authorized
shares of the Series B Preferred Stock may be reduced or eliminated by the Board
of Directors of the Corporation or a duly-authorized committee thereof in
compliance with the General Corporation Law of the State of Delaware stating
that such reduction has been authorized, but the number of authorized shares of
Series B Preferred Stock shall not be increased.
Section 3. Certain Definitions. For purposes hereof the following
definitions shall apply:
"Board" shall mean the Board of Directors of the Corporation.
"Business Day" shall mean any day excluding Saturday, Sunday and any
day which shall be in the State of New York a legal holiday or a day on which
banking institutions in the State of New York are authorized by law to close.
<PAGE>
2
"Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Corporation.
"Conversion Adjustment Condition" shall mean the receipt by the
Corporation of net proceeds of at least $3,000,000 from the private or public
sale of Junior Stock issued on terms which fairly value the Corporation's Common
Stock at a price in excess of $2.50 per share (or, if applicable, the adjusted
value per share that proportionally reflects any stock split, combination,
dividend, reclassification or similar event involving the Corporation's Common
Stock, in each case in accordance with the principles set forth in Section 7).
"Corporation" shall mean MonsterDaata.com, Inc., a Delaware
corporation.
"Issuance Date" shall mean the date of original issuance of the
Series B Preferred Stock.
"Junior Stock" shall mean the Common Stock and any shares of
Preferred Stock of any series or class of the Corporation, whether presently
outstanding or hereafter issued, which are by their terms expressly made junior
to the shares of Series B Preferred Stock at the time outstanding as to the
distribution of assets on any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation and are not subject to mandatory redemption or
repurchase prior to the date on which no shares of Series B Preferred Stock are
outstanding.
"Majority of the Series B Preferred Stock" shall mean more than 50%
of the outstanding shares of Series B Preferred Stock.
"Preferred Stock" shall mean the unclassified Preferred Stock, par
value $.01 per share, of the Corporation.
"Redemption Date" shall have the meaning assigned to such term in
Section 6(b) hereof.
"Redemption Price" shall have the meaning assigned to such term in
Section 6(c) hereof.
"Redemption Notice" shall have the meaning assigned to such term in
Section 6(d) hereof.
"Series B Conversion Ratio" shall have the meaning assigned to such
term in Section 8(b) hereof.
"Series A Preferred Stock" shall mean the Series A Convertible
Preferred Stock, par value $.01 per share, of the Corporation.
"Series B Preferred Stock" shall mean the Series B Convertible
Preferred Stock, par value $.01 per share, of the Corporation.
"Supermajority of the Series B Preferred Stock" shall mean more than
90% of the outstanding shares of Series B Preferred Stock.
<PAGE>
3
"Voting Stock" shall mean any shares having general voting power in
electing the Board (irrespective of whether or not at the time stock of any
other class or classes has or might have voting power by reason of the
occurrence of any contingency). The Common Stock is Voting Stock.
Section 4. Dividends.
(a) Dividends and Distributions. Subject to the prior and superior
rights of the holders of any shares of any series or class of capital stock
ranking prior and superior to the shares of Series B Preferred Stock with
respect to dividends, the holders of shares of Series B Preferred Stock shall be
entitled to receive out of assets legally available for that purpose, a
quarterly cumulative dividend equal to 1.5% of the then applicable liquidation
preference (i.e., 6% per annum, compounded quarterly).
(b) All dividends or distributions declared upon the Series B
Preferred Stock shall be declared pro rata per share.
