AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 4, 2000
REGISTRATION NO. 333-93511
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MonsterDaata.com, Inc.
----------------------
(name of small business issuer in its charter)
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DELAWARE 7374 22-2732163
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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115 Stevens Avenue
Valhalla, NY 10595
(914) 747-9100
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(Address and telephone number of principal executive offices
and principal place of business)
James Garfinkel
MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
(914) 747-9100
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(Name, address and telephone number of agent for service of process)
COPY TO:
Todd M. Roberts, Esq.
Roberts, Sheridan & Kotel,
a Professional Corporation
12 East 49th Street, 30th Floor
New York, NY 10017
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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We hereby amend this registration statement on such date or dates as may be
necessary to delay its effective date until we file a further amendment which
specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the registration statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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1,043,845 Shares
MONSTERDAATA.COM, INC.
Common Stock
We are registering 1,043,845 shares of our common stock, par value $0.01 per
share, on behalf of the selling shareholders identified under the heading
"Selling Shareholders" in this prospectus. We will not receive any portion of
the proceeds from the resale of the shares registered on behalf of the selling
shareholders. For information on the methods of sale of the shares we are
registering on behalf of the selling shareholders, refer to the discussion under
the heading "Plan of Distribution."
Our common stock trades on the OTC Bulletin Board under the symbol MDDC. On May
2, 2000 the last sale price of our common stock on the OTC Bulletin Board was
$1.38.
Investing in our Common Stock involves risks. See "Risk Factors" beginning on
page 7.
Neither the Securities and Exchange Commission nor any state securities
commission approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May 3, 2000
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TABLE OF CONTENTS
Prospectus Summary ........................................................ 3
Risk Factors .............................................................. 7
Use of Proceeds ........................................................... 17
Market For Our Common Stock ............................................... 17
Dividend Policy ........................................................... 17
Capitalization ............................................................ 18
Summary Financial Data .................................................... 19
Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................... 20
Description of Our Business ............................................... 21
Management ................................................................ 33
Compensation of Executive Officers ........................................ 36
Certain Relationships and Related
Transactions ............................................................ 39
Principal Shareholders .................................................... 39
Selling Shareholders ...................................................... 41
Description of Securities ................................................. 42
Shares Eligible for Future Sale ........................................... 47
Plan of Distribution ...................................................... 47
Legal Proceedings ......................................................... 49
Legal Counsel ............................................................. 49
Changes in Accountants .................................................... 49
Experts ................................................................... 49
Available Information ..................................................... 49
Independent Auditors Report ............................................... F-1
You should rely only on the information contained in this prospectus. No dealer,
salesperson or other person is authorized to give information that is not
contained in this prospectus. This prospectus is not an offer to sell nor is it
seeking an offer to buy these securities in any jurisdiction where the offer or
sale is not permitted. The information contained in this prospectus is correct
only as of the date of this prospectus, regardless of the time of the delivery
of this prospectus or any sale of these securities.
The statements contained in this prospectus 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.
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 our objectives, including, among other things, technological
and other developments in the Internet field, intense and evolving competition,
the lack of an "established trading market" for our shares, and our ability to
obtain additional financing, as well as other risks detailed from time to time
in our public disclosure filings with the Securities and Exchange Commission
(the "SEC").
We have filed applications for the registration of the following trademarks:
DAATA SUPERSTORE, MAKE MY DAATA, NEIGHBORHOOD PLACE, PERSONAL PRIVATE EYE, and
RELOCATION PLACE. This prospectus also includes product names, trademarks and
trade names of other companies not related to us.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This
summary does not contain all of the information that you should consider before
investing in shares of our common stock offered by the Selling Shareholders. You
should read the entire prospectus carefully, especially the risks of investing
in our common stock discussed under "Risk Factors" on page 6.
MonsterDaata.com, Inc.
Our Business
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.
In addition to distributing our products and services through our own Web site
at www.MonsterDaata.com, we license portions of our content databases to
selected Internet portals and real estate destination Web sites, including
www.REALTOR.com, the country's leading real estate 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.
Our Business Objectives and Market
Our objective is to be the premier total solutions provider of real estate
transaction facilitation and due diligence information on the Internet. We
believe that we are well positioned to use our comprehensive content and
database development capabilities to support real estate professionals,
including brokers, lenders, insurers, title companies, appraisers, and
investors, and consumers in their sales, purchase, finance and insurance
transactions involving commercial and residential real estate on the Internet.
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 industry,
because of its size, fragmented nature and reliance on the exchange of
information, is particularly well suited to benefit from the Internet. According
to the United States Department of Commerce, in 1998 the U.S. real estate
industry generated $1.5 trillion of commerce and accounted for 15% of the gross
domestic product. A recent study in 1999, by NPD Online Research showed that 64%
of Web users used the Internet to shop for real estate and related information.
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,
insurers, title companies and appraisers - with consumers, businesses and
investors through our Internet data services. We plan to generate revenues from
licensing our content to other Internet sites, selling eReports and
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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, primarily to regional Multiple Listing Services
("MLSs"), Boards of Realtors, realty franchise chains, and other Web portal
sites.
Our Corporate History
We were incorporated on July 22, 1985, in Delaware, under the corporate name
"Trans West, Inc." For eight years prior to September 27, 1995, we were an
inactive corporation. On September 27, 1995 we revived our corporate charter in
Delaware and were reactivated, although we had no material assets or capital,
and no operations or income. On February 13, 1996, we changed our corporate name
to "D-Vine, Ltd."
On April 2, 1999, we acquired 99.2% of the outstanding capital stock of Taconic
Data Corp ("TDC"), a corporation which was formed in New York on June 11, 1992.
In connection with this acquisition, 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. The historical, financial and other
information contained in this prospectus relates to TDC's business for all
periods prior to April 2, 1999.
On April 5, 1999, we changed our corporate name to "MonsterDaata.com, Inc."
Our principal executive offices are located at 115 Stevens Avenue, Valhalla, NY
10595. Our phone number is (914) 747-9100.
THE OFFERING
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Common Stock Offered
by Selling Shareholders ..........................1,043,845 (1)
Use of Proceeds .......................................We will not receive any proceeds from the sale of the shares of
common stock.
Risk Factors ..........................................For a discussion of certain factors you should consider before
buying shares of our common stock, see "Risk Factors."
Dividend Policy .......................................We do not intend to pay dividends on our common stock. We plan to
retain any earnings for use in the operations of our business and
to fund future growth.
OTC Bulletin Board Symbol .............................MDDC
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(1) Includes 692,570 shares of common stock issued or issuable upon conversion
of outstanding shares of Series A Cumulative Convertible Preferred Stock and
349,275 shares of common stock issued or issuable upon the exercise of warrants
for the purchase of common stock at a price of $3.75 per share, subject to
adjustment, issued to Selling Shareholders that purchased shares of Series A
Cumulative Convertible Preferred Stock.
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SUMMARY FINANCIAL DATA
The following table summarizes the historical consolidated financial data for
our business. Financial data for periods prior to April 2, 1999, relates almost
exclusively to the operations of TDC, the company we acquired on April 2, 1999.
The income statement data and balance sheet data set forth below for the years
ended December 31, 1997, 1998 and 1999 are derived from the audited financial
statements as of December 31, 1997, 1998 and 1999, and for the periods then
ended, included near the end of this prospectus.
Due to the significant changes in the nature of our business during 1999,
results of operations in 1997 and 1998 may not be comparable to our current
operations. You should read this financial data in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section included in this prospectus.
Statement of Operations Data:
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For the Year Ended
December 31,
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1998 1999
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(in thousands, except share
and per share data)
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Sales ..................................................................... $ 1,967 $ 2,488
Cost of sales ............................................................. 1,182 753
Gross profit .............................................................. 785 1,735
Operating expenses:
Product development costs ............................................... -- 880
Selling, general and administrative expenses ............................ 2,353 3,694
Operating income (loss) ................................................... (1,568) (2,839)
Other income (expense) .................................................... (78) 10
Merger/acquisition costs .................................................. -- 215
Net income (loss) ......................................................... (1,647) (2,829)
Basic and diluted net income (loss) per common share ...................... $ (0.27) $ (0.41)
Weighted average number of common shares outstanding (basic and diluted) .. 6,024,773 6,956,929
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Balance Sheet Data:
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December 31, 1998 December 31, 1999
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(in thousands)
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Cash ...................................................................... $ 56 $ 620
Current assets ............................................................ 715 955
Current liabilities ....................................................... 2,045 1,878
Deferred revenues ......................................................... 1,084 521
Working capital net of deferred revenue ................................... (246) (402)
Total assets .............................................................. 855 1,352
Total stockholders' equity ................................................ (1,278) (613)
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RISK FACTORS
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.
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 will need to raise
additional funds in the future.
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 activities. Accordingly, our auditors have included in their
report on our financial statements for the year ended December 31, 1999, a
qualification which raises doubts as to our ability to continue as a going
concern.
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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.
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.
