424B3 1 form-424bsb2_12973.txt LOCATEPLUS HOLDINGS CO. FORM 424B FILED PURSUANT TO RULE 424(b)(3) REGISTRATION NO. 333-117522 [LOGO] LOCATEPLUS HOLDINGS CORPORATION LPHC LocatePLUS Holdings Corporation PROSPECTUS The information contained in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement containing this prospectus, which was filed with the Securities and Exchange Commission, is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. DATED OCTOBER 4, 2004 LOCATEPLUS HOLDINGS CORPORATION 12,820,000 Shares of Class A Voting Common Stock $.01 par value -------------------------------------------------------------------------------- This prospectus relates to the offer and sale from time to time of up to 4,000,000 shares of our outstanding Class A Voting Common Stock, 7,500,000 shares of our Class A Voting Common Stock issuable upon conversion of a term note, and 1,320,000 shares of our Class A Voting Common Stock issuable upon the exercise of a currently exercisable common stock purchase warrant, which are held by certain selling stockholders named in this prospectus. The prices at which such stockholders may sell the shares in this offering will be determined by the prevailing market price for the shares or in negotiated transactions. We will not receive any of the proceeds from the sale of the shares. Our Class A Voting Common Stock is listed on the Over the Counter Bulletin Board under the symbol "LPLHA.OB." On October 1, 2004, the last reported sale price of our common stock was $0.30 per share. --------------------- INVESTING IN THESE SECURITIES INVOLVES SIGNIFICANT RISKS. YOU SHOULD CAREFULLY REVIEW THE SECTION OF THIS PROSPECTUS TITLED "RISK FACTORS", WHICH BEGINS ON PAGE 4, BEFORE YOU MAKE AN INVESTMENT DECISION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES AUTHORITY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR THEIR OFFER OR SALE, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This prospectus is dated October 4, 2004. NOTICE TO RESIDENTS OF THE STATE OF CALIFORNIA Because of our current unprofitability and certain restrictions imposed on us by California securities laws and regulations, each purchaser of our securities in California, and each transferee thereof, must meet, along with their spouses, one of the following suitability standards: (I) a net worth (excluding home, furnishings and automobiles) of $250,000 or more and gross annual income during 2003 and estimated during 2004 of $65,000 from all sources; or (II) a net worth (excluding home, furnishings and automobiles) of $500,000 or more; or (III) a net worth (inclusive of home, furnishings and automobiles) of $1,000,000 or more; or (IV) gross annual income during 2003 and estimated during 2004 of $200,000 or more from all sources. Each California resident purchasing securities hereby will be deemed to represent that he, she or it comes within one of the aforementioned categories. Purchasers in the State of California should note that the exemption from registration set forth in California Corporations Code Section 25104(h) (relating to public resales and secondary trading of securities) will not be available to purchasers of our securities in this offering. Other exemptions from registration may be available to purchasers of our securities in this offering, which may permit purchasers of our securities in the State of California to resell their securities. For example, an exemption may be available to purchasers permitting, without registration, a private sale by a BONA FIDE owner for his or her or its own account without advertising and without being effected by or through a broker-dealer in a public offering. * * * NOTICE TO RESIDENTS OF THE STATE OF FLORIDA This offering has not been registered with the Division of Securities and Finance of the State of Florida, and is being made pursuant to an exemption from registration under the securities laws of that state. In the State of Florida, this offering is limited to corporations with assets in excess of $500,000 that purchase more than $50,000 in our securities in this offering, unless another exemption from registration is available. Prior to purchasing our securities in this offering, a prospective purchaser in the State of Florida will be required to execute investment documents confirming that it (I) is a corporation; (II) has greater than $500,000 in assets; and (III) is purchasing more than $50,000 of our securities in this offering. * * * NOTICE TO RESIDENTS OF THE COMMONWEALTH OF MASSACHUSETTS This offering has not been registered in the Commonwealth of Massachusetts, and is being offered pursuant to an exemption from registration under the securities laws of that state. Unless another exemption from registration is available, this offering is limited to banks, savings institutions, insurance companies, investment companies, pension and profit-sharing trusts, other financial institutions and institutional buyers, and broker-dealers, whether purchasing for themselves or in a fiduciary capacity. Each prospective Massachusetts investor must execute a subscription agreement that includes a representation that it comes within one of the aforementioned categories prior to purchasing any of our securities. * * * NOTICE TO RESIDENTS OF THE STATE OF NEW HAMPSHIRE Because of certain restrictions imposed by New Hampshire securities laws and regulations, each purchaser of our securities must meet the following suitability standards: (I) a minimum annual taxable income of $50,000 and a minimum net worth (excluding home, home furnishings and automobiles) of $125,000; or (II) a minimum net worth (excluding home, home furnishings and automobiles) of $250,000. Each New Hampshire resident must execute a subscription agreement that includes a representation that he, she or it comes within one of the aforementioned categories prior to purchasing any of our securities. * * * NOTICE TO RESIDENTS OF THE COMMONWEALTH OF VIRGINIA Because of certain restrictions imposed by Virginia securities laws and regulations, each purchaser of our securities in Virginia must meet one of the following suitability standards: (I) a net worth (inclusive of home, furnishings and automobiles) of $1,000,000 or more; or (II) gross annual income during each of 2002 and 2003 and estimated during 2004 of $200,000 or more from all sources. Each Virginia resident must execute a subscription agreement that includes a representation that he, she or it comes within one of the aforementioned categories prior to purchasing any of our securities. * * * NOTICE TO RESIDENTS OF THE STATE OF WASHINGTON This offering has not been registered in the State of Washington, and is being offered pursuant to an exemption from registration under the securities laws of that state. Unless another exemption from registration is available, this offering is limited to banks, savings institutions, insurance companies, investment companies, pension and profit-sharing trusts, other financial institutions and institutional buyers, and broker-dealers, whether purchasing for themselves or in a fiduciary capacity. Each prospective Washington investor must execute a subscription agreement that includes a representation that it comes within one of the aforementioned categories prior to purchasing any of our securities. * * * NOTICE TO RESIDENTS OF THE STATE OF WISCONSIN This offering has not been registered in the State of Wisconsin, and is being offered pursuant to an exemption from registration under the securities laws of that state. This offering is limited to accredited individuals, unless another exemption from registration is available. Each purchaser of Units in Wisconsin must meet one of the following suitability standards: (I) a net worth (inclusive of home, furnishings and automobiles) of $1,000,000 or more; or (II) individually, gross annual income during each of 2002 and 2003 and estimated during 2004 of $200,000 or more from all sources; or (iii) with his or her spouse, gross annual income during each of 2002 and 2003 and estimated during 2004 of $300,000 or more from all sources. Each Wisconsin resident must execute a subscription agreement that includes a representation that he or she comes within one of the aforementioned categories prior to purchasing any of our Units. * * * TABLE OF CONTENTS ----------------- PAGE ---- Prospectus Summary......................................................... 1 Risk Factors............................................................... 4 Forward-Looking Statements................................................. 11 Use of Proceeds............................................................ 11 Dividend Policy............................................................ 11 Selling Security Holders................................................... 11 Plan of Distribution....................................................... 12 Capitalization............................................................. 14 Selected Consolidated Financial Data....................................... 15 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................. 16 Business................................................................... 22 Executive Officers and Directors........................................... 29 Organization Within the Past Five Years.................................... 36 Certain Relationships and Related Transactions............................. 37 Market for Common Equity .................................................. 41 Principal Stockholders..................................................... 41 Description of Capital Stock............................................... 44 Shares Eligible for Future Sale............................................ 46 Transfer Agent and Registrar............................................... 47 Legal Matters.............................................................. 47 Experts.................................................................... 47 Additional Information..................................................... 47 Index to Financial Statements.............................................. F * * * -------------------------------------------------------------------------------- PROSPECTUS SUMMARY YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED INFORMATION IN THIS PROSPECTUS REGARDING US AND THE RISKS ASSOCIATED WITH PURCHASING OUR SECURITIES. OUR COMPANY ----------- We are a provider of public information via our proprietary data integration solutions through our wholly-owned subsidiaries, LocatePLUS Corporation, Worldwide Information, Inc., Certifion Corporation (d/b/a Entersect), Dataphant, Inc., and Metrigenics, Inc. (together with LocatePLUS Holdings Corporation, we refer to these companies collectively as the "LocatePLUS Group"). Since 1996, we have sold a CD-ROM-based product, which we refer to as Worldwide Information(TM), that enables users to search certain motor vehicle records and drivers' license information in multiple states through a dynamic search engine, using complete or partial information. Since March 1, 2000, we have maintained a database that is accessible through the Internet known as LocatePLUS(TM). Our LocatePLUS(TM) database contains searchable and cross-referenced public information about individuals throughout the United States, including individuals' names, addresses, dates of birth, bankruptcies, social security numbers, prior residences and probable acquaintances (such as neighbors and other individuals sharing a residence) and, in certain circumstances, real estate holdings, liens, judgments, drivers' license information and motor vehicle records. Information in our LocatePLUS(TM) database is integrated in a manner that allows users to access it rapidly and efficiently. During December 2002, we launched another version of our LocatePLUS(TM) database that is accessible using certain wireless devices manufactured by third parties, such as personal digital assistants and e-mail capable pagers. We refer to that product as LocatePLUS AnyWhere(TM). Since September 1, 2003, our wholly-owned subsidiary, Certifion Corporation (D/B/A Entersect), has offered on-line self-certification products. PLAN OF DISTRIBUTION -------------------- All of the 12,820,000 shares of our Class A Voting Common Stock offered by this prospectus may be offered and sold, from time to time, by the selling security holders identified in this prospectus. We will not receive any of the proceeds from the sale of shares by the selling security holders. We will pay the expenses of preparing this prospectus and the related registration statement. The selling security holders have not advised us of any specific plan for distribution of the shares offered hereby, but it is anticipated that the shares will be sold from time to time by the selling security holders or by pledgees, donees, transferees or other successors in interest on a best efforts basis without an underwriter. Such sales may be made on the OTC Bulletin Board or any national securities exchange upon which our shares may trade in the future, over-the-counter, or otherwise, at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The shares may be sold by one or more of the following, without limitation: o a block trade in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; o purchases by a broker or dealer for its account pursuant to this prospectus; o ordinary brokerage transactions and transactions in which the broker solicits purchases; o through options, swaps or derivatives; o in privately negotiated transactions; o in transactions to cover short sales; o through a combination of any such methods of sale; or o in accordance with Rule 144 under the Securities Act, rather than pursuant to this prospectus. Each of the selling security holders may sell its shares directly to purchasers or may use brokers, dealers, underwriters or agents to sell its shares. Brokers or dealers engaged by the selling security holder may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions, discounts or concessions from a selling security holder, or, if any such broker-dealer acts as agent for the purchaser of shares, from the purchaser in amounts to be negotiated immediately prior to the sale. The compensation received by brokers or dealers may, but is not expected to, exceed that which is customary for the types of transactions involved. Broker-dealers may agree 1 with a selling security holder to sell a specified number of shares at a stipulated price per share, and, to the extent the broker-dealer is unable to do so acting as agent for a selling security holder, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment to a selling security holder. Broker-dealers who acquire shares as principal may thereafter resell the shares from time to time in transactions, which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above, in the over-the counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions. In connection with resales of the shares, broker-dealers may pay to or receive from the purchasers of shares commissions as described above. Each selling security holder and any broker-dealers or agents that participate with a selling security holder in the sale of the shares may be deemed to be an "underwriter" within the meaning of the Securities Act. In that event, any commissions received by broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. From time to time the selling security holders may engage in short sales, short sales against the box, puts and calls and other hedging transactions in our securities, and may sell and deliver the shares in connection with such transactions or in settlement of securities loans. These transactions may be entered into with broker-dealers or other financial institutions. In addition, from time to time, a selling security holder may pledge its shares pursuant to the margin provisions of its customer agreements with its broker-dealer. Upon delivery of the shares or a default by a selling security holder, the broker-dealer or financial institution may offer and sell the pledged shares from time to time. HOW TO CONTACT US ----------------- Our executive offices are located at 100 Cummings Center, Suite 235M, Beverly, Massachusetts 01915. Our phone number is (978) 921-2727. Our website is http://www.locateplus.com. Information on our website is not intended to be incorporated into this prospectus. 