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Manhattan Bridge Capital, Inc – ‘424B3’ on 5/14/99

As of: Friday, 5/14/99 · Accession #: 1047469-99-20583 · File #: 333-74203

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/14/99  Manhattan Bridge Capital, Inc     424B3                  1:169K                                   Merrill Corp/New/FA

Prospectus — Rule 424(b)(3)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Prospectus                                            77    272K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Administrative and general expenses Business Capitalization Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1998 Consolidated Statements of Operations for the years ended December 31, 1997 and 1998 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997 and 1998 Description of Capital Stock Dilution Dividend Policy Equity in earnings of affiliate Experts Legal Matters Management Management's Discussion and Analysis of Financial Condition and Results of Operations Net advertising revenues Net income Notes to Consolidated Financial Statements Notes to Financial Statements Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet Offering, The Paulson Investment Company, Inc Principal and Selling Shareholders Provision for income taxes Publishing costs Redwine & Company, Inc Related Party Transactions Report of Independent Public Accountants Risk Factors Selected Financial Data Selling expenses Shares Eligible for Future Sale Statements of Cash Flows for the years ended October 31, 1997 and 1998 Statements of Operations for the years ended October 31, 1997 and 1998 Statements of Shareholders' Equity for the years ended October 31, 1997 and 1998 Summary The offering Unaudited Pro Forma Condensed Consolidated Balance Sheet Unaudited Pro Forma Condensed Consolidated Statement of Operations Underwriting Use of proceeds
1	1st Page - Filing Submission
"	Paulson Investment Company, Inc
3	Summary
4	The offering
7	Risk Factors
10	Use of proceeds
11	Dividend Policy
12	Capitalization
13	Dilution
14	Selected Financial Data
15	Management's Discussion and Analysis of Financial Condition and Results of Operations
17	Net advertising revenues
"	Publishing costs
"	Selling expenses
18	Administrative and general expenses
"	Equity in earnings of affiliate
"	Provision for income taxes
"	Net income
22	Business
32	Management
37	Related Party Transactions
38	Principal and Selling Shareholders
39	Description of Capital Stock
41	Shares Eligible for Future Sale
43	Underwriting
46	Legal Matters
"	Experts
48	Report of Independent Public Accountants
50	Consolidated Statements of Operations for the years ended December 31, 1997 and 1998
51	Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997 and 1998
52	Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1998
53	Notes to Consolidated Financial Statements
63	Statements of Operations for the years ended October 31, 1997 and 1998
64	Statements of Shareholders' Equity for the years ended October 31, 1997 and 1998
65	Statements of Cash Flows for the years ended October 31, 1997 and 1998
66	Notes to Financial Statements
72	Unaudited Pro Forma Condensed Consolidated Balance Sheet
73	Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
75	Unaudited Pro Forma Condensed Consolidated Statement of Operations
77	Redwine & Company, Inc

424B3 1st Page of 77 TOC ↑Top Previous Next ↓Bottom Just 1st
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-74203

1,325,000 COMMON SHARES

[LOGO]

DAG MEDIA, INC.

This is the initial public offering of DAG Media, Inc. We are offering
1,250,000 of our common shares and Assaf Ran, our founder and principal
shareholder, is offering as a selling shareholder 75,000 common shares that he
owns. The initial public offering price for each common share is $6.50.

There has been no prior market for our common shares. Our shares have been
approved for trading on the Nasdaq SmallCap Market under the symbol "DAGM."

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR SOME OF THE FACTORS YOU SHOULD
CONSIDER BEFORE BUYING OUR COMMON SHARES.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

[Enlarge/Download Table]

DAG MEDIA SELLING SHAREHOLDER
--------------------------- -------------------------
PER SHARE TOTAL PER SHARE TOTAL
----------- -------------- ----------- ------------

Initial public offering price.............................. $ 6.50 $ 8,125,000 $ 6.50 $ 487,500
Underwriting discounts and commissions..................... $ 0.585 $ 731,250 $ 0.585 $ 43,875
Proceeds before expenses................................... $ 5.915 $ 7,393,750 $ 5.915 $ 443,625

We have granted the underwriters a 45-day option to purchase up to an
additional 198,750 common shares from us to cover over-allotments.

The underwriters are offering the common shares on a firm commitment basis
and expect to deliver the common shares offered by this prospectus against
payment on or about May 18, 1999.

PAULSON INVESTMENT COMPANY, INC. REDWINE & COMPANY, INC.

The date of this prospectus is May 13, 1999

424B3 2nd Page of 77 TOC 1st Previous Next ↓Bottom Just 2nd
The JEWISH ISRAELI YELLOW PAGES-Registered Trademark- and variants of the
mark, and THE JEWISH REFERRAL SERVICE-Registered Trademark- are our registered
trademarks or service marks. We also plan to seek federal trademark and service
mark protection for THE JEWISH MASTER GUIDE-TM- and for NEWYELLOW-TM-. All other
trademarks, service marks and trade names appearing in this prospectus are the
property of their respective holders.

424B3 3rd Page of 77 TOC 1st Previous Next ↓Bottom Just 3rd
SUMMARY

UNLESS STATED TO THE CONTRARY, REFERENCES TO "WE," "US,"OR "OUR" REFER TO
DAG MEDIA AND, WHERE APPROPRIATE, OUR PREDECESSORS AND SUBSIDIARIES.

DAG MEDIA

We publish and distribute yellow page directories in print and on the world
wide web. Our largest directory, THE JEWISH ISRAELI YELLOW PAGES, has been
published, bilingually, in English and Hebrew, since February 1990 and covers
the New York metropolitan area. We also publish a smaller English-only yellow
page directory, THE JEWISH MASTER GUIDE, which is distributed to the Hasidic and
ultra-Orthodox Jewish communities in the New York metropolitan area. To give
added value to users of and advertisers in our directories, we also operate THE
JEWISH REFERRAL SERVICE and a "portal" web site on the Internet. The JEWISH
REFERRAL SERVICE directs potential customers and clients to businesses that
advertise in our directories. Our web site contains English-only versions of our
directories and has links to web sites maintained by advertisers in our
directories and other web sites, including those containing programs, events and
news of particular interest to the Jewish and Israeli communities.

GROWTH STRATEGY

We plan to expand our operations by introducing an English-only, general
interest yellow page directory, NEWYELLOW, in the New York metropolitan area
that will compete directly with the Bell Atlantic Yellow Pages. We plan to
introduce the first NEWYELLOW directory in Manhattan by June 2000. We have never
published a general interest yellow page directory. In addition, Bell Atlantic
has significantly greater resources than we do. Accordingly, we cannot assure
you that we will publish NEWYELLOW or if we do publish NEWYELLOW, that we can do
so profitably. We may also consider offering versions of the JEWISH ISRAELI
YELLOW PAGES, the MASTER GUIDE and the JEWISH REFERRAL SERVICE in other cities
with large Jewish and Israeli populations like Miami, Florida and Los Angeles,
California.

EXECUTIVE OFFICES AND WEB SITES

Our executive offices are located at 125-10 Queens Boulevard, Kew Gardens,
New York 11415, and our telephone number is (718) 263-8454. Our addresses on the
world wide web are HTTP://WWW.PORTY.COM, HTTP://WWW.JEWISHYELLOW.COM,
HTTP://WWW.DAPEY-ASSAF.COM AND HTTP://WWW.NEWYELLOW.COM.

424B3 4th Page of 77 TOC 1st Previous Next ↓Bottom Just 4th
THE OFFERING

[Download Table]

Common shares being offered.............. 1,250,000 by us and 75,000 by our
principal shareholder

Offering price........................... $6.50 per common share

Common shares outstanding:
Before the offering.................... 1,726,190
After the offering..................... 2,976,190

Use of proceeds.......................... Printing, publishing and distribution
costs for NEWYELLOW; sales commission
advances for NEWYELLOW; marketing and
promotional expenses for NEWYELLOW and
our web site; and general corporate
purposes, including working capital.

Nasdaq SmallCap Market symbol for our
common shares.......................... DAGM

Common shares outstanding excludes 124,000 common shares reserved for
issuance under our stock option plan.

Common shares outstanding after the offering assumes that the underwriters
will not exercise their option to purchase additional common shares to cover
over-allotments.

424B3 5th Page of 77 TOC 1st Previous Next ↓Bottom Just 5th
SUMMARY FINANCIAL DATA

The summary financial data contained in this section of the prospectus
should be read together with our audited consolidated financial statements, the
audited financial statements of Dapey Assaf-Hamadrikh Leassakim Israelim Be New
York and our unaudited pro forma condensed consolidated financial statements,
including the notes accompanying these statements, and the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section of this prospectus.

- Our historical financial data include the accounts of Dapey Assaf-Dapey
Zahav and 50% of the net income of Dapey Assaf-Hamadrikh.

- Pro forma statement of operations data assume that Dapey Assaf-Hamadrikh
became our wholly owned subsidiary on January 1, 1998 and pro forma
balance sheet data assume that it became our wholly owned subsidiary on
December 31, 1998.

- Pro forma, as adjusted balance sheet data assume that Dapey
Assaf-Hamadrikh became our wholly owned subsidiary on January 1, 1998 and
pro forma
balance sheet data assume that it became our wholly owned subsidiary on
December 31, 1998 and give effect to the sale of the common shares offered
by us in this prospectus, after deducting $1,512,500, our share of the
underwriting discounts and commissions and other estimated offering
expenses.

STATEMENT OF OPERATIONS DATA:

[Enlarge/Download Table]

YEARS ENDED DECEMBER 31,
-------------------------------------------

1998
1997 1998 (PRO FORMA)
------------- ------------- -------------
Net advertising revenues............................................ $ 2,501,754 $ 2,759,092 $ 2,835,917
Publishing costs.................................................... 441,535 377,983 377,983
------------- ------------- -------------
Gross profit........................................................ 2,060,219 2,381,109 2,457,934
Operating costs and expenses:
Selling expenses.................................................. 922,124 946,315 957,227
Administrative and general expenses............................... 658,956 765,233 893,116
------------- ------------- -------------
Total operating costs and expenses................................ 1,581,080 1,711,548 1,850,343
------------- ------------- -------------
Earnings from operations before provision for income taxes and
equity income..................................................... 479,139 669,561 607,591
Provision for income taxes.......................................... 240,000 329,000 312,000
Equity in earnings of affiliate..................................... 16,012 17,035 --
------------- ------------- -------------
Net income.......................................................... $ 255,151 $ 357,596 $ 295,591
------------- ------------- -------------
------------- ------------- -------------
Basic and diluted net income per common share outstanding........... $ 0.20 $ 0.29 $ 0.17
------------- ------------- -------------
------------- ------------- -------------
Basic and diluted weighted average number of common shares
outstanding....................................................... 1,250,000 1,250,000 1,726,190
------------- ------------- -------------
------------- ------------- -------------

Pro forma administrative and general expenses assumes that the compensation
paid to Assaf Ran was $75,000, the amount payable under his employment agreement
that takes effect on the effective date of this offering, rather than the
$25,000 that was actually paid to him.

424B3 6th Page of 77 TOC 1st Previous Next ↓Bottom Just 6th
BALANCE SHEET DATA:

[Enlarge/Download Table]

DECEMBER 31, 1998
-----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------------- -------------- ---------------

Cash........................................................... $ 310,185 $ 385,325 $ 7,293,088
Working capital................................................ 162,041 162,561 7,070,323
Total assets................................................... 2,970,190 4,363,046 10,975,546
Total liabilities.............................................. 2,445,451 2,445,451 2,445,451
Total shareholders' equity..................................... 524,739 1,917,595 8,530,095

424B3 7th Page of 77 TOC 1st Previous Next ↓Bottom Just 7th
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED BELOW, AS WELL AS
THE OTHER INFORMATION APPEARING IN THIS PROSPECTUS, BEFORE PURCHASING ANY OF OUR
COMMON SHARES.

BELL ATLANTIC AND OTHER EXISTING OR POTENTIAL COMPETITORS HAVE SIGNIFICANT
COMPETITIVE ADVANTAGES.

Many of our competitors, particularly Bell Atlantic, have significant
operating and financial advantages. Our competitors' advantages include:

- greater financial, personnel, technical and marketing resources,

- superior systems,

- stronger relationships with advertisers,

- greater production capacity,

- better-developed distribution channels, and

- greater name recognition.

WE HAVE NEVER PUBLISHED A GENERAL INTEREST YELLOW PAGE DIRECTORY. THUS, OUR
PROSPECTS FOR SUCCESS ARE UNCERTAIN.

Since we have never published a general interest yellow page directory, we
have no relevant operating history upon which you can evaluate whether we will
be successful. Therefore, you should consider our prospects in light of the
risks and uncertainties encountered by companies trying to introduce a new
product, particularly companies proposing to enter markets dominated by large
and well-known companies. In addition, our ability to publish NEWYELLOW will
also depend on factors outside of our control, including the development of
similar or superior products by competitors, general economic conditions and
economic conditions specific to publishers of yellow page directories.

BECAUSE WE CONTRACT WITH SALES AGENCIES, WE COULD LOSE HALF OUR SALES FORCE ON
30 DAYS NOTICE.

Approximately half of our sales force is provided to us under agreements
with independent sales agencies, which are terminable upon 30 days notice by
either party. Accordingly, on 30 days notice we could lose half of our sales
force. In addition, due to the demands of the job, many sales representatives
leave within one year of their hire. Replenishing our sales force involves
significant time and expense for recruiting and training.

424B3 8th Page of 77 TOC 1st Previous Next ↓Bottom Just 8th
WE DO NOT HAVE ANY LONG-TERM COMMITMENTS FROM ADVERTISERS, UPON WHOM OUR SUCCESS
DEPENDS.

We do not have long-term contractual arrangements with advertisers. Thus, we
must obtain new advertisers and renewals from existing advertisers, for each
directory that we publish. There is no assurance that our current advertisers
will continue to place ads in our directories or that we will be able to attract
new advertisers. Any failure to achieve sufficient advertising revenues would
have a material adverse effect on our business, results of operations and
financial condition.

IF WE FAIL TO PUBLISH A DIRECTORY, IT IS UNLIKELY THAT WE WILL HAVE SUFFICIENT
CASH TO REFUND OUR ADVERTISERS.

A significant portion of our revenues is collected prior to the publication
and distribution of our directories and is used to pay our employees,
contractors and suppliers. If we did not publish a directory, we would be
obligated to refund prepaid advertising fees. It is unlikely that we would have
sufficient cash reserves to repay all these advances. In that event, we would
have to generate cash by borrowing money, selling securities or selling assets.
We do not know whether any of those alternatives will be possible. Further, any
of these alternatives, particularly the sale of our assets, would inhibit our
ability to conduct our business.

WE DO NOT HAVE THE ABILITY TO MEASURE THE EFFECTIVENESS OF ADVERTISEMENTS. AS
OUR BUSINESS GROWS, OUR CUSTOMERS MAY REQUIRE US TO DO SO.

We do not have the ability to quantify the effectiveness of advertising in
our directories. However, we may have to provide this type of information when
we start publishing a directory that competes directly with the Bell Atlantic
Yellow Pages. The effectiveness of advertising is usually based upon demographic
and other relevant statistical data. If we cannot provide our advertisers with
this information or if they perceive the information that we provide to be
unreliable, they may not advertise in NEWYELLOW or refuse to pay our standard
advertising rates. Accordingly, we will have to either develop the ability to
provide this information to our advertisers or contract with third parties to
provide this information on our behalf. Either alternative will result in
additional personnel and equipment costs which we have not budgeted for, and may
also cause interruptions in our business operations.

WE CANNOT LAUNCH NEWYELLOW WITHOUT THE PROCEEDS OF THIS OFFERING.

The expansion of our operations to add NEWYELLOW, and possibly other yellow
page directories, requires substantial amounts of additional capital. Most of
our costs relating to the publication of the first NEWYELLOW directory,
including sales commissions, publishing costs and distribution costs, will be
incurred before we begin to collect our advertising revenue. Accordingly, we
cannot undertake this project if this offering is not successful.

424B3 9th Page of 77 TOC 1st Previous Next ↓Bottom Just 9th
OUR GROWTH DEPENDS ON THE CONTINUED SERVICES OF ASSAF RAN.

We depend on the continued services of Assaf Ran, our founder, president and
chief executive officer. Mr. Ran supervises all aspects of our business,
including our sales force and production staff. Mr. Ran has the personal
relationships with the principals of our key services providers including our
printer, HaMakor Printing Ltd., and the heads of the independent sales agencies
which provide about half of our sales representatives. If Mr. Ran's employment
terminates, our relationships with our key suppliers and vendors may be
jeopardized. Mr. Ran has entered into an employment agreement, but that is no
guarantee that his employment will not terminate before its expiration on June
30, 2002. In addition, we have applied to purchase a $3 million key man life
insurance policy on Mr. Ran. Mr. Ran has not yet been approved for a policy and
we do not know whether a policy will be available.