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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 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
terminated in March 2000 and automatically renewed with rolling 90-day
extensions, 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
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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 April 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:
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,
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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.
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 to 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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<PAGE>
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 U.S. 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 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.
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<PAGE>
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 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.
13
<PAGE>
Shares eligible for future sale could reduce the market price of our stock.
As of March 31, 2000, 7,766,010 shares of our common stock were issued and
outstanding. Of these shares, 6,409,010 are "restricted securities" which under
certain circumstances may be sold in compliance with Rule 144 or other
exemptions under the Securities Act of 1933, as amended (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, 4,591,611 are held by our officers and directors and sales will be
subject to the volume limitations contained in Rule 144.
We also have 1,206,692 shares of common stock subject to options outstanding as
of March 31, 2000 under our option plan (exercisable at prices ranging from
$1.00 to $4.00 per share). Of these options, 820,000 have been granted to
directors and executive officers, and 386,692 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
183,348 outstanding options that are currently exercisable, 160,000 are held by
directors or executive officers and 23,348 are held by other employees or
consultants.
On March 31, 2000, 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.
From November 1, 1999 through January 31, 2000, we issued a total of 1,591.76
shares of Series A Cumulative Convertible 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 March 31, 2000, warrants to purchase 120,140
shares of our common stock that were issued in connection with the sale of our
preferred stock were outstanding. Each share of our outstanding Series A
preferred stock is currently 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.
During the month of April, 2000, we issued 425 shares of Series B Cumulative
Convertible Preferred Stock and related warrants to purchase shares of our
common stock at a warrant exercise price of $4.25 per share, subject to
adjustment. Each share of our Series B preferred stock is currently convertible
into 267 shares of common stock. We have undertaken to file a registration
statement with the SEC within the six months following the first sale of Series
B preferred stock to make the common shares issuable upon conversion of the
preferred stock and upon exercise of the warrants eligible for public resale.
We currently anticipate the sale of additional shares to institutional
purchasers at a price that is materially lower the purchase price recently paid
by the purchasers of our Series A and Series B preferred stock. We have engaged
in preliminary discussions with representatives of some of these Series A and
Series B purchasers regarding an adjustment to the purchase price paid for their
shares, which would result in a refund of a portion of the proceeds or the
issuance of additional securities without charge. No assurances can be made
regarding the outcome of these discussions, but it is anticipated that the cash
impact on the company will be manageable and that the additional securities that
may be issued will total less than 5% of our fully-diluted share capital.
14
<PAGE>
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 (the "Exchange Act") 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.
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; and
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.
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<PAGE>
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.
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 March 31, 2000, Mitchell Deutsch, together with his children, owned about
40.3% of our outstanding common stock, and James Garfinkel, together with his
wife and child, owned about 15.8% 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. As of March 31, 2000, 1,567.32 shares of Series A
Cumulative Convertible Preferred Stock were outstanding. Our Board of Directors
has
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<PAGE>
also authorized the issuance of 2,000 shares of Series B Cumulative Convertible
Preferred Stock, of which 425 shares were outstanding as of April 27, 2000.
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.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of common stock.
MARKET FOR OUR COMMON STOCK
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
-------------- ---- ---
March 31, 2000 $8.00 $3.25
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
May 2, 2000 was $1.38 per share. At March 31, 2000, there were 7,766,010 shares
of common stock outstanding, which were held by approximately 545 stockholders
of record.
DIVIDEND POLICY
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. 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.
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CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999. The
table should be read in conjunction with our financial statements, and the
related notes thereto. See "Financial Statements."
<TABLE>
<CAPTION>
December 31,
1999
-----------
<S> <C>
Capital lease obligations ................................................. $70,882
Notes payable to stockholders ............................................. 298,702
Stockholders' equity:
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, $.01 par value; 50,000,000 shares authorized, 7,660,948
shares issued and outstanding ........................................ 76,609
Additional paid-in capital ................................................ 3,036,154
Options and warrants ...................................................... 535,665
Note receivable, stockholder .............................................. (95,950)
Accumulated earnings (deficit) ............................................ (5,747,453)
Total stockholders' equity (deficiency) ................................... $(613,215)
</TABLE>
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<PAGE>
SUMMARY FINANCIAL DATA
The following table summarizes the historical consolidated financial data for
our business. Financial data for periods prior to April 2, 1999, relates almost
exclusively to the operations of TDC, the company we acquired on April 2, 1999.
The income statement data and balance sheet data set forth below for the years
ended December 31, 1998 and 1999 are derived from the audited financial
statements as of December 31, 1998 and 1999, and for the periods then ended,
included near the end of this prospectus.
Due to the significant changes in the nature of our business during 1999,
results of operations in 1998 may not be comparable to our current operations.
You should read this financial data in conjunction with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section included in this prospectus.
<TABLE>
<CAPTION>
For the Year Ended
December 31,
Statement of Operations Data: 1998 1999
- -----------------------------------------------------------------------------------------
(in thousands, except share and per
share data)
<S> <C> <C>
Sales .............................................. $ 1,967 $ 2,488
Cost of sales ...................................... 1,182 753
--------------------------
Gross profit ....................................... 785 1,735
Operating expenses:
Product development costs ....................... -- 880
Selling, general and administrative expenses ..... 2,353 3,694
Operating income (loss) ............................ (1,568) (2,839)
Other income (expense) ............................. (78) 10
Merger/acquisition costs ........................... -- 215
--------------------------
Net income (loss) .................................. (1,647) (2,829)
==========================
Basic and diluted net income (loss)
per common share ................................. $ (0.27) $ (0.41)
Weighted average number of common shares outstanding
(basic and diluted) ........................ 6,024,773 6,956,929
<CAPTION>
December 31, December 31,
1998 1999
Balance Sheet Data: (in thousands)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Cash ............................................... $ 56 $ 620
Current assets ..................................... 715 955
Current liabilities ................................ 2,045 1,878
Deferred revenues .................................. 1,084 521
Working capital net of deferred revenue ............ (246) (402)
Total assets ....................................... 855 1,352
Total stockholders' equity ......................... (1,278) (613)
</TABLE>
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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.
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
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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 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 total deferred revenue) of $401,985. 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
during the second quarter of 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. As described
in more detail above, during the month of April, 2000, we issued 425 shares of
Series B Cumulative Convertible Preferred Stock and related common stock
purchase warrants for $425,000, and we are engaged in preliminary discussions
regarding an adjustment downward in the purchase price which could result in a
partial refund of these proceeds or the issuance of additional securities
without charge. 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.
DESCRIPTION OF OUR BUSINESS
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,
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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).
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
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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 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.
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
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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 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
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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 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
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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 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)
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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.
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:
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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.
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 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;
o Signonsandiego.com - a San Diego Tribune site, offering San Diego's
most comprehensive online community with seven million monthly page
views;
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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;
o Compatibility with key customer's existing information systems;
o Reputation for reliability;
o Price;
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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,
Move.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
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 come 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;
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<PAGE>
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.
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
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<PAGE>
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.
Properties
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.
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 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
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<PAGE>
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.
MANAGEMENT
Our Directors and Executive Officers
The following table sets forth certain information regarding the members of our
board of directors and our executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mitchell 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
Marc Siden...................... 32 Executive Vice President - Strategy
James Garfinkel................. 42 Secretary, Treasurer, Vice President, Director
Thomas Ingegneri................ 55 Director
</TABLE>
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
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<PAGE>
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 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 science 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.
MARC SIDEN has been our Executive Vice President, Strategy since March 2000.
Previously Mr. Siden was 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. Mr. Siden is a graduate of the University of Maryland
with a Bachelor of Arts degree.
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<PAGE>
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.
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
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.
Compensation of Directors
Our directors do not currently receive any fees or other compensation in
connection with their services as directors.
Board of Directors Committees
We currently have no separate committees of directors, and all directors
participate in matters customarily delegated to Audit Committees, Compensation
Committees and Executive Committees.
Limitations on Directors' Liabilities and Indemnification
Our Amended and Restated Certificate of Incorporation limits the liability of
our directors and officers for monetary damages for any breach of fiduciary duty
to the maximum extent permitted by Delaware law. As such, we believe that our
directors and officers would not be personally liable for monetary damages for
breach of their fiduciary duties as a director or officer, except for liability
(1) for breach of their duty of loyalty to the corporation or its stockholders;
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (3) for unlawful payments of dividends
or unlawful stock repurchases or redemptions as provided in Section 174 of the
General Corporation Law of the State of Delaware; or (4) for any transaction
from which the director or officer derives an improper personal benefit. In
addition, our Amended and Restated Certificate of Incorporation provides for the
mandatory indemnification of our current and former directors and officers. We
indemnify them against all expenses, including amounts paid upon judgment,
counsel fees and amounts paid and in settlement, in connection with the defense
or settlement of any claim, action, suit or proceeding brought against them
because they are or were our director or officer. Our indemnification does not
extend, however, to circumstances where a current or former director or officer
is adjudged to be liable for his or her own willful misconduct in the
performance of his or her duties. Our bylaws require that we provide advances to
our directors and officers to cover their expenses, as they are incurred, if we
receive an undertaking from them that they will repay these advances if it is
later determined that they were not entitled to be indemnified by us in such
circumstances. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors and officers pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion
35
<PAGE>
of the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Compensation of Executive Officers
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.