2 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- IMPORTANT NOTE CONCERNING OUR FINANCIAL CONDITION ------------------------------------------------- Our financial statements were prepared on the assumption that we will continue as a going concern, and our independent accountants have expressed doubt as to that assumption. Our management estimates that our projected cash flow from operations, plus our cash reserves, will be sufficient to permit us to continue our current level of operations for at least twelve months from the date of this prospectus. However, we plan to increase our sales and marketing, product development, and administrative expenses. We intend to use the proceeds from the exercise of our Public Warrants, if any, to fund our activities, although there can be no assurance the funds will be available from the exercise of our Public Warrants in the amounts or at the times that we require. For more information on this matter, you should review our financial statements, which begin on page SF-1 of this prospectus, as well as the section of this prospectus titled "Management's Discussion and Analysis of Financial Condition and Results of Operations". OUR CAPITAL STRUCTURE AND SHARES ELIGIBLE FOR FUTURE SALE --------------------------------------------------------- The following table outlines our capital stock as of July 31, 2004: Shares of Class A Voting Common Stock outstanding...........90,766,428(1) Shares of Class B Non-voting Common Stock outstanding.......72,898,596(2) Total shares of both classes of Common Stock outstanding...163,655,024(1)(2) -------------- (1) Assuming no exercise or conversion of: o warrants to purchase 16,624,989 shares of Class A Voting Common Stock outstanding as of July 31, 2004; o options to purchase up to 12,048,700 shares of Class A Voting Common Stock pursuant to our 1999 Incentive and Non-qualified Stock Option Plan; o a put option which permits us to sell up to $1,575,288 in shares of Class A Voting Common Stock as of July 31, 2004; o options to purchase up to 25,000,000 shares of Class A Voting Common Stock pursuant to our 2003 Stock Plan; o debt convertible into 44,444 shares of Class A Voting Common Stock at the election of one debtholder; or o debt convertible into 7,500,000 shares of Class A Voting Common Stock at the election of one debt holder. (2) Assuming no exercise or conversion of: o warrants and options to purchase up to 10,683,249 shares of Class B Non-voting Common Stock outstanding as of July 31, 2004; or o options to purchase up to 25,000,000 shares of Class B Non-Voting Common Stock pursuant to our 2003 Stock Plan. * * * 3 -------------------------------------------------------------------------------- RISK FACTORS ANY INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AND ALL OF THE INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO EXERCISE OUR PUBLIC WARRANTS OR OTHERWISE PURCHASE ANY OF OUR SECURITIES. WE HAVE NOT ATTEMPTED TO RANK THE FOLLOWING RISKS IN ORDER OF THEIR LIKELIHOOD. RISKS RELATED TO OUR BUSINESS ----------------------------- OUR FINANCIAL STATEMENTS WERE PREPARED ON THE ASSUMPTION THAT WE WILL CONTINUE AS A GOING CONCERN, AND OUR INDEPENDENT ACCOUNTANTS HAVE EXPRESSED DOUBT AS TO THAT ASSUMPTION. Our financial statements were prepared on the assumption that we will continue as a going concern, and our independent accountants have expressed doubt as to that assumption. If sufficient capital is not available, we would likely be required to reduce or discontinue our operations. We plan to increase our sales and marketing, product development, and administrative expenses. We intend to use the proceeds from the exercise of our Public Warrants (if any) to fund our activities, although there can be no assurance the funds will be available from the exercise of our Public Warrants in the amounts or at the times we require. As a result, we may be required to raise additional capital, which may not be available to us on favorable terms, if at all. If we are unable to generate sufficient cash from operations and we are unable to raise additional capital, we will be forced to discontinue some or all of our operations, reduce the development of some or all of our products, or reduce our workforce, all of which would materially adversely affect our business. WE HAVE A HISTORY OF LOSSES, EXPECT FUTURE LOSSES AND CANNOT ASSURE YOU THAT WE WILL ACHIEVE PROFITABILITY. We have incurred significant net losses since our inception. We incurred net losses of approximately $4.0 million in 2002 and $4.4 million in 2003. Our accumulated deficit as of June 30, 2004 was approximately $27.0 million. We anticipate that our expenses relating to our sales and marketing and product development, as well as our general and administrative expenses, will increase during the foreseeable future. To achieve profitability, we must generate substantially more revenue than we have in prior years. Even if we ultimately achieve profitability, we may not be able to sustain or increase our profitability. If our revenue grows more slowly than we anticipate, or if our operating expenses exceed our expectations, our operating results and financial condition will be adversely affected. For more information on our history of losses, you should review our financial statements, which are included in this prospectus beginning on page SF-1. OUR RIGHT TO USE CERTAIN THIRD PARTY DATA IS SUBJECT TO TERMINATION BY OUR CURRENT DATA PROVIDERS. ANY SUCH TERMINATION COULD DISRUPT OUR BUSINESS. We obtain our data from a variety of sources. Some of our data providers may terminate our right to use their data in their sole discretion and without any recourse to us. If our access to certain data sources is restricted, there can be no assurance that we would be able to obtain and integrate replacement data on a timely basis. In such an event, our products would likely be less attractive to current and potential customers and our revenue would likely decrease. A SUBSTANTIAL PORTION OF OUR ASSETS CONSISTS OF AN AMOUNT DUE TO US FROM A THIRD PARTY. IF THIS AMOUNT IS NOT REPAID, OUR FINANCIAL CONDITION COULD BE HARMED. As of June 30, 2004, approximately $603,500 was owed to us by an unaffiliated, privately-held leasing company, pursuant to a demand note that bears interest at the rate of 11% per annum. We cannot guarantee the timing of this repayment or that this amount will be repaid at all. In the event that this amount is not repaid, our financial condition would be materially harmed. OUR FUTURE QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, WHICH COULD ADVERSELY AFFECT THE PRICE OF OUR SECURITIES. You should not rely on quarter-to-quarter comparisons of our historical results as an indication of our future performance. If our quarterly operating results do not meet the expectations of our investors, the market price of our securities will likely decline. Our future quarterly results may fluctuate as a result of many factors, some of which are outside our control, including: 4 o legal and regulatory developments that may adversely affect our ability to collect or disseminate data; o the timing, introduction and commercialization of our new products and services (including the integration of additional datasets into our databases); o increased unemployment in the United States, which may result in reduced use of our products by human resources personnel; o the potential costs of protecting our intellectual property rights; o the operating costs and capital expenditures related to the expansion of our business operations and infrastructure, including the retention of key personnel, the addition of new employees and the acquisition and integration of new datasets; o the introduction of similar or substitute databases by our competitors; and o the timing and establishment of our marketing and channel partnership arrangements. WE HAVE LIMITED PRODUCT OFFERINGS, AND IF DEMAND FOR THESE PRODUCTS DECLINES OR FAILS TO DEVELOP AS WE EXPECT, OUR REVENUE WILL DECLINE. We derive the majority of our current consolidated net revenue from two products. Specifically, in the year ended December 31, 2003, and in the six months ended June 30, 2004, we derived substantially all of our recurring consolidated revenue from our CD-ROM-based Worldwide Information(TM) and Internet-based LocatePLUS(TM) products. We expect that revenue from our Internet-based and CD-ROM-based products will continue to account for a significant portion of our total revenue for the foreseeable future. As a result, continued and widespread market acceptance of our existing products is critical to our future success. We cannot assure you that our current products will achieve market acceptance at the rates at which we expect, or that demand for our products will continue to grow. If our products do not achieve increasing market acceptance, our revenue would most likely decline and our financial condition would be adversely affected. WE OBTAIN DATA FROM A VARIETY OF SOURCES. IF WE ARE UNABLE TO OBTAIN NECESSARY DATA, OUR PRODUCTS MAY NOT BE ATTRACTIVE TO OUR TARGET CUSTOMERS. Sources of our data include both private and government data providers, including federal, state and local government agencies. From time to time, certain sources of publicly available data, such as state motor vehicle registries, have refused to release data to us. As a result, we have, on occasion, been forced to obtain such data through the exercise of our rights under the Freedom of Information Act. Such efforts can be costly and time consuming, and we cannot guarantee that we will be able to successfully acquire such data on a consistent basis. From time to time, we may also be required to license or purchase additional data to expand our product offerings or maintain our databases. We cannot assure you that such third-party licenses will be available to us on commercially reasonable terms, or at all. Our inability to maintain or obtain any third-party license required to sell or develop our products or product enhancements could require us to obtain substitute, possibly less current data, which would likely be less attractive to our current and prospective customers. IF WE CANNOT INTEGRATE, UPDATE AND IMPROVE OUR PRODUCTS, OUR PRODUCTS MAY BE LESS ATTRACTIVE TO OUR TARGET MARKET, WHICH WOULD ADVERSELY AFFECT OUR REVENUES AND FINANCIAL CONDITION. We must continuously update our databases so that we may provide datasets to customers that are accurate and current. We must also integrate additional datasets for our products to remain competitive. Updating our databases and integrating additional datasets are time-consuming processes and often require extensive resources, as we often obtain public documents in a form that is not suitable for use in any of our products. For example, we often receive "raw data" on electronic tape media from state motor vehicle licensing agencies that must be modified so that it can be searched rapidly based upon partial information. We can give no assurance that we will have adequate resources to update our datasets or to integrate new datasets. If we are unable to update our datasets or integrate new datasets, our products are likely to be less desirable to our target market than those of our competitors, and our sales and financial condition would be adversely affected. 5 THE MARKET FOR DATABASE PRODUCTS AND SERVICES IS HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE TO EFFECTIVELY COMPETE IN THIS MARKET. Our industry is intensely competitive and we expect competition to continue to increase from both existing competitors and new market entrants. Many of the companies that currently compete with us, as well as other companies with whom we may compete in the future, are national or international in scope and have greater resources than we do. Those resources could enable those companies to initiate price cuts or take other measures in an effort to gain market share in our target markets. We may have inadequate resources to compete against such businesses. For example, our LocatePLUS(TM) product competes with products offered by: o Accurint; o ChoicePoint; o Confi-chek.com; o FlatRateInfo.com; and o Lexis-Nexis. Our Worldwide Information(TM) product primarily competes with the registries of motor vehicles of various states that sell their data to screened users. These state agencies generally provide data in "raw form" without the search capabilities that we provide in our Worldwide Information(TM) product. We cannot assure you that we will be able to compete successfully against these or other current and future participants in our markets or against alternative technologies, nor can we assure you that the competitive pressures that we face will not adversely affect our business. WE FACE RISKS ASSOCIATED WITH OUR STRATEGIC ALLIANCES, WHICH COULD LIMIT OUR ABILITY TO INCREASE OUR MARKET SHARE. From time to time, we enter into "channel partner" arrangements and similar strategic alliances, through which we license access to our databases to third parties in exchange for royalties. We can give no assurance that we will be able to identify and secure appropriate channel partners or that any channel partner arrangements will be profitable. If we are unable to enter into appropriate channel partner arrangements, use of our database may not grow sufficiently to meet our business objectives. Disruptions in our relations with our channel partners may adversely effect our financial condition and the results of our operations. TO INCREASE OUR REVENUE, WE MUST INCREASE OUR SALES FORCE AND EXPAND OUR DISTRIBUTION CHANNELS. WE CAN NOT ASSURE YOU THAT WE WILL BE SUCCESSFUL IN THESE EFFORTS. To date, we have sold our products primarily through our direct sales and tele-sales force. Our future revenue growth will depend in large part on recruiting and training additional direct sales and tele-sales personnel and expanding our distribution channels. We may experience difficulty recruiting qualified sales and support personnel and establishing third-party distribution relationships such as channel partner arrangements. We may not be able to successfully expand our tele-sales force or other distribution channels, and any such expansion, if achieved, may not result in increased revenue or profits. WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, AND WE MAY BE SUBJECT TO INFRINGEMENT CLAIMS THAT MAY ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL CONDITION. Our products consist of publicly available data that we organize to permit rapid and effective computerized searches. Because our datasets consist of publicly available data, we cannot prevent competitors from developing equivalent databases. We anticipate that our success will depend, in part, on our proprietary data integration and linking methodologies. We have not obtained, and do not anticipate that we will obtain, patent protection for these methodologies. We rely on trade secret rights, confidentiality agreements and procedures and licensing arrangements to establish and protect our proprietary rights with respect to our data integration methodologies. Despite our efforts, third parties could attempt to copy or otherwise obtain and make unauthorized use of our products or independently develop similar products. 