SOME OF OUR SENIOR OFFICERS LACK EXPERIENCE IN OUR BUSINESS.

All of our senior executive officers, other than Mr. Ran, are new. Our vice
president of sales commenced his employment in June 1998 and our vice president
of sales and corporate development and our chief financial officer will commence
their employment on the effective date of this offering. It will take some time
before these officers are fully knowledgeable about our business and operations.
This lack of experience and knowledge may cause delays in our expansion plans.

FAILURE OF HAMAKOR PRINTING TO BE YEAR 2000 COMPLIANT COULD RESULT IN DELAYS AND
ADDITIONAL COSTS.

HaMakor Printing, our only material supplier, may not be Year 2000
compliant. If it is not Year 2000 compliant, it may not be able to print the
February 2000 edition of the JEWISH ISRAELI YELLOW PAGES in a timely and
efficient manner. In that case we would have to find a new printer, resulting in
delays and potential additional costs. We cannot assure you that we will be able
to find a new printer that can provide us with the same favorable pricing,
service and quality as HaMakor does.

YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS.

This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words like "anticipate," "believes," "expects," "future"
and "intends" and similar expressions to identify forward-looking statements.
You should not unduly rely on these forward-looking statements, which apply only
as of the date of this prospectus. Our actual results could differ materially
from those anticipated in these forward-looking statements for many reasons,
including the risks described above and elsewhere in this prospectus.

424B3 10th Page of 77 TOC 1st Previous Next ↓Bottom Just 10th
USE OF PROCEEDS

The net proceeds to us from the sale of the common shares offered by us in
this prospectus will be approximately $6.6 million. Net proceeds from the sale
of common shares are computed by deducting our share of the underwriting
discounts and commissions and estimated offering expenses from the total public
offering price. We intend to use these net proceeds as follows:

[Enlarge/Download Table]

AMOUNT PERCENTAGE
-------------- -----------

Printing, publishing and distribution costs for NEWYELLOW............................. $ 2,600,000 39.39%
Sales commissions for NEWYELLOW....................................................... 2,400,000 36.36%
Marketing and promotional expenses for NEWYELLOW and our web site..................... 1,400,000 21.21%
General corporate purposes, including working capital................................. 200,000 3.04%
-------------- -----------
$ 6,600,000 100.00%
-------------- -----------
-------------- -----------

- Printing, publishing and distribution costs represent the actual cost of
printing and distributing approximately 900,000 copies of the Manhattan
version of NEWYELLOW, assuming 1,500 pages per copy.

- Sales commissions reflect commissions that will be paid to our sales force
prior to our actual receipt of advertising revenues.

- Marketing and promotional expenses include expenses related to the
development of strategic alliances and relationships including:

- local newspaper, radio and broadcast and cable television advertising,

- bulletin board advertising and

- hiring a public relations firm.

- General corporate purposes include the following:

- hiring additional personnel;

- acquiring and enhancing our operating, support and management systems;

- costs of opening two new sales offices; and

- capital expenditures for computers and other equipment.

Approximately $100,000 of the marketing and promotional expenses will be
used for the further development and expansion of our web site. The majority of
this amount will be used for programmers.

Working capital may also be applied to acquisitions, although we do not have
current plans, agreements or commitments for any acquisition. Any proceeds from
the exercise of the option we granted to the underwriters to purchase additional
common shares from us will be added to working capital. In addition, the
proceeds from the

424B3 11th Page of 77 TOC 1st Previous Next ↓Bottom Just 11th
repayment of Assaf Ran's loan, approximately $300,000, will be added to working
capital. See "Related Party Transactions" for more information about this loan.

We will retain broad discretion in the allocation of the net proceeds of
this offering within the categories listed above. We may also use portions of
the net proceeds for other purposes. The amounts actually expended and their
uses will depend on a number of factors, including the amount of our future
revenues and the other factors described under "Risk Factors." Pending their
use, the net proceeds of this offering will be invested in short-term,
interest-bearing, investment grade securities.

We expect that the net proceeds from this offering, together with cash flow
from operations, will be sufficient to fund our operations and capital
requirements for at least 12 months following the consummation of this offering.
We may be required to seek additional sources of capital sooner if:

- operating assumptions change or prove to be inaccurate;

- we consummate any acquisitions of significant businesses or assets; or

- we further accelerate our expansion plans and enter new markets more
rapidly.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. We may incur indebtedness in the future which may prohibit
or effectively restrict the payment of dividends, although we have no current
plans to do so.

424B3 12th Page of 77 TOC 1st Previous Next ↓Bottom Just 12th
CAPITALIZATION

The following table shows our capitalization as of December 31, 1998:

- on an actual basis,

- on a pro forma basis assuming Dapey Assaf-Hamadrikh became our wholly
owned subsidiary on December 31, 1998 and

- on a pro forma, as adjusted basis assuming Dapey Assaf-Hamadrikh became
our wholly owned subsidiary on December 31, 1998 and giving effect to the
sale of the common shares offered by us in this prospectus after deducting
$1,512,500, our share of the underwriting discounts and commissions and
other estimated offering expenses.

[Enlarge/Download Table]

DECEMBER 31, 1998
--------------------------------------------

PRO FORMA,
ACTUAL PRO FORMA AS ADJUSTED
------------ -------------- --------------
Shareholders' equity:
Preferred shares, $0.01 par value; 5,000,000 shares authorized;
no shares issued and outstanding actual, pro forma or pro
forma, as adjusted............................................. $ -- $ -- $ --
Common shares, $0.001 par value; 25,000,000 shares authorized;
1,250,000 shares issued and outstanding actual; 1,726,190
shares issued and outstanding pro forma; 2,976,190 shares
issued and outstanding as adjusted............................. 1,250 1,726 2,976
Additional paid-in capital....................................... 150 1,392,530 8,003,780
Retained earnings................................................ 523,339 523,339 523,339
------------ -------------- --------------
Total shareholders' equity..................................... 524,739 $ 1,917,595 8,530,095
------------ -------------- --------------
Total capitalization............................................... $ 524,739 $ 1,917,595 $ 8,530,095
------------ -------------- --------------
------------ -------------- --------------

Common shares outstanding, excludes 124,000 common shares reserved for
issuance pursuant to our stock option plan.

424B3 13th Page of 77 TOC 1st Previous Next ↓Bottom Just 13th
DILUTION

Our pro forma net tangible book value as of December 31, 1998 was
approximately $566,614, or $0.33 per common share. Pro forma net tangible book
value per common share represents the amount of total tangible assets less total
liabilities, divided by the pro forma common shares outstanding as of December
31, 1998. Pro forma net tangible book value and pro forma common shares
outstanding as of December 31, 1998 assume that both Dapey Assaf-Dapey Dapey
Zahav and Dapey Assaf-Hamadrikh are our wholly owned subsidiaries. Giving effect
to the issuance and sale of the common shares offered by us in this prospectus,
after deducting $1,512,500, our share of the underwriting discounts and
commissions and estimated offering expenses, our pro forma net tangible book
value as of December 31, 1998 would have been $7,179,114, or $2.41 per common
share. This represents an immediate increase in pro forma net tangible book
value of $2.08 per common share to existing shareholders and an immediate
dilution of $4.09 per common share, or 62.9%, to new investors. The following
table illustrates this per share dilution.

[Enlarge/Download Table]

Initial public offering price per common share....................... $ 6.50
Net tangible book value per common share at December 31, 1998........ $ 0.33
Increase in pro forma net tangible book value per common share
attributable to new investors...................................... $ 2.08
Net tangible book value per common share after this offering......... $ 2.41
---------
Dilution per common share to new investors........................... $ 4.09
---------
---------

The following table compares, on a pro forma basis, as of December 31, 1998,
information concerning common shares purchased by existing shareholders and
common shares to be purchased by new investors in this offering. This
information assumes an initial public offering price of $6.50 per share and does
not take into account underwriting discounts and commissions and other offering
expenses:

[Enlarge/Download Table]

SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ --------- -------------- --------- -----------

Existing shareholders...................... 1,726,190 58.00% $ 2,400 0.03% $ 0.00
New investors.............................. 1,250,000 42.00% $ 8,125,000 99.97% $ 6.50
------------ --------- -------------- ---------
Total................................ 2,976,190 100.00% $ 8,127,400 100.00%
------------ --------- -------------- ---------
------------ --------- -------------- ---------

424B3 14th Page of 77 TOC 1st Previous Next ↓Bottom Just 14th
SELECTED FINANCIAL DATA

The following selected financial data are qualified by reference to, and
should be read together with, (1) our consolidated financial statements for the
years ended December 31, 1997 and 1998, including the accompanying notes, which
have been audited by Arthur Andersen, LLP, independent public accountants, and
(2) "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus.

STATEMENT OF OPERATIONS DATA:

[Enlarge/Download Table]

FOR THE YEARS ENDED
DECEMBER 31,
------------------------------

1997 1998
-------------- --------------
Net advertising revenues......................................................... $ 2,501,754 $ 2,759,092
Publishing costs................................................................. 441,535 377,983
-------------- --------------
Gross profit..................................................................... 2,060,219 2,381,109
Operating costs and expenses:
Selling expenses............................................................... 922,124 946,315
Administrative and general expenses............................................ 658,956 765,233
-------------- --------------
Total operating costs and expenses............................................. 1,581,080 1,711,548
-------------- --------------
Earnings from operations before provision for income taxes and equity income..... 479,139 669,561
Provision for income taxes....................................................... 240,000 329,000
Equity in earnings of affiliate.................................................. 16,012 17,035
-------------- --------------
Net income....................................................................... $ 255,151 $ 357,596
-------------- --------------
-------------- --------------
Basic and diluted net income per common share.................................... $ 0.20 $ 0.29
-------------- --------------
-------------- --------------
Basic and diluted weighted average number of common shares outstanding........... 1,250,000 1,250,000
-------------- --------------
-------------- --------------

BALANCE SHEET DATA:

[Enlarge/Download Table]

AS OF DECEMBER 31,
1998
----------------------

Cash...................................................................................... $ 310,185
Working capital........................................................................... 162,041
Total assets.............................................................................. 2,970,190
Total liabilities......................................................................... 2,445,451
Total shareholders' equity................................................................ 524,739

424B3 15th Page of 77 TOC 1st Previous Next ↓Bottom Just 15th
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THIS SECTION OF THIS PROSPECTUS INCLUDES A NUMBER OF FORWARD-LOOKING
STATEMENTS THAT REFLECT OUR CURRENT VIEWS ABOUT FUTURE EVENTS AND FINANCIAL
PERFORMANCE. WE USE WORDS LIKE "PLAN," "BELIEVES," "EXPECTS," "FUTURE" AND
"INTENDS" AND SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING STATEMENTS. YOU
SHOULD NOT UNDULY RELY ON THESE FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY AS
OF THE DATE OF THIS PROSPECTUS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM HISTORICAL RESULTS OR OUR PREDICTIONS. FOR A DESCRIPTION OF SOME OF THESE
RISKS, SEE "RISK FACTORS."

We currently publish and distribute two yellow page directories, the JEWISH
ISRAELI YELLOW PAGES and the MASTER GUIDE, in print and on the world wide web.
These directories cover the New York metropolitan market. In addition, to give
added value to users of and advertisers in our directories, we also operate the
JEWISH REFERRAL SERVICE and a "portal" web site. By June 2000, we plan to launch
NEWYELLOW, an English-only, general interest yellow page directory that will
compete directly with the Bell Atlantic Yellow Pages in the New York
metropolitan market.

Our principal source of revenue derives from the sale of ads for our
directories. Our advertising rates for new advertisers have increased
approximately 20% to 30% a year since 1990. However, we believe it is unlikely
that this trend will continue. Any further increases in our advertising rates
would reduce the disparity between our rates and those of the Bell Atlantic
Yellow Pages and may cause some of our advertisers to stop advertising in our
directories.

Advertising fees, whether collected in cash or evidenced by a receivable,
generated in advance of publication dates are recorded as "Advanced billings for
unpublished directories" on our balance sheet. Many of our advertisers pay the
fee over a period of time. In that case, the entire amount of the deferred
payment is booked as a receivable. Revenues are recognized at the time the
directory in which the ad appears is published. Similarly, costs directly
related to the publication of a directory in advance of publication are recorded
as "Directories in progress" on our balance sheet and are recognized when the
directory to which they relate is published. All other costs are expensed as
incurred.

The principal operating costs incurred in connection with publishing the
directories are commissions payable to sales representatives and costs for paper
and printing. Generally, advertising commissions are paid as advertising revenue
is collected. However, we expect that for the initial edition of NEWYELLOW we
will have to pay commissions to our sales representatives even before we collect
the related advertising revenue. Accordingly, approximately $2.4 million of the
net proceeds of this offering is earmarked for commissions payable with respect
to NEWYELLOW advertising. We do not have any agreements with paper suppliers or
printers. Since ads are sold before we purchase paper and print a particular
directory, a substantial

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increase in the cost of paper or printing costs would reduce our profitability.
Administrative and general expenses include expenditures for marketing,
insurance, rent, state and local franchise taxes, licensing fees, office
overhead and wages and fees paid to employees and contract workers.

QUARTERLY OPERATING RESULTS

Our results of operations have been subject to quarterly fluctuations. Most
of our revenue and most of our expenses have been recognized in the first and
the third quarters when the JEWISH ISRAELI YELLOW PAGES is printed and
distributed. As a result, quarterly results have not been indicative of annual
results. Future quarterly operating results may fluctuate as a result of these
factors and the timing of publication of NEWYELLOW and associated start-up
costs.

RECENT DEVELOPMENTS

Our entire business is operated by Dapey Assaf-Dapey Zahav and Dapey Assaf-
Hamadrikh. Dapey Assaf-Dapey Zahav, which was 100% owned by Assaf Ran, publishes
the directories and conducts all other aspects of our business. Dapey Assaf-
Hamadrikh owns all the trademarks, trade names and service marks used in
connection with our business and provides collection services to Dapey
Assaf-Dapey Zahav. Mr. Ran owned 50% of Dapey Assaf-Hamadrikh.

Management believed that the success of this offering would depend, in part,
on the ability of the public shareholders to acquire an interest in an entity
that owns all of the assets used in the business, including the intellectual
property rights. Accordingly, DAG Media was organized in February 1999 to serve
as the corporate parent of Dapey Assaf-Dapey Zahav and Dapey Assaf-Hamadrikh. On
May 11, 1999, the shareholders of Dapey Assaf-Dapey Zahav and Dapey
Assaf-Hamadrikh exchanged all of their shares in those entities for 1,726,190 of
our common shares. As a result, Dapey Assaf-Dapey Zahav and Dapey
Assaf-Hamadrikh became our wholly owned subsidiaries.

The transaction described above has been accounted for under the purchase
method of accounting. Accordingly, the value of the consideration deemed to have
been paid to the minority shareholders of Dapey Assaf-Hamadrikh, 238,095 of our
common shares, has been allocated among the assets of Dapey Assaf-Hamadrikh,
including our trademarks, tradenames and other intellectual property, based on
their relative fair market values and to the extent of their fair market values.
The excess of "purchase price" over the value of these assets has been allocated
to goodwill. The purchase price is deemed to be approximately $1,393,000. Of
this amount, $350,000 will be allocated to the intellectual property rights and
approximately $1 million has been allocated to goodwill. These amounts will be
amortized on a straight-line basis over 25 years, or $54,000 per year, beginning
with our 1999 fiscal year.

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Until the exchange transaction described above occurs, our historical
financial data include all of the operations of Dapey Assaf-Dapey Zahav and 50%
of the net income of Dapey Assaf-Hamadrikh.

RESULTS OF OPERATIONS

The following table sets forth for the periods presented statement of
operations data as a percentage of net advertising revenue. The trends suggested
by this table may not be indicative of future operating results.