<TABLE>
<CAPTION>
Securities
Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation Options/SARs
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mitchell F. Deutsch(1)................... 1999 $212,893 $11,200 $ 55,667 490,000
President, Chief Executive Officer 1998 $64,487 $0 $371,163 0
and Chairman of the Board 1997 $237,500 $0 $0 0
Edward J. Tobin(2)....................... 1999 $0 $0 $0 0
Former Chief Executive Officer, President and 1998 $0 $0 $0 0
Director 1997 $0 $0 $0 0
James Garfinkel(1)....................... 1999 $62,668 $4,800 $0 210,000
Secretary, Treasurer and Vice-President 1998 $57,645 $0 $25,455 0
1997 $35,000 $0 $0 0
John Evans............................... 1999 $80,099 $39,500 $0 228,000
Chief Financial Officer and Executive Vice President 1998 $0 $0 $0 0
- Corporate Development 1997 $0 $0 $0 0
Marc Siden(1) ........................... 1999 $67,500 $0 $0 100,000
Executive Vice President - Strategy 1998 $0 $0 $0 0
1997 $0 $0 $0 0
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The salary information relates to their employment with TDC for
periods prior to April 2, 1999..
(2) Mr. Tobin resigned as an executive officer and director on April 2,
1999 in connection with our acquisition of TDC.
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<PAGE>
Employment Agreements
We currently have no written employment agreements with any of our key officers
or directors, although we intend to complete employment agreements with our
executive officers during the second quarter of 2000.
STOCK OPTIONS
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 Exercise
Options/SARs employees in or Expiration
Name and Principal Position granted fiscal year(1) Base Price Date
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mitchell Deutsch 490,000 30.8% $1.10 June 20, 2004
President, Chief Executive Officer
and Chairman of the Board
James Garfinkel 210,000 13.2% $1.10 June 20, 2004
Secretary, Treasurer and Vice-
President
John Evans 128,000 8.0% $1.00 June 21, 2009
Chief Financial Officer and Executive Vice 100,000 6.3% $3.02 Oct. 11, 2009
President - Corporate Development
Marc Siden 50,000 3.1% $1.00 June 21, 1999
Executive Vice President - Strategy 50,000 3.1% $3.02 Oct. 11, 2009
</TABLE>
- ----------
(1) Percentage based on 1,591,421 options issued during the fiscal year ending
December 31, 1999.
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<PAGE>
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 $259,700.00 $1,038,800.00
James Garfinkel 0 42,000 168,000 $111,300.00 $ 445,200.00
John Evans 123,000 5,000 100,000 $ 13,750.00 $ 73,000.00
Marc Siden 5,000 20,000 75,000 $ 14,600.00 $ 145,650.00
</TABLE>
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. 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 March 31, 2000, options to purchase 1,206,692 shares
of common stock were outstanding, with exercise prices between $1.00 and $4.00
per share, and 183,348 of the options were vested and exercisable at that time.
Options issued under our Plan do not confer upon recipients thereof any voting
or any other rights of stockholders.
- --------
(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.
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<PAGE>
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.
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.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of March 31, 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 7,766,010 shares of common stock outstanding on March 31,
2000.
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<PAGE>
Name Amount(3) Percent
- ---- --------- -------
Directors and Executive Officers
Mitchell Deutsch(4) 3,262,174 42.0%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
John Evans 134,400 1.7%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
Marc Siden(5) 442,929 5.7%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
James Garfinkel(6) 1,214,973 15.6%
c/o MonsterDaata.com, Inc.
115 Stevens Avenue
Valhalla, NY 10595
Thomas Ingegneri(7) 119,764 1.5%
54 South Main St
Cranbury, NJ 08512
Directors and named executive
officers as a group 5,174,239 66.6%
5% Shareholders
Barry Garfinkel(8) 421,724 5.4%
919 Third Ave
New York, NY 10022
- ----------
(3) 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 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.
(4) 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.
(5) These shares are held in the name of What About Me, Inc., an entity owned by
Marc Siden.
(6) Includes 24,540 shares owned by James Garfinkel's dependent child and 42,000
shares issuable under options exercisable within 60 days.
(7) These shares are held in the name of Thomas Associates.
(8) 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.
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SELLING SHAREHOLDERS
The following table sets forth as of December 21, 1999, (i) the name of
each Selling Shareholder, (ii) the amount of shares of common stock which may be
offered by each Selling Shareholder, (iii) the amount of shares of common Stock
to be offered by each Selling Shareholder, and (iv) the amount and percentage of
shares of common Stock to be owned by each such holder following the completion
of the offering. The amounts of common Stock set forth below, under the caption
"Amount to be Offered," represent the aggregate number of shares of (A) common
Stock owned by each Selling Stockholder, (B) common Stock issued or issuable
upon conversion of the Series A Cumulative Convertible Preferred Stock owned by
each Selling Shareholder, assuming the maximum conversion rate of 450 shares of
common stock per share of Series A Cumulative Convertible Preferred Stock is
applicable, and (C) common Stock issued or issuable upon the exercise of
warrants issued to purchasers of Series A Cumulative Convertible Preferred
Stock.
<TABLE>
<CAPTION>
Shares Amount to Shares Owned after Percentage Owned after
------ --------- ------------------ ----------------------
Selling Shareholder Owned be Offered Offering Offering
- ------------------- ----- ---------- -------- --------
<S> <C> <C> <C> <C>
Allegra Films Pension, LP(1) 39,608 39,608 0 *
Bet Torah 100 100 0 *
Ron Deutsch 98,641 98,641 0 *
Barry Garfinkel 421,724 61,602 360,122 4.6
David Garfinkel 344,952 61,602 283,350 3.6
Pala Mgmt. Corp. Ret. Tr. 15,388 15,388 0 *
Gregory Hotaling(2) 1,343 1,343 0 *
Huneke Family Trust 96,922 96,922 0 *
Ice Hockey in Harlem, Inc. 500 500 0 *
David Jacquin 40,387 40,387 0 *
Ira Kotel(2) 7,571 7,571 0 *
Gustavo Larramendi 30,799 30,799 0 *
The Meaningful Life Center 800 800 0 *
Nicholas O'Keefe(2) 6,717 6,717 0 *
George Regan 20,194 20,194 0 *
Roberts, Sheridan & Kotel, a
Professional Corporation 231,236 195,836 35,400 *
Todd Roberts(2) 211,772 211,772 0 *
Troy Roberts 8,086 8,086 0 *
Holly Schepisi(2) 3,385 3,385 0 *
Student Advocacy Inc. 100 100 0 *
The Torah Program, Inc. 500 500 0 *
Eve Silverman Def'd Cont.
Plan(1) 114,286 114,286 0 *
Ziona Silverman 12,319 12,319 0 *
Leslie VanDermeer 15,388 15,388 0 *
</TABLE>
* Represents less than 1.0%. of the 7,766,010 outstanding shares of common
stock.
(1) Pension account managed for the benefit of Eve Silverman, the wife of
Mitchell Deutsch, who is the Chief Executive Officer and President and a
director of MonsterDaata.com, Inc.
(2) These selling shareholders are employees of Roberts, Sheridan & Kotel, a
Professional Corporation. As set forth in the "Legal Counsel" section
below, this law firm is providing certain legal services in connection
with this offering, and it has previously provided legal services to us in
connection with a number of other legal matters.
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<PAGE>
DESCRIPTION OF OUR SECURITIES
The following summary of certain provisions of our capital stock describes all
material provisions, but does not purport to be complete and is subject to, and
qualified in its entirety by, our Certificate of Incorporation and By-laws that
are included as exhibits to the registration statement of which this prospectus
is a part and by the provisions of applicable law.
We have filed our Certificate of Incorporation to (i) authorize 50,000,000
shares of common stock and 10,000,000 shares of preferred stock, each $.01 par
value per share, and (ii) set forth the rights and privileges of the common
stock and the preferred stock as described below. The discussion herein
describes our capital stock, the Certificate of Incorporation and the By-laws in
effect upon effectiveness of the registration statement of which this prospectus
is a part.
Common Stock
As of March 31, 2000, 7,766,010 shares of our common stock were issued and
outstanding. Holders of common stock have the right to cast only one vote for
each share of common stock held in all matters as to which the vote or consent
of our stockholders is required or taken. There are no cumulative voting rights.
Accordingly, the holders of a majority of the shares of common stock voting for
the election of directors can elect all the directors if they choose to do so,
subject to any voting rights of holders of preferred stock to elect directors.
There are no pre-emptive rights for our common stock.
Stockholders holding a majority of the voting power of the capital stock issued
and outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of our stockholders.