6 WE FACE SIGNIFICANT SECURITY RISKS RELATED TO OUR ELECTRONIC TRANSMISSION OF CONFIDENTIAL INFORMATION. IF WE ARE UNABLE TO ADEQUATELY PROTECT CERTAIN CONFIDENTIAL INFORMATION, OUR REPUTATION AND BUSINESS WOULD BE ADVERSELY AFFECTED, AND WE COULD BE SUBJECT TO LIABILITY IN CERTAIN JURISDICTIONS. We rely on commercially available encryption software and other technologies to provide system security and to effect secure transmission of confidential information, such as credit card numbers. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments may result in a compromise or breach of the security measures used by us to protect customer transaction data. If our security systems were to be compromised, it could have a material adverse effect on our reputation and business and, under the laws of certain jurisdictions, we may be subject to significant liabilities and reporting obligations. A party who is able to circumvent our security measures could misappropriate our information, cause interruptions in our operations, damage our reputation and customers' willingness to use our products and subject us to possible liability under applicable states' privacy laws. We may be required to expend significant capital and other resources to protect against these security breaches or to alleviate problems caused by these breaches. OUR PRODUCTS MAY HAVE UNKNOWN DEFECTS WHICH COULD HAVE ADVERSE EFFECTS ON OUR CUSTOMER RELATIONS AND FINANCIAL RESULTS. Datasets as complex as those that we develop may contain undetected defects or errors. For example, our products may contain unknown defects due to errors in the data that we purchase from our data providers. Despite testing, defects or errors may occur in our existing or new products, which could make them less attractive to our target markets. As a result, defects and errors in our datasets could result in loss of revenue or market share, failure to achieve market acceptance, diversion of development resources, injury to our reputation and an adverse effect on our business, financial condition and results of operation. DEFECTS OR ERRORS COULD RESULT IN PRODUCT LIABILITY CLAIMS THAT MAY NOT BE COVERED BY OUR INSURANCE. Our datasets may contain errors, which may give rise to claims against us. We generally disclaim all warranties on the data we include in our products. However, our disclaimers may not be enforceable. In such an event, or if liabilities arise that are not contractually limited, our business could be adversely affected. We currently do not maintain professional liability insurance, and our general liability insurance may not cover claims of this nature. WE MAY ENCOUNTER DIFFICULTIES MANAGING OUR PLANNED GROWTH. We intend to expand our customer base and develop new products. To manage our anticipated growth, we must continue to improve our operational and financial systems and expand, train, retain and manage our employee base. Any growth of our business may place a strain on our managerial and financial resources. IF WE ARE NOT ABLE TO HIRE, INTEGRATE OR RETAIN QUALIFIED PERSONNEL, WE MAY NOT BE ABLE TO CONTINUE OUR BUSINESS AS PRESENTLY CONDUCTED. The recent growth in our business has resulted in an increase in the responsibilities of our personnel. Several of our personnel are presently serving in more than one capacity. Competition for experienced and qualified personnel in our industry is intense. We may not be able to retain our current key employees, or attract, integrate or retain other qualified personnel in the future. If we do not succeed in attracting new personnel or in integrating, retaining and motivating our current personnel, our business could be harmed. WE DEPEND ON OUR KEY EMPLOYEES FOR OUR FUTURE SUCCESS; THE LOSS OF ANY OF OUR KEY EMPLOYEES COULD DELAY OUR PLANNED GROWTH AND LIMIT OUR ABILITY TO ACHIEVE PROFITABILITY. Our success depends to a significant extent on the performance and continued service of our senior management and other key employees, and particularly those of our President and Chief Executive Officer, Mr. Jon R. Latorella. We have no employment agreements with any of our employees. The loss of the services of any of our senior management or any of our other key employees would disrupt our operations and would delay our planned growth while we worked to replace those employees. We do not maintain "key man" life insurance on any of our employees. As a result, if any of our key employees were to die or become unable to provide services for us, our operations would be disrupted and we would have no means of recovering any resulting losses. 7 THERE IS NO ASSURANCE THAT WE WILL PAY DIVIDENDS IN THE FUTURE. We have never declared or paid a dividend. At this time, we do not anticipate paying any dividends in the future. We are under no legal or contractual obligation to declare or to pay dividends, and the timing and amount of any future dividends and distributions is at the discretion of our Board of Directors and will depend, among other things, on our future after-tax earnings, operations, capital requirements, borrowing capacity, financial condition and general business conditions. We plan to retain any earnings for use in the operation of our business. You should not purchase our securities on the expectation of future dividends. RISKS RELATED TO OUR INDUSTRY ----------------------------- EXISTING GOVERNMENT REGULATIONS AND INDUSTRY STANDARDS MAY LIMIT OUR ABILITY TO ACQUIRE OR DISSEMINATE DATA. IF OUR ABILITY TO ACQUIRE OR DISSEMINATE DATA IS LIMITED, OUR REVENUES WILL DECREASE AND OUR FINANCIAL CONDITION WILL BE ADVERSELY AFFECTED. WE MAY ALSO BE SUBJECT TO LIABILITY ARISING FROM SUCH REGULATIONS. Much of the data we provide is subject to regulation by the Federal Trade Commission under the Federal Fair Credit Reporting Act and Title V of the Financial Services Modernization Act (which is also referred to as the "Gramm-Leach-Bliley Act"), and by various other federal, state and local regulatory authorities pursuant to a variety of laws. These laws and regulations are designed to protect individuals from the misuse of their personal information. We have not engaged counsel or any other third party to review our activity in light of these laws and regulations, although we believe that our activities do not violate any law specifically applicable to the dissemination of data concerning individuals. However, our belief may be incorrect, and we may be in violation of laws governing the dissemination of data. In such a case, we may be subject to enforcement action by regulatory agencies and claims against us by individuals (to the extent such laws permit private rights of action). Any such claims could significantly disrupt our business and operations. We do not currently maintain liability insurance to cover such claims. FUTURE GOVERNMENT REGULATION MAY FURTHER LIMIT OUR ABILITY TO PROVIDE OUR PRODUCTS TO CUSTOMERS AND CAUSE US TO LOSE REVENUE. Future laws or regulations that further restrict the use of personal or public record information could disrupt our business and could cause us to lose revenue. For example, if laws were enacted that restricted our use of Social Security numbers, our ability to provide meaningful data to our customers would be adversely affected. If we are unable to respond to regulatory or industry standards effectively, our business, financial condition and results of operation would be adversely affected. Our future success will depend, in part, on our ability to enhance and improve the responsiveness, functionality and features of our products and services in accordance with newly-imposed regulatory or industry standards, of which we can give no assurance. WE COULD FACE LIABILITY BASED ON THE NATURE OF OUR SERVICES AND THE CONTENT OF THE MATERIALS THAT WE PROVIDE. We may face potential liability from individuals, government agencies or businesses for defamation, invasion of privacy, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the data contained in our products. Although we carry a limited amount of general liability insurance, our insurance may not cover claims of these types and may not be adequate to indemnify us for liability that may be imposed. Any imposition of liability, particularly liability that is not covered by insurance or which is in excess of our insurance coverage, would negatively affect our reputation, business, financial condition and results of operations. RISKS ASSOCIATED WITH AN INVESTMENT IN OUR SECURITIES ----------------------------------------------------- WE HAVE A LARGE NUMBER OF SECURITIES THAT ARE AVAILABLE FOR RESALE. SALES OF THESE SECURITIES COULD CAUSE THE PRICE OF OUR SECURITIES TO DECLINE. Sales of a large number of shares of our securities in the public markets, or the potential for such sales, could decrease the trading price of our securities and could impair our ability to raise capital through future sales of our securities. As of July 31, 2004, we had 90,766,428 shares of Class A Voting Common Stock issued and outstanding and 72,898,596 shares of Class B Non-voting Common Stock issued and outstanding. If all of our options, put rights, warrants and convertible securities issued as of July 31, 2004 were exercised as of that date, we 8 would have had 142,822,327 shares of Class A Voting Common Stock issued and outstanding and 85,531,845 shares of Class B Non-voting Common Stock issued and outstanding. WE HAVE ISSUED A SUBSTANTIAL NUMBER OF WARRANTS AND OTHER CONVERTIBLE SECURITIES. OUR WARRANTS AND CONVERTIBLE SECURITIES MAY CAUSE THE TRADING PRICE OF OUR SECURITIES TO DECLINE, AND MAY LIMIT OUR ABILITY TO RAISE CAPITAL FROM OTHER SOURCES. As of July 31, 2004, there were 16,624,989 shares of Class A Voting Common Stock issuable upon the exercise of warrants. As of that date, there also were 44,444 shares of Class A Voting Common Stock issuable upon conversion of a certain $10,000 convertible promissory note, 7,500,000 shares of Class A Voting Common Stock issuable upon conversion of a certain $3,000,000 convertible term note (discussed below), and we had reserved 12,048,700 shares of our Class A Voting Common Stock for issuance pursuant to our 1999 Incentive and Non-Qualified Stock Option Plan and 25,000,000 shares of our Class A Voting Common Stock reserved for issuance pursuant to our 2003 Stock Plan. As of July 31, 2004, there were 10,683,249 shares of Class B Non-voting Common Stock issuable upon the exercise of warrants, and 25,000,000 shares of Class B Non-voting Common Stock reserved for issuance pursuant to our 2003 Stock Plan. While these securities are outstanding, the holders will have the opportunity to profit from a rise in the price of our securities with a resulting dilution (upon exercise or conversion) in the value of the interests of our other security holders. Our ability to obtain additional financing during the period these convertible securities are outstanding may be adversely affected and their existence may have a negative effect on the price of our securities. The holders of these securities are likely to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital by a new offering of securities on terms more favorable to us than those of the outstanding warrants and convertible promissory notes. EXISTING STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM THE SALE OF SECURITIES PURSUANT TO OUR INVESTMENT AGREEMENT WITH DUTCHESS. In August 2003, we entered into an Investment Agreement with Dutchess Private Equities Fund, L.P., pursuant to which we issued a "put" right to Dutchess. Under the Investment Agreement, also referred to as an "equity line of credit," we may put shares of our Class A Voting Common Stock to Dutchess under certain circumstances, at a 5% discount to the lowest closing bid price for the ten days immediately following our notice to Dutchess of our election to exercise our put right. These discounted sales could cause the price of our Class A Voting Common Stock to decline. The sale of those shares under the equity line of credit will have a dilutive impact on our stockholders. As a result, our net income per share could decrease in future periods, and the market price of our Class A Voting Common Stock could also decline. In addition, the lower our stock price at the time we exercise our put option, the more shares we will have to issue to Dutchess to draw down on the full equity line. If our stock price decreases, our existing stockholders would experience greater dilution. EXISTING STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM THE SALE OF SECURITIES PURSUANT TO OUR INVESTMENT AGREEMENT WITH LAURUS FUNDS. On June 17, 2004 we entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Islands company, relating to the private placement of a convertible term note issued by the Company in the principal amount of $3,000,000 due June 17, 2007 (the "Note"), and a common stock purchase warrant (the "Warrant"). We also entered into related security documents and a Registration Rights Agreement. The Note is convertible into 7,500,000 shares of our Class A Voting Common Stock at a fixed conversion rate of $0.40 per share and the Warrant provides for the purchase of up to 1,320,000 shares of Class A Common Stock at a price of $0.45 each, subject to customary adjustments, until June 17, 2009. Therefore, an aggregate of 8,820,000 shares of Class A Common Stock are issuable upon conversion of the Note and exercise of the Warrant. OUR SECURITIES HAVE BEEN THINLY TRADED ON THE OVER-THE-COUNTER BULLETIN BOARD, WHICH MAY NOT PROVIDE LIQUIDITY FOR OUR INVESTORS. Our securities are quoted on the Over-the-Counter Bulletin Board. The Over-the-Counter Bulletin Board is an inter-dealer, over-the-counter market that provides significantly less liquidity than the NASDAQ Stock Market or 9 national or regional exchanges. Securities traded on the Over-the-Counter Bulletin Board are usually thinly traded, highly volatile, have fewer market makers and are not followed by analysts. The Securities and Exchange Commission's order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the Over-the-Counter Bulletin Board. Quotes for stocks included on the Over-the-Counter Bulletin Board are not listed in newspapers. Therefore, prices for securities traded solely on the Over-the-Counter Bulletin Board may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price. OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER CURRENTLY OWNS A SUBSTANTIAL PORTION OF OUR VOTING SECURITIES. THEREFORE, HE HAS SUBSTANTIAL CONTROL OVER APPROVING CERTAIN TRANSACTIONS AND MATTERS PRESENTED TO OUR STOCKHOLDERS. Mr. Jon R. Latorella, our President and Chief Executive Officer, currently controls approximately 39% of our voting securities. He will continue to hold a substantial portion of our voting securities even if all of the convertible securities exercisable for shares of Class A Voting Common Stock (including the