[Enlarge/Download Table]

1997 1998
--------- ---------

Net advertising revenues......................................... 100.00% 100.00%
Publishing costs................................................. 17.65% 13.70%
Gross profit..................................................... 82.35% 86.30%
Selling expenses................................................. 36.86% 34.30%
Administrative and general expenses.............................. 26.34% 27.73%
Total operating costs and expenses............................... 63.20% 62.03%
Earnings before provisions for income taxes and equity income.... 19.15% 24.27%
Provision for income taxes....................................... 9.59% 11.92%
Equity in earnings of affilliate................................. 0.64% 0.62%
Net income....................................................... 10.20% 12.96%

YEARS ENDED DECEMBER 31, 1997 AND 1998

NET ADVERTISING REVENUES. Net advertising revenues for 1998 increased to
$2,759,092 from $2,501,754 in the prior year, an increase of 10.29%. The
increase reflected both increases in ad rates to new advertisers as well as an
increase in the number of advertisers. The 16(th) and 17(th)editions published
in February and August 1998, had 2,675 and 2,776 advertisers, respectively. The
14(th) and 15(th) editions published in February and August 1997, had 2,311 and
2,725 advertisers, respectively.

PUBLISHING COSTS. Publishing costs for 1998 decreased to $377,983 from
$441,535 in 1997, or 14.39%. This decrease resulted from:

- a global decrease in paper prices,

- the use of thinner paper and

- the printer's agreement to pay shipping costs.

As a result of the increase in net advertising revenues and the decrease in
publishing costs, gross profit for 1998 increased to $2,381,109 from $2,060,219,
or 15.58%.

SELLING EXPENSES. Selling expenses increased 2.62% to $946,315 in 1998 from
$922,124 in the prior year. However, as a percentage of net advertising
revenues, selling expenses declined to 34.30% in 1998 from 36.86% in the prior
year, reflecting lower commission rates and higher advertising rates.

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ADMINISTRATIVE AND GENERAL EXPENSES. Administrative and general expenses in
1998 were $765,233 compared to $658,956 in 1997, an increase of 16.13%. This
increase was attributable to the hiring of additional clerical personnel
necessitated by the growth in the size of the JEWISH ISRAELI YELLOW PAGES and
the publication of the 1(st) edition of the MASTER GUIDE.

EARNINGS BEFORE PROVISION FOR INCOME TAXES AND EQUITY INCOME. Earnings
before provision for income taxes and equity income in 1998 were $669,561
compared to $479,139 for the prior year, an increase of 39.74%. This increase is
attributable to a 10.29% increase in net advertising revenues and only a 3.31%
increase in total costs and expenses. More importantly, as a percentage of net
advertising revenues, total costs and expenses decreased from 80.85% in 1997 to
75.73% in 1998.

EQUITY IN EARNINGS OF AFFILIATE. Equity in earnings of affiliate represents
50% of the net income of Dapey Assaf-Hamadrikh. For 1998 equity in earnings of
affiliate was $17,035 compared to $16,012 for 1997, an increase of 6.39%. As a
percentage of net advertising revenues, equity in earnings of affiliate was
virtually the same in both years.

PROVISION FOR INCOME TAXES. Provision for income taxes in 1998 and 1997 was
$329,000 and $240,000, respectively. As a percentage of net advertising
revenues, provision for income taxes increased to 11.92% in 1998 from 9.59% in
1997.

NET INCOME. Net income for 1998 increased 40.15% to $357,596 from $255,151
in 1997. As a percentage of net advertising revenues, net income in 1998
increased 27.06% to 12.96% from 10.20% in 1997.

LIQUIDITY AND CAPITAL RESOURCES

To date, our only source of funds has been cash flow from operations, which
has funded both our working capital needs and capital expenditures. We have no
debt or credit facilities. Generally, advertising fees, whether collected in
cash or evidenced by a receivable, are generated before the publication of the
related directory and before many of the costs directly associated with
publishing the related directory are incurred.

At December 31, 1998 we had cash and cash equivalents of $310,185 and
working capital of $162,041 compared to cash and cash equivalents of $132,741
and working capital of $47,638 at December 31, 1997. For the year ended December
31, 1998, net cash provided by operating activities was $433,731, compared to
$133,253 for the prior year. Net cash used in investing activities in 1998 was
$34,940 of which $17,035 represented 50% of the net income of Dapey
Assaf-Hamadrikh and $17,905 was used to purchase new computer equipment. Net
cash used in financing activities in 1998 was $221,347, the amount of the loan
made to our principal shareholder, Assaf Ran.

At December 31, 1998, advance billings for unpublished directories and
directories in progress were $1,832,341 and $623,335, respectively. In
comparison, the

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corresponding amounts at December 31, 1997, were $1,226,343 and $379,390,
respectively. At December 31, 1998, we had income taxes payable of $358,000 and
deferred taxes payable of $171,000. Deferred taxes payable represents the timing
difference between reporting income on an accrual basis for financial purposes
and on a cash basis for tax purposes.

We do not have any material commitments under any leases, sales agency
agreements or employment agreements, other than the employment agreements with
Assaf Ran and Dvir Langer. Mr. Ran's employment agreement terminates June 30,
2002 and provides for a base salary of $75,000 per year. Mr. Langer's employment
agreement is for one year from the date of this prospectus and provides for a
guaranteed minimum base salary of $60,000.

We expect our working capital requirements to increase significantly over
the next 12 months as we implement our plan to launch our new directory,
NEWYELLOW, and continue to expand our web site. The net proceeds of this
offering will be used to pay our sales representatives commissions on ad sales
for NEWYELLOW, for marketing expenses for NEWYELLOW and our web site, for the
cost of printing and distributing NEWYELLOW and for other operating expenses
that are expected to increase as we expand our business. Accordingly, we will
depend primarily on the net proceeds of this offering to expand our operations.

We expect that the net proceeds of this offering, together with our cash
flow from operations, will be sufficient to meet our working capital
requirements for at least the next 12 months. However, if our operating
assumptions change or prove to be inaccurate or we accelerate our plans to
launch directories in addition to the initial NEWYELLOW directory, we may be
required to seek additional sources of capital sooner than we expect. Our
ability to obtain any additional financing may be limited by our financial
condition, our operating results or the condition of the financial markets. We
cannot assure you that we will be able to obtain additional financing or what
will be the terms of any subsequent financing.

YEAR 2000 COMPLIANCE

The "Year 2000" problem is the result of computer programs being written
using two digits, rather than four, to define the applicable year. Computer
programs and microprocessors that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, or not recognize the
date at all, which could result in major system failures or miscalculations.
Year 2000 problems experienced by us or our suppliers, could adversely impact
our ability to service our customers or otherwise carry on our business,
including causing interruptions in the operation of our web site, customer
billing, and invoicing and data interfaces to and from these systems. We have
not yet developed a contingency plan to address situations that may result if we
or our suppliers are unable to achieve Year 2000 compliance. The cost of
developing and implementing this kind of plan, if necessary, could be material.

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We believe, based on evaluation by our own staff and an outside consultant,
that substantially all of our existing systems, software and hardware are Year
2000 compliant. The possibility exists that, despite assurances given by our
vendors and suppliers, and our own internal assessment, our systems may contain
undetected errors or defects relating to the Year 2000 problem. If these systems
are not Year 2000 compliant, on January 1, 2000 they may either malfunction or
shut down completely. In either case, historical data critical to our business,
operations and financial condition may be temporarily or permanently lost,
forcing us to discontinue operations for a significant amount of time until the
lost data are retrieved or recreated, if possible. We may also have to expend
significant amounts of capital to recreate the lost data and restore our
computer systems to working order, which could force us to delay or discontinue
our expansion plans.

During the third quarter of 1999 we plan to contact the banks, utility
companies, telecommunications and transportation providers and material
suppliers on whom we rely, including HaMakor Printing, to assess their
compliance with Year 2000 related issues. Initially, we plan to send them
letters asking them if they are Year 2000 compliant and, if not, when they
expect to be. If we do not receive answers to these inquiries, or the answers we
receive are unsatisfactory, we will evaluate our alternatives at that time. Such
alternatives would include switching to new suppliers who are Year 2000
compliant.

In particular, we must confirm that HaMakor Printing is Year 2000 compliant.
If HaMakor is not Year 2000 compliant, then we will assess whether its failure
would affect its ability to print our February 2000 JEWISH ISRAELI YELLOW PAGES
directory. If it does, we will have to find a new printer. While we believe that
we will be able to find a new printer relatively quickly, we cannot be certain
that a new printer will be willing or able to provide us with the same level of
pricing, service and quality as HaMakor.

At the present time, we do not anticipate that these inquiries will involve
any significant cost and expense. However, this may change as we develop new
information. We plan to use our administrative staff to handle these inquiries.
If the issues become too technical, we may retain the services of a Year 2000
consultant to advise us.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." This statement establishes the
fair market value based method of accounting for an employee stock option but
allows companies to continue to measure the compensation cost for those plans
using the intrinsic value-based method of accounting prescribed by APB Opinion
No. 25 "Accounting for Stock Issued to Employees." Companies electing to
continue using the accounting provided for under APB Opinion No. 25 must,
however, make pro forma disclosures of net income and earnings per share as if
the fair value-based method of accounting defined in SFAS No. 123 had been
applied. We have elected to

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account for stock-based compensation awards to employees and directors under the
accounting prescribed by APB Opinion No. 25 and will provide the disclosures
required by SFAS No. 123.

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." This statement requires the presentation of both
"basic earnings per share" and "diluted earnings per share" on the face of the
statement of operations. Basic earnings per share is computed on the weighted
average number of shares actually outstanding during the year and diluted
earnings per share takes into account the effect of potential dilution from the
exercise of outstanding dilutive stock options and warrants for common stock
using the treasury stock method. We have adopted SFAS No. 128 for the current
fiscal year.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS 131,
applicable to public companies, established new standards for reporting
information about operating segments in annual and periodic financial
statements. SFAS No. 131 is effective beginning with the year ended December 31,
1998. We believe that we operate in only one segment.

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BUSINESS

We currently publish and distribute two yellow page directories, the JEWISH
ISRAELI YELLOW PAGES and the MASTER GUIDE, in print and on the world wide web.
These directories cover the New York metropolitan market, which includes the
five boroughs of New York City, Nassau, Suffolk, Westchester and Rockland
counties and northern New Jersey. Based on our knowledge of the market, we
believe that our yellow page directories have more paying advertisers than those
of any publisher of yellow page directories for the New York metropolitan market
except Bell Atlantic. However, there is no independent source to confirm this
belief. In addition, to give added value to users of and advertisers in our
directories, we also operate the JEWISH REFERRAL SERVICE, and a "portal" web
site. By June 2000, we plan to launch NEWYELLOW, an English-only, general
interest yellow page directory that will compete directly with the Bell Atlantic
Yellow Pages in the New York metropolitan market.

INDUSTRY BACKGROUND(*)

In 1998, yellow page advertising revenues in the United States were
estimated to be $12.07 billion, a 6.3% increase over 1997 yellow page
advertising revenues of $11.36 billion. The eight largest publishers of yellow
page directories in the United States -- including the five regional bell
operating companies, GTE, SNET and Sprint -- account for the overwhelming
majority of yellow page advertising revenues. Bell Atlantic and SBC Directory
Operations, a division of SBC Corporation, one of the regional bell operating
companies, are the two largest publishers of yellow page directories in the
United States, each having annual yellow page advertising revenue in excess of
$2 billion.

There are many independent publishers of yellow page directories in the
United States. In 1997 United States publishers of yellow page directories not
affiliated with local telephone companies increased their market share to 6.4%
from 6.2% in 1996. Their yellow page advertising revenues were expected to grow
by 15.4% in 1998.

Further, in 1997 the total aggregate yellow page advertising revenues of
companies that publish yellow page directories on the Internet were
approximately $21.8 million. Simba estimates that yellow page Internet
advertising revenues will grow significantly, reaching $164.9 million by 2000.

PRODUCTS AND SERVICES

THE JEWISH ISRAELI YELLOW PAGES. The JEWISH ISRAELI YELLOW PAGES is a
bilingual, yellow page directory that is distributed free through local
commercial and retail

---------------------
* Except as otherwise indicated, all industry data are based on the YELLOW
PAGES & DIRECTORY REPORT, a publication of Cowles/Simba Information, a unit
of Cowles Business Media; INTERNET YELLOW PAGES, 1998: BUSINESS MODELS AND
MARKET OPPORTUNITIES, an annual research report published by Cowles/Simba;
and oral communications with representatives of Cowles/Simba in January
1999.

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establishments in the New York metropolitan area as well as through travel
agencies in Israel. All ads in the JEWISH ISRAELI YELLOW PAGES are in English
and Hebrew unless the advertiser specifically requests that the ad be English
only. The JEWISH ISRAELI YELLOW PAGES is organized according to the Hebrew
alphabet, although it is indexed in both Hebrew and English. We believe that the
JEWISH ISRAELI YELLOW PAGES is used principally by persons whose native language
is Hebrew although it is also used by members of the Jewish community whether or
not they speak Hebrew.

The JEWISH ISRAELI YELLOW PAGES was first published in February 1990 and has
been published in February and August of each year since 1991. Currently,
approximately 350,000 copies of the JEWISH ISRAELI YELLOW PAGES are printed and
distributed annually. The JEWISH ISRAELI YELLOW PAGES has grown substantially
since its initial edition. The 1(st)edition, published in February 1990, had 118
pages and approximately 217 advertisers. The 18(th) edition, published in
February 1999, has 1,696 pages and more than 3,200 advertisers. No single
advertiser accounts for a material portion of our ad revenues. We believe that,
based on the number of pages and paying advertisers, the JEWISH ISRAELI YELLOW
PAGES is the largest yellow page directory in the New York metropolitan area not
published by Bell Atlantic.

The tables below illustrate the growth in the number of pages and
advertisers of the JEWISH ISRAELI YELLOW PAGES. Data for the years 1991 through
1998 represent an average of the two directories published in each of those
years.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

[Download Table]

PAGES PER DIRECTORY

PAGES
1990 118
1991 174
1992 215
1993 272
1994 321
1995 430
1996 792
1997 1239
1998 1408
1999 1696
YEAR

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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

[Download Table]

AVERAGE ADVERTISERS PER DIRECTORY

ADVERTISERS
1990 217
1991 505
1992 574
1993 646
1994 806
1995 1115
1996 1592
1997 2518
1998 2725
1999 3244
YEAR

Advertisers in the JEWISH ISRAELI YELLOW PAGES include companies such as El
Al Israel Airlines, Sprint PCS and AllState Insurance Company, as well as local
and neighborhood businesses, such as restaurants, car dealerships, retail
establishments, professionals, such as doctors, accountants and lawyers, and
travel agencies. Typically, the advertisers provide us with the copy of their ad
and our trained bilingual staff produces Hebrew text for the ad. Our editors
also design ads for our advertisers. The size of an ad can range from a single
line listing to a full page. Approximately 1% of the ads are line listings; the
others are at least one-sixth of a page. Prices range from $300 for a line
listing to $4,206 for a full page. Special rates apply for full color ads and
premium positioning. Full color ads are $6,250 and premium positioning ranges
from $8,250 to $22,000. Except for line listings, prices include all copy,
graphic and design work. Basic ads are printed in black and red while premium
ads are printed in four colors. Historically, our advertising rates for new
advertisers have increased at the rate of 20% to 30% annually since 1990. We
believe, however, that it is unlikely that this trend will continue. Any further
increases in our advertising rates would reduce the disparity between our rates
and those of the Bell Atlantic Yellow Pages and may cause some of our
advertisers to stop advertising in our directory.

All production, including layout, design, edit and most proofreading
functions, for the JEWISH ISRAELI YELLOW PAGES is performed at our headquarters
in Queens, New York by our bilingual staff. The final version of the JEWISH
ISRAELI YELLOW PAGES is shipped to Israel to be printed by HaMakor Printing Ltd.
The printed directories are shipped to our main office in New York for
distribution.

We believe that HaMakor provides us with a competitive advantage with
respect to cost, quality and responsiveness. From time to time we receive
solicitations from printers who would like to publish our directory. We have
consistently found their pricing to be significantly higher than that of
HaMakor, even after taking into account shipping costs. In addition, we believe
the quality of HaMakor's product is superior to anything that a local printer
would produce, particularly because so much of the

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directory is in Hebrew. Finally, because of our long standing relationship with
HaMakor we receive timely service.

We buy all our paper for our directories on the local market at prevailing
prices. Accordingly, we do not depend on any single source of supply although we
are subject to market forces that affect the price of paper. Paper costs
fluctuate according to supply and demand in the marketplace. In addition, paper
costs can be affected by events outside of our control, such as fluctuations in
currency rates, political events, global economic conditions, environmental
issues and acts of God.