Holders of our common stock are entitled to receive such dividends as and if
declared by our board subject to the rights of holders of any outstanding
preferred stock. In the event of the liquidation, distribution or sale of
assets, dissolution or winding up of our affairs, all of our tangible and
intangible assets remaining after the payment of all debts, any preferential
amounts to be distributed to holders of our preferred stock, and other
liabilities, shall be distributed, pro rata, among the holders of our common
stock.
Preferred Stock
General
As of March 31, 2000, 1,567.32 shares of our preferred stock were issued and
outstanding. We may issue shares of preferred stock from time to time in one or
more series as determined by our board of directors. Our board is authorized to
establish the designation, powers, preferences, voting rights and other rights
of each series of preferred stock including (a) the rate of distribution, (b)
the price at and the terms and conditions on which shares shall be redeemed, (c)
the amount payable upon shares for distributions of any kind, (d) the terms and
conditions on which shares may be converted if the shares of any series are
issued with the privilege of conversion and (e) voting rights except as limited
by law. Our board of directors could, without shareholder approval, issue
preferred stock with voting and other rights that could adversely affect the
voting power of the holders of common stock and which could have certain
antitakeover effects. The number of authorized shares of any series of preferred
stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by resolution adopted by our board of directors.
Although we currently do not have any fixed plans to designate any series of
preferred stock, other than the Series A Cumulative Convertible Preferred Stock,
par value $0.01 ("Series A Preferred Stock") and the Series B Cumulative
Convertible Preferred Stock, par value $0.01 ("Series B Preferred Stock") or to
issue additional shares of preferred stock other than the shares of Series A
Preferred Stock and the Series B Preferred Stock, there can be no assurance that
we will not do so in the future. As a result, we could authorize the issuance of
a series of preferred stock which would grant to holders preferred rights to our
assets upon liquidation, the right to receive dividend coupons before dividends
would be declared to holders of common stock, and the right to the redemption of
such
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<PAGE>
shares, together with a premium, prior to the redemption of common stock. In
addition, our board of directors could issue large blocks of voting stock to
fend off unwanted tender offers or hostile takeovers without further stockholder
approval. Our current stockholders have no redemption rights.
Series A Cumulative Convertible Preferred Stock
Our board of directors has authorized the issuance of up to 2000 shares, of
which 1,567.32 were outstanding as of March 31, 2000, of Series A Preferred
Stock, the rights, preferences and characteristics of which are as follows:
Dividends
The holders of Series A Preferred Stock are 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), 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 A Preferred Stock. We do not intend to pay cash
dividends on the Series A Preferred Stock or the underlying common stock for the
foreseeable future.
Conversion
Each share of Series A Preferred Stock is convertible, at any time at the option
of the holder thereof, into validly issued, fully paid and nonassessable shares
of common stock. According to our Certificate of Designations for the Series A
Preferred Stock, filed on October 21, 1999, each share of Series A Preferred
Stock is convertible into shares of common stock at a conversion ratio of 300
shares of common stock for each share of Series A Preferred Stock; provided,
however, that if a "Conversion Adjustment Condition" has not been satisfied on
or prior to February 28, 2000, the conversion ratio shall on such date be
increased to 450 shares of common stock for each outstanding share of Series A
Preferred Stock. The Conversion Adjustment Condition, as defined in the
Certificate of Designations for our Series A Preferred Stock, is satisfied if we
receive net proceeds of at least $5,000,000 from the private or public sale of
common stock (or sale of preferred stock junior to the Series A Preferred Stock)
issued on terms which fairly value our common stock at more than $3.50 per
share. Because the Conversion Adjustment Condition was not satisfied as of
February 28, 2000, the conversion ratio was reset to 450 shares of common stock
for each outstanding share of Series A Preferred 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.
Automatic Conversion
The Series A Preferred Stock will be automatically converted into shares of
common stock upon the occurrence of any of the following events:
o our consolidation or merger with or into any other unrelated entity
in which we are not the surviving entity, or any other corporate
reorganization or transaction in which in excess of 75% of our
voting power is transferred to an unrelated entity;
o a sale or other disposition of substantially all of our assets; or
o our receipt of a written notice from the holders of more than 90% of
the holders of our Series A Preferred Stock electing to convert
their shares.
Liquidation
Upon our liquidation, dissolution or winding up, whether voluntary or
involuntary (a "Liquidation Event"), after payment or provision for payment of
our debts and other liabilities, the holders of the Series A Preferred Stock
then
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<PAGE>
outstanding will first be entitled to be paid out of our assets available for
distribution to our shareholders, before any payment or declaration and setting
apart for payment of any amount shall be made in respect of junior stock, $1,000
per share of Series A Preferred Stock (subject to appropriate adjustment to
reflect any stock split, combination, reclassification or reorganization of the
Series A Preferred Stock), plus an amount equal to all declared and unpaid
dividends. If upon any Liquidation Event, whether voluntary or involuntary, the
assets to be distributed to the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such shareholders of the full preferential
amounts aforesaid, then all of our assets to be distributed shall be so
distributed ratably to the holders of the Series A Preferred Stock on the basis
of the number of shares of Series A Preferred Stock held. All shares of Series A
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 our preferred
stock.
Redemption
At any time after the first anniversary of the date of original issuance of the
Series A Preferred Stock, we may, at our option, redeem the shares in whole, but
not in part, at a redemption price of $1,100 per share plus all accrued and
unpaid dividends; provided, however, that we shall not redeem Series A Preferred
Stock or give notice of any redemption unless we have sufficient and lawful
funds to redeem all of the then outstanding Series A Preferred Stock. There are
no sinking fund provisions applicable to the Series A Preferred Stock.
Voting Rights
The holders of Series A Preferred Stock do not have voting rights on any
matters, except regarding any amendment to our Certificate of Incorporation that
adversely affects the conversion terms or other economic rights or preferences
of the Series A Preferred Stock.
Series B Cumulative Convertible Preferred Stock
Our board of directors has authorized the issuance of up to 2000 shares, of
which 425 were outstanding as of May 2, 2000, of Series B Preferred Stock, the
rights, preferences and characteristics of which are as follows:
Dividends
The holders of Series B Preferred Stock are 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), 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. We do not intend to pay cash
dividends on the Series B Preferred Stock or the underlying common stock for the
foreseeable future.
Conversion
Each share of Series B Preferred Stock is convertible, at any time at the option
of the holder thereof, into validly issued, fully paid and nonassessable shares
of common stock. Each share of Series B Preferred Stock shall be convertible
into shares of common stock at a conversion ratio of 267 shares of common stock
for each share of Series B Preferred Stock; provided, however, that if a
"Conversion Adjustment Condition" has not been satisfied on or prior to December
1, 2000, the conversion ratio shall be 334 shares of common stock for each
outstanding share of Series B Preferred Stock from and after such December 1,
2000 date. The Conversion Adjustment Condition, as defined in the Certificate of
Designations for our Series B Preferred Stock, is satisfied if we receive net
proceeds of at least $3,000,000 from the private or public sale of common stock
(or sale of preferred stock junior to the Series B Preferred Stock) issued on
terms which fairly value our common stock at more than $2.50 per share.
Series B 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.
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<PAGE>
Automatic Conversion
The Series B Preferred Stock will be automatically converted into shares of
common stock upon the occurrence of any of the following events:
o our consolidation or merger with or into any other unrelated entity
in which we are not the surviving entity, or any other corporate
reorganization or transaction in which in excess of 75% of our
voting power is transferred to an unrelated entity;
o a sale or other disposition of substantially all of our assets; or
o our receipt of a written notice from the holders of more than 90% of
the holders of our Series B Preferred Stock electing to convert
their shares.
Liquidation
Upon a Liquidation Event, after payment or provision for payment of our debts
and other liabilities, the holders of the Series B Preferred Stock then
outstanding will first be entitled to be paid out of our assets available for
distribution to our shareholders, 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
such series), in the amount equal to $1,000 per share of Series B Preferred
Stock (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. 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 our assets 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 our preferred
stock.
Redemption
At any time after the first anniversary of the date of original issuance of the
Series B Preferred Stock, we may, at our option, redeem the shares in whole, but
not in part, at a redemption price of $1,100 per share plus all accrued and
unpaid dividends; provided, however, that we shall not redeem Series B Preferred
Stock or give notice of any redemption unless we have sufficient and lawful
funds to redeem all of the then outstanding Series B Preferred Stock. There are
no sinking fund provisions applicable to the Series B Preferred Stock.
Voting Rights
The holders of Series B Preferred Stock do not have voting rights on any
matters, except regarding any amendment to our Certificate of Incorporation that
adversely affects the conversion terms or other economic rights or preferences
of the Series B Preferred Stock.
Warrants
The Ocean Strategic Holdings Limited Warrant
On March 31, 2000, in consideration for the modification of the exercise price
of a previously issued warrant (from $0.01 per share to $1.00 per share), we
issued to Ocean Strategic Holdings Limited a warrant to purchase 500,000
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<PAGE>
shares of our common stock at an exercise price of $3.00 per share. The warrant
expires on March 31, 2004, and is not exercisable until March 31, 2000. The
warrant was issued pursuant to the provisions of Regulation S.