Section 5. Liquidation Rights of Series B Preferred Stock. In the
event of a liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary (a "Liquidation Event"), after payment or provision for
payment of debts and other liabilities of the Corporation, the holders of the
Series B Preferred Stock then outstanding shall first be entitled to be paid out
of the assets of the Corporation available for distribution to its shareholders,
whether such assets are capital, surplus, or earnings, before any payment or
declaration and setting apart for payment of any amount shall be made in respect
of Junior Stock, but pari passu with shares of other series of preferred stock
ranking on a parity with the Series B Preferred Stock including, without
limitation, shares of Series A Preferred Stock (on the basis of the relative
liquidation amounts for each such series), an amount equal to $1,000 per share
(subject to appropriate adjustment to reflect any stock split, combination,
reclassification or reorganization of the Series B Preferred Stock) plus an
amount equal to all declared and unpaid dividends thereon. If upon any
Liquidation Event, whether voluntary or involuntary, the assets to be
distributed to the holders of the Series B Preferred Stock shall be insufficient
to permit the payment to such shareholders of the full preferential amounts
aforesaid, then all of the assets of the Corporation to be distributed shall be
so distributed ratably to the holders of the Series B Preferred Stock on the
basis of the number of shares of Series B Preferred Stock held. All shares of
Series B Preferred Stock shall rank as to payment, upon the occurrence of a
Liquidation Event, senior to the Common Stock as provided herein and, unless the
terms of such series shall provide otherwise, senior to all other series of the
Corporation's preferred stock.
Section 6. Redemption.
(a) Restriction on Redemption and Purchase. Except as expressly
provided in this Section 6, the Corporation shall not have the right to
purchase, call, redeem or otherwise acquire for value any or all of the Series B
Preferred Stock.
(b) Optional Redemption. At any time after the first anniversary of
the Issuance Date, the Corporation may, at its option, redeem the Series B
Preferred Stock in whole, but not in
<PAGE>
4
part, at the Redemption Price hereinafter specified; provided, however, that the
Corporation shall not redeem Series B Preferred Stock or give notice of any
redemption unless the Corporation has sufficient and lawful funds to redeem all
of the then outstanding Series B Preferred Stock. The date on which the Series B
Preferred Stock is to be redeemed pursuant to this Section 6(b) is herein called
the "Redemption Date."
(c) Redemption Price. The Redemption Price of the Series B Preferred
Stock (the "Redemption Price") shall be an amount per share equal to $1,100
(subject to appropriate adjustment to reflect any stock split, combination,
reclassification or reorganization of the Series B Preferred Stock) plus all
declared and unpaid dividends thereon, to and including the Redemption Date.
(d) Redemption Notice. The Corporation shall, not less than thirty
(30) days nor more than sixty (60) days prior to the Redemption Date, give
written notice ("Redemption Notice") to each holder of record of Series B
Preferred Stock to be redeemed. The Redemption Notice shall state:
(1) that all of the outstanding shares of Series B Preferred
Stock are to be redeemed and the total number of shares
being redeemed;
(2) the number of shares of Series B Preferred Stock held by
the holder which the Corporation intends to redeem;
(3) the Redemption Date and Redemption Price;
(4) that the holder's right to convert the Series B
Preferred Stock into shares of the Common Stock as
provided in Section 8 hereof will terminate on the
Redemption Date; and
(5) the time, place and manner in which the holder is to
surrender to the Corporation the certificate or
certificates representing the shares of Series B
Preferred Stock to be redeemed.
(e) Payment of Redemption Price and Surrender of Stock. On the
Redemption Date, the Redemption Price of the Series B Preferred Stock scheduled
to be redeemed or called for redemption shall be payable to the holders of the
Series B Preferred Stock. On or before the Redemption Date, each holder of
Series B Preferred Stock to be redeemed, unless the holder has exercised his
right to convert the shares as provided in Section 8 hereof, shall surrender the
certificate or certificates representing such shares to the Corporation, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price for such shares shall be payable to the order of the person or
entity whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be cancelled and retired.
(f) Termination of Rights. If the Redemption Notice is duly given,
and, if at least ten (10) days prior to the Redemption Date, the Redemption
Price is either paid or made available for payment through the arrangement
specified in subsection (g) below, then notwithstanding that the certificates
evidencing any of the shares of Series B Preferred Stock so
<PAGE>
5
called or scheduled for redemption have not been surrendered, all rights with
respect to such shares shall forthwith after the Redemption Date cease and
terminate, except only (i) the right of the holders to receive the Redemption
Price without interest upon surrender of their certificates therefor or (ii) the
right to receive shares of Common Stock upon exercise of the conversion rights
provided in Section 8 hereof on or before the Redemption Date.