THE MASTER GUIDE. In October 1998 we published the first edition of the
MASTER GUIDE, a yellow page directory designed to meet the special needs of the
Hasidic and ultra-Orthodox Jewish communities in the New York metropolitan area.
The first edition of the MASTER GUIDE had 124 pages and 80 advertisers. A second
edition is scheduled for publication in June 1999. We produce the MASTER GUIDE
generally in the same manner as we do the JEWISH ISRAELI YELLOW PAGES, including
printing it in Israel. The MASTER GUIDE differs from the JEWISH ISRAELI YELLOW
PAGES in that the MASTER GUIDE is published in English only, does not advertise
products or services that might offend the Hasidic and ultra-Orthodox Jewish
communities and is only published once a year. Generally, advertising rates for
the MASTER GUIDE are lower than those for the JEWISH ISRAELI YELLOW PAGES
because the market that it serves is smaller. Distribution of the MASTER GUIDE
is accomplished by placing copies of the directory in synagogues, community
centers and businesses located in Hasidic and ultra-Orthodox neighborhoods. The
development of the MASTER GUIDE reflects our strategy to expand by identifying
and pursuing niche markets for yellow page directories.

THE JEWISH REFERRAL SERVICE. The JEWISH REFERRAL SERVICE provides added
value to users of and advertisers in our directories. Potential consumers who
are looking to purchase goods or services call the referral service and an
operator directs them to one or more advertisers in our directories. Tourists
also call the referral service with questions involving travel, lodging, visa
issues, driver's license issues and the like. Finally, advertisers use the
referral service as a tool to generate new business.

The telephone number for the JEWISH REFERRAL SERVICE is published throughout
our directories and in newspapers serving the Jewish and Israeli communities. As
part of the referral service, we recently established a program under which
participating advertisers have agreed to give discounts to customers who produce
the Jewish Israeli Yellow Pages Consumer Discount Card. This card is distributed
with the JEWISH ISRAELI YELLOW PAGES or the MASTER GUIDE or can be ordered
directly from us. By presenting the card at participating establishments,
consumers can receive discounts of up to 10%.

ONLINE SERVICES. Initially our web site, launched in 1995, contained an
English-only version of the JEWISH ISRAELI YELLOW PAGES. In 1999 we expanded our
online presence so that our web site functions as a "portal" with links to a
variety of sites on the web, particularly those that carry information and news
that may be of particular

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interest to the Israeli and Jewish communities. It also provides a link to our
directories as well as the web sites of our advertisers. We also develop web
sites for our advertisers for a fee. We plan to further enhance our web site by
providing links to NEWYELLOW and community-focused yellow page directories, by
including news and information and by creating strategic alliances with other
Internet portals. While we have not yet derived any revenue from our web site,
we plan to explore ways in which it can be used to generate additional
advertising revenue.

GROWTH STRATEGY

We plan to expand our operations by introducing NEWYELLOW, English-only,
general interest yellow page directories, in the New York metropolitan area. We
plan to introduce the first NEWYELLOW directory in Manhattan by June 2000. If
the Manhattan NEWYELLOW directory is successful, we plan to offer additional
NEWYELLOW directories covering the other boroughs in New York City, the other
counties in the New York metropolitan area and northern New Jersey.

NEWYELLOW will compete directly with yellow page directories published by
Bell Atlantic. Ads in NEWYELLOW will be priced significantly below the rates
currently charged by Bell Atlantic for its yellow page directories. Thus,
NEWYELLOW will be positioned as a low-cost alternative to the Bell Atlantic
Yellow Pages, appealing to smaller businesses that are looking for a less
expensive alternative. Although we have not conducted any formal marketing
surveys, some of our advertisers have told us that they do not advertise in the
Bell Atlantic Yellow Pages because the rates are too high and other advertisers
have indicated that they would switch from the Bell Atlantic Yellow Pages if a
less expensive alternative were available. We believe that our lower advertising
rates as well as our expertise in publishing yellow page directories,
particularly our ability to hire, train and manage an effective sales force, our
low advertising rates and our low overhead will enable us to compete effectively
with Bell Atlantic.

To successfully introduce NEWYELLOW into the New York market and sustain and
increase our profitability, we must do the following:

- convince advertisers that NEWYELLOW will be used by sufficient number of
their potential customers to make it worthwhile and cost effective for
them to advertise in NEWYELLOW;

- manage the production, including ad sales, graphic design, layout, editing
and proofreading, of multiple directories addressing different markets in
varying stages of development;

- attract, retain and motivate qualified personnel and expand the number of
sales, operating and management personnel;

- provide high quality, easy to use and reliable directories;

- establish a brand identity for NEWYELLOW;

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- develop new and maintain existing relationships with advertisers without
diverting revenues from our existing directories;

- develop and upgrade our management, technical, information and accounting
systems;

- respond to competitive developments promptly;

- introduce enhancements to our existing products and services to address
new technologies and standards and evolving customer demands;

- control costs and expenses and manage higher levels of capital
expenditures and operating expenses; and

- maintain effective quality control over all of our directories.

Our failure to achieve any of the above in an efficient manner and at a pace
consistent with the growth of our business could adversely affect our business,
financial condition and results of operations.

To meet our goal of publishing NEWYELLOW by June 2000, we will have to
quickly hire and train many new sales representatives. We have not yet hired any
new sales representatives for NEWYELLOW. We cannot assure you that we will be
able to hire and retain qualified personnel to keep pace with our expansion
strategy. Some of the factors that will affect our ability to hire and retain
qualified sales representatives include:

- our inability to offer compensation packages at the same level as
financially stronger competitors;

- the availability of qualified personnel; and

- competition for sales personnel in general.

We may also explore opportunities for adding JEWISH ISRAELI YELLOW PAGES and
MASTER GUIDE directories in other cities with large Jewish and Israeli
populations, like Miami, Florida and Los Angeles, California.

SALES

Advertisements for the JEWISH ISRAELI YELLOW PAGES and the MASTER GUIDE are
sold through our network of trained sales representatives, all of which are
independent contractors and are paid solely on a commission basis. Of the
approximately 65 sales representatives in our network, 32 are hired directly by
us and 33 are hired by two sales agencies with which we have sales agency
agreements, B.I.Y., Inc. and M.I.Y. Inc. The sales representatives hired by us
work out of our offices in Queens, New York and Fairlawn, New Jersey. B.I.Y. is
located in Brooklyn, New York and M.I.Y. is located in Manhattan, New York. Our
selling force is based in these locations because of the high concentration of
Jewish and Israeli consumers in these areas. M.I.Y. is owned by Daniel Frank and
B.I.Y. is owned by Avi Sheffi. Mr. Frank and Mr. Sheffi

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will each own approximately 1% of our outstanding common shares after this
offering is completed.

We plan to open two new company-owned sales offices in 1999: one in Long
Island that will be dedicated to the JEWISH ISRAELI YELLOW PAGES and the MASTER
GUIDE and one in Manhattan dedicated to NEWYELLOW. We have commenced our search
for managers to supervise these offices but have not taken any further steps in
connection with this expansion. At the appropriate time we will decide whether
to lease or buy the facilities that will house these operations. Funds for the
opening of these offices will come from the net proceeds of this offering and
cash flow from operations, including the repayment of Mr. Ran's loan.

Under our agreements with the sales agencies, which are terminable upon 30
days notice, the agencies may not sell advertising for any yellow page
directories other than those we publish. Generally, each sales agency is
responsible for all fixed costs relating to its operations. We pay sales
commissions to the agencies, which, in turn, pays commissions to the individual
sales representatives who sell the ads. The commissions payable to the
individual sales representatives are prescribed in our agreements with the
agencies and are consistent with the commissions we pay to the sales
representatives that we hire directly.

We are responsible for training each sales representative, whether hired
directly by us or by one of our sales agencies. Generally, training consists of
one-day orientation, during which one of our sales managers educates the sales
representative about our business and operations, and a two-week period during
which the sales representative receives extensive supervision and support from a
sales manager or another experienced sales representative.

MARKETING STRATEGY

The JEWISH ISRAELI YELLOW PAGES and MASTER GUIDE are marketed to the Jewish
and Israeli communities living in the New York metropolitan area. According to
the American Jewish Congress, there are approximately two million Jews living in
this market, representing approximately 10.6% of the total population. We
believe that the Jewish population has higher than average disposable income, is
well educated and possesses a strong sense of community. In addition, while
there is no precise data as to the number of Israeli immigrants living in the
New York metropolitan area, we believe the number is substantial. Moreover, a
significant number of Israeli tourists visit the area annually. Accordingly, we
believe that advertisers are attracted to the JEWISH ISRAELI YELLOW PAGES as a
way to advertise directly to this market.

We further believe that the Jewish population in the New York metropolitan
area is likely use to the JEWISH ISRAELI YELLOW PAGES because of the impression
that businesses that advertise in the JEWISH ISRAELI YELLOW PAGES support or are
affiliated with the Jewish community. In the case of the MASTER GUIDE, users can
be comfortable that none of its advertisers will offend their religious beliefs.
We also believe that our advertising rates are attractive, particulalrly to
small businesses who cannot afford to

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advertise in the Bell Atlantic Yellow Pages. Generally, advertising rates for
the JEWISH ISRAELI YELLOW PAGES and the MASTER GUIDE are approximately 33% of
the rates for the Bell Atlantic Yellow Pages.

NEWYELLOW will initially compete directly with the Bell Atlantic Yellow
Pages in Manhattan and then with the Bell Atlantic Yellow Pages in the other
boroughs of New York City and in the surrounding suburbs. Initially, we will
dedicate up to 10 sales representatives from our existing network, spread out
over the four sales offices, to selling ads for NEWYELLOW. Before the end of
1999, we expect to open a new company-owned sales office, which will be staffed
by sales representatives that we will hire directly and which will be dedicated
to selling ads exclusively for NEWYELLOW. Because NEWYELLOW is a new
publication, which may make it more difficult to sell, and because it will
compete directly with Bell Atlantic, the commission structure for NEWYELLOW
sales representatives may have to be higher than it is for our other
directories.

We believe that advertisers will be attracted to NEWYELLOW for several
reasons. First, NEWYELLOW is likely to be smaller and less dense than the Bell
Atlantic Yellow Pages, so that each advertisement in NEWYELLOW will stand out
more prominently than it would in the Bell Atlantic Yellow Pages. Second,
advertising rates for NEWYELLOW will be significantly lower than the comparable
rates for advertising in the Bell Atlantic Yellow Pages. Accordingly, we believe
that NEWYELLOW will attract advertisers who do not currently advertise in the
Bell Atlantic Yellow Pages as well as existing Bell Atlantic Yellow Page
advertisers. The table below compares the proposed advertising rates for the
first edition of NEWYELLOW and the advertising rates generally offered by Bell
Atlantic for the 1999 edition of its Yellow Pages. All rates assume single color
ads using black print on yellow paper.

[Enlarge/Download Table]

BELL
ATLANTIC
NEWYELLOW YELLOW PAGES
------------ ------------

Full Page..................................................... $ 21,120 $ 74,496
Half Page..................................................... $ 12,684 $ 37,248
Quarter Page.................................................. $ 6,802 $ 18,624
Sixth Page.................................................... $ 4,864 $ 12,416
Eighth Page................................................... $ 3,686 $ 9,312
Sixteenth Page................................................ $ 1,824 $ 4,656
Inside Front Cover............................................ $ 75,000 $ 300,000
Inside Back Cover............................................. $ 75,000 $ 300,000
Back Cover.................................................... $ 150,000 $ 500,000
Page One...................................................... $ 75,000 ***

We plan to advertise NEWYELLOW primarily in local media outlets where
advertising rates are relatively low. In addition to marketing NEWYELLOW
independently, we will also seek to enter joint marketing agreements with local
and long distance telecommunications companies. We intend to spend approximately
$1.4 million from the net proceeds of this offering on the marketing campaign
for NEWYELLOW. See "Use

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of Proceeds" for a more detailed discussion regarding how we intend to use the
net proceeds of this offering.

GOVERNMENT REGULATION

We are subject to laws and regulations relating to business corporations
generally, such as the Occupational Safety and Health Act, Fair Employment
Practices and minimum wage standards. We believe that we are in material
compliance with all laws and regulations affecting our business and we do not
have any material liabilities under these laws and regulations. In addition,
compliance with all these laws and regulations does not have a material adverse
effect on our capital expenditures, earnings, or competitive position.

COMPETITION

In New York, the market for yellow page advertising is dominated by Bell
Atlantic. In addition, there are a number of independent publishers of yellow
page directories, including bilingual directories for specific ethnic
communities. There are also independent publishers of yellow page directories
that publish community or neighborhood directories. However, we are not aware of
any other Hebrew-English yellow page directory or a yellow page directory that
is published specifically for the Hasidic and ultra-Orthodox Jewish communities
in the New York metropolitan area. By focusing on the special needs of the
Hebrew speaking and the Hasidic and ultra-Orthodox Jewish communities, we
believe that we have identified niche markets that allows us to compete
effectively with our larger rivals.

Unlike the JEWISH ISRAELI YELLOW PAGES and the MASTER GUIDE, NEWYELLOW will
compete directly with the Bell Atlantic Yellow Pages and other smaller,
English-only, general interest yellow page directories published by companies
other than Bell Atlantic. Since there are virtually no barriers to entry in this
market, any company with a reasonable amount of capital, like the regional bell
operating companies or publishers, are potential competitors. Recently, an
independent yellow page publisher, Yellow Book USA, announced that it planned to
publish a Manhattan yellow page directory to compete with the Bell Atlantic
Yellow Pages. In addition, the Internet is growing rapidly and is a current and
potential source of even greater competition. There are a number of online
yellow page directories, including Big Yellow, owned by Bell Atlantic. Finally,
strategic alliances could give rise to new or stronger competitors. Many of our
competitors, such as Bell Atlantic, can reduce advertising rates, particularly
where directory operations can be subsidized by other revenues, making
advertising in our directories less attractive. In response to competitive
pressures, we may have to increase our sales and marketing expenses or reduce
our advertising rates. Since we may not capture a significant share of the
markets where we operate, we cannot assure you that we can compete effectively.

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INTELLECTUAL PROPERTY

To protect our rights to our intellectual property, we rely on a combination
of federal, state and common law trademarks, service marks and trade names,
copyrights and trade secret protection. We have registered some of our
trademarks and service marks on the supplemental register of the United States
and some of our trade names in Queens, New York and New Jersey. In addition,
every directory we publish has been registered with the United States copyright
office. The protective steps we have taken may be inadequate to deter
misappropriation of our proprietary information. We may be unable to detect the
unauthorized use of, or take steps to enforce, our intellectual property rights.
In addition, although we believe that our proprietary rights do not infringe on
the intellectual property rights of others, other parties may assert
infringement claims against us or claims that we have violated a trademark,
trade name, service mark or copyright belonging to them. These claims, even if
not meritorious, could result in the expenditure of significant financial and
managerial resources on our part.

EMPLOYEES

As of March 1, 1999, we employed three people, two of whom are full-time,
and all of whom were employed in executive, managerial or administrative
positions capacities. In addition, we retained the services of 10
administrative, accounting and production personnel, all of whom are independent
contractors. Finally, we had a network of 65 sales representatives, 32 hired by
us directly and 33 hired by the sales agencies that sell ads for our
directories. We believe that our relationship with our employees and contractors
is good. None of our employees is represented by a labor union.

FACILITIES

Our executive and principal operating office is located in Queens, New York
in 3,000 square feet. This space is occupied under a lease expiring October 30,
1999. The monthly rent is $4,552. After this offering is completed, we intend to
negotiate with the owner of the premises regarding a new lease. If we cannot
reach an agreement within a reasonable amount of time, we will look for
alternative space which we believe will be available on satisfactory terms. Our
New Jersey sales office is located in an approximately 1,000 square foot
facility in Fair Lawn, New Jersey. The space is leased on a month-to-month basis
for $1,100 per month.

LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors, including those who will take office
on the date of this prospectus, and their respective ages, as of the date of
this prospectus, are as follows:

[Enlarge/Download Table]

NAME AGE POSITION
--------------------------------------- --- ------------------------------------------

Assaf Ran.............................. 33 Chief executive officer, president and
director
Dvir Langer............................ 30 Vice president--sales and corporate
development nominee and director nominee
Eyal Huberfeld......................... 24 Vice president--sales and director
Hanan Goldenthal....................... 48 Chief financial and accounting officer,
treasurer and secretary
Yoram Evan............................. 33 Director
Phillip Michals........................ 29 Director nominee
Eran Goldshmid......................... 32 Director nominee

All directors hold office until the next annual meeting of shareholders and
until their successors are duly elected and qualified. Officers are elected to
serve subject to the discretion of the board of directors.