The warrant holder is entitled to an adjustment in the kind and number of shares
of stock receivable upon exercise of the warrant upon specified events,
including reclassification of our common stock, capital reorganization, stock
dividend or other change in outstanding shares of our common stock,
consolidations or mergers with or into another corporation other than a
consolidation or merger in which we are the continuing corporation and which
does not result in any reclassification, capital reorganization, stock dividend
or other change of outstanding shares or common stock and sales of our property
to another entity as an entirety.
The warrant holder may not exercise any portion of the warrant which would give
him a beneficial ownership of 5.0% or more of the outstanding shares of common
stock at the time of such exercise. The warrant holder may waive this limitation
with written notice to us made at least 61 days after a prior notice to us.
The warrant may only be transferred (i) if the transfer gives the transferee or
transferor the right to purchase at least 5,000 shares of our common stock and
(ii) in compliance with applicable federal and state securities laws by the
transferor and transferee.
Common Stock Warrants
In connection with the consummation of stock purchase agreements with various
parties for the purchase of our Series A Cumulative Convertible Preferred Stock,
we issued 594,310 warrants to purchase shares of our common stock at a purchase
price of $3.75 per share, subject to adjustment. 120,140 of these warrants were
outstanding as of March 31, 2000, all of which expire in November 2004. In
addition, we issued 56,738 warrants to purchase shares of our common stock at a
purchase price of $4.25 per share to purchasers of our Series B Cumulative
Convertible Preferred Stock, which warrants expire in April 2005. All these
warrants were issued pursuant to the provisions of Regulation D.
The warrant holders are entitled to an adjustment in the kind and number of
shares of stock receivable upon exercise of the warrant upon specified events,
including reclassification of our common stock, capital reorganization, stock
dividend or other change in outstanding shares of our common stock,
consolidations or mergers to which we are a party other than a merger or
consolidation in which we are the continuing corporation or in the case of any
sale or conveyance to another entity of the our property as an entirety or
substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation.
The warrants may only be transferred in compliance with applicable federal and
state securities laws by the transferor and transferee. 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.
Section 203 of the Delaware General Corporation Law
We are subject to a statute under the Delaware Act regulating "business
combinations," defined to include a broad range of transactions, between
Delaware corporations and "interested stockholders," defined as persons who have
acquired at least 15% of a corporation's stock. Under the statute, a corporation
may not engage in any business combination with any interested stockholder for a
period of three years from the date such person became an interested stockholder
unless certain conditions are satisfied. We have not sought to "elect out" of
the statute and, therefore the restrictions imposed by such statute apply to us.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is Corporate Stock
Transfer.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
As of March 31, 2000, 7,766,010 shares of our common stock were issued and
outstanding. Of that amount, 1,357,000 shares were freely tradable without
restriction or further registration under the Securities Act, unless purchased
or held by our "affiliates," as defined in Rule 144 of the Securities Act. The
remaining 6,409,010 shares are "restricted securities," which under certain
circumstances may be sold in compliance with Rule 144 or other exemptions under
the Securities Act, and in particular the 6,000,000 restricted shares issued in
connection with our acquisition of TDC have become eligible for resale under
Rule 144 in April 2000.
In general, under Rule 144, a person, including an affiliate, who has
beneficially owned shares of our common stock for at least one year (including
the prior holding period of any prior owner other than an affiliate) may resell,
within any three-month period, up to the following amount of shares, whichever
is greater:
o one percent of the then outstanding shares of our common stock; or
o the average weekly trading volume in the common stock during the
four calendar weeks preceding each such sale.
A person who is not our affiliate for at least three months, and who has
beneficially owned his shares for at least two years (including the holding
period of any prior owner other than an affiliate) may sell such shares under
Rule 144 without regard to the limitations described above.
Rule 144 defines "affiliate" of a company as a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such company. Affiliates of a company generally
include its directors, executive officers and principal shareholders.
Of the 6,409,010 restricted shares described above, we have registered 2,000
shares for public resale by Selling Shareholders as set forth in this
prospectus. An additional number of shares, up to 1,041,845, that may be issued
upon conversion of our Series A Preferred Stock and the exercise of the related
common stock warrants are also registered for resale as set forth in this
prospectus. Further shares, up to 170,213, may be issued upon conversion of our
recently issued Series B Preferred Stock and related common stock purchase
warrants.
Additionally, as more fully described elsewhere in this prospectus, we have
1,206,692 shares of common stock issuable upon the exercise of options
outstanding as of March 31, 2000 under our 1999 Stock Option Plan exercisable at
prices ranging from $1.00 to $4.00 per share, and 500,000 shares of common stock
issuable upon the exercise of a warrant issued to Ocean Strategic Holdings
Limited, exercisable at a price of $3.00 per share. The warrant expires on March
31, 2004, and is not exercisable until March 31, 2000. Shares issued upon the
exercise of this warrant will be "restricted securities."
As of March 31, 2000, there were approximately 545 current holders of record of
our common stock.
Sales of substantial amounts of shares of common stock in the public market, the
perception that such sales could occur, or the issuance of other securities,
could adversely affect the market price of the common stock and could impair our
future ability to raise capital through an offering of our equity securities.
PLAN OF DISTRIBUTION
We are registering 1,043,845 shares of common stock covered by this prospectus
on behalf of the Selling Shareholders. We will pay the costs and fees of
registering the common stock, but the Selling Shareholders will pay any
brokerage commissions, discounts or other expenses relating to the sale of the
common stock.
The Selling Shareholders may, from time to time, sell all or portion of the
shares of common stock on any market upon which the common stock may be quoted,
in privately negotiated transactions or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale, at prices related to
the prevailing market prices, or
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<PAGE>
at negotiated prices. The shares of common stock could be sold by the Selling
Shareholders by one or more of the following methods:
o block trades in which the broker or dealer so engaged will attempt
to sell the shares of the common stock as agent, but may position
and resell a portion of the block as principal, in order to
facilitate the transaction;
o purchases by a broker or dealer as principal and the resale by the
broker or dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o privately negotiated transactions;
o market sales, both long and short to the extent permitted under the
federal securities laws; and
o a combination of any of these methods of sale.
When selling the common stock, the Selling Shareholders may enter into hedging
or other types of transactions with third parties. For example, the Selling
Shareholders may:
o enter into transactions involving short sales of the common stock by
broker-dealers;
o sell common stock short themselves and redeliver such shares to
close out their short positions;
o enter into options or other types of transactions that require the
selling shareholder to deliver common stock to a broker-dealer, who
will then resell or transfer the common stock under this prospectus;
or
o loan or pledge the common stock to a broker-dealer, who may sell the
loaned shares or, in the event of default, sell the pledged shares.
In effecting sales, brokers and dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Broker-dealers may receive
commissions, discounts or concessions for their services from the Selling
Shareholders or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser, in amounts to be negotiated. These commissions
or discounts are not expected to exceed those customary in the types of
transactions involved. Broker-dealers may agree with the Selling Shareholders to
sell a specified number of shares of common stock at a stipulated price per
share, and, to the extent such broker-dealer is unable to do so acting as agent
for the selling shareholder, to purchase as principal any unsold shares of
common stock at the price required to fulfill the broker-dealer commitment to
the Selling Shareholders.
The Selling Shareholders and any broker-dealer or agent involved in the sale or
resale of the common stock may qualify as "underwriters" within the meaning of
Section 2(a)(11) of the Securities Act and a portion of any proceeds of sale and
the broker-dealers' or agents' commissions, discounts, or concessions may be
deemed to be underwriters' compensation under the Securities Act.
In addition to selling their common stock under this prospectus, the Selling
Shareholders may:
o agree to indemnify any broker-dealer or agent against certain
liabilities related to the selling of the common stock, including
liabilities arising under the Securities Act;
o transfer their common stock in other ways not involving market
makers or established trading markets, including directly by gift,
distribution, or other transfer; or
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<PAGE>
o sell their common stock under Rule 144 of the Securities Act rather
than under this prospectus, if the transaction meets the
requirements of Rule 144.
We have informed the Selling Shareholders that the anti-manipulation provisions
of Regulation M promulgated under the Securities Exchange Act may apply to the
sales of their shares offered hereby, and we have also advised the Selling
Shareholders of the requirement for delivery of this prospectus in connection
with any sale of the common stock offered hereby.
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 TDC 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.
LEGAL COUNSEL
The validity of the common stock offered hereby will be passed upon for us by
Roberts Sheridan & Kotel, a Professional Corporation, New York, New York. The
firm, together with certain of its employees, beneficially own an aggregate of
462,024 shares of common stock, assuming the conversion of all shares of Series
A Preferred Stock beneficially owned by Roberts, Sheridan & Kotel, a
Professional Corporation, and its employees. 462,624 of these shares of common
stock are included in this offering.
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.