Public Warrants) are exercised. Mr. Latorella's holdings may delay, deter or prevent transactions, such as tender offers, that could benefit other investors. "PENNY STOCK" RULES MAY MAKE BUYING OR SELLING OUR SECURITIES DIFFICULT. Trading in our securities is subject to the Securities and Exchange Commission's "penny stock" rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The Securities and Exchange Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser's written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities. WE MAY SELL ADDITIONAL SHARES IN THE FUTURE, WHICH COULD CAUSE THE PRICE OF OUR SECURITIES TO DECLINE. We currently have 150,000,000 shares of Class A Voting Common Stock and 250,000,000 shares of Class B Non-voting Common Stock authorized. As a result, we have substantial amounts of authorized but unissued capital stock. Our Second Amended and Restated Certificate of Incorporation and applicable provisions of Delaware law provide that we may issue authorized capital stock at the approval of our Board of Directors, and no stockholder vote or other form of stockholder approval is required for us to issue such capital stock. Consequently, we could issue shares of either class of our common stock in connection with future financings or acquisitions or in conjunction with equity compensation arrangements. The offering prices in connection with those future issuances could be less than the current sales prices of our securities. Any future issuances of any of our securities could cause the trading price of our securities to decline. INVESTORS MUST CONTACT A BROKER-DEALER TO TRADE OVER-THE-COUNTER BULLETIN BOARD SECURITIES. AS A RESULT, YOU MAY NOT BE ABLE TO BUY OR SELL OUR SECURITIES AT THE TIMES THAT YOU MAY WISH. Even though our securities are quoted on the Over-the-Counter Bulletin Board, the Over-the-Counter Bulletin Board may not permit our investors to sell securities when and in the manner that they wish. Because there are no automated systems for negotiating trades on the Over-the-Counter Bulletin Board, they are conducted via telephone. In times of heavy market volume, the limitations of this process may result in a significant increase in the time it takes to execute investor orders. Therefore, when investors place market orders - an order to buy or sell a specific number of shares at the current market price - it is possible for the price of a stock to go up or down significantly during the lapse of time between placing a market order and its execution. 10 FORWARD-LOOKING STATEMENTS Some of the statements under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this prospectus constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. Although we believe that the assumptions underlying our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. USE OF PROCEEDS This prospectus relates to the resale of shares of our Class A Voting Common Stock owned by NFC Corporation, a current stockholder and by Laurus Master Fund, Ltd., which will become a stockholder upon the exercise of a common stock purchase warrant or upon the conversion of a convertible term note. We will not receive any of the proceeds from the resale of the shares of Class A Voting Common Stock owned by either of the selling security holders. DIVIDEND POLICY We have never declared or paid a cash dividend. At this time, we do not anticipate paying dividends in the future. We are under no legal or contractual obligation to declare or to pay dividends, and the timing and amount of any future cash dividends or distributions is at the discretion of our Board of Directors and will depend, among other things, on our future after-tax earnings, operations, capital requirements, borrowing capacity, financial condition and general business conditions. We plan to retain any earnings for use in the operation of our business and to fund future growth. You should not purchase any of our securities on the expectation of future dividends. SELLING SECURITY HOLDERS This prospectus relates to the resale from time to time of up to a total of 12,820,000 shares of our Class A Voting Common Stock by the selling stockholders, comprising: o 4,000,000 shares of Class A Voting Common Stock; o 1,320,000 shares of Class A Voting Common Stock issuable upon exercise of a warrant with an exercise price of $0.45per share; o 7,500,000 shares of Class A Voting Common Stock issuable upon the conversion of a term note with a fixed conversion rate of $0.40 per share; and On June 17, 2004 we entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Islands company and, in a private placement exempt from the registration requirements of the Securities Act, we issued a convertible term note in the principal amount of $3,000,000 due June 17, 2007 (the "Note"), and a common stock purchase warrant (the "Warrant"). We also entered into related security documents and a Registration Rights Agreement whereby, among other things, we agreed to file a registration statement, of which this prospectus is a part, with the SEC, to register the resale of the shares of our Class A Common Stock that we will issue upon exercise of Warrant and upon conversion of the Note. We agreed to keep the registration statement effective until the date when all of the shares registered hereunder are sold or the date on which the shares registered hereunder can be sold without registration and without restriction as to the number of shares that may be sold. The Note is convertible into 7,500,000 shares of our Class A Voting Common Stock at a fixed conversion rate of $0.40 per share and the Warrant provides for the purchase of up to 1,320,000 shares of Class A Common Stock at a price of $0.45 each, subject to customary adjustments, until June 17, 2009. 11 On June 8, 2004, we issued 4,000,000 shares of our Class A Voting Common Stock to NFC Corporation in a private placement exempt from the registration provisions of the Securities Act in exchange for certain investor relations services to be performed by NFC Corporation. At that time, we agreed to file a registration statement, of which this prospectus is a part, with the SEC, to register the resale of the 4,000,000 issued and outstanding shares of our Class A Common Stock included in this prospectus. We expect NFC Corporation to complete its work no later than June 30, 2005. The offers and sales of securities set forth above were made in reliance on Section 4(2) of the Securities Act and Rule 506 promulgated thereunder. We received representations from each of Laurus Master Fund, Ltd. and NFC Corporation that, at the time of the offer and sale, each was an accredited investor as such term is defined in Rule 501(a) of Regulation D. In addition, each represented that the securities were acquired for their own account for investment purposes only and without a view toward or for resale in connection with their distribution and no general solicitation was undertaken. Each of the selling security holders has represented to us that it is neither a registered broker-dealer nor an affiliate thereof. The selling security holders may offer their shares of common stock for sale from time to time at market prices prevailing at the time of sale or at negotiated prices, and without payment of any underwriting discounts or commissions except for usual and customary selling commissions paid to brokers or dealers. The following table sets forth, as of September 1, 2004, the number of shares being held of record or beneficially by the selling security holders. All of the data presented is based upon information currently available to the company.

BENEFICIAL OWNERSHIP OF BENEFICIAL OWNERSHIP OF SELLING SECURITY HOLDER SHARES PRIOR TO OFFERING(4) AFTER OFFERING(5) -------------------------------- ---------------------- NUMBER PERCENT NUMBER OF SHARES OFFERED NAME OF SELLING SECURITY HOLDER HEREBY(5) NUMBER PERCENT Laurus Master Fund, Ltd.(1)(2) 8,820,000 8.9 8,820,000 - * NFC Corporation(3) 4,000,000 4.4 4,000,000 - *

________________ * Less than one percent of outstanding shares of class. (1) Includes 7,500,000 shares (to be acquired during the effectiveness of this registration statement, but not within 60 days of July 31, 2004) issuable upon conversion of the Note and 1320,000 shares issuable upon exercise of the Warrant. (2) Laurus Master Fund, Ltd. exercises dispositive and voting control with respect to the securities to be offered for resale. Laurus Capital Management, L.L.C. controls Laurus Master Fund, Ltd. Eugene Grin and David Grin are the sole members of Laurus Capital Management, L.L.C. (3) Geoffrey J. Eiten, President of NFC Corporation exercises dispositive and voting control with respect to the securities to be offered for resale. (4) Except as stated in Note 1 above, applicable percentage of ownership is based on 90,766,428 shares of Class A Voting Common Stock outstanding as of July 31, 2004, plus any securities held by such holder for or convertible into Class A Voting Common Stock within sixty (60 days) of July 31, 2004. (5) Assumes that all shares are sold pursuant to this offering and that no other shares of common stock are acquired or disposed of by the selling security holders prior to the termination of this offering. Because the selling security holders may sell all, some or none of their shares or may acquire or dispose of other shares of common stock, we cannot estimate the aggregate number of shares which will be sold in this offering or the number or percentage of shares of common stock that each selling security holder will own upon completion of this offering. PLAN OF DISTRIBUTION All of the 12,820,000 shares of our Class A Voting Common Stock offered by this prospectus may be offered and sold, from time to time, by the selling security holders identified in this prospectus. We will not receive any of the proceeds from the sale of shares by the selling security holders. We will pay the expenses of preparing this prospectus and the related registration statement. 12 The selling security holders have not advised us of any specific plan for distribution of the shares offered hereby, but it is anticipated that the shares will be sold from time to time by the selling security holders or by pledgees, donees, transferees or other successors in interest on a best efforts basis without an underwriter. Such sales may be made on the OTC Bulletin Board or any national securities exchange upon which our shares may trade in the future, over-the-counter, or otherwise, at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The shares may be sold by one or more of the following, without limitation: o a block trade in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; o purchases by a broker or dealer for its account pursuant to this prospectus; o ordinary brokerage transactions and transactions in which the broker solicits purchases; o through options, swaps or derivatives; o in privately negotiated transactions; o in transactions to cover short sales; o through a combination of any such methods of sale; or o through a combination of any such methods of sale; or o in accordance with Rule 144 under the Securities Act, rather than pursuant to this prospectus. Each of the selling security holders may sell its shares directly to purchasers or may use brokers, dealers, underwriters or agents to sell its shares. Brokers or dealers engaged by the selling security holders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions, discounts or concessions from a selling security holder, or, if any such broker-dealer acts as agent for the purchaser of shares, from the purchaser in amounts to be negotiated immediately prior to the sale. The compensation received by brokers or dealers may, but is not expected to, exceed that which is customary for the types of transactions involved. Broker-dealers may agree with a selling security holder to sell a specified number of shares at a stipulated price per share, and, to the extent the broker-dealer is unable to do so acting as agent for a selling security holder, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment to a selling security holder. Broker-dealers who acquire shares as principal may thereafter resell the shares from time to time in transactions, which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above, in the over-the counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions. In connection with resales of the shares, broker-dealers may pay to or receive from the purchasers of shares commissions as described above. Each selling security holder and any broker-dealers or agents that participate with a selling security holder in the sale of the shares may be deemed to be an "underwriter" within the meaning of the Securities Act. In that event, any commissions received by broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. From time to time the selling security holders may engage in short sales, short sales against the box, puts and calls and other hedging transactions in our securities, and may sell and deliver the shares in connection with such transactions or in settlement of securities loans. These transactions may be entered into with broker-dealers or other financial institutions. In addition, from time to time, a selling security holder may pledge its shares pursuant to the margin provisions of its customer agreements with its broker-dealer. Upon delivery of the shares or a default by a selling security holder, the broker-dealer or financial institution may offer and sell the pledged shares from time to time. CAPITALIZATION The table below sets forth our capitalization as of June 30, 2004. You should read this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations", and our consolidated financial statements and the related notes beginning on page SF-1 of this prospectus. JUNE 30, 2004 -------------- (IN THOUSANDS) DEBT: Current portion of notes, convertible debt and capital lease obligations......................................... $ 2,043 ========= Capital lease obligations and notes, net of current portion................................................... 3,755 ========= 13 STOCKHOLDERS' EQUITY: Common Stock, par value $0.01 per share: Class A Voting Common Stock, 150,000,000 shares authorized; 90,458,607 shares issued and outstanding..... 905 Class B Non-voting Common Stock, 250,000,000 shares authorized; 72,898,596 shares issued and outstanding..... 729 Additional paid-in capital................................... 24,610 Warrants..................................................... 2,237 Common stock subscriptions receivable ....................... (500) Accumulated deficit.......................................... (26,612) --------- TOTAL STOCKHOLDERS' EQUITY................................... 1,369 --------- TOTAL CAPITALIZATION......................................... $ 7,167 ========= 14 SELECTED CONSOLIDATED FINANCIAL DATA You should read the selected financial data set forth below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus. The statement of operations data set forth on the following page for the years ended December 31, 2002 and 2003 and the balance sheet data as of December 31, 2003 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The statement of operations data set forth on the following page for the six months ended June 30, 2003 and 2004 and the balance sheet data as of June 30, 2004 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. These historical results are not necessarily indicative of results to be expected for any future period.