Set forth below is a brief description of the background and business
experience of our executive officers and directors:

ASSAF RAN, our founder, has been our chief executive officer and president
since our inception in 1989. In 1987 Mr. Ran founded Dapey Assaf Maagarei
Mechirim, Ltd., a publishing company in Israel, and is a member of its board of
directors.

DVIR LANGER will become our vice president--sales and corporate development
and will join our board of directors immediately following the closing of the
sale of the common shares offered by this prospectus. From August 1996 through
April 1999, Mr. Langer was employed by Prudential Securities as a financial
advisor. He has also been an employee of Cosmo Management Corporation, a real
estate management firm, since May 1994. Mr. Langer received a BA degree in
philosophy from the University of British Columbia in June 1993 and a JD from
Brooklyn Law School in June 1996. He has been a member of the New York State Bar
since February 1997.

EYAL HUBERFELD has been our vice president--sales since June 1998 and a
member of our board of directors since February 1999. From September 1997
through June 1998, was one of our independent sales representatives. From August
1996 to January 1997, Mr. Huberfeld worked for Yedeot Aharonot, an Israeli daily
newspaper,

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as a marketing manager and consultant. Between March 1993 and March 1996, Mr.
Huberfeld served in the Israeli Defense Force, in the bomb disposal unit.

HANAN GOLDENTHAL has been our chief financial and accounting officer,
treasurer and secretary since February 1999. For the last 10 years, he has been
engaged in the practice of public accounting. Until December 1998, he was a
principal of Goldenthal & Pankowski, CPAs, and since January 1999, he has been a
principal of Goldenthal & Suss, CPAs, PC. From September 1995 to December 1998,
he was also a principal of GP Business Solutions, Inc., a management consulting
firm. Mr. Goldenthal has been our accountant since our inception. Mr. Goldenthal
is a part-time employee and continues to practice accounting with Goldenthal &
Suss, CPAs, PC. Mr. Goldenthal is a certified public accountant and received a
BBA from Baruch College in June 1976.

YORAM EVAN has been a member of our board of directors since October 1998.
Since January 1999, he has been vice president of operations and finance and,
since July 1997, a member of the board of directors of Netgrocer, an internet
grocery company. From December 1997 to December 1998, he was the chief financial
officer of American Value Brands, Inc., a food marketing company. From April
1996 to September 1997, Mr. Evan has acted as the managing partner of two
investment funds in Israel, which he founded. From March 1992 to April 1996, Mr.
Evan served in the budget department of the Israeli Ministry of Finance. Mr.
Evan received a BA in economics in July 1991 and an MBA in February 1997 from
the University of Tel Aviv in Israel.

PHILLIP MICHALS will join our board of directors immediately following the
closing of the sale of the common shares offered by this prospectus. He is the
founder and, since August 1996, the president of Up-Tick Trading, a consulting
company to investment banking firms. Since July 1994, he has also been a
principal and a vice president of Michals and Stockmen Consulting Inc., a
management consulting firm. Mr. Michals received a BS degree in human resources
from the University of Delaware in May 1992.

ERAN GOLDSHMID will join our board of directors immediately following the
closing of the sale of the common shares offered by this prospectus. Since
December 1998, he has been the general manager of the Carmiel Shopping Center in
Carmiel, Israel. From April 1995 through December 1998, he was head of marketing
at Environmental Engineering & Design Company, Ltd., Tel Aviv, Israel. From
February 1993 through April 1995, he was head of a sales office for Yedioth
Aharonath, an Israeli daily newspaper. Mr. Goldshmid received certification as a
financial consultant in February 1993 from the School for Investment
Consultants, Tel Aviv, Israel, and a BA in business administration from the
University of Humberside, England in December 1998.

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COMMITTEES OF THE BOARD OF DIRECTORS

Our board of directors has established compensation and audit committees.
Messrs. Evan, Michals and Goldshmid will be members of both committees, and Mr.
Ran will be a member of the audit committee. The compensation committee will
review and make recommendations to the board of directors regarding compensation
matters. The compensation committee will also administer our stock option plan.
The audit committee will meet with management and our independent public
accountants to determine the adequacy of internal controls and other financial
reporting matters.

EXECUTIVE COMPENSATION

The following table shows information regarding compensation paid during the
year ended December 31, 1998 to our chief executive officer. No other employee
received compensation in excess of $100,000 in 1998.

[Enlarge/Download Table]

OTHER ANNUAL ALL OTHER
NAME SALARY BONUS COMPENSATION COMPENSATION
-------------------------------------------- --------- ----------- ------------------- -------------------

Assaf Ran................................... $ 25,000 -- -- --

In addition, we advanced $295,262, net of repayments, to Mr. Ran in 1998.
Mr. Ran will repay this loan out of the net proceeds from the sale of his common
shares offered by this prospectus.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Until after the consummation of this offering, we will not have a
compensation committee or other board committee performing equivalent functions.
Employment contracts with Messrs. Ran and Langer have been approved by the
entire board of directors, consisting of Messrs. Ran, Huberfeld and Evan.

EMPLOYMENT CONTRACTS

In March 1999, we entered into an employment agreement with Assaf Ran
providing for his employment as president and chief executive officer until June
30, 2002 at an annual base salary of $75,000 and annual bonuses to be determined
by the compensation committee in its sole and absolute discretion. Under the
agreement, Mr. Ran is entitled to participate in all executive benefit plans and
has agreed to a one-year non-competition period following the termination of the
agreement except if his employment is terminated without cause or for good
reason as defined in the agreement. A court may determine not to enforce, or
only partially enforce, the non-compete provisions of this agreement. The
agreement renews automatically for successive one-year terms until either party
gives 180 days notice of its or his intention to terminate the agreement.

In March 1999, we entered into a one-year employment agreement with Dvir
Langer, commencing on the date this registration statement becomes effective,
providing for his employment, as vice president--sales and corporate
development.

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His compensation consists of commissions based on advertising revenue generated
by him or other sales representatives whom he supervises. Mr. Langer is
guaranteed a minimum base salary of $60,000. Under the agreement, Mr. Langer has
agreed to a two-year non-competition period following the termination of the
agreement. A court may determine not to enforce, or only partially enforce, the
non-compete provisions of this agreement. The agreement renews automatically for
successive one-year terms until either party gives 14 days notice of its or his
intention to terminate the agreement.

1999 STOCK OPTION PLAN

To attract and retain persons necessary for our success, in March 1999 our
board of directors approved the adoption of the DAG Media, Inc. 1999 Stock
Option Plan covering 124,000 common shares. Under this plan, officers, directors
and key employees and consultants are eligible to receive incentive and/or
non-qualified stock options. This plan, which has a term of 10 years from the
date of its adoption, will be administered by the compensation committee. The
selection of participants, allotment of shares, determination of price and other
conditions relating to the purchase of options will be determined by the
compensation committee in its sole discretion.

Incentive stock options granted under this plan are exercisable for a period
of up to 10 years from the date of grant at an exercise price which is not less
than the fair market value of the common shares on the date of the grant, except
that the term of an incentive stock option granted under the plan to a
shareholder owning more than 10% of the outstanding common shares may not exceed
five years and its exercise price may not be less than 110% of the fair market
value of the common shares on the date of the grant.

As of the date this registration statement becomes effective, options
covering 29,324 common shares will be outstanding under our plan, including
options covering 7,000 common shares granted to a non-employee director. In
addition, immediately after the closing of the sale of the common shares offered
by this prospectus, options covering an additional 14,000 common shares will be
granted to non-employee directors. Options covering 14,884 common shares were
granted to two of our employees. These options have an exercise price of $6.50
per share and a term of five years. The options granted to one employee will be
exercisable on the date this registration statement becomes effective and the
options granted to the other will be exercisable one year from the date this
registration statement becomes effective.

Options covering the remaining 7,440 common shares were granted to one of
our contractors, subject to her becoming an employee. They will have an exercise
price equal to the fair market value on the date her employment commences or
$6.50 if her employment commences before the date this registration statement
becomes effective. They will have a term of five years and will be exercisable
one year from the date this registration statement becomes effective. No other
options have been granted under our plan.

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COMPENSATION OF DIRECTORS

Each director, other than employee directors, upon first taking office after
this registration statement becomes effective will receive a one-time grant
under our stock option plan of options to purchase 7,000 common shares at a
price equal to the fair market value on the date of grant. These options will
vest immediately upon grant. In addition, each non-employee director will
receive a $200 stipend for each board meeting he or she attends in person and
reimbursement for travel expenses for attendance at meetings.

LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION

Our certificate of incorporation provides that, to the extent permitted by
the New York Business Corporation Law, our directors will not be personally
liable to us or to our shareholders for monetary damages if they breach their
fiduciary duty of care as a director, including breaches which constitute gross
negligence. Thus, neither we nor our shareholders may be able to recover damages
even if directors take actions which are harmful to us. The liability of
directors under the federal securities laws is not affected. A director may be
liable for monetary damages only if a claimant can show a breach of the
individual director's duty of loyalty in performing their duties, a failure to
act in good faith, intentional misconduct, a knowing violation of the law, an
improper personal benefit or an illegal dividend or stock purchase.

There is no pending litigation or proceeding involving any of our directors,
officers, employees or agents in which we are required or permitted to provide
indemnification. We are not aware of any threatened litigation or proceeding
that may result in a claim for indemnification.

Our certificate of incorporation also provides that we will indemnify and
hold harmless each of our directors or officers to the fullest extent authorized
by the New York Business Corporation Law, against all expense, liability and
loss, including attorneys fees, judgments, fines, Employee Retirement Income
Security Act excise taxes or penalties and amounts paid or to be paid in
settlement, reasonably incurred or suffered by him or her arising from his or
her actions as an officer or director.

We have been advised that, in the opinion of the Securities and Exchange
Commission, indemnification for liabilities arising under the Securities Act, as
provided in our certificate of incorporation, is against public policy as
expressed in the Securities Act and is therefore unenforceable.

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RELATED PARTY TRANSACTIONS

During the year ended December 31, 1998, we advanced $295,262, net of
repayments, to Assaf Ran, our principal shareholder. This amount is evidenced by
a five-year promissory note bearing interest at 4.74% per annum and repayable in
quarterly installments with interest only payable during the first two years and
interest and principal payments payable over the last three years of the note.
Mr. Ran is selling 75,000 of his common shares in this offering, the net
proceeds of which will be used to repay this loan.

On May 11, 1999, the shareholders of Dapey Assaf-Dapey Zahav, Dapey Assaf-
Hamadrikh, including Mr. Ran, Eyal Huberfeld, one of our officers and directors,
and Dvir Langer, who will become an officer and director immediately following
the closing of the sale of the common shares offered by this prospectus,
exchanged all of the shares that they own in those companies for 1,726,190 of
our common shares.

In February 1999, our board of directors authorized the granting of options
covering 7,444 common shares to Hanan Goldenthal, our chief financial and
accounting officer, and options covering 7,000 common shares to Yoram Evan, a
non-employee director. These options are not exercisable until this registration
statement becomes effective and have an exercise of $6.50, the initial public
offering price. In addition, the board of directors authorized the granting of
options covering 7,000 common shares to each of Philip Michals and Eran
Goldshmid, non-employee director nominees. These options will not be exercisable
until they first take office after this registration statement becomes
effective.

At the time of the loan to Mr. Ran described above, we lacked independent
directors to ratify the transaction and did not determine whether the terms of
the loan were as favorable to us as those generally available from unaffiliated
third parties. Our bylaws now provide that, all material transactions and loans
between us and any of our affiliates must be on terms that are no less favorable
than those that can be obtained from unaffiliated third parties. Also, all
future material transactions, loans, and any foregiveness of loans involving
affiliates must be approved by a majority of our independent directors who do
not have an interest in the transaction and who have access, at our expense, to
our or independent legal counsel.

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PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of common shares as of the date of this prospectus and as adjusted to
reflect the sale of the common shares offered by this prospectus by:

- each shareholder who we know owns beneficially more than 5% of our
outstanding common shares,

- each of our directors,

- our chief executive officer and

- all of our directors and executive officers as a group.

In connection with this table:

- The address of each person listed is c/o DAG Media, Inc., 125-10 Queens
Boulevard, Kew Gardens, New York 11415.

- As required by the rules and regulations of the Securities and Exchange
Commission, number of common shares beneficially owned after this offering
by Messrs. Goldenthal, Evan, Michals, and Goldschmid represents common
shares issuable upon exercise of options that vest within 60 days of the
effective date of this registration statement.

- All officers and directors as a group consists of five persons before this
offering and seven persons after this offering.

All of the common shares set forth in the following table are subject to
agreements prohibiting the sale, assignment or transfer for a period of one year
from the date this registration statement becomes effective without the prior
written consent of Paulson. See "Underwriting" for more information about these
agreements. Each person listed below has sole investment and voting power with
respect to the common shares that he owns.

[Enlarge/Download Table]

BEFORE OFFERING AFTER OFFERING
---------------------------------- ----------------------------------
NUMBER OF PERCENTAGE OF COMMON SHARES NUMBER OF PERCENTAGE OF
COMMON SHARES COMMON SHARES OFFERED BY COMMON SHARES COMMON SHARES
BENEFICIALLY BENEFICIALLY SELLING BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER(1) OWNED OWNED SHAREHOLDER OWNED OWNED
------------------------------ --------------- ----------------- --------------- --------------- -----------------

Assaf Ran..................... 1,488,095 86.21% 75,000 1,413,095 47.48%
Dvir Langer................... 148,809 8.62% -- 148,809 5.00%
Eyal Huberfeld................ 29,762 1.72% -- 29,762 1.00%
Hanan Goldenthal.............. -- -- -- 7,444 *
Yoram Evan.................... -- -- -- 7,000 *
Phillip Michals............... -- -- -- 7,000 *
Eran Goldshmid................ -- -- -- 7,000 *
All officers and directors as
a group..................... 1,666,666 96.55% 75,000 1,620,110 53.92%

---------------------

* Less than 1%

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DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 25,000,000 common shares, par value
$.001 per share, and 5,000,000 preferred shares, par value of $.01 per share.
Before this offering, a total of 1,726,190 of our common shares were owned by
five shareholders. Upon completion of this offering, there will be 2,976,190 of
our common shares issued and outstanding. If the option we granted to the
underwriters to purchase additional common shares from us in this offering is
exercised in full, we will have 3,174,940 common shares issued and outstanding.
There are no preferred shares outstanding.

COMMON SHARES

In general, after the payment of dividends payable with respect to any
issued and outstanding preferred shares, the holders of outstanding common
shares are entitled to receive dividends out of assets legally available for the
payment of dividends at the times and in the amounts that the board of directors
determines. Each shareholder is entitled to one vote for each common share held
on all matters submitted to a vote of shareholders. The holders of a majority of
the common shares voted can elect all of the directors then standing for
election. The common shares are not entitled to preemptive rights and are not
subject to conversion or redemption. If we are liquidated or dissolved or our
business is otherwise wound up, the holders of common shares would be entitled
to share ratably in the distribution of all of our assets remaining available
for distribution after satisfaction of all our liabilities and the payment of
the liquidation preference of any outstanding preferred shares. Each outstanding
common share is, and all common shares to be outstanding upon completion of this
offering will be, fully paid and nonassessable.

After the closing of this offering, Assaf Ran will own approximately 47.5%
of our outstanding common shares. Accordingly, he will control the outcome of
all matters submitted to a vote of the shareholders, including the election of
directors, amendments to our certificate of incorporation and approval of
significant corporate transactions. This consolidation of voting power could
also have the effect of delaying, deterring or preventing a change in control
that might be beneficial to other shareholders.

PREFERRED SHARES

Our board of directors has the authority, within the limitations and
restrictions stated in our certificate of incorporation, to issue preferred
shares, in one or more classes or series, and to fix the rights, preferences,
privileges and restrictions of the series of preferred shares, including
dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preferences and the number of shares constituting any series or the
designation of a series. Any issuance of preferred shares must be approved by a
majority of our independent directors who do not have an interest in the
transaction and who have access, at our expense, to our or independent legal

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counsel. The issuance of preferred shares could have the effect of decreasing
the market price of the common shares and could adversely affect the voting and
other rights of the holders of common shares.

OPTIONS AND WARRANTS

We have reserved 124,000 common shares for issuance under our stock option
plan. On the date this registration statement becomes effective, options
covering 29,324 common shares will be outstanding and options covering an
additional 14,000 common shares will be outstanding immediately after the
closing of the sale of the common shares offered by this prospectus. Also, the
underwriters will receive five-year warrants covering 132,500 common shares. The
exercise of any of these options and warrants will dilute the percentage
ownership of our other shareholders.