EXPERTS
Our financial statements as of December 31, 1998 and December 31, 1999 and for
each of the years in the period then ended included in this prospectus have been
so included in reliance on the report of Marcum & Kliegman LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
AVAILABLE INFORMATION
We filed a registration statement with the SEC on Form SB-2 relating to the
shares offered in this prospectus. This prospectus does not contain all of the
information included in the registration statement. For further information
about us and the shares we are offering in this prospectus, refer to the
registration statement and its exhibits. The statements we make in this
prospectus regarding the content of any contract or other document are
necessarily not complete, and you may examine the copy of the contract or other
document that we filed as an exhibit to the registration statement. All our
statements about those contracts or other documents are qualified in their
entirety by referring you to the exhibits to the registration statement.
After the effective date of this offering, we intend to furnish to our
stockholders annual reports containing audited financial statements and interim
reports. We currently file annual and quarterly reports and other information
with
49
<PAGE>
the SEC. Such reports and other information can be inspected and copied at the
public reference facility of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices located
at Seven World Trade Center, Suite 1300, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained by mail from the Public Reference Section of the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Our common stock is traded in the over-the-counter market and
is quoted on the OTC Bulletin Board(R) and such reports, proxy statements and
other information concerning us may be inspected and copied at the offices of
the National Association of Securities Dealers, Inc., 9801 Washingtonian
Boulevard, Gaithersburg, Maryland 20878. In addition, we are required to file
electronic versions of these documents with the SEC through the SEC's Electronic
Data Gathering, Analysis and Retrieval ("EDGAR") system. The SEC maintains a Web
site at http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the SEC.
50
<PAGE>
MONSTERDAATA.COM, INC.
CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
<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
<TABLE>
<S> <C> <C>
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
===========
</TABLE>
The accompanying notesare an integral part of these financial statements.
F-2
<PAGE>
MONSTERDAATA.COM, INC.
BALANCE SHEET
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<S> <C> <C>
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
===========
</TABLE>
The accompanying notesare 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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
--------------------------------------
<S> <C> <C>
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)
============ ============
</TABLE>
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 Common
Shares Stock Stock Additional
-------------------------- Par Value Par Value Paid-in
Subscribed Issued $0.01 Shares $0.01 Capital
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - January 1, 1998 -- $-- 2,803,750 $28,038 $ (26,038)
Stock transaction among
Stockholders 140,330
Conversion of accounts payable 162,143 1,621 225,379
Conversion of debt 758,158 7,582 962,836
Capital contribution 228,562
Stock-based compensation 51,050 511 70,959
Issuance of stock for services 110,340 1,103 379,144
Reorganization 2,139,332 21,393 (21,393)
Net loss -- -- -- -- -- --
------------ ----------- ---------- --------- ------- ----------
BALANCE - December 31,
1998 (Forward) -- -- $-- 6,024,773 $60,248 $1,959,779
============ =========== ========== ========= ======= ==========
<CAPTION>
Options
and Note Accumulated
Warrants Receivable Deficit Total
------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE - January 1, 1998 $-- $-- $(1,271,312) $(1,269,312)
Stock transaction among
Stockholders 140,330
Conversion of accounts payable 227,000
Conversion of debt 970,418
Capital contribution 228,562
Stock-based compensation 71,470
Issuance of stock for services 380,247
Reorganization --
Net loss -- -- (1,646,795) (1,646,795)
-------- --------- ----------- ---------
BALANCE - December 31,
1998 (Forward) $-- $-- $(2,918,107) $(898,080)
======== ========= =========== =========
</TABLE>
The accompanying notesare 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 Common
Shares Stock Stock Additional Options
-------------------------- Par Value Par Value Paid-in and
Subscribed Issued $0.01 Shares $ 0.01 Capital Warrants
--------------------------------------------------------------------------------------------
<S> <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)
Conversion of accounts payable 113,142 1,131 228,869 82,500
Issuance of preferred stock
and warrants 1,56 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
Net loss -- -- -- -- -- -- --
----- ----- ---------- --------- ------- ---------- ---------
Balance - December 31, 1999 20.53 1,56 $1,581,760 7,660,948 $76,609 $3,036,154 $ 535,665
===== ===== ========== ========= ======= ========== =========
<CAPTION>
Note Accumulated
Receivable Deficit Total
---------------------------------------------
<S> <C> <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 (118,000) 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 22,050
Net loss -- (2,829,346) (2,829,346)
-------- ----------- ------------
Balance - December 31, 1999 $(95,950) $(5,697,803) $ (613,215)
======== =========== ============
</TABLE>
The accompanying notesare 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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
-------------------------------------------
<S> <C> <C>
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 1,582,744 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
----------- -----------
</TABLE>
The accompanying notesare 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
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
-------------------------------------------
<S> <C> <C>
NET INCREASE IN CASH AND CASH
EQUIVALENT $ 563,954 $ 22,022
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
</TABLE>
The accompanying notesare an integral part of these financial statements.
F-8
<PAGE>
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 reactivated 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>
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>
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>
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>
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>
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>
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>
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>
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 1,116,471 32,650
S corporation - pass through to stockholders -- 192,438
----------- -----------
Total $ 750 $ 325
=========== ===========
F-17
<PAGE>
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 1,464,000
------------
1,732,000
Less: Valuation Allowance (1,732,000)
------------
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 $3,574,000, 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>
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.
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.
F-19
<PAGE>
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:
<TABLE>
<CAPTION>
Number Weighted Weighted
Of Average Average
Options Exercise Price Remaining Life
-------------------------------------------------------
<S> <C> <C> <C>
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
=========
</TABLE>
F-20
<PAGE>
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>
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
In March 2000, 24.44 shares of Series A Preferred Stock were converted into
11,000 shares of common stock by four Series A Preferred Stock holders.
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 $6.70 and $7.00 per share, respectively. 10,985 and 10,286 shares
of the common stock were issued in connection with the exercise of these
options, respectively.
F-22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Section 145 of the General Corporation Law of the State of
Delaware, we have elected to provide our directors and officers with protections
and indemnities to the fullest extent permitted by Delaware law, even in cases
where the claims are brought by us or on our behalf. These protections and
indemnifications do not eliminate the directors' fiduciary duties, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware law. We have also
applied to purchase directors' and officers' liability insurance coverage for
such claims, to the extent we can obtain insurance on commercially reasonable
terms to provide coverage against claims for monetary damages for breach of
fiduciary duty.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by us in
connection with the sale of the common stock being registered hereby. All
amounts shown are estimates, except the SEC registration fee.
SEC Registration Fee.................................................$1,378.40
Legal Fees and Expenses.............................................$30,000.00
Accounting Fees and Expenses........................................$35,000.00
Miscellaneous.......................................................$ 5,000.00
==========
Total...............................................................$71,378.40
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding securities sold by us in the last three
years that were not registered under the Securities Act. None of these sales of
securities involved the use of an underwriter and no commissions were paid in
connection with the sale of any of these securities.
In the last three years, none of these securities were registered under the
Securities Act:
o On August 1, 1997, we issued to Ocean Strategic Holdings, Ltd.
("OSHL") a warrant for the purchase of 1,000,000 shares of our
common stock for cash consideration of $50,000 (the "1997 Warrant").
The 1997 Warrant was issued pursuant to the provisions of Regulation
S of the Securities Act. The exercise price of the 1997 Warrant,
which was originally $0.01 per share, was increased to $1.00 per
share in connection with the issuance of the 1999 Warrant to OHSL
(described below).
o On March 31, 1999, in consideration for the modification of the
exercise price (from $0.01 per share to $1.00 per share) of the 1997
Warrant, we issued to OSHL a new warrant to purchase 500,000 shares
of our common stock at an exercise price of $3.00 per share (the
"1999 Warrant"). The 1999 Warrant expires on March 31, 2004, and is
not exercisable until March 31, 2000. The 1999 Warrant was issued
pursuant to the provisions of Regulation S.
o On April 2, 1999, we issued 6,000,000 of our shares of common stock
to 18 shareholders of TDC, in exchange for their shares of TDC. Our
shares of common stock were issued solely for shares of Taconic.