(g) Deposit of Funds. At least ten (10) days prior to the Redemption
Date, the Corporation shall deposit with any bank or trust company in New York,
New York, a sum equal to the aggregate Redemption Price of all shares of the
Series B Preferred Stock scheduled to be redeemed or called for redemption and
not yet redeemed, with irrevocable instructions and authority to the bank or
trust company to pay the Redemption Price to the respective holders upon the
surrender of their share certificates. The deposit shall constitute full payment
for the shares of Series B Preferred Stock to the holders thereof, and from and
after the later of the date of such deposit and the Redemption Date, the shares
of Series B Preferred Stock shall be deemed to be redeemed and no longer
outstanding, and the holders thereof shall cease to be shareholders with respect
to such shares of Series B Preferred Stock and shall have no rights with respect
thereto, except the right to receive from the back or trust company payment of
the Redemption Price of the shares of Series B Preferred Stock, without
interest, upon surrender of their certificates therefor and the right, prior to
the Redemption Date, to convert such shares of Series B Preferred Stock into
shares of Common Stock as provided in Section 8 hereof. Any monies so deposited
and unclaimed at the end of one year from the Redemption Date shall be released
or repaid to the Corporation, after which time the holder of shares of Series B
Preferred Stock called for redemption shall be entitled to receive payment of
the Redemption Price only from the Corporation.
Section 7. Voting Rights.
(a) Series B Preferred Stock. Except as set forth in paragraph (b)
of this Section, the holders of Series B Preferred Stock shall have no voting
rights on any matters.
(b) Amendment of Certificate of Incorporation. Any amendment to the
Certificate of Incorporation of the Corporation that adversely affects the
conversion terms or other economic rights or preferences of the Series B
Preferred Stock shall require the approval of the holders of a Supermajority of
the Series B Preferred Stock. The adoption of a Certificate of Designations for
a senior class of Preferred Stock by itself shall be deemed to not constitute an
amendment to the Certificate of Incorporation of the Corporation for the
purposes of this Section.
Section 8. Conversion. The holders of Series B Preferred Stock shall
have the following conversion rights:
(a) Right to Convert. Each share of Series B Preferred Stock shall
be convertible, at any time at the option of the holder thereof, into validly
issued, fully paid and nonassessable shares of Common Stock.
(b) Series B Conversion Ratio. Each share of Series B Preferred
Stock shall be convertible into shares of Common Stock at a ratio (the "Series B
Conversion Ratio") equal to
<PAGE>
6
267 shares of Common Stock for each share of Series B Preferred Stock, subject
to adjustment as hereinafter provided; provided, however, that if the Conversion
Adjustment Condition has not been satisfied on or prior to December 1, 2000, the
Series B Conversion Ratio shall be equal to 334 shares of Common Stock for each
outstanding share of Series B Preferred Stock from and after such December 1,
2000 date, subject to adjustment as hereinafter provided.
(c) Dividends Upon Conversion. Upon conversion, all accrued and
unpaid dividends (whether or not declared), if any, on the Series B Preferred
Stock shall be canceled.
(d) Automatic Conversion.
(1) The Series B Preferred Stock will be automatically
converted into shares of Common Stock (i) in the event of (A) any consolidation
or merger of the Corporation with or into any other unrelated corporation or
other entity in which the Corporation is not the surviving entity, or any other
corporate reorganization or transaction or series of related transactions by the
Corporation in which in excess of 75% of the Corporation's voting power is
transferred to an unrelated person or entity, or (B) a sale or other disposition
of all or substantially all of the assets of the Corporation (any such event in
(A) or (B), a "Merger Transaction") or (ii) upon receipt by the Corporation of a
written notice from the holders of a Supermajority of the Series B Preferred
Stock electing to convert their shares of Series B Preferred Stock.
(2) Upon the occurrence of any of the events specified in
paragraph (d)(1) above, the outstanding shares of Series B Preferred Stock shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates
evidencing such shares of Series B Preferred Stock are either delivered to the
Corporation or its transfer agent as provided below, or the holder thereof
notifies the Corporation or its transfer agent that such certificates have been
lost, stolen, mutilated or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon the occurrence of such automatic
conversion of the Series B Preferred Stock, the holders of Series B Preferred
Stock shall surrender the certificates representing such shares at the office of
the Corporation or any transfer agent for the Series B Preferred Stock.