STATEMENTS OF OPERATIONS DATA: SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ----------------------------------- ----------------------------------- 2004 2003 2003 2002 ------------- ------------- ------------- ------------- (UNAUDITED) REVENUES: Information Sales -CD Rom $ 298,894 $ 232,068 $ 478,278 $ 345,003 -Online 1,860,777 1,143,496 2,543,581 1,471,188 -Channel Partner 376,198 95,165 263,834 32,284 -Wireless 3,128 2,970 7,417 1,980 Engineering services 47,200 96,167 105,667 53,333 ----------------------------------- ----------------------------------- Total revenues 2,586,197 1,569,866 3,398,777 1,903,786 ----------------------------------- ----------------------------------- COSTS AND EXPENSES: Costs of revenues: -CD Rom 45,643 40,856 91,775 90,397 -Online and Channel Partner 1,902,073 1,088,778 2,606,875 1,217,809 -Engineering services 0 23,339 2,749 1,100 -Wireless 871 1,375 26,025 9,297 Selling and marketing 594,999 415,154 1,049,381 1,001,529 General and administrative 3,432,506 1,732,455 3,804,200 3,257,546 Research & Development 164,074 0 0 0 ----------------------------------- ----------------------------------- Total operating expenses 6,140,796 3,301,957 7,581,005 5,577,678 ----------------------------------- ----------------------------------- OPERATING LOSS (3,554,599) (1,732,091) (4,182,228) (3,673,890) OTHER INCOME (EXPENSE): Interest income 45,595 67,365 137,253 53,835 Interest expense (428,330) (251,795) (686,315) (397,674) Other income, net 15,744 304,978 283,500 21,122 ----------------------------------- ----------------------------------- Net loss $ (3,921,590) $ (1,611,543) $ (4,407,185) $ (3,996,607) =================================== =================================== BASIC AND DILUTED NET LOSS PER SHARE $ (0.02) $ (0.01) $ (0.03) $ (0.04) SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER SHARE 157,150,404 127,617,401 130,299,353 111,798,301

AS OF BALANCE SHEET DATA: JUNE 30, 2004 AS OF (UNAUDITED) DECEMBER 31, 2003 ----------- ----------- Cash and cash equivalents $ 3,268,207 $ 1,522,922 Total current assets 5,252,303 4,003,217 Total assets 8,804,174 7,214,166 Total current liabilities 3,679,437 4,648,013 Total stockholders' equity 1,369,305 2,004,486 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS TOGETHER WITH OUR UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS REPORT. THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21 E OF THE SECURITIES EXCHANGE ACT OF 1934, EACH AS AMENDED. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT INFORMATION AND EXPECTATIONS AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE BUT ARE NOT LIMITED TO, UNCERTAINTIES RELATING TO OUR ABILITY TO SUCCESSFULLY COMPETE IN OUR INDUSTRY, UNCERTAINTIES REGARDING OUR ABILITY TO OBTAIN FINANCIAL AND OTHER RESOURCES FOR OUR PRODUCT DEVELOPMENT AND COMMERCIAL ACTIVITIES, AND UNCERTAINTIES RELATING TO PRIVACY REGULATIONS. THESE FACTORS, AND OTHERS, ARE DISCUSSED FROM TIME TO TIME IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE THEY ARE MADE. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE THEY ARE MADE. FURTHER DISCUSSION OF RISK FACTORS IS ALSO AVAILABLE IN OUR REGISTRATION STATEMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. OVERVIEW We provide public information via our proprietary data integration solutions. Since 1996, we have sold a CD-ROM-based product, which we refer to as Worldwide Information(TM), that enables users to search certain motor vehicle records and driver's license information in multiple states through a dynamic search engine, using complete or partial information. Since March 1, 2000, we have maintained a database that is accessible through the Internet, known as LocatePLUS(TM). Our LocatePLUS(TM) product contains searchable and cross-referenced public information on individuals throughout the United States, including individuals' names, addresses, dates of birth, Social Security numbers, prior residences, and, in certain circumstances, real estate holdings, recorded bankruptcies, liens, judgments, drivers' license information and motor vehicle records. Since September 2003, we have offered personal information for self-certification purposes through our Entersect(TM) product. We distribute our content both directly (through the Internet in the case of our LocatePLUS(TM) product and through the mail in the case of our Worldwide Information(TM) CD-ROM) and through "channel partner" arrangements, by which third-party database providers obtain access to our databases in consideration for a royalty (such as in connection with Internet-based job search and on-line dating sites, in the case of our Entersect(TM) product). On September 1, 2003, through our newly formed wholly-owned subsidiary Certifion Corporation, we acquired all of the assets of Project Entersect Corporation in consideration for $62,662. The acquisition was accounted for as a purchase and has been recorded and reflected with our operations from the time of purchase. That wholly-owned subsidiary operates under the trade name Entersect. Entersect provides a self-identification and validation service for Internet-based online job search and dating sites. On October 17, 2003, through a merger with our newly formed wholly-owned subsidiary, Dataphant, Inc., we acquired Voice Power Technologies, Inc., a Texas-based provider of data technology. In connection with this acquisition, Voice Power Technologies merged with and into Dataphant. As consideration for the merger, shareholders of Voice Power Technologies received an aggregate of 2,500,000 shares of LocatePLUS Class B Non-voting Common Stock. As a result of this acquisition, we obtained information concerning virtually all land-line phone numbers in the United States and approximately 25% of the United States-based cell phone numbers. This data has been integrated into our LocatePLUS(TM), Worldwide Information(TM) and Entersect(TM) product lines via licenses of Dataphant's intellectual property. On January 6, 2004 we formed Metrigenics, Inc., a wholly owned subsidiary. Metrigenics, Inc. was formed to develop a new technology that we can utilize in its existing product line. Through June 30, 2004 approximately $160,000 has been expensed relating to this new subsidiary and $21,000 remains in prepaid expenses. Although our products generally consist primarily of publicly available - and therefore non-proprietary - information, we integrate data in our products in a proprietary manner that allows users to access data rapidly and efficiently. In addition, our LocatePLUS(TM) product utilizes proprietary methodologies to link data from different sources associated with a given individual to a single background report, even though the sources of data with 16 respect to a given individual may be incomplete or contain only partial information. We have sought patent protection with respect to certain aspects of our marking and search technology (referred to as our "Bull's Eye" feature) and aspects of our CareerScan(TM) and TrustmeID(TM) products, both of which are marketed in connection with our Entersect(TM) product. Revenue associated with our Worldwide Information(TM) product is recognized upon delivery to the customer of a CD-ROM, provided that no significant obligations remain, evidence of the arrangement exists, the fee is fixed or determinable and collectibility is reasonably assured. Information in our Worldwide Information(TM) product is updated and released either quarterly or twice a year. In the case of our LocatePLUS(TM) product, we charge a fee to customers, that varies based upon the type and quantity of information requested. Revenue from our LocatePLUS(TM) product is recognized when requested information is downloaded, there is evidence of an arrangement, the fee is fixed or determinable, and collectability is reasonably assured. We charge our fees to customers' credit cards (approximately 60% of our current LocatePLUS(TM) customer base) or invoice customers for such fees on a monthly basis (approximately 40% of our current customer base). In the case of our Entersect(TM) products, we charge a fee to customers that varies based upon the type of certification requested. Revenue from our Entersect(TM) product is recognized when certifications are purchased online (and paid for via credit card) and collectibility is reasonably assured. In the case of Dataphant subsidiary, all sales have been made to our other wholly owned subsidiaries and, as a result have been eliminated on consolidation. Our costs of revenue consist primarily of our costs to obtain data and software maintenance expenses, which consist primarily of payroll and related expenses for information technology personnel, Internet access and hosting charges, and expenses relating to Web content and design. We obtain our data from multiple sources and we have entered into various license agreements with the related data providers. In 2003 and 2002, we recorded $1,738,849 and $665,366, respectively, in costs related to these agreements. In the six months ended June 30, 2004 and 2003, we recorded $1,673,932 and $793,914 respectively, in costs related to these agreements. In the event that any of our primary sources of data became unavailable to us, we believe that we would be able to integrate alternate sources of data without significant disruption to our business or operations, as there are currently a number of providers of such data. Our selling and marketing expenses consist of salaries and commissions paid to sales representatives for the products that we offer, as well as direct mail advertising campaigns and magazine and Internet-banner advertisements. General and administrative expenses consist of payroll and related expenses for non-sales, non-research and development and executive and administrative personnel, facilities expenses, insurance, professional services expenses, travel and other miscellaneous expenses. Interest income consists of earnings on our cash, cash equivalents and short term investments. Interest expense is primarily attributable to various notes issued through the year ended December 31, 2003. As of June 30, 2004, we had notes payable (current and long-term) totaling $4,997,400. We have incurred significant net losses since our inception. We incurred net losses of approximately $3.9 million in 2002, $4.4 million in 2003 and $3.9 million in the six months ended June 30, 2004. Our accumulated deficit as of June 30, 2004 was approximately $26.6 million. We raised approximately $2.4 million from sales of our equity securities during 2003 and $3.3 million from the sale of equity and debt instruments during the six months ended June 30, 2004. In June we entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Islands company, relating to the private placement of a convertible term note issued by the Company in the principal amount of $3,000,000 due June 2007. We believe our current sources of liquidity, funding, and customer demand are adequate to sustain our current level of operations 12 months from the date hereof. However, we anticipate that we will increase our sales and marketing, product development and general and administrative expenses during 2004 and for the foreseeable future. To achieve our business objectives, we must raise additional capital, which may consist of future debt or equity offerings. Any such financings may be dilutive to existing investors. During August 2003, we issued a put to one investor that provides us, subject to certain limitations, the right to sell, at our discretion, up to $5 million in shares of our Class A Voting Common Stock to the investor at a purchase price equal to 95% of the lowest closing bid price for our Class A Voting Common Stock during a ten-day pricing period. The number of shares that we may sell to that investor is limited by the trading volume of our Class A 17 Voting Common Stock and certain customary closing conditions. Pursuant to this put, through December 31, 2003, we sold 2,708,637 shares of Class A Voting Common Stock, resulting in $651,068 in net proceeds to us. Through June 30, 2004, we have issued 9,003,850 shares of Class A Voting Common Stock in connection with our exercise of the put, resulting in net proceeds of $3,340,731 to us. The value of shares of Class A Voting Common Stock available under the put as of June 30, 2004 was $1,659,269. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO SIX MONTHS ENDED JUNE 30, 2003 REVENUES. Revenues from our Worldwide InformationTM CD-ROM product increased to $298,894 for the six months ended June 30, 2004 from $232,068 for the six months ended June 30, 2003, an increase of 29%. This increase was the result of increased unit sales and the release of a new phone CD-ROM product. Revenues from our Internet-based product, LocatePLUS(TM), increased to $1,860,777 for the six months ended June 30, 2004, as compared to $1,143,496 for the six months ended June 30, 2003, an increase of 63%. This increase is attributable to an increase in customers and usage. The number of users of our Internet-based product increased to 15,851 at June 30, 2004 from 12,459 at June 30, 2003, an increase of 27%. Revenue from channel partners increased to $376,198 from $95,165 an increase of 295%. The increase is attributable to gaining greater acceptance by partners for streaming XML (a distribution method for our data). The number of channel partners has increased from four at June 30, 2003 to nine at June 30, 2004. Revenues from our wireless product, LocatePLUS AnyWhere(TM), were $3,128 during the six months ended June 30, 2004 as compared to $2,970 during the six months ended June 30, 2003, an increase of 5%. We also realized $47,200 of engineering services revenue during the six months ended June 30, 2004 as compared to $96,167 during the six months ended June 30, 2003, a decrease of 51%. COSTS OF REVENUES. For the six months ended June 30, 2004, costs of revenues for Worldwide InformationTM were $45,643 as compared to $40,856 for the six months ended June 30, 2003, an increase of 12%. The increase is attributable to a higher number of CD-ROM releases produced during 2004 than in 2003. For the six months ended June 30, 2004, our costs of revenues associated with LocatePLUS(TM) online and channel were $1,902,703 as compared to $1,088,778 for the six months ended June 30, 2003, an increase of 75%. The increase in cost is attributable to the cost of acquiring additional data sets. Costs of revenue associated with LocatePLUS(TM) are not expected to increase significantly over the next twelve months as we have acquired most of the data planned for that product. Costs of revenues for LocatePLUS Anywhere(TM) were $871 and we expect this cost to decrease in the future as we sell this product through our Earthlink partnership. It is anticipated that the partnership will generate a royalty stream to us with limited associated costs of revenues. SELLING AND MARKETING EXPENSES. Selling and marketing expenses for the six months ended June 30, 2004 were $594,999 as compared to $415,154 for the six months ended June 30, 2003, an increase of 43%. This increase is attributable to an increase in the headcount of our sales staff and an increase in our marketing efforts. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the six months ended June 30, 2004 were $3,432,506 as compared to $1,732,455 for the six months ended June 30, 2003, an increase of 98%. This increase is attributable primarily to an increase in costs associated with investor relations activities, employee related expenses, and amortization of costs associated with the acquisitions. Investor relation activities are typically discretionary expenses incurred as a result of increased communication with shareholders and may or may not continue into the future. INTEREST INCOME. Interest income decreased to $45,595 for the six months ended June 30, 2004, from $67,365 for the six months ended June 30, 2003. This decrease is attributable to a decrease in the outstanding principal balance of notes receivable from 2003. INTEREST EXPENSE. Interest expense increased to $428,330 for the six months ended June 30, 2004, from $251,795 for the six months ended June 30, 2003. This increase is primarily attributable to interest on notes payable issued in late 2003. OTHER INCOME. Other income decreased to $15,744 for the six months ended June 30, 2004, from $21,478 for the six months ended June 30, 2003. This decrease is attributable to lower income recorded for the payment of previously written off receivables. 18 YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002 REVENUES. Revenues from our Worldwide InformationTM CD-ROM product increased to $478,278 for the year ended December 31, 2003 from $345,003 for the year ended December 31, 2002, an increase of 39%. The increase was due to an increase in the number of customers for that product in 2003 relative to 2002. Revenues from our LocatePLUS(TM) and Entersect(TM) products increased to $2,543,581 for the year ended December 31, 2003, as compared to $1,471,188 for the year ended December 31, 2002, an increase of 73%. This increase is attributable to an increase in the number of customers for and per customer usage of our LocatePLUSTM product and the launch of certain new product offerings. The number of users of our LocatePLUS(TM) and Entersect(TM) products increased to 14,184 at December 31, 2003 from 10,966 at December 31, 2002, an increase of 29%. In 2003, we launched criminal records searches, corporate record searches, and our enhanced phone number search. In 2003, we began substantial delivery of our LocatePLUS(TM) and Entersect(TM) products through channel partnerships. Revenues from our channel partners increased to $263,834 for the year ended December 31, 2003 as compared to $32,284 for the year ended December 31, 2002 an increase of 717%. As part of our channel partner agreements, we occasionally provide engineering services. In 2003, we recognized $105,667 in engineering revenue as compared to $53,333 recognized in 2002, an increase of 98%. These services are not recurring and are dependent on our customers needs. In 2002, we launched our LocatePLUS Anywhere(TM) wireless product. We recognized revenues of $7,417 in 2003, as compared to $1,980 in 2002, an increase of 275%. We expect our online, wireless, and channel revenues to increase and our CD-ROM revenue to be stable during the next twelve months. COSTS OF REVENUES. For the year ended December 31, 2003, our costs of revenues for our Worldwide InformationTM products were $91,775 as compared to $90,397 for the year ended December 31, 2002, an increase of 2%. Our data costs for WorldWide InformationTM are generally fixed and do not increase as revenues increase. For the year ended December 31, 2003, our costs of revenues associated with our LocatePLUS(TM) and channel partner sales (including Entersect(TM)) were $2,606,875, as compared to $1,217,809 for the year ended December 31, 2002, an increase of 114%. This increase is primarily attributable to the acquisition of new data sets. Costs of revenues for our LocatePLUS(TM) and channel partner sales are expected to stabilize at approximately $3.5 million per annum, as that amount represents the current cost of the required data sets. As our revenues increase, costs of revenues are not expected to increase proportionately. Costs of engineering services were allocated based on time spent for engineering services. Costs of wireless revenues are primarily the cost of wireless connectivity and the amortized cost of devices sold to end users. SELLING AND MARKETING EXPENSES. Selling and marketing expenses for the year ended December 31, 2003 were $1,049,381, as compared to $1,001,529 for the year ended December 31, 2002, an increase of approximately 5%. This increase in expenses is attributable primarily to an increase in our sales force and commissions associated with increased sales volume. We expect selling and marketing expenses to increase over the next twelve months as we focus resources on increasing revenues. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the year ended December 31, 2003 were $3,804,200 as compared to $3,257,546 for the year ended December 31, 2002, a increase of 17%. This increase is attributable primarily to an increase in the costs associated with investor relations activities. We anticipate general and administrative expenses to increase over the next twelve months. INTEREST INCOME. Interest income increased to $137,253 for the year ended December 31, 2003, from $53,835 for the year ended December 31, 2002, an increase of 155%. This increase is attributable to interest earned on a certain $1,000,000 note issued to us in 2002, of which $838,508 of principal remained outstanding as of December 31, 2003. INTEREST EXPENSE. Interest expense increased to $686,315 for the year ended December 31, 2003, from $397,674 for the year ended December 31, 2002, an increase of 73%. This increase is attributable to notes payable issued in 2003. OTHER INCOME. Other income increased to $40,605 for the year ended December 31, 2003, from $21,122 for the year ended December 31, 2002, an increase of 92%. This increase is attributable to miscellaneous sales and to income recorded for the repayment of previously written off debt. 19 LIQUIDITY AND CAPITAL RESOURCES From our incorporation in 1996 through December 31, 2003, we raised approximately $19.9 million through a series of private and public placements of equity and convertible debt to fund marketing and sales efforts and develop our products and services. During 2003, our financing activities provided approximately $4.8 million of cash, principally through the sale of Units in our initial public offering and a private placement of Class B Non-voting Common Stock. As of June 30, 2004, our cash and investments totaled $3,268,207. During the six months ended June 30, 2004 and 2003, we used approximately $3.0 million and $1.7 million, respectively, in operating activities principally to fund our net losses. During 2001, we loaned $1.0 million and in 2002, we loaned an additional $1.0 million to Andover Secure Resources, Inc, an unaffiliated third party leasing company, due to the favorable terms of those loan. These loans are payable upon our demand and bear interest at 10% and 11% per annum, respectively. As of June 30, 2004, approximately $604,000 remains outstanding on these loans. In December 2002, we issued a one-year term note for $250,000 with ten-year, fully vested detachable warrants to an individual who, as a condition of his investment, required that he be appointed to the Board of Directors of the Company. The note bears interest at the rate of 10% per annum and is payable in a lump sum at maturity. The detachable warrants provide for the purchase of 250,000 shares of our Class B Non-Voting Common Stock with an exercise price of $0.22 per share. This note was repaid in January 2004. During 2003, we received $1.6 million, net of issuance costs, by issuing subordinated promissory notes bearing simple interest ranging from 10% to 12% per annum. In conjunction with the issuance of these notes, warrants to purchase 2,500,000 shares of Class B Non-Voting Common stock with a weighted average exercise price of $0.14 were also issued. We raised approximately $2.4 million of equity during 2003 and $3.3 million during the six months ended June 30, 2004. We believe that our current sources of cash are sufficient to maintain our current level of operations. However, to execute our current planned expansion of operations, additional financing would be necessary for such expansion. In August 2003, issued a put with an investor which that provided that the Company, subject to certain limitations, may sell up to $5 million in shares of Class A Voting Common Stock. Under this put, we sold 2,708,637 shares for a total $651,068 in net proceeds through December 31, 2003. The remaining balance available under the put at December 31, 2003 was $4,348,932. Through June 30, 2004, we have issued 9,003,850 shares of Class A Voting Common Stock in connection with our exercise of the put, resulting in net proceeds of $3,340,731. Management's plans include increasing sales, expanding infrastructure, and hiring additional staff. To accomplish this, we intend to identify and secure sources of additional capital. During June 2004, the company paid $500,000 to NFC Corporation, in the form of 4,000,000 restricted shares of the Company's Class A Voting Common Stock, for future investor relation services. These additional shares were valued at $0.13 per share, a discount to market for restricted shares based on the agreed upon contract value. On June 17, 2004 we entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Islands company, relating to the private placement of a convertible term note issued by the Company in the principal amount of $3,000,000 due June 17, 2007 (the "Note"), and a common stock purchase warrant (the "Warrant"). We also entered into related security documents and a Registration Rights Agreement. The Note is convertible into 7,500,000 shares of our Class A Voting Common Stock at a fixed conversion rate of $0.40 per share and the Warrant provides for the purchase of up to 1,320,000 shares of Class A Common Stock at a price of $0.45 each, subject to customary adjustments, until June 17, 2009. Therefore, an aggregate of 8,820,000 shares of Class A Common Stock are issuable upon conversion of the Note and exercise of the Warrant. COMMITMENTS AND CONTINGENCIES OPERATING LEASES 20 We lease office space and equipment under various operating lease agreements which terminate on various dates through 2008. Rent expense amounted to $579,419 and $494,466 during 2003 and 2002, respectively. As of June 30, 2004 future minimum payments under our non-cancelable operating leases total $1,225,226. CAPITAL LEASES We have entered into certain long-term equipment lease agreements that are classified as capital leases and expire in 2007. At June 30, 2004, future minimum lease payments under our non-cancelable capital leases total $879,641. LICENSE AGREEMENTS We have entered into various data acquisition agreements under which we are required to make minimum payments totaling $1,808,294 through 2006. The following represents the contractual obligation and commercial commitments as of December 31, 2003.