These shares were issued in a transaction that did not involve any
public offering of our shares within the meaning of Section 4(2) of
the Securities Act and Rule 506 of Regulation D. On December 1,
1999, we issued to Barry Hartheimer 31,000
II-1
<PAGE>
shares of our common stock for services he provided to us in
connection with the issuance of our shares to TDC on April 2, 1999,
and in connection with the completion of a $243,075 capital
contribution that was made to us by certain of our shareholders
prior to April 2, 1999. These shares were also issued in a
transaction that did not involve any public offering of our shares
within the meaning of Section 4(2) of the Securities Act and Rule
506 of Regulation D.
o Also on April 2, 1999, OSHL exercised its rights under the 1997
Warrant to purchase 1,000,000 shares of our common stock for
$1,000,000. The 1,000,000 shares issued upon exercise of the 1997
Warrant were issued pursuant to the provisions of Regulation S, and
the funds received were used for Web site development costs and
general corporate purposes.
o On August 23, 1999, pursuant to a development and consulting
agreement with X-Ceed, Inc., we issued to X-Ceed, Inc. 82,142 shares
of our common stock. These shares were issued in a transaction that
did not involve any public offering of our shares within the meaning
of Section 4(2) of the Securities Act and Rule 506 of Regulation D.
o Pursuant to transactions completed from November through February
2000, we issued 1,591.76 shares of Series A Preferred Stock and
related warrants to purchase common stock to private investors for
an aggregate offering amount of $1.5 million. These shares were
issued in a transaction that did not involve any public offering of
our shares within the meaning of Section 4(2) of the Securities Act
and Rule 506 of Regulation D, and the proceeds were used for general
corporate purposes.
o Pursuant to transactions completed in April 2000, we issued 425
shares of Series B Preferred Stock and related warrants to purchase
common stock to private investors for an aggregate offering amount
of $425,000. These shares were issued in a transaction that did not
involve any public offering of our shares within the meaning of
Section 4(2) of the Securities Act and Rule 506 of Regulation D, and
the proceeds were used for general corporate purposes.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibit
Number Description of Document
-----------------------
2.1 Acquisition Agreement and Plan of Reorganization, dated March 26, 1999,
among D-Vine, Ltd., Taconic Data Corp., and certain shareholders of
D-Vine, Ltd. and of Taconic Data Corp. (incorporated by reference from
our Current Report filed on Form 8-K with the SEC on April 16, 1999).
3.1 Amended and Restated Certificate of Incorporation (incorporated by
reference from 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 from our
amendment to our Annual Report filed on Form 10-K/A with the SEC on
December 7, 1999).
4.1 Warrant to purchase 500,000 shares of our common stock, at an exercise
price of $3.00 per share, issued to Ocean Strategic Holdings, Limited
on March 31, 1999 (incorporated by reference from our Current Report
filed on Form 8-K with the SEC on April 16, 1999).
4.2.1 Certificate of Designations, Preferences and Rights for the Series A
Cumulative Convertible Preferred Stock (incorporated by reference from
our amendment to our Annual Report filed on Form 10-KSB/A with the SEC
on December 7, 1999).
II-2
<PAGE>
4.2.2 Certificate of Designations, Preferences and Rights of Series B
Cumulative Convertible Preferred Stock (incorporated by reference from
our Annual Report filed on Form 10-KSB with the SEC on March 30, 2000).
4.3 *Form of Cumulative Convertible Preferred Stock Purchase Agreement
(Series A and Series B).
4.4 *Form of Warrant to purchase shares of our common stock, exercisable
for one year, issued with our Series A Preferred Stock.
4.5 *Form of Warrant to purchase shares of our common stock, exercisable
for five years, issued with our Series A Preferred Stock.
4.6 Form of Warrant to purchase shares of our common stock, exercisable for
five years, issued with our Series B Preferred Stock.
5.1 **Opinion of Roberts, Sheridan & Kotel, a Professional Corporation.
10.1 1999 Stock Option Plan (incorporated by reference from our amendment to
our Registration Statement filed on Form S-8 with the SEC on June 18,
1999).
10.2 ***Employment Agreement for Mitchell Deutsch (to be filed by
amendment).
10.3 ***Employment Agreement for James Garfinkel (to be filed by amendment).
10.4 ***Employment Agreement for John Evans (to be filed by amendment).
21.1 *Subsidiaries of the registrant.
23.1 Consent of Marcum & Kleigman, LLC.
23.2 **Consent of Roberts, Sheridan & Kotel, a Professional corporation
(included with exhibit 5.1).
24.1 *Power of attorney of certain directors and officers of
MonsterDaata.com, Inc. Reference is made to the Signature Page to the
Registration Statement.
- ----------
* Previously filed with the Registration Statement on Form SB-2 filed with the
SEC on December 21, 1999.
** Previously filed with Amendment No. 1 to the Registration Statement on Form
SB-2/A filed with the SEC on January 11, 2000.
*** To be filed by post-effective amendment.
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities
Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be
II-3
<PAGE>
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
(iii) Include any additional or changed material information on the plan
of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial BONA
FIDE offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the Delaware General Corporation Law, our Certificate of
Incorporation or our By-Laws, or otherwise, we have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by any of our directors, officers, or controlling
persons in the successful defense of any action, suit or proceeding) is asserted
by such directors, officers or controlling persons in connection with the
securities being registered hereunder, we will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
We hereby undertake that we will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1), or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of such securities at that time as the initial bona fide
offering of those securities.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act, we certify that
we have reasonable grounds to believe that we meet all of the requirements for
filing on Form SB-2 and authorized this registration statement to be signed on
its behalf by the undersigned in the City of New York, State of New York, on the
3rd day of May, 2000.
MONSTERDAATA.COM, INC.
By: /s/ Mitchell Deutsch
-------------------------------------
Mitchell Deutsch
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
amended registration statement has been signed on the 3rd day of May, 2000, by
the following persons in the capacities indicated:
Signature Title Date
- --------- ----- ----
Mitchell Deutsch President and Chief Executive May 3, 2000
- -------------------------------- Officer, Director (Principal
Mitchell Deutsch Executive Officer)
/s/ John Evans* Chief Financial Officer and May 3, 2000
- -------------------------------- Executive Vice President -
John Evans Corporate Development
(Principal Accounting and
Financial Officer)
/s/ James Garfinkel* Secretary, Treasurer, May 3, 2000
- -------------------------------- Vice-President, Director
James Garfinkel
/s/ Thomas Ingegneri* Director May 3, 2000
- --------------------------------
Thomas Ingegneri
*By: Mitchell Deutsch
---------------------------
Mitchell Deutsch
Attorney-in-fact
II-5
Exhibit 4.7
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE. NEITHER SUCH WARRANTS NOR SUCH SECURITIES MAY
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT SUCH
REGISTRATION, EXCEPT UPON DELIVERY TO THE COMPANY OF SUCH EVIDENCE AS MAY BE
SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
MONSTERDAATA.COM, INC.
Warrant for the Purchase of
Shares of Common Stock
No. [ ]-L [ ] Shares
FOR VALUE RECEIVED, MONSTERDAATA.COM, INC., a Delaware corporation
(the "Company"), hereby certifies that Steven Bergman, his designee or his
permitted assigns (the "Holder"), is entitled to purchase from the Company, up
to [ ] fully paid and non-assessable shares ("Warrant Shares") of common stock,
$.01 par value per share, of the Company (the "Common Stock"). This Warrant may
be exercised by the Holder in whole at any time, or in part from time to time,
on or after [ ], 2000 and prior to 5:00 P.M., Eastern Standard Time, on the
Expiration Date (as defined below). This Warrant entitles the Holder to purchase
from the Company the number of fully-paid and non-assessable shares set forth
above at the exercise price (the "Exercise Price"), payable in lawful money of
the United States of America, of $4.25 per share; provided, however, that if the
Company fails to satisfy its obligations with regard to the registration
statement referenced in Section 7 of the Purchase Agreement, dated as of [ ],
2000 between the Company and the original Holder relating to certain shares of
Preferred Stock of the Company (the "PSPA"), the Exercise Price shall be reduced
in accordance with the applicable terms of Section 7 of the PSPA (which terms
are deemed to be incorporated herein by reference). The Expiration Date shall be
the date of the fifth anniversary of the issuance of this Warrant ([ ], 2005).
1. Exercise of Warrant. (a) This Warrant may be exercised by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed):
(i) at the address set forth in Section 8(a) hereof, together with
proper payment of the Exercise Price, or the proportionate part
thereof if this Warrant is exercised in part, with payment for the
Warrant Shares made by certified or official bank check payable to
the order of the Company.
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(ii) by the surrender of this Warrant (with the cashless exercise
form attached hereto duly executed) (a "Cashless Exercise") at the
address set forth in Section 8(a) hereof. Such presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay
the aggregate Exercise Price, or the proportionate part thereof if
this Warrant is exercised in part. In the event of a Cashless
Exercise, the Holder shall exchange its Warrant Certificate for that
number of shares of Common Stock determined by multiplying the
number of Common Shares subject to such Cashless Exercise by a
fraction, the numerator of which shall be the difference between the
then current market price per share of the Common Stock and the per
share Exercise Price, and the denominator of which shall be the then
current market price per share of the Common Stock. For purposes of
any computation under this Section, the then current market price
per share of Common Stock at any date (the "Market Price") shall be
deemed to be last sale price of the Common Stock on the business day
prior to the date of the Cashless Exercise or, in case no such
reported sales take place on such day, the average of the last
reported bid and asked prices of the Common Stock on such day, in
either case as reported on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. (the "OTCBB"), or other
similar organization if the OTCBB is no longer reporting such
information, or if not so available, the fair market price of the
Common Stock as determined by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder shall
be entitled to receive a new Warrant covering the Warrant Shares that have not
been exercised and setting forth the proportionate part of the Exercise Price
applicable to such Warrant Shares.