Thereupon, there shall be issued and delivered to such holder promptly at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock into
which the share of Series B Preferred Stock surrendered were convertible on the
date on which such automatic conversion occurred.
(e) Mechanics of Conversion. Each holder of Series B Preferred Stock
that desires to convert its shares of Series B Preferred Stock into shares of
Common Stock shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series B Preferred Stock or Common Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same and shall
state therein the number of shares of Series B Preferred Stock being converted.
Thereupon the Corporation shall promptly issue and deliver to such holder a
certificate or certificates for the
<PAGE>
7
number of shares of Common Stock to which such holder is entitled. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the certificate or certificates
representing the shares of Series B Preferred Stock to be converted, and the
person or entity entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder of such
shares of Common Stock on such date. In the event that a notice to convert is
given following a Redemption Notice and such redemption is not consummated, the
conversion shall, at the option of the holder of the Series B Preferred Stock
who tendered for conversion, be voidable and such holder shall have the right to
maintain ownership of the shares of Series B Preferred Stock tendered for
conversion.
(f) Adjustment for Stock Splits and Combinations. If the Corporation
at any time or from time to time after the Issuance Date effects a subdivision
of the outstanding Common Stock, the Series B Conversion Ratio then in effect
immediately before that subdivision shall be proportionately increased (and the
Series B Conversion Ratio that would apply after December 1, 2000, if the
Conversion Adjustment Condition is not satisfied, shall be proportionately
increased), and conversely, if the Corporation at any time or from time to time
after the Issuance Date combines the outstanding shares of Common Stock into a
smaller number of shares, the Series B Conversion Ratio then in effect
immediately before the combination shall be proportionately decreased (and the
Series B Conversion Ratio that would apply after December 1, 2000, if the
Conversion Adjustment Condition is not satisfied, shall be proportionately
decreased). Any adjustment under this subsection (f) shall become effective at
the close of business on the date the subdivision or combination becomes
effective.
(g) Adjustment for Certain Dividends and Distributions. If the
Corporation at any time or from time to time after the Issuance Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Series B Conversion Ratio then in effect
shall be increased (and the Series B Conversion Ratio that would apply after
December 1, 2000, if the Conversion Adjustment Condition is not satisfied, shall
be proportionately increased) as of the time of such issuance or, in the event
such record date is fixed, as of the close of business on such record date, by
multiplying the Series B Conversion Ratio then in effect by a fraction (1) the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution, and (2) the denominator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date; provided, however, that, if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series B Conversion Ratio shall be recomputed accordingly as
of the close of business on such record date and thereafter the Series B
Conversion Ratio shall be adjusted pursuant to this subsection (g) as of the
time of actual payment of such dividends or distributions.
(h) Adjustment for Reclassification, Exchange and Substitution. In
the event that at any time or from time to time after the Issuance Date, the
Common Stock issuable upon the conversion of the Series B Preferred Stock is
changed into the same or a different number of
<PAGE>
8
shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
of stock dividend or a reorganization, merger, consolidation or sale or assets,
provided for elsewhere in this Section 8), then and in any such event each
holder of Series B Preferred Stock shall have the right thereafter to convert
such Series B Preferred Stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change, by holders of the maximum number of shares of Common Stock into
which such shares of Series B Preferred Stock could have been converted
immediately prior to such recapitalization, reclassification or change, all
subject to further adjustment as provided herein.
(i) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Series B Conversion Ratio, the Corporation, at its expense,
shall cause its Chief Financial Officer or Chief Accounting Officer to compute
such adjustment or readjustment in accordance with the provisions hereof and
prepare a certificate showing such adjustment or readjustment, and shall mail
such certificate, by certified mail, return receipt requested, postage prepaid,
to cash registered holder of Series B Preferred Stock at the holder's address as
shown in the Corporation's books. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (1) the Series B
Conversion Ratio at the time in effect and (2) the type and amount, if any, of
other property which at the time would be received upon conversion of the Series
B Preferred Stock.
(j) Fractional Shares. No fractional shares of Common Stock shall be
issuable upon conversion of the Series B Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to the product of such fraction multiplied by
the fair market value of one share of Common Stock on the date of conversion, as
determined in good faith by the Board.