AUTHORIZED BUT UNISSUED SHARES

The authorized but unissued common shares and preferred shares are available
for future issuance without shareholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future public offerings
to raise additional capital, corporate acquisitions and employee benefit plans.
The existence of authorized but unissued common shares and preferred shares
could render more difficult or discourage an attempt to obtain control of us by
means of a proxy contest, tender offer, merger or otherwise.

The New York Business Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
the corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage. Our certificate of incorporation does not impose
any supermajority vote requirements.

LISTING ON NASDAQ SMALLCAP MARKET

Our shares have been approved for trading on the Nasdaq SmallCap Market
under the symbol "DAGM."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common shares will be American
Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.

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SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there was no public market for the common shares. We
cannot predict the effect, if any, that sales of, or the availability for sale
of, our common shares will have on the market price of the common shares
prevailing from time to time. Future sales of substantial amounts of common
shares in the public market, including shares issued upon the exercise of
options to be granted under our stock option plan, could adversely affect the
prevailing market price of our common shares and could impair our ability to
raise capital in the future through the sale of securities.

Upon completion of this offering, we will have 2,976,190 common shares
outstanding, or 3,174,940 if the option we granted to the underwriters to
purchase additional common shares from us in this offering is exercised in full.
Of these common shares, 1,325,000, or 1,523,750 if the option we granted to the
underwriters to purchase additional common shares from us in this offering is
exercised in full, will be freely transferable without restriction under the
Securities Act of 1933, except for any shares held by someone who is our
"affiliate" as that term is defined by the rules and regulations issued under
the Securities Act. Common shares held by an affiliate will be subject to the
resale limitations of Rule 144 promulgated under the Securities Act. The
remaining 1,651,190 common shares held by existing shareholders are "restricted
securities" as that term is defined in Rule 144. Restricted securities may be
sold in the public market only if registered or if they qualify for an exemption
from registration under Rule 144 summarized below.

As a result of the contractual restrictions described below and the
provisions of Rule 144, the restricted securities could be available for resale
immediately upon the expiration of the one-year period imposed by the lock-up
agreements described below.

LOCK-UP AGREEMENTS

All of our officers, directors and shareholders have signed lock-up
agreements under which they have agreed not to transfer or dispose of, directly
or indirectly, any common shares or any securities convertible into or
exercisable or exchangeable for common shares, for a period of one year after
the date this registration statement becomes effective. Transfers or
dispositions can be made sooner with the prior written consent of Paulson
Investment Company. See "Underwriting" for a further discussion of the terms of
the lock-up agreements.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
this offering, a person, or persons whose shares are aggregated, who has
beneficially owned common shares for at least one year is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of one percent of the then outstanding common shares or the average
weekly trading volume of the common shares on the Nasdaq SmallCap Market during
the four calendar weeks

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preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission. Sales under Rule 144 are also subject to manner of sale
provisions, notice requirements and the availability of current public
information about us. Under Rule 144(k) any person, or persons whose shares are
aggregated, who is not deemed to have been one of our affiliates at any time
during the 90 days preceding a sale and who has beneficially owned the shares
proposed to be sold for at least two years, is entitled to sell those shares
without regard to the volume limitations, manner-of-sale provisions, public
information requirements or notice requirements of Rule 144.

STOCK OPTIONS

Following the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering 124,000 common shares
reserved for issuance under our stock option plan. The registration statement
will become effective automatically upon filing.

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UNDERWRITING

The underwriters named below have severally agreed, subject to the terms and
conditions contained in an underwriting agreement with us, to purchase 1,250,000
common shares from us and 75,000 common shares from Assaf Ran, at the price set
forth on the cover page of this prospectus, in accordance with the following
table.

[Enlarge/Download Table]

NUMBER OF
UNDERWRITER COMMON SHARES
--------------------------------------------------------------------------- ---------------

Paulson Investment Company, Inc............................................ 1,125,000
Redwine & Company, Inc..................................................... 200,000
---------------

Total.................................................................. 1,325,000
---------------
---------------

The underwriting agreement provides that the underwriters are committed to
purchase all the common shares offered by this prospectus if any common shares
are purchased. This commitment does not apply to 198,750 common shares subject
to the option granted by us to the underwriters to purchase additional common
shares in this offering.

The underwriters have advised us that they propose to offer the common
shares offered by this prospectus to the public at the initial public offering
price set forth on the cover page of this prospectus, and to selected dealers at
that price less a concession within their discretion and that the underwriters
and selected dealers may reallow a concession to other dealers, including the
underwriters, within the discretion of the underwriters. After completion of the
initial public distribution of the common shares offered by this prospectus, the
public offering price, the concessions to selected dealers and the reallowance
to their dealers may be changed by the underwriters.

We have granted the underwriters an option, expiring 45 days after the date
of this prospectus, to purchase up to 198,750 additional common shares from us
on the same terms as set forth in this prospectus. The underwriters may exercise
this option, in whole or in part, only to cover over-allotments, if any,
incurred in the sale of the common shares offered by this prospectus.

The underwriters have informed us that they do not expect to confirm sales
of common shares offered by this prospectus on a discretionary basis.

Until the distribution of the common shares offered by this prospectus is
completed, rules of the Securities and Exchange Commission may limit the ability
of the underwriters and selling group members to bid for and purchase common
shares. As an exception to these rules, the underwriters may engage in
transactions that stabilize the price of the common shares. These transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the common shares. If the underwriters create a short position in
connection with the offering, that is, if they sell more common shares than are
set forth on the cover page of this prospectus, the underwriters may reduce that
short position by purchasing common

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shares in the open market. The underwriters may also elect to reduce any short
position by exercising all or part of the option granted by us to purchase
additional common shares described above.

The underwriters may also impose a penalty bid on the selling group members.
This means that if the underwriters purchase common shares in the open market to
reduce the underwriters' short position or to stabilize the price of the common
shares, they may reclaim the amount of the selling concession from the selling
group members who sold those securities as part of this offering.

In general, the purchase of a security to stabilize or to reduce a short
position could cause the price of the security to be higher than it might be
otherwise. The imposition of a penalty bid might also affect the price of a
security if it were to discourage resales of the security. Neither we nor the
underwriters can predict the direction or magnitude of any effect that the
transactions described above may have on the price of the common shares. In
addition, neither we nor the underwriters can represent that the underwriters
will engage in these types of transactions or that these types of transactions,
once commenced, will not be discontinued without notice.

The underwriting agreement provides for indemnification between us and the
underwriters against specified liabilities, including liabilities under the
Securities Act, and for contribution by us and the underwriters to payments that
may be required to be made in respect of those liabilities. We have been advised
that, in the opinion of the Securities and Exchange Commission, indemnification
for liabilities under the Securities Act is against public policy as expressed
in the Securities Act and is therefore unenforceable.

We have agreed to pay Paulson a nonaccountable expense allowance equal to
three percent of the gross proceeds from the sale of the common shares offered
by us by this prospectus, of which $35,000 has already been paid. If this
offering is not consummated, any nonaccountable portion of the advanced payment
will be promptly returned to us.

Assaf Ran, the selling shareholder, has also agreed to pay Paulson a
nonaccountable expense allowance equal to three percent of the gross proceeds
from the sale of his common shares offered by this prospectus. Additionally, Mr.
Ran has agreed to pay the registration fee of the Securities and Exchange
Commission and the blue sky filing fees attributable to the common shares he is
selling by this prospectus, as well as his pro rata share of the underwriting
discounts and commissions.

We have agreed to issue warrants to the underwriters to purchase from the
Company up to 132,500 common shares at an exercise price per share equal to
$7.80 per share. These warrants are exercisable during the four-year period
beginning one year from the date this registration statement becomes effective.
These warrants are not transferable for one year from the date of issuance,
except to an individual who is either a partner or an officer of an underwriter,
by will or by the laws of descent and distribution and are not redeemable. We
have agreed to maintain an effective

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registration statement with respect to the issuance of the common shares
underlying these warrants, if necessary, to allow their public resale without
restriction, at all times during the period in which they are exercisable. These
common shares are being registered on the registration statement of which this
prospectus is a part.

We have agreed that, for a period of one year from the date this
registration statement becomes effective, in general we will not offer, sell,
contract to sell, grant any option for the sale or otherwise dispose of any of
our securities without Paulson's consent, other than with respect to option
grants under our stock option plan. Our officers, directors and the shareholders
also have agreed that, for a period of one year from the date this registration
statement becomes effective, they will not offer, sell, contract to sell, grant
any option for the sale or otherwise dispose of any common shares (other than
intra-family transfers or transfers to trusts for estate planning purposes)
without Paulson's consent, which consent will not be unreasonably withheld. They
have also agreed that for the five-year period beginning on the date this
registration statement becomes effective that they will notify Paulson before
they sell common shares under Rule 144.

Before this offering, there has been no public market for the common shares.
Accordingly, the initial public offering price of the common shares offered by
this prospectus was determined by negotiations between us and the underwriters.
Among the factors considered in determining the initial public offering price of
the common shares offered by this prospectus were:

- our history and our prospects,

- the industry in which we operate,

- the status and development prospects for our proposed products and
services,

- our past and present operating results,

- the previous experience of our executive officers, and

- the general condition of the securities markets at the time of this
offering.

The offering price stated on the cover page of this prospectus should not be
considered an indication of the actual value of the common shares. That price is
subject to change as a result of market conditions and other factors, and we
cannot assure you that the common shares can be resold at or above the initial
public offering price.

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LEGAL MATTERS

The validity of the common shares offered by this prospectus will be passed
upon for us and for Mr. Ran by Morse, Zelnick, Rose & Lander, LLP, New York, New
York. Weiss, Jensen, Ellis & Howard, Portland, Oregon, has acted as counsel to
the underwriters named in this prospectus in connection with this offering.

EXPERTS

Our consolidated financial statements and the financial statements of Dapey
Assaf-Hamadrikh included in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect to those statements, and
are included in this prospectus in reliance upon their authority as experts in
giving those reports.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form SB-2 under the Securities Act
with respect to our common shares with the Securities and Exchange Commission.
This prospectus does not contain all of the information included in the
registration statement and the accompanying exhibits and schedules. For further
information with respect to us and our common shares, you should refer to the
registration statement and the accompanying exhibits and schedules. Statements
in this prospectus regarding the contents of contracts or other documents are
not necessarily complete. In each instance you should refer to the copy of the
contract or other document filed as an exhibit to the registration statement.
Statements in this prospectus about these contracts and documents are qualified
by reference to the exhibits.

You may inspect a copy of the registration statement and the accompanying
exhibits and schedules without charge at the public reference facilities
maintained by the Securities and Exchange Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Securities and Exchange
Commission's regional offices located at the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13(th) Floor, New York, New York 10048, and you may obtain copies of all
or any part of the registration statement from these offices upon the payment of
the fees prescribed by the Securities and Exchange Commission. You may obtain
information on the operation of the public reference room may be obtained by
calling the Securities and Exchange Commission at 1-800-SEC-0330.

The Securities and Exchange Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission. The address of the site is HTTP://WWW.SEC.GOV.

We intend to furnish our shareholders with annual reports containing
financial statements audited by its independent certified public accountants.

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DAG MEDIA, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

[Enlarge/Download Table]

PAGE
---------

Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheet at December 31, 1998............................................................ F-3
Consolidated Statements of Operations for the years ended December 31, 1997 and 1998....................... F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997 and 1998............. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1998....................... F-6
Notes to Consolidated Financial Statements................................................................. F-7

F-1

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of DAG Media, Inc.:

We have audited the accompanying consolidated balance sheet of DAG Media,
Inc. (a New York corporation) and subsidiary as of December 31, 1998, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended December 31, 1997 and 1998. These consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of DAG Media,
Inc. and subsidiary as of December 31, 1998, and the results of their operations
and their cash flows for the years ended December 31, 1997 and 1998, in
conformity with generally accepted accounting principles.

Arthur Andersen LLP

New York, New York
March 10, 1999 (except with respect
to the matter
disclosed in the second
paragraph of Note 8 as to which
the date is May 11, 1999)

F-2

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DAG MEDIA, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1998

[Download Table]

ASSETS
Current assets:
Cash and cash equivalents............................................ $ 310,185
Trade accounts receivable (less allowance of $451,378 for doubtful
accounts).......................................................... 1,652,972
Directories in progress.............................................. 623,335
Deferred tax asset................................................... 21,000
----------
Total current assets............................................... 2,607,492
----------

Fixed assets, net of accumulated depreciation of $18,041............... 90,383
----------

Other noncurrent assets:
Shareholder loan receivable.......................................... 221,347
Investment in affiliate.............................................. 41,875
Deposits............................................................. 9,093
----------
Total assets....................................................... $2,970,190
----------
----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................................ $ 84,110
Advance billings for unpublished directories......................... 1,832,341
Income taxes payable................................................. 358,000
Deferred taxes payable............................................... 171,000
----------
Total current liabilities.......................................... 2,445,451
----------

Shareholders' equity:
Common shares, $.001 par value; 1,250,000 shares issued and
outstanding........................................................ 1,250
Additional paid-in capital........................................... 150
Retained earnings.................................................... 523,339
----------
Total shareholders' equity......................................... 524,739
----------

Total liabilities and shareholders' equity......................... $2,970,190
----------
----------

The accompanying notes are an integral part of this consolidated balance sheet.

F-3

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DAG MEDIA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998

[Enlarge/Download Table]

1997 1998
-------------- --------------

Net advertising revenues......................................................... $ 2,501,754 $ 2,759,092
Publishing costs................................................................. 441,535 377,983
-------------- --------------
Gross profit............................................................... 2,060,219 2,381,109

Operating costs and expenses:
Selling expenses............................................................... 922,124 946,315
Administrative and general expenses............................................ 658,956 765,233
-------------- --------------
Total operating costs and expenses......................................... 1,581,080 1,711,548
-------------- --------------
Earnings from operations before provision for income taxes and equity income..... 479,139 669,561

Provision for income taxes....................................................... 240,000 329,000

Equity in earnings of affiliate.................................................. 16,012 17,035
-------------- --------------
Net income................................................................. $ 255,151 $ 357,596
-------------- --------------
-------------- --------------

Basic and diluted net income per common share outstanding...................... $ .20 $ .29
-------------- --------------
-------------- --------------

Basic and diluted weighted average number of common shares outstanding......... 1,250,000 1,250,000
-------------- --------------
-------------- --------------

The accompanying notes are an integral part of these
consolidated financial statements.

F-4

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DAG MEDIA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998

[Enlarge/Download Table]

ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
SHARES CAPITAL (DEFICIT) TOTAL
--------- ----------- ------------ ------------

Balance, December 31, 1996..................................... $ 1,250 $ 150 $ (89,408) $ (88,008)

Net income for the year ended December 31, 1997.............. -- -- 255,151 255,151
--------- ----- ------------ ------------

Balance, December 31, 1997..................................... 1,250 150 165,743 167,143

Net income for the year ended December 31, 1998.............. -- -- 357,596 357,596
--------- ----- ------------ ------------

Balance, December 31, 1998..................................... $ 1,250 $ 150 $ 523,339 $ 524,739
--------- ----- ------------ ------------
--------- ----- ------------ ------------

The accompanying notes are an integral part of these
consolidated financial statements.

F-5

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DAG MEDIA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998

[Enlarge/Download Table]

1997 1998
------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................................................... $ 255,151 $ 357,596
Adjustments to reconcile net income to net cash provided by operating activities--
Depreciation and amortization................................................... 3,917 13,094
Provision for bad debts......................................................... 136,155 208,909
Changes in operating assets and liabilities--
Accounts receivable........................................................... (779,747) (837,513)
Directories in progress....................................................... (531) (243,945)
Deferred tax asset............................................................ 40,000 --
Other current and noncurrent assets........................................... (1,002) --
Accounts payable and accrued expenses......................................... (41,124) 592
Advance billing for unpublished directories................................... 320,434 605,998
Income and deferred taxes payable............................................. 200,000 329,000
------------ ------------
Net cash provided by operating activities............................ 133,253 433,731
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliate, net........................................................ (16,012) (17,035)
Purchase of fixed assets............................................................ (80,219) (17,905)
------------ ------------
Net cash used in investing activities................................ (96,231) (34,940)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Loans to shareholder, net........................................................... (11,819) (221,347)
------------ ------------
Net cash used in financing activities................................ (11,819) (221,347)
------------ ------------
Net increase in cash................................................. 25,203 177,444

Cash and cash equivalents, beginning of year.......................................... 107,538 132,741
------------ ------------

Cash and cash equivalents, end of year................................................ $ 132,741 $ 310,185
------------ ------------
------------ ------------

The accompanying notes are an integral part of these
consolidated financial statements.