PAYMENTS DUE BY PERIOD LESS THAN 1-3 3-5 MORE THAN CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR YEARS YEARS 5 YEARS ---------- ---------- ---------- ---------- ---------- Long-Term Debt including current $2,157,328 $1,931,819 $ 225,509 $ -- $ -- Capital Leases 1,381,502 1,023,457 358,045 -- -- Operating Leases 609,032 522,027 87,005 -- -- License Agreements 2,750,992 2,051,427 699,565 -- -- ---------- ---------- ---------- ---------- ---------- Total $6,898,854 $5,528,730 $1,370,124 $ -- $ -- ========== ========== ========== ========== ==========

CRITICAL ACCOUNTING POLICIES We have identified the policies identified in the following paragraph as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the notes to the consolidated financial statements included elsewhere in this prospectus. Note that our preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. Our accounting policies that are the most important to the portrayal of our financial condition and results, and which require the highest degree of management judgment relate to revenue recognition and the provision for uncollectible accounts receivable. We estimate the likelihood of customer payment based principally on a customer's credit history and our general credit experience. To the extent our estimates differ materially from actual results, the timing and amount of revenues recognized or bad debt expense recorded may be materially misstated during a reporting period. CERTAIN RELATED PARTY TRANSACTIONS LOANS FROM DIRECTORS In December 2002, we issued a one-year term note for $250,000 with ten-year, fully-vested detachable warrants to Robert Kite. As a condition of his investment, Mr. Kite required that he be appointed to our Board of Directors. The note bears interest at the rate of 10% per annum and is payable in one lump sum at maturity. The detachable warrants provide for the purchase of 250,000 shares of our Class B Non-Voting Common Stock with an exercise price of $0.22 per share. This note was repaid January 2004. USE OF OUR ASSETS 21 Certain of our executives are allowed use of company cars for both business and personal purposes. These cars have been capitalized as assets of the Company, totaling $113,369 as of June 30, 2004. NOTES RECEIVABLE FROM RELATED PARTIES During 2000, we issued cash loans of $400,000 and received, in exchange, promissory notes from two of our officers, Messrs. Jon Latorella and Robert A. Goddard. Although the notes were due January 3, 2010, each of the notes' terms provided that, if, as of January 3, 2003, the officers were still employed by us, then the obligations and debt evidenced by the notes were to be canceled without further action, and we are to pay to the officers, no later than February 29, 2004, an amount in cash sufficient to fulfill the officers' tax liabilities attributable to the cancellation of the notes. As such, we expensed the principal of the notes on a monthly basis, and, in 2003 and 2002, recognized $9,722 and $133,000 of amortization expense respectively on notes receivable from related parties. Additionally, we accrued approximately $6,701 in 2003 and $71,480 in 2002 ($215,929 cumulative through December 31, 2003) relating to an estimate of Messrs. Latorella's and Goddard's tax liability to be reimbursed by us. As of January 3, 2003, both Mr. Latorella and Mr. Goddard were employed by us and, accordingly, the notes were cancelled as of that date. Mr. Goddard ceased employment with us on March 31, 2003. For more information on these matters, see the section titled "Certain Transactions", below. OFF-BALANCE-SHEET ARRANGEMENTS We have no off-balance-sheet arrangements currently in effect or in effect during the year ended December 31, 2003, including but not limited to any guarantee contracts that have the characteristics defined in paragraph 3 of FASB Interpretation No. 45 (November 2002), as amended; any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement; any obligation that could be accounted for as a derivative instrument; or any obligation arising out of a variable interest (as referenced in FASB Interpretation No. 46, as amended). RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In December 2002, the FASB issued SFAS 148, "Accounting for Stock-based Compensation and Disclosure - an amendment of FASB Statement No.123" (SAS 148). This statement amends SFAS 123, "Accounting for Stock-Based Compensation," to provide alternative transition methods for a voluntary change to fair value accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS 123 to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We have not adopted the fair value recognition principles of SFAS 123; therefore this Statement has had no effect upon our consolidated financial condition or results of operations. We have provided the additional disclosure required by SFAS 148. BUSINESS OVERVIEW LocatePLUS Holdings Corporation, through itself and its wholly-owned subsidiaries LocatePLUS Corporation, Worldwide Information, Inc. and Certifion Corporation (D/B/A Entersect) (collectively referred to as the "LocatePLUS Group") provider public information VIA our proprietary data integration solutions. Since 1996, we have sold a CD-ROM-based product, which we refer to as Worldwide Information(TM), which enables users to search certain motor vehicle records and driver's license information in multiple states. Since March 1, 2000, we have maintained a database that is accessible through the Internet, known as LocatePLUS(TM). Our LocatePLUS(TM) product contains searchable and cross-referenced public information on individuals throughout the United States, including individuals' names, addresses, dates of birth, Social Security numbers, prior residences, and, in certain circumstances, real estate holdings, recorded bankruptcies, liens, judgments, drivers' license information, and motor vehicle records. On September 1, 2003, our newly formed wholly-owned subsidiary, Certifion Corporation, acquired all of the assets of Project Entersect Corporation, a provider of data technology. Certifion provides on-line self-screening services for Internet-based jobs search resume and online dating services. In October 2003, the Company merged Voice Power Technology into its newly formed wholly owned subsidiary Dataphant, Inc. There were no assets acquired in this acquisition and the Company issued 2,500,000 shares of its Class B Non-Voting common stock to the stock holders of Voice Power Technology in consideration for a two year non-competition 22 agreement with these stockholders. The Company formed Metrigenics, Inc., a wholly owned subsidiary on January 6, 2004. Metrigenics, Inc. was formed to develop a new technology that the Company can utilize in its existing product line. Through June 30, 2004 approximately $160,000 has been expensed relating to this new subsidiary and $21,000 remains in prepaid expenses. The prepaid expenses are to fund the salary of the principal scientist (a related party to the CEO) through July 2004 and other expenses through an oral agreement with a foundation. All intercompany accounts and transactions are eliminated in consolidation. 23 INDUSTRY BACKGROUND We are a background information provider. Users of background information have historically included law enforcement, other government agencies, law firms, investigation companies, private investigators and insurance companies. Information is used by those entities for various activities ranging from legal discovery to employment screening to the detection of fraud and the prevention of crime and terrorism. Additional users, such as large businesses, have increasingly availed themselves of background information services in connection with their human resource functions and other business decisions. Non-traditional users, such as individuals using Internet job search and on-line dating service sites, have also begun to avail themselves of background information in response to concerns about identity theft. A considerable amount of background information about individuals in the United States is publicly available. Examples of such public data include: o names and addresses o property ownership o aliases o bankruptcies o nationwide court records o certain criminal records The sources of these types of public data, however, are often fragmented and geographically dispersed. In addition, the reliability of this information and the data provided by various sources may not be consistent. In this environment, users of public information are faced with the time-consuming, costly and difficult task of gathering data from numerous locations and sources, verifying the information acquired and organizing it into a useful format. While services and technologies have developed to enable remote access to certain information sources, there have historically been few comprehensive access points for information available about individuals. Traditional sources of information, including credit reporting services and other database services, make available only limited types of information for specific purposes, such as verifying credit worthiness. Such services may also be limited by applicable law to specified uses and users. Almost none of those sources is integrated in a manner that allows easy and rapid access to data. BUSINESS STRATEGY Our business plan is to provide an entire suite of information products and services for professionals in law enforcement agencies, human resources, law firms, insurance underwriting, fraud investigation, private equity funds, private investigation and financial institutions. We believe that we will be able to compete with competitive services based upon the pricing of our products and services and based upon certain technical advantages incorporated in our systems (such as our Bull's-EyeTM data integration methodologies and our ability to provide certain otherwise "unlisted" telephone information). OUR TARGET MARKET AND SCREENING OF USERS Historically our products were been marketed and sold to federal, state and local government agencies (including law enforcement agencies), private investigators, human resource professionals and the legal profession. Our products have been used in: o crime and terrorism investigation (E.G., in conjunction with federal and state investigations in the aftermath of the September 11th terrorist attacks and the subsequent anthrax incidents); o detection of fraud; o "skip tracking" (I.E., the location of debtors and individuals in violation of parole or bail restrictions); o background checks; o legal due diligence; and o risk management. In addition to these government and business uses of our products, our EntersectTM product is offered to the public in connection with self-certification for Internet job search and dating services. 24 Our LocatePLUS(TM) and Worldwide Information(TM) products are generally marketed and sold only to pre-screened business and government end users. Before obtaining access to our LocatePLUS(TM) database or our Worldwide Information(TM) product, we generally require commercial customers to provide background information about their business need for data and about themselves, such as business licenses, bar admission cards or private investigator licenses. Individuals involved in law enforcement must provide similar evidence of their authority. In an attempt to prevent the misuse of data in our LocatePLUS(TM) and Worldwide Information(TM) products, we have adopted a three-tier security schema for those products. ========== ====================== ============================================== LEVEL INDUSTRY USERS SAMPLE DATASETS AVAILABLE TO USERS ========== ====================== ============================================== I General Business Names, Addresses and Phone Numbers Past Residences, Neighbors and Affiliates Real Property ========== ====================== ============================================== Private Investigators Insurance Level I Data, PLUS: II Attorneys/Law Firms Liens and Judgments Government Drivers' Records Corporate Security Certain Motor Vehicle Records ========== ====================== ============================================== III Law Enforcement Level I and II Data, PLUS: Comprehensive Criminal Records Restricted Motor Vehicle Records Certain Credit Reporting Data ========== ====================== ============================================== LOCATEPLUS(TM) We launched our LocatePLUS(TM) Internet site in March 2000. Our LocatePLUS(TM) database contains searchable and cross-referenced public information on individuals throughout the United States. Information is presented in a dynamic, hyper-linked fashion, permitting users to rapidly identify and obtain personal information relating to individuals and their associated residences, possible acquaintances, and a variety of other types of data. Our LocatePLUS(TM) database consists of approximately five billion individual data entries. According to our estimates, we have data entries relating to approximately 205 million adult individuals in the United States (or approximately 98% of the adult population of the United States, based on the 2000 United States Census). As of June 30, 2004, there were approximately 15,850 pre-screened users of our LocatePLUS(TM) database. Datasets currently integrated in our LocatePLUS(TM) product include nationwide records relating to: o names and addresses o real estate records o aliases o prior residences o dates of birth o recorded bankruptcies o Social Security numbers o liens o driver's license information o motor vehicle records o residential address information o certain death records (including dates of residence) o phone numbers o certain criminal arrest, conviction and incarceration records o vessel registrations We intend to continue integration of datasets into our LocatePLUS(TM) product, including: o certain hunting and fishing o certain professional licenses licenses o certain fingerprint files o certain facial image files o Federal Aviation o certain gun licenses Administration records 25 We can currently give no assurance as to the timing of integration of such datasets, however, or whether these new datasets will be integrated with our LocatePLUS(TM) product at all. We believe that one of the significant advantages of our LocatePLUS(TM) product, in comparison with many products with which it competes, is the ability of LocatePLUS(TM) to "tie" data associated with a given individual to produce a single report through our Bull's-EyeTM technology. Our Bull's-EyeTM system uses a proprietary methodology to associate data in a manner that generally results in a matching of data entries across diverse data sources, allowing users to obtain a single, comprehensive data report about an individual, even when there is no single element that ties data entries together (such as a Social Security number). This comprehensive data report is itself linked to other data potentially relevant to a business or government agency researching an individual, such as names and addresses of possible acquaintances, relatives and neighbors of that individual. LOCATEPLUS ANYWHERE(TM) We also offer a version of our LocatePLUS(TM) product that is accessible through wireless personal digital assistants and e-mail capable pagers, which we refer to as LocatePLUS AnyWhere(TM). LocatePLUS AnyWhere(TM) was commercially launched in mid-December 2002. This product is being marketed primarily to law enforcement. It is sold on a subscription fee basis, permitting unlimited access to our LocatePLUS(TM) database for a flat monthly fee provided that that the user agrees to a fixed term commitment. ENTERSECT(TM) On September 1, 2003, our newly formed wholly-owned subsidiary, Certifion Corporation, acquired all of the assets of Project Entersect Corporation a provider of data technology. Certifion operates under the trade name of "Entersect," and provides self-screening for both resume and online dating services. WORLDWIDE INFORMATION(TM) Since 1996, we have produced CD-ROM products that enable users to quickly search motor vehicle records in multiple states through a dynamic search engine, known as Worldwide Information(TM). Our Worldwide Information(TM) product enables users to search certain motor vehicle records and drivers' license information in multiple states through a dynamic search engine. Unlike many competing products, our Worldwide Information(TM) product enables users to rapidly identify vehicles or drivers using complete or partial search criteria. We believe that this ability to search partial data is a valuable tool in circumstances in which incomplete information is available, as is often the case in criminal investigations. Unlike data provided by Internet-based services, searches on our CD-ROM product are confidential and unavailable to any person other than the user of our CD-ROM product. We believe that the confidential nature of this CD-ROM product makes it particularly attractive to law enforcement agencies, which must often conduct criminal investigations in strict secrecy. As of December 31, 2003, there were approximately 2,000 pre-screened purchasers of our Worldwide Information(TM) CD-ROM product. SOURCES OF OUR DATA Our operations depend upon information derived from a wide variety of automated and manual sources. External sources of data include public records information companies, governmental authorities and on-line search systems. We license or otherwise obtain our data from five primary sources, as well as over twenty other ancillary sources (including both private and government sources). In the event that any of our primary sources of data were no longer available to us, we believe that we would be able to integrate alternate sources of data without significant disruption to our business or operations, as we believe there are currently a number of equivalent providers of such data. REGULATORY RESTRICTIONS ON OUR BUSINESS Both federal and state law regulates the sale of data. Recently, consumer advocates and federal regulators have voiced concerns regarding public access to, or commercial use of, personal information. As a result, increased pressure has been placed upon federal and state legislators to regulate the dissemination or commercial use of personal information. 