(k) Reservation of Common Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series B Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series B Preferred Stock.
(l) Notices. Any notice required or permitted by this Section 8 or
any other provision hereof to be given shall be deemed sufficient and effective
when received if in writing and sent by hand delivery, overnight courier or
certified or registered mail, return receipt requested, postage prepaid, and
addressed (x) to a holder of record of Series B Preferred Stock at the address
of such holder appearing on the books of the Corporation, or (y) to the
Corporation at 115 Stevens Avenue, Valhalla, NY, 10595 or (z) to the Corporation
or any such holder, at any other address for the giving of notice specified in a
written notice given to the other.
(m) Payment of Taxes and Other Charges. The Corporation will pay all
taxes (other than taxes based upon income) and other governmental or third party
charges that may be imposed with respect to the issue or delivery of shares of
Common Stock upon conversion of shares of Series B Preferred Stock, including,
without limitation, any tax or other charge imposed in connection with any
transfer involved in the issue and delivery of shares of Common
<PAGE>
9
Stock in a name other than that in which the shares of Series B Preferred Stock
so converted were registered.
Section 9. No Amendment or Impairment. The Corporation shall not
amend its Certificate of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or seeking
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation.
Section 10. No Reissuance of Series B Preferred Stock. No share or
shares of Series B Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued.
Section 11. Outstanding Shares. For the purpose of this Certificate
of Designations, all shares of Series B Preferred Stock issued shall be deemed
outstanding except (i) from the date, or the deemed date, of surrender of
certificates evidencing shares of Series B Preferred Stock, all shares of Series
B Preferred Stock converted into Common Stock, (ii) from the date of
registration of transfer, all shares of Series B Preferred Stock held of record
by the Corporation or any subsidiary of the Corporation and (iii) any and all
shares of Series B Preferred Stock held (in escrow or otherwise) prior to
delivery of such stock by the Corporation to the initial beneficial owners
thereof.
Section 12. Status of Acquired Shares. Shares of Series B Preferred
Stock received upon redemption, purchase, conversion or otherwise acquired by
the Corporation will be restored to the status of authorized but unissued shares
of Preferred Stock, without designation as to class, and may thereafter be
issued, but not as shares of Series B Preferred Stock.
Section 13. Preemptive Rights. The Series B Preferred Stock is not
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.
Section 14. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law , such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
<PAGE>
10
IN WITNESS WHEREOF, MonsterDaata.com, Inc. has caused this
certificate to be signed on its behalf by James Garfinkel, its Vice President
and Secretary, this 24th day of March, 2000.
MONSTERDAATA.COM, INC.
By: /s/ James Garfinkel
--------------------------------------
Name: James Garfinkel
Title: Vice President and Secretary
For the Year For the Year
Ended Ended
December 31, December 31,
1999 1998
---------------------------
Average common share outstanding - Basic 6,956,929 6,024,773
Net effect of dilutive stock options and/or
warrants - based on the treasury method
using average market price 0 0
-------------------------
Average common share outstanding - Diluted 6,956,929 6,024,773
=========================
Loss from continuing operations ($2,829,346) ($1,646,795)
Preferred stock dividend 0 0
-------------------------
Loss applicable to common stockholders ($2,829,346) ($1,646,795)
=========================
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This financial data schedule contains summary financial information extracted
from balance sheet and income statement and is qualified in its' entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 619,546
<SECURITIES> 0
<RECEIVABLES> 297,516
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,534
<PP&E> 1,068,886
<DEPRECIATION> (688,156)
<TOTAL-ASSETS> 1,351,894
<CURRENT-LIABILITIES> 1,877,642
<BONDS> 0
0
1,581,760
<COMMON> 76,609
<OTHER-SE> (2,271,584)
<TOTAL-LIABILITY-AND-EQUITY> 1,351,894
<SALES> 2,488,434
<TOTAL-REVENUES> 2,488,434
<CGS> 753,013
<TOTAL-COSTS> 4,573,958
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,599
<INCOME-PRETAX> (2,828,596)
<INCOME-TAX> 750
<INCOME-CONTINUING> (2,829,346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,829,346)
<EPS-BASIC> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