F-6

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DAG MEDIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1998

1. COMPANY BACKGROUND AND SUMMARY

EXCHANGE

DAG Media, Inc. (the "Company" or "DAG") was incorporated in the State of
New York in February 1999. Immediately prior to the initial public offering (see
note 8), Assaf Ran, the sole shareholder of Dapey Assaf-Dapey Zahav, Ltd.
("DAZ"), will exchange all of his shares in DAZ for 1,250,000 common shares of
the Company and all of his shares in Dapey Assaf-Hamadrikh Leassakim Israelim Be
New York, Ltd. ("DAH"), an entity in which he has a 50% interest, for 238,095
common shares of the Company. In addition, the minority shareholders of DAH who
own the remaining 50% of DAH will exchange all of their shares in DAH for
238,095 common shares of the Company. As a result, DAZ and DAH will become
wholly owned subsidiaries of the Company. DAH is reflected in the accompanying
consolidated financial statements as an investment in affiliate. (See notes 2
and 8.)

NATURE OF BUSINESS

The Company publishes and distributes yellow page directories in print and
online. DAG's primary product is a bilingual (English--Hebrew) yellow page
directory called The Jewish Israeli Yellow Pages (the "JI Directory"). It was
first published in February 1990 and has been published in February and August
of each year since February 1991 and covers the New York metropolitan area. In
October 1998, the Company published the initial edition of a smaller,
English-only yellow page directory called The Jewish Master Guide (the "Master
Guide"), which is distributed to ultra-orthodox Jewish communities in the New
York metropolitan area. The JI Directory and the Master Guide are published on
DAG's web site at the address WWW.PORTY.COM (the "Portal"). The Company also
provides its customers and users with a referral service.

2. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of DAG include the accounts of DAG and
DAZ. Significant intercompany accounts and transactions have been eliminated in
consolidation. The Company's 50% investment in DAH, the operating and financial
policies of which the Company is able to influence significantly, is accounted
for using the equity method of accounting. Accordingly, the Company's share of
the net earnings in DAH is included in consolidated net income.

F-7

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DAG MEDIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1998

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

DIRECTORIES IN PROGRESS/ADVANCE BILLINGS FOR UNPUBLISHED DIRECTORIES

Directories in progress include direct costs applicable to unpublished
directories. Advance billings for unpublished directories arise from prepayments
on advertising contracts. Upon publication, revenue and the related expense are
recognized.

FIXED ASSETS

Fixed assets are recorded at cost. Depreciation is provided on a
straight-line basis to distribute costs evenly over the useful economic lives of
the assets involved.

INCOME TAXES

The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income taxes are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.

REVENUE RECOGNITION

Advertising revenues are recognized under the point-of-publication method,
which is the method generally followed by publishing companies. Under this
method, revenues and expenses are recognized when the related directories are
published.

F-8

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DAG MEDIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1998

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE

Basic and diluted earnings per share are calculated in accordance with
Financial Accounting Standard Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share." Under this standard, basic
earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. diluted earnings per share includes the potential dilution from the
exercise of outstanding dilutive stock options and warrrants for common shares
using the treasury stock method. As of December 31, 1998, the stock option plan
(see note 7) was not in effect. Accordingly there is no difference between basic
and fully diluted earnings per share.

STOCK-BASED COMPENSATION

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This statement establishes a fair market value based method of
accounting for an employee stock option but allows companies to continue to
measure compensation cost for those plans using the intrinsic value based method
prescribed by APB Opinion No. 25 "Accounting for Stock Issued to Employees."
Companies electing to continue using the accounting under APB Opinion No. 25
must, however, make pro forma disclosure of net income and earnings per share as
if the fair value based method of accounting in SFAS No. 123 had been applied.
The Company has elected to account for its stock-based compensation awards to
employees and directors under the accounting prescribed by APB Opinion No. 25,
under which no compensation cost has been recognized. The Company will be
required to make pro forma disclosures at December 31, 1999.

SEGMENT DISCLOSURE

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS 131, applicable to public companies,
established new standards for reporting information about operating segments in
annual financial statements. The disclosure prescribed by SFAS 131 is effective
beginning with the year ended December 31, 1998. The Company does not believe
that it operates in more than one segment.

F-9

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DAG MEDIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1998

3. FIXED ASSETS

[Enlarge/Download Table]

DECEMBER 31, 1998
-----------------

Office equipment....................................................... $ 26,620
Automobile............................................................. 64,598
Leasehold improvement.................................................. 17,206
-----------------
Total fixed assets................................................... 108,424

Less: accumulated depreciation......................................... (18,041)
-----------------
Fixed assets, net of accumulated depreciation........................ $ 90,383
-----------------
-----------------

4. SHAREHOLDER LOAN

During the year ended December 31, 1998, the Company advanced $221,347 to
Assaf Ran, its principal shareholder. In addition, Mr. Ran owes $73,915 to DAH.
The aggregate amount owed by Mr. Ran, $295,262, is evidenced by a five-year
promissory note bearing interest at 4.74% per annum and repayable in quarterly
installments with interest only payable during the first two years and interest
and principal payments payable over the last three years of the note.

5. INCOME TAXES

The provision for income taxes consists of the following:

[Enlarge/Download Table]

FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1998
------------ ------------

Current taxes:
Federal..................................................... $ (13,000) $ 218,000
State....................................................... (8,000) 140,000
------------ ------------
Total current taxes....................................... (21,000) 358,000
------------ ------------
Deferred taxes:
Federal..................................................... 159,000 (18,000)
State....................................................... 102,000 (11,000)
------------ ------------
Total deferred taxes...................................... 261,000 (29,000)
------------ ------------
Provision for income taxes................................ $ 240,000 $ 329,000
------------ ------------
------------ ------------

F-10

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DAG MEDIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1998

5. INCOME TAXES (CONTINUED)
Deferred tax assets (liabilities) are comprised of the following:

[Enlarge/Download Table]

FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1997 1998
------------- ---------------

Accounts receivable...................................... $ (469,000) $ (675,000)
Prepaid expenses......................................... (174,000) (285,000)
Other deferred tax liabilities, net...................... -- (50,000)
------------- ---------------
Gross deferred tax liability......................... (643,000) (1,010,000)
------------- ---------------

Advance billings for unpublished directories............. 564,000 839,000
Other deferred tax asset, net............................ 4,000 --
------------- ---------------
Gross deferred tax asset............................. 568,000 839,000
------------- ---------------
Net deferred tax liability........................... $ (75,000) $ (171,000)
------------- ---------------
------------- ---------------

The Company is on the cash method of accounting for tax purposes. The
deferred tax items indicated above are primarily a result of recognizing items
of income or expense under the cash method in a different period from when those
items are recognized for accrual basis financial purposes. The provision for
income taxes on income differs from the amount computed by applying the U.S.
federal income tax rate (34%) because of the effect of the following items:

[Enlarge/Download Table]

FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1997 1998
------------ ------------

Tax at U.S. federal income tax rate........................... $ 163,000 $ 228,000
State income taxes, net of U.S. federal income tax benefit.... 62,000 85,000
Other......................................................... 15,000 16,000
------------ ------------
Provision for income taxes................................ $ 240,000 $ 329,000
------------ ------------
------------ ------------

6. COMMITMENTS AND CONTINGENCIES

In March 1999 the Company entered into employment agreements with its two
principal officers. One agreement was entered into with Assaf Ran providing for
his employment as president and chief executive officer through June 30, 2002.
The agreement renews automatically for successive one-year periods until either
party gives

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DAG MEDIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1998

6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
180 days written notice of its intention to terminate the agreement. Under the
agreement, Mr. Ran will receive an annual base salary of $75,000, annual bonuses
as is determined by the compensation committee in its sole and absolute
discretion and participation in all executive benefit plans. Under the agreement
Mr. Ran has also agreed to a one-year non-competition period following the
termination of the agreement so long as the Company is not in breach of the
agreement. The other agreement is with Dvir Langer providing for his employment
as vice president-sales and corporate development. The employment term is for
one year commencing upon the closing of the initial public offering. This
agreement is renewable for additional one-year terms until either party gives 14
days written notice of its intention to terminate the agreement. Under the
agreement, Mr. Langer will receive a minimum base salary of $60,000. Under the
agreement, Mr. Langer has agreed to a two-year non-competition period following
the termination of his agreement.

LITIGATION

From time to time in the normal course of business, the Company is party to
various claims and/or litigation. Management believes that the settlement of all
such claims and/or litigation, considered in the aggregate, will not have a
material adverse effect on the Company's financial position and results of
operations.

7. STOCK OPTION PLAN

To attract and retain persons necessary for the success of the Company, in
March 1999, the Board of Directors approved the adoption of DAG Media, Inc. 1999
Stock Option Plan ("the Stock Option Plan") covering 124,000 common shares.
Pursuant to the Stock Option Plan, officers, directors and key employees and
consultants are eligible to receive incentive and/or non-qualified stock
options. The Stock Option Plan, which has a term of ten years from the date of
its adoption, will be administered by the compensation committee. The selection
of participants, allotment of shares, determination of price and other
conditions relating to the purchase of options will be determined by the
compensation committee, in its sole discretion. Incentive stock options granted
under the Stock Option Plan are exercisable for a period of up to ten years from
the date of grant at an exercise price which is not less than the fair market
value of the common shares on the date of grant, except that the term of an
incentive stock option granted under the Stock Option Plan to a shareholder
owning more than 10% of the outstanding common shares may not exceed five years
and its exercise price may not be less than 110% of the fair market value of the
common shares on

F-12

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DAG MEDIA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1997 AND 1998

7. STOCK OPTION PLAN (CONTINUED)
the date of grant. The Company has granted options covering 22,324 common shares
which cannot be exercised before the initial public offering. These options will
have an exercise price equal to the initial public offering price per common
share in the initial public offering (see note 8) and will have a five-year
term. The options granted to the employees are intended to qualify as incentive
stock options. Options granted to one employee will vest immediately and the
options granted to the other two persons will vest one year from the date of the
initial public offering.

8. SUBSEQUENT EVENTS: INITIAL PUBLIC OFFERING

On March 10, 1999, the Company filed a registration statement with the
Securities and Exchange Commission to register 1,325,000 common shares at an
expected initial public offering price of $6.50 per share. Of the 1,325,000
common shares offered, 1,250,000 are being offered by the Company and 75,000 are
being offered by Assaf Ran, the Company's principal shareholder. Mr. Ran will
use the net proceeds from the sale of his shares to repay his loan from the
Company. (See note 4.) The Company expects to realize proceeds of approximately
$6,600,000 from the sale of its common shares, net of commissions and offering
expenses.

In connection with the initial public offering, the Company entered into an
Exchange Agreement with DAZ, DAH and the shareholders of DAZ and DAH. Pursuant
to the Exchange Agreement, on May 11, 1999 the shareholders of DAZ and DAH
exchanged all of their common shares in DAZ and DAH, as the case may be, for
common shares of the Company and DAZ and DAH became wholly owned subsidiaries of
the Company. The exchange has been accounted for under the purchase method of
accounting, resulting in a "step up" in the basis of the Company's assets to the
extent of the interests of the minority shareholders. The value of the minority
interest is estimated to be $1,393,000 (assuming a 10% discount from the
anticipated initial public offering price) and has been allocated among the
assets of the Company based on their relative fair market values. Of this
amount, approximately $42,000 has been allocated to the Company's tangible
assets, $350,000 has been allocated to the Company's trademarks, trade names and
other intellectual property and $1.0 million has been allocated to goodwill. The
amounts allocated to the Company's intellectual property and goodwill will be
amortized on a straight-line basis over 25 years, or approximately $54,000 per
year, after the initial public offering.

F-13

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DAPEY ASSAF--HAMADRIKH LEASSAKIM ISRAELIM BE NEW YORK, LTD.

INDEX TO FINANCIAL STATEMENTS

[Enlarge/Download Table]

PAGE
---------

Report of Independent Public Accountants.................................................................. F-15
Balance Sheet at October 31, 1998......................................................................... F-16
Statements of Operations for the years ended October 31, 1997 and 1998.................................... F-17
Statements of Shareholders' Equity for the years ended October 31, 1997 and 1998.......................... F-18
Statements of Cash Flows for the years ended October 31, 1997 and 1998.................................... F-19
Notes to Financial Statements............................................................................. F-20

F-14

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Dapey Assaf-Hamadrikh Leassakim Israelim Be New York,
Ltd.:

We have audited the accompanying balance sheet of Dapey Assaf-Hamadrikh
Leassakim Israelim Be New York, Ltd. as of October 31, 1998, and the related
statements of operations, shareholders' equity and cash flows for the years
ended October 31, 1997 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dapey Assaf-Hamadrikh
Leassakim Israelim Be New York, Ltd. as of October 31, 1998, and the results of
its operations and its cash flows for the years ended October 31, 1997 and 1998,
in conformity with generally accepted accounting principles.

Arthur Andersen LLP

New York, New York
March 10, 1999

F-15

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DAPEY ASSAF-HAMADRIKH LEASSAKIM ISRAELIM BE NEW YORK, LTD.

BALANCE SHEET
OCTOBER 31, 1998

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ASSETS
Current assets:
Cash.............................................................................................. $ 75,140
Fixed assets, net of accumulated depreciation of $10,525............................................ 9,315
Other noncurrent assets:
Shareholder loan receivable....................................................................... 73,915
------------
Total assets.................................................................................... $ 158,370
------------
------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................................................. $ 74,620
Shareholders' equity:
Common shares, no par value; 200 shares authorized; 100 shares issued and outstanding............. 1,000
Retained earnings................................................................................. 82,750
------------
Total shareholders' equity...................................................................... 83,750
------------
Total liabilities and shareholders' equity...................................................... $ 158,370
------------
------------

The accompanying notes are an integral part of this balance sheet.

F-16

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DAPEY ASSAF-HAMADRIKH LEASSAKIM ISRAELIM BE NEW YORK, LTD.

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1997 AND 1998

[Enlarge/Download Table]

1997 1998
---------- ----------

Net revenues, related party.............................................................. $ 75,728 $ 76,825
Operating costs and expenses:
Selling expenses....................................................................... 10,301 10,912
Administrative and general expenses.................................................... 26,403 23,844
---------- ----------
Total operating costs and expenses................................................... 36,704 34,756
---------- ----------
Earnings from operations before provision for income taxes............................... 39,024 42,069
Provision for income taxes............................................................... 7,000 8,000
---------- ----------
Net income............................................................................... $ 32,024 $ 34,069
---------- ----------
---------- ----------

The accompanying notes are an integral part of these financial statements.

F-17

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DAPEY ASSAF-HAMADRIKH LEASSAKIM ISRAELIM BE NEW YORK, LTD.

STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED OCTOBER 31, 1997 AND 1998

[Enlarge/Download Table]

COMMON RETAINED
SHARES EARNINGS TOTAL
--------- ---------- ----------

Balance, October 31, 1996..................................................... $ 1,000 $ 16,657 $ 17,657
Net income for the year ended October 31, 1997.............................. -- 32,024 32,024
--------- ---------- ----------
Balance, October 31, 1997..................................................... 1,000 48,681 49,681
Net income for the year ended October 31, 1998.............................. -- 34,069 34,069
--------- ---------- ----------
Balance, October 31, 1998..................................................... $ 1,000 $ 82,750 $ 83,750
--------- ---------- ----------
--------- ---------- ----------

The accompanying notes are an integral part of these financial statements.

F-18

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DAPEY ASSAF-HAMADRIKH LEASSAKIM ISRAELIM BE NEW YORK, LTD.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED OCTOBER 31, 1997 AND 1998

[Enlarge/Download Table]

1997 1998
----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................... $ 32,024 $ 34,069
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation..................................................................... 3,130 1,595
Loss on retirement of fixed assets............................................... -- 180
Changes in operating assets and liabilities-
Accounts payable and accrued expenses.......................................... 2,824 70,025
Deposits....................................................................... 4,400 --
----------- -----------
Net cash provided by operating activities.................................... 42,378 105,869
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans to shareholder, net............................................................ (44,532) (38,915)
----------- -----------
Net cash used in financing activities........................................ (44,532) (38,915)
----------- -----------
Net increase (decrease) in cash.............................................. (2,154) 66,954
Cash, beginning of year................................................................ 10,340 8,186
----------- -----------
Cash, end of year...................................................................... $ 8,186 $ 75,140
----------- -----------
----------- -----------

The accompanying notes are an integral part of these financial statements.