(c) Upon surrender of this Warrant, the Company will (i) issue a
certificate or certificates in the name of the Holder for the largest number of
whole shares of the Common Stock to which the Holder shall be entitled and, if
this Warrant is exercised in whole, in lieu of any fractional share of the
Common Stock to which the Holder shall be entitled, pay to the Holder cash in an
amount equal to the fair value of such fractional share (determined in such
reasonable manner as the Board of Directors of the Company shall determine), and
(ii) deliver the other securities and properties receivable upon the exercise of
this Warrant, or the proportionate part thereof if this Warrant is exercised in
part, pursuant to the provisions of this Warrant.
2. Reservation of Warrant Shares. The Company agrees that, prior to
the expiration of this Warrant, (i) the Company shall at all times have
authorized and in reserve, and shall keep available, solely for issuance and
delivery upon the exercise of this Warrant, the shares of Common Stock and other
securities and properties as from time to time shall be receivable upon the
exercise of this Warrant, free and clear of all restrictions on sale or
transfer, other than under Federal or state securities laws, and free and clear
of all preemptive rights and rights of first refusal.
3. Anti-Dilution Provisions. (a) If the Company at any time while
this Warrant, or any portion hereof, remains outstanding and unexpired shall pay
a dividend or make
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a distribution on its capital stock in shares of Common Stock or split,
subdivide or combine the securities as to which purchase rights under this
Warrant exist into a different number of securities of the same class (an
"Adjustment Event"), then provision shall be made so that (i) the Exercise Price
for such securities shall be proportionately decreased in the case of a split or
subdivision or proportionately increased in the case of a combination, and (ii)
the number of securities issuable upon exercise of this Warrant shall be
increased or decreased, as the case may be, to the number determined by dividing
(x) the product of the number of shares issuable upon the exercise of this
Warrant immediately prior to the Adjustment Event and the Exercise Price in
effect immediately prior to the Adjustment Event by (y) the Exercise Price in
effect immediately after the Adjustment Event.
(b) In the case of any capital reorganization or reclassification,
or any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation, or
in the case of any sale or conveyance to another entity of the property of the
Company as an entirety or substantially as an entirety, or in the case of any
statutory exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third corporation into the
Company), the Holder of this Warrant shall have the right thereafter to receive
on the exercise of this Warrant the kind and amount of securities, cash or other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization, reclassification
consolidation, merger, statutory exchange, sale or conveyance and in any such
case, if necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Section 3 with respect to the rights and
interests thereafter of the Holder of this Warrant to the end that the
provisions set forth in this Section 3 shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
or other securities or property thereafter deliverable on the exercise of this
Warrant. The above provisions of this paragraph 3(b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(c) Whenever the Exercise Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Company shall promptly mail to the Holders
of the warrants a certificate of the Company's chief financial officer setting
forth the Exercise Price and the number of Common Shares after such adjustment
or the effect of such modification, a brief statement of the facts requiring
such adjustment or modification and the manner of computing the same, and, at
the request of the Holder of any Warrant, obtain, at the Company's expense, a
certificate of a firm of independent public accountants of recognized standing
selected by the Board of Directors (who may be the
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regular auditors of the Company) to such effect and cause of such certificate to
be mailed to the Holders of the Warrants.
(d) In case any event shall occur as to which the other provisions
of this Section 3 are not strictly applicable but as to which the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof then,
in each such case, the Holders of Warrants representing the right to purchase a
majority of the Common Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by such Holders.
(e) No adjustments in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least $0.01 per
share of Common Stock. All calculations under this Section 3 shall be made to
the nearest cent or to the nearest share, as the case may be. Anything in this
Section 3 to the contrary notwithstanding, the Company shall be entitled to make
such reductions in the Exercise Price, in addition to those required by this
Section 3 as it in its discretion shall deem to be advisable in order that any
stock dividend, subdivision of shares or distribution of rights to purchase
stock or securities convertible or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable.
4. Fully Paid Stock. The shares of the Common Stock represented by
each and every certificate for Warrant Shares delivered on the exercise of this
Warrant shall at the time of such delivery, be duly authorized, validly issued
and outstanding, fully paid and nonassessable.
5. Investment Intent; Limited Transferability. (a) The Holder
represents, by accepting this Warrant, that it understands that this Warrant and
any securities obtainable upon exercise of this Warrant have not been registered
for sale under Federal or state securities laws and are being offered and sold
to the Holder pursuant to one or more exemptions from the registration
requirements of such securities laws. In the absence of an effective
registration of such securities or an exemption therefrom, any certificates for
such securities shall bear the legend set forth on the first page hereof. The
Holder understands that it must bear the economic risk of its investment in this
Warrant and any securities obtainable upon exercise of this Warrant for an
indefinite period of time, as this Warrant and such securities have not been
registered under Federal or state securities laws and therefore cannot be sold
unless subsequently registered under such laws, unless an exemption from such
registration is available.
(b) The Holder, by its acceptance of this Warrant, represents to the
Company that (i) it is acquiring this Warrant and will acquire any securities
obtainable upon exercise of this Warrant for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof in
violation of the Securities Act, (ii) it has such sophistication,
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knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment in the Company, (iii) it has
the ability to bear the economic risks of its investment for an indefinite
period of time and could afford a complete loss of its investment and (iv) it
had and will continue to have access to information, and the opportunity, prior
to the acquisition of the Warrant Shares and this Warrant, to ask questions of
and receive answers from representatives of the Company, in each case concerning
the finances, operations and business of the Company.
(c) The Holder agrees that this Warrant and any such securities will
not be sold or otherwise transferred unless (i) a registration statement with
respect to such transfer is effective under the Securities Act and any
applicable state securities laws or (ii) such sale or transfer is made pursuant
to one or more exemptions from the Securities Act.
(d) This Warrant may not be sold, transferred, assigned or
hypothecated by the Holder except in compliance with the provisions of the Act
and the applicable state securities "blue sky" laws, and is so transferable only
upon the books of the Company which it shall cause to be maintained for such
purpose. The Company may treat the registered Holder of this Warrant as he or it
appears on the Company's books at any time as the Holder for all purposes. The
Company shall permit any Holder of a Warrant or his duly authorized attorney,
upon written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of Warrants. All Warrants
issued upon the transfer or assignment of this Warrant will be dated the same
date as this Warrant, and all rights of the holder thereof shall be identical to
those of the Holder.
(e) The Holder has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
Warrants or the exercise of the Warrants and (ii) the opportunity to request
such additional information which the Company possesses or can acquire without
unreasonable effort or expense.
(f) The Holder did not (i) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio, whether closed circuit, or
generally available or (ii) attend any seminar, meeting or investor or other
conference whose attendees were, to such Holder's knowledge, invited by any
general solicitation or general advertising.
(g) The Holder is an "accredited investor" within the meaning of
Regulation D under the Act. Such Holder is acquiring the Warrants for its own
account and not with a present view to, or for sale in connection with, any
distribution thereof in violation of the registration requirements of the
Securities Exchange Act of 1934.
(h) Either by reason of such Holder's business or financial
experience or the business or financial experience of its professional advisors
(who are unaffiliated with and who are not compensated by the Company or any
affiliate, finder or selling agent of the Company, directly or indirectly), such
Holder has the capacity to protect such Holder's interests in connection with
the transactions contemplated by this Warrant.
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6. Warrant Holder Not Shareholder. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent to or receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise hereof.
7. Modification. This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing signed by the Holder and
the Company. The waiver by either party of compliance with any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
such party of a provision of this Agreement.
8. Communication. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 115 Stevens Avenue, Valhalla, NY 10595,
Attention: President or other address as the Company has designated in writing
to the Holder; or
(b) the Holder at [ ] or other such
address as the Holder has designated in writing to the Company.
9. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and construed
in accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
11. Assignability. The Holder shall not assign this Warrant at any
time, without the written consent of the Company, to any other party.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its President and Chief Executive Officer this [ ] day of [ ], 2000.
MONSTERDAATA.COM, INC.
By: _____________________________
Mitchell Deutsch
President and Chief Executive Officer
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SUBSCRIPTION
The undersigned, _______________________________, pursuant to the
provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase
_________________ shares of the Common Stock, par value $.01 per share, of
MonsterDaata.com, Inc. covered by said Warrant, and makes payment therefor in
full at the price per share provided by said Warrant.
Dated:_______________ Signature: _____________________
Address: _____________________
_____________________
_____________________
CASHLESS EXERCISE
The undersigned Holder, pursuant to the provisions of the foregoing
Warrant, hereby irrevocably elects to exchange its Warrants for _________ shares
of Common Stock of MonsterDaata.com, Inc. pursuant to the Cashless Exercise
provisions of said Warrant.
Dated:_______________ Signature: _____________________
Address: _____________________
_____________________
_____________________
[Letterhead of Marcum & Kliegman LLP]
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
MonsterDaata.com, Inc.
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form SB-2 Post Effective Amendment #1) and to the
inclusion of our report dated February 18, 2000 with respect to the financial
statements for the years ended December 31, 1999 and 1998.
/s/ Marcum & Kliegman LLP
Marcum & Kliegman LLP
New York, New York
May 5, 2000