F-19

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DAPEY ASSAF-HAMADRIKH LEASSAKIM ISRAELIM BE NEW YORK, LTD.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 1997 AND 1998

1. COMPANY BACKGROUND

NATURE OF BUSINESS

Dapey Assaf-Hamadrikh Leassakim Israelim Be New York, Ltd ("the Company" or
"DAH") acts as an agent on behalf of Dapey Assaf-Dapey Zahav, Ltd. ("DAZ") (see
note 5) and represents DAZ in the collection of advertising fees from its
customers. DAH also owns the Jewish Israeli Yellow Pages and the Jewish Referral
Service registered trademarks and service marks.

2. SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR

The Company's fiscal year ends on October 31.

USE OF ESTIMATES

FIXED ASSETS

Fixed assets are recorded at cost. Depreciation is provided on a
straight-line basis to distribute costs evenly over the useful economic lives of
the assets involved.

INCOME TAXES

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DAPEY ASSAF-HAMADRIKH LEASSAKIM ISRAELIM BE NEW YORK, LTD.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

OCTOBER 31, 1997 AND 1998

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION

The Company has entered into an agreement with DAZ, a related entity, to
represent DAZ in the collection of advertising fees from its customers. All of
the Company's revenue in the current and prior year was derived from the
agreement. (See note 5.)

3. FIXED ASSETS

[Enlarge/Download Table]

OCTOBER 31,
1998
---------------

Automobile............................................................. $ 19,840
Less-Accumulated depreciation.......................................... (10,525)
---------------
Fixed assets, net of accumulated depreciation........................ $ 9,315
---------------
---------------

4. SHAREHOLDER LOAN

During the year ended October 31, 1998, the Company advanced $73,915 to
Assaf Ran, its 50% shareholder, which is evidenced by a five-year promissory
note bearing interest at 4.74% per annum and repayable in quarterly installments
with interest only payable during the first two years and interest and principal
payments payable over the last three years of the note.

5. RELATED PARTY TRANSACTIONS

As discussed in note 1, the Company has an agreement with DAZ to collect
advertising fees from its customers. The agreement also includes reimbursement
of all commission and marketing expenses incurred by DAH on behalf of DAZ.
Management believes that the fees charged are consistent with those that would
be available from an unrelated party.

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DAPEY ASSAF-HAMADRIKH LEASSAKIM ISRAELIM BE NEW YORK, LTD.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

OCTOBER 31, 1997 AND 1998

6. INCOME TAXES

The provision for income taxes consists of the following:

[Enlarge/Download Table]

FOR THE YEARS ENDED
OCTOBER 31,
--------------------

1997 1998
--------- ---------
Current taxes:
Federal........................................................... $ 5,656 $ 6,310
State............................................................. 1,344 1,690
--------- ---------
Provision for income taxes...................................... $ 7,000 $ 8,000
--------- ---------
--------- ---------

The provision for income taxes differs from the amount computed by applying
the U.S. federal income tax rates because of the effect of the following items:

[Enlarge/Download Table]

FOR THE YEARS ENDED
OCTOBER 31,
--------------------
1997 1998
--------- ---------

Tax at U.S. federal income tax rate................................. $ 5,656 $ 6,310
State income taxes, net of U.S. federal income tax benefit.......... 1,344 1,690
--------- ---------
Provision for income taxes...................................... $ 7,000 $ 8,000
--------- ---------
--------- ---------

7. SUBSEQUENT EVENTS: INITIAL PUBLIC OFFERING

On March 10, 1999, DAG Media, Inc. ("DAG") filed a registration statement
with the Securities and Exchange Commission to register 1,325,000 common shares
at an expected initial public offering price of $6.50 per share. Of the
1,325,000 common shares offered, 1,250,000 are being offered by DAG and 75,000
are being offered by Assaf Ran, the Company's principal shareholder. Mr. Ran
will use the net proceeds from the sale of his shares to repay his loan from the
Company. (See note 4.) DAG expects to realize proceeds of approximately
$6,600,000 from the sale of the common shares, net of commissions and offering
expenses.

In connection with the initial public offering, DAG entered into an Exchange
Agreement with DAZ, DAH and the shareholders of DAZ and DAH. Under the Exchange
Agreement, on May 11, 1999 the shareholders of DAZ and DAH exchanged all of
their common shares in DAZ and DAH, as the case may be, for common shares of DAG
and DAZ and DAH became wholly owned subsidiaries of DAG. The exchange has been
accounted for under the purchase method of accounting, resulting in a "step up"
in the basis of DAG's assets to the extent of the

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DAPEY ASSAF-HAMADRIKH LEASSAKIM ISRAELIM BE NEW YORK, LTD.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

OCTOBER 31, 1997 AND 1998

7. SUBSEQUENT EVENTS: INITIAL PUBLIC OFFERING (CONTINUED)
interests of the minority shareholders of DAH. The value of the minority
interest is estimated to be $1,393,000 (assuming a 10% discount from the
anticipated initial public offering price per share) and has been allocated
among the assets of the Company based on their relative fair market values. Of
this amount, approximately $42,000 has been allocated to DAG's tangible assets,
$350,000 has been allocated to DAG's trademarks, trade names and other
intellectual property and $1.0 million has been allocated to goodwill. The
amounts allocated to the DAG's intellectual property and goodwill will be
amortized on a straight-line basis over 25 years, or approximately $54,000 per
year, after the initial public offering.

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DAG MEDIA, INC. AND SUBSIDIARIES

INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

[Enlarge/Download Table]

PAGE
---------

Unaudited Pro Forma Condensed Consolidated Financial Statements........................................... F-25
Unaudited Pro Forma Condensed Consolidated Balance Sheet.................................................. F-26
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet......................................... F-27
Unaudited Pro Forma Condensed Consolidated Statement of Operations........................................ F-29
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations............................... F-30

F-24

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DAG MEDIA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial
statements as of and for the year ended December 31, 1998 have been derived from
the application of pro forma adjustments to the historical consolidated
financial statements of DAG Media, Inc. and those of Dapey Assaf-Hamadrikh
Leassakim Israelim Be New York, Ltd. The unaudited pro forma condensed
consolidated balance sheet gives effect to the transaction by which Dapey
Assaf-Hamadrikh became a wholly owned subsidiary of DAG Media as if it occurred
on December 31, 1998 and the unaudited pro forma consolidated statement of
operations information for the year ended December 31, 1998 gives effect to that
transaction as if it occurred on January 1, 1998. The unaudited pro forma
condensed consolidated financial statements do not purport to be indicative of
DAG Media's results of operations or financial condition would have been
assuming that the transaction by which Dapey Assaf-Hamadrikh becomes a wholly
owned subsidiary of DAG Media had occurred on those respective dates, nor does
it purport to be indicative of DAG Media's future operating results or financial
condition.

The acquisition of the minority interest of Dapey Assaf-Hamadrikh will be
accounted for using the purchase method of accounting. The purchase method of
accounting allocates the aggregate purchase price to the assets acquired and
liabilities assumed based upon their respective fair values. The excess purchase
price over the fair value of net assets acquired, was approximately $1.3 million
and has been allocated to goodwill and trademarks.

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DAG MEDIA, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998

[Enlarge/Download Table]

HISTORICAL
------------------------------

10/31/98
12/31/98 DAPEY ASSAF- PRO FORMA
DAG MEDIA, INC. HAMADRIKH ADJUSTMENTS PRO FORMA
--------------- ------------ ------------ -----------
ASSETS
Current assets:
Cash and cash equivalents............................... $ 310,185 $ 75,140 $ -- $ 385,325
Trade accounts receivable, net.......................... 1,652,972 -- (74,620)(a) 1,578,352
Directories in progress................................. 623,335 -- -- 623,335
Deferred tax asset...................................... 21,000 -- -- 21,000
--------------- ------------ ------------ -----------
Total current assets.................................. 2,607,492 75,140 (74,620) 2,608,012
--------------- ------------ ------------ -----------
Fixed assets, net....................................... 90,383 9,315 -- 99,698
--------------- ------------ ------------ -----------
Other noncurrent assets:
Intangibles............................................. -- 1,350,981(b) 1,350,981
Shareholder loan receivable............................. 221,347 73,915 -- 295,262
Investment in affiliate................................. 41,875 -- (41,875)(c) 0
Deposits................................................ 9,093 -- -- 9,093
--------------- ------------ ------------ -----------
Total assets.......................................... $2,970,190 $158,370 $ 1,234,486 $4,363,046
--------------- ------------ ------------ -----------
--------------- ------------ ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to Dapey Assaf...................................... $ -- $ 74,620 $ (74,620)(a) $ --
Accounts payable and accrued expenses................... 84,110 -- -- 84,110
Advance billings for unpublished directories............ 1,832,341 -- -- 1,832,341
Income taxes payable.................................... 358,000 -- -- 358,000
Deferred taxes payable.................................. 171,000 -- -- 171,000
--------------- ------------ ------------ -----------
Total current liabilities............................. 2,445,451 74,620 (74,620) 2,445,451
--------------- ------------ ------------ -----------
Shareholders' equity:
Common shares........................................... 1,250 1,000 (524) 1,726
Additional paid-in capital.............................. 150 0 1,392,380 1,392,530
Retained earnings....................................... 523,339 82,750 (82,750) 523,339
--------------- ------------ ------------ -----------
Total shareholders' equity............................ 524,739 83,750 1,309,106(c) 1,917,595
--------------- ------------ ------------ -----------
Total liabilities and shareholders' equity............ $2,970,190 $158,370 $ 1,234,486 $4,363,046
--------------- ------------ ------------ -----------
--------------- ------------ ------------ -----------

The accompanying notes and management's assumptions to the unaudited pro forma
condensed consolidated financial statements are integral parts of this statement

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DAG MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

BALANCE SHEET

(a) Reflects the elimination of the intercompany payable/receivable.

(b) Hamadrikh acquistion

On May 11, 1999, DAG Media, Inc. ("DAG"), in accordance with an Exchange
Agreement among DAG, Dapey Assaf-Dapey Zahav, Ltd. ("DAZ"), Dapey
Assaf-Hamadrikh Le Assakim Be New York, Ltd. ("DAH") and the shareholders
of DAZ and DAH, acquired all of the outstanding shares of capital stock
of DAH in exchange for an aggregate of 476,190 of its common shares. Of
this amount, 238,095 common shares represented DAG's 50% interest in DAH.
The remaining 238,095 common shares issued to the minority shareholders
of DAH has been accounted for under the purchase method of accounting,
resulting in a "step up" in the basis of the DAH's assets. The deemed
purchase price for these assets is the value of the DAG common shares
received by the minority shareholders of DAH. For this purpose, the value
of these shares is deemed to be 90% of the initial public offering price.
Assuming that the actual offering price of the shares offered hereby is
$6.50 per share, the deemed purchase price will be approximately
$1,393,000.

Set forth below is DAG's allocation of the purchase price to the DAH
assets:

[Download Table]

Aggregate purchase price.............................. $1,392,856
Less: net book value of assets acquired........... 41,875
----------
Excess of cost over net book value of assets
acquired............................................ $1,350,981
----------
----------

Allocation of excess of cost over net book value of assets acquired:

[Download Table]

Goodwill.............................................. $1,000,981
Trademarks............................................ 350,000
----------
Total............................................. $1,350,981
----------
----------

The portion of the purchase price allocated to the intangible assets is
based on an estimated value of these assets by DAG.

The estimated useful lives are as follows:

[Download Table]

Trademarks.............................................. 25 years
Goodwill................................................ 25 years

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DAG MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

BALANCE SHEET

[Download Table]

Elimination of DAZ common shares...................... $ (500)
Elimination of intercompany investment................ (500)
Issuance of common shares in connection with the
acquisition of DAH.................................. 476
----------
Subtotal.......................................... (524)
----------
Additional paid-in capital:
Additional paid-in capital from issuance of common
shares in connection with the acquisition of
DAH............................................. 1,392,380
Retained earnings:
Elimination of DAH historical retained earnings... (41,375)
Elimination of intercompany investment............ (41,375)
----------
(82,750)
----------
Total........................................... $1,309,106
----------
----------

F-28

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DAG MEDIA, INC AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1998

[Enlarge/Download Table]

HISTORICAL
------------------------------

10/31/98
12/31/98 DAPEY ASSAF- PRO FORMA
DAG MEDIA, INC. HAMADRIKH ADJUSTMENTS PRO FORMA
--------------- ------------ ------------- ----------
Net advertising revenues......................................... $2,759,092 $76,825 $ -- $2,835,917
Publishing costs................................................. 377,983 -- -- 377,983
--------------- ------------ ------------- ----------
Gross profit............................................... 2,381,109 76,825 -- 2,457,934
Operating costs and expenses:
Selling expenses............................................... 946,315 10,912 -- 957,227
Administrative expenses........................................ 765,233 23,844 104,039(a) 893,116
--------------- ------------ ------------- ----------
Total operating costs and expenses......................... 1,711,548 34,756 104,039 1,850,343
--------------- ------------ ------------- ----------
Earnings from operations before provision for income taxes and
equity income.................................................. 669,561 42,069 104,039 607,591
Provision (benefit) for income taxes............................. 329,000 8,000 (25,000)(b) 312,000
Equity in earnings of affiliate.................................. 17,035 -- 17,035(c) --
--------------- ------------ ------------- ----------
Net income....................................................... $ 357,596 $34,069 $ 96,074 $ 295,591
--------------- ------------ ------------- ----------
--------------- ------------ ------------- ----------
Basic and diluted net income per common share outstanding........ $0.29 -- -- $0.17
--------------- ------------ ------------- ----------
--------------- ------------ ------------- ----------
Basic and diluted weighted number of common shares outstanding... 1,250,000 -- -- 1,726,190
--------------- ------------ ------------- ----------
--------------- ------------ ------------- ----------

The accompanying notes and management's assumptions to the unaudited pro forma
condensed consolidated financial statements are integral parts of this statement

F-29

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DAG MEDIA, INC AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(a) Pro forma adjustments to administrative and general expenses include:

[Download Table]

Amortization of intangibles for the year ended December 31, 1998..... $ 54,039
Pro forma effect of increase compensation expense for chief executive
officer............................................................ 50,000
---------
Total.............................................................. $ 104,039
---------
---------
(b) The income tax benefit reflects a reduction in income taxes due to
increased administrative expenses.

F-30

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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION THAT IS DIFFERENT. THIS DOCUMENT
MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN
THIS PROSPECTUS MAY ONLY BE ACCURATE ON ITS DATE.
------------------------

TABLE OF CONTENTS

[Download Table]

PAGE
---------

Summary........................................ 3
Risk Factors................................... 7
Use of Proceeds................................ 10
Dividend Policy................................ 11
Capitalization................................. 12
Dilution....................................... 13
Selected Financial Data........................ 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 15
Business....................................... 22
Management..................................... 32
Related Party Transactions..................... 37
Principal and Selling Shareholders............. 38
Description of Capital Stock................... 39
Shares Eligible for Future Sale................ 41
Underwriting................................... 43
Legal Matters.................................. 46
Experts........................................ 46
Where You Can Find Additional Information...... 46
Index to DAG Media, Inc. and Subsidiary
Consolidated Financial Statements............ F-1
Index to Dapey Assaf-Hamadrikh Leassakim Be New
York, Ltd. Financial Statements.............. F-14
Index to DAG Media, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated
Financial Statements......................... F-24

THROUGH AND INCLUDING JUNE 7, 1999, ALL BROKER-DEALERS THAT BUY, SELL OR
TRADE THESE COMMON SHARES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THEIR OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

1,325,000 COMMON SHARES

[LOGO]

DAG MEDIA, INC.

---------------------

PROSPECTUS

---------------------

PAULSON INVESTMENT COMPANY, INC.

REDWINE & COMPANY, INC.

May 13, 1999

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘424B3’ Filing	Date	First	Last	Other Filings

	6/30/02	9	57	10QSB
	1/1/00	20
	12/31/99	55		10KSB40
	10/30/99	31
	6/7/99	77		10QSB
	5/18/99	1
Filed on:	5/14/99
	5/13/99	1	77	3
	5/11/99	16	73
	3/10/99	48	68	SB-2
	3/1/99	31
	12/31/98	5	76
	10/31/98	60	69
	1/1/98	5	71
	12/31/97	14	59
	10/31/97	61	69
	12/31/96	51
	10/31/96	64
				List all Filings

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Filing Submission 0001047469-99-020583 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Manhattan Bridge Capital, Inc – ‘424B3’ on 5/14/99

As of: Friday, 5/14/99 · Accession #: 1047469-99-20583 · File #: 333-74203

Prospectus — Rule 424(b)(3)Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Prospectus — Rule 424(b)(3)
Filing Table of Contents