26 One such legislative enactment that has had an effect on our business was the Financial Services Modernization Act of 2000, also known as the "Gramm-Leach-Bliley Act". Among other things, this law restricts the collection, use, and transfer of certain data that includes "credit header" information, which had historically functioned as the backbone of our data resources. Implementation of this law's restrictions by the Federal Trade Commission significantly limited the availability of certain data for our database, but we have subsequently developed datasets that function independently of "credit header" information. Although we have not engaged counsel to review this matter or the conduct of our operations generally, we believe that our operations are currently unaffected by the Gramm-Leach-Bliley Act or any law specifically applicable to the dissemination of data concerning individuals. Any further restriction on our use of personal information, however, could limit the usefulness and have a material adverse affect on operations, our products, including our LocatePLUS(TM) product, and our operations. Federal and state law prohibits us from selling information about minors. Our products have been designed to prevent the dissemination of such data. DISTRIBUTION OF OUR PRODUCTS We distribute our content both directly (though the Internet in the case of our LocatePLUS(TM) product and through the mail in the case of our Worldwide Information(TM) CD-ROM) and through "channel partner" arrangements, by which third parties access our databases in consideration for a royalty (such as through online job search and dating sites, in the case of our Entersect(TM) product). We also, from time to time, provide certain consulting services to third party database providers on the integration and assimilation of public data. To date, our efforts to license data have resulted in seven channel partnerships. COMPETITION Current competitors for our LocatePLUS(TM) and Entersect(TM) products include Accurint, ChoicePoint, Confi-chek.com, and Lexis-Nexis. Many of the companies that currently compete with this product, as well as other companies with whom we may compete in the future, are national or international in scope and have greater resources than we do. Those resources could enable those companies to initiate price cuts or take other measures in an effort to gain market share in our target markets. Our Worldwide Information(TM) product primarily competes with the registries of motor vehicles of various states that sell their data to screened users. These state agencies generally provide data in "raw form" without the search capabilities that we provide in our Worldwide Information(TM) product. EMPLOYEES As of June 30, 2004, the LocatePLUS Group had 70 employees. We believe that our relations with our employees are good. FACILITIES LocatePLUS Holdings Corporation and LocatePLUS Corporation are presently headquartered in Beverly, Massachusetts, where we lease approximately 32,000 square feet. The lease on that facility expires on February 28, 2007, and our annual lease obligation is approximately $432,000. Worldwide Information, Inc., is presently located in Byfield, Massachusetts, where it leases approximately 2,700 square feet. The lease on the Byfield facility expired on May 1, 2004, and we are currently a tenant-at-will in this facility. Our annual lease payments on that facility in 2003 were approximately $25,000. We are currently operating on a month to month basis. Dataphant, Inc., is located in Austin, Texas, where it leases approximately 3,000 square feet pursuant to a month-to-month lease (which includes the use of office equipment), with current monthly rental obligations of $3,680. Certifion Corporation (which does business under the name "Entersect") is located in Santa Ana, California, where it leases approximately 700 square feet pursuant to a month-to-month lease, with current monthly rental obligations of $1,700. 27 Metrigenics, Inc., is located in Geneseo, New York. We also lease a storage facility in Georgetown, Massachusetts pursuant to a month-to-month lease, with current monthly rental obligations of $500. We believe that our facilities are sufficient for our projected needs. INTELLECTUAL PROPERTY Publicly available data concerning individuals is generally non-proprietary. As a result, our intellectual property consists largely of certain trade secrets and know-how associated with the integration of databases and our ability to link diverse datasets. We rely on a combination of confidentiality agreements, restrictions on access to our proprietary systems, and contractual provisions (such as in our user agreements) to protect our intellectual property. We have registered LOCATEPLUS.COM(R) as a trademark with the United States Patent and Trademark Office. We maintain LOCATEPLUS(TM), WORLDWIDE INFORMATION(TM), ENTERSECT(TM), CAREERSCAN(TM), and TRUSTMEID(TM) as unregistered trademarks relating to our products. We may, from time to time, claim certain other rights under trademark law, however, we currently have no other marks registered or pending with the United States Patent and Trademark Office or the equivalent agency of any other country. In 2003, we filed for patent protection covering certain aspects of two of our products. We have filed for patent protection covering certain aspects of our search product, Bull's-Eye(TM), that electronically matches database information with current public phone and utility information to identify current information. We also filed for patent protection covering certain aspects of our self-validation products Career Screen(TM) and TrustmeID(TM). LEGAL PROCEEDINGS We are not currently involved in any material legal proceedings, although claims may arise from time to time in the conduct of our operations. There can be no assurance at this time that any claims that may arise in connection with the conduct of our business will not materially adversely affect our business or operations, or divert our critical resources. * * * 28 EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth specific information regarding our executive officers and directors as of June 30, 2004. EXECUTIVE OFFICERS AND DIRECTORS AGE POSITIONS --------------------- --- --------- Jon R. Latorella 40 Chairman of the Board, President and Chief Executive Officer Sonia P. Bejjani 35 Director; President-Worldwide Information, Inc. James C. Fields 37 Vice President of Finance, Treasurer and Secretary, Acting Chief Financial Officer Mark H. Ettinger 39 Vice President of Sales Thomas Garlock(1) 47 Director John P. Houlihan (1) 58 Director Robert H. Kite(1) 49 Director Thomas E. Murphy(2) 45 Director Gerard Scalley(2) 48 Director (1) Member of our Compensation Committee. (2) Member of our Audit Committee. CURRENT DIRECTORS AND OFFICERS JON R. LATORELLA co-founded our business in 1991 and has been our Chief Executive Officer since we commenced our activities. Mr. Latorella is also the Chairman of our Board of Directors. Before founding our business, Mr. Latorella served as a consultant to various local and state law enforcement agencies. Mr. Latorella holds a Bachelor of Science/Bachelor of Arts from the University of Massachusetts, which he received in 1994. SONIA P. BEJJANI co-founded our business in 1991 and has been a member of our Board of Directors and employed by us in various capacities since we commenced our activities. For the five years ending August 1, 2001, Ms. Bejjani was our Vice President - Sales and Customer Service. Since August 1, 2001, Ms. Bejjani has been the President of Worldwide Information, Inc., our wholly-owned subsidiary. JAMES C. FIELDS was appointed our Vice President of Finance, Treasurer, Secretary and Acting Chief Financial Officer on March 31, 2003. Prior to that, Mr. Fields served as our Director of Finance since February 2001. Prior to joining us, Mr. Fields was the Controller and Vice President of operations at CO Space, a carrier neutral collocation company. Mr. Fields is a certified public accountant and holds a Bachelor of Arts in Accounting from the College of St. Scholastica, which he received in 1992, and a Masters of Business Administration from Babson College, which he received in 1999. MARK H. ETTINGER became our Vice President of Sales in April 2004. Prior to joining us, he was the Director of the Legal Translation Center since May 2003. Prior to joining the Legal Translation Center, he was the Vice President of National Practice Institute since August 1996, where his primary responsibilities included establishing and overseeing relationships with key law schools and state, county and metro bar associations. Mr. Ettinger holds a Bachelor of Arts from University of Minnesota, which he received in 1987, and a Masters of Business Administration from University of St. Thomas, which he received in 1992. THOMAS GARLOCK has provided organizational and merger and acquisition consulting services to technology companies in the computer hardware/software and wireless telecommunications industry since 1980. Mr. Garlock has been the principal in a variety of communications license-based ventures that have developed cellular telephone systems in 55 "metropolitan statistical areas" in the United States. He is the co-founder and Chairman of In Sync Interactive Corporation, the nation's largest owner of interactive video data service licenses issued by the Federal Communications Commission. In October 2001, In Sync filed for bankruptcy protection with respect to 29 of its 42 subsidiaries. Mr. Garlock 29 attended Kent State University, the University of California at Los Angeles, and the Otis Parsons School of Design. Mr. Garlock joined our Board of Directors in October 1996, and is currently a member of our Audit Committee. JOHN P. HOULIHAN has been President and owner of Zalkin, Inc., a worldwide exporter of used clothing with offices in Council Bluffs, Iowa and Brownsville, Texas, since 1979. Before that, Mr. Houlihan owned Goodrich Dairy, a chain of 47 retail stores, and Riekes Equipment, a material handling and forklift company. Mr. Houlihan holds a Bachelor of Arts from Creighton University, which he received in 1968, and a Juris Doctorate from Creighton University, which he received in 1971. Mr. Houlihan joined our Board of Directors in January 2001, and he is currently the Chairman of the Compensation Committee of our Board of Directors. ROBERT H. KITE has been President of KFC, Inc., the managing entity of KFC, LLLP, a private investment entity, since 1981. Mr. Kite has also served on the Board of National Energy, Inc., a publicly traded energy exploration and exploitation company, since 1987. National Energy, Inc. filed for Chapter 11 bankruptcy in 1999, and was subsequently reorganized. Mr. Kite is also on the Board of Directors of the FBI Citizens' Academy (Charter Academy) of Phoenix, Arizona, and Child Health U.S.A. of Scottsdale, Arizona. Mr. Kite holds a Bachelor of Science in Political Science and Psychology which he received from Southern Methodist University 1977. Mr. Kite joined our Board of Directors in December 2002, and is currently a member of the Compensation Committee of the Board of Directors. THOMAS E. MURPHY joined Jesup & Lamont Securities Corporation as a Senior Vice President in 2004. Prior to this, Mr. Murphy was employed by Oftring & Company, Inc., a registered broker-dealer located in Worcester, Massachusetts, since 1989, where he held the title of Senior Vice President. Mr. Murphy holds a Bachelors of the Arts in Investments from Babson College, which he received in 1981. Mr. Murphy joined our Board of Directors on March 28, 2003, and he is currently the Chairman of the Audit Committee of our Board of Directors. GERARD SCALLEY has been employed by the Woburn, Massachusetts Police Department for the past 22 years, where he currently holds the rank of Lieutenant. His current responsibilities include supervision of that department's detective bureau and its Drug Abuse Resistance Education (DARE) program. He has also worked as a crime prevention officer and as commander of the North Eastern Massachusetts Law Enforcement Council Regional Drug Task Force. Mr. Scalley has been affiliated with numerous law enforcement related organizations during his career, including the National Technical Investigator's Association, the Narcotic Enforcement Officer's Association, the National DARE Officer's Association and the Irish American Police Officer's Association. Mr. Scalley also lectures at the University of Massachusetts at Lowell on criminal justice matters. Mr. Scalley received a Bachelor of Arts in Criminal Justice from Salem State College in 1998, and a Master of Arts in Criminal Justice from the University of Massachusetts at Lowell in 2000. Mr. Scalley joined our Board of Directors in June 2002, and is currently a member of our Audit Committee. Each of the directors holds such his or her office until his or her successor is duly chosen and qualified, or until his or her earlier resignation or removal. The Company is not aware of any family relationships between any of the officers and any of the Company's directors. Each of the officers holds such office until his or her successor shall have been duly chosen and shall have been qualified, or until his earlier resignation or removal. We do not have any employment agreements with any of our employees. FORMER DIRECTORS AND OFFICERS Dr. Richard B. Yules, a former member of our Board of Directors, resigned from the Board on March 12, 2003. Mr. Robert A. Goddard, our former Chief Financial Officer, Treasurer, and Secretary, ceased employment with us on March 31, 2003. AUDIT COMMITTEE The Audit Committee of the Board of Directors is responsible for the appointment, compensation and oversight of our independent auditors, reviews the scope of the audit services provided by our independent accountants, and reviews our accounting practices and internal accounting controls. Currently, the members of the Audit Committee are Messrs. Murphy and Scalley. There is one vacancy on the Audit Committee of the Board of Directors. 30 Mr. Murphy serves as the Chairman of the Audit Committee. The Board has determined that Mr. Murphy is a financial expert for the purposes of the Securities Exchange Act of 1934, as amended. COMPENSATION COMMITTEE The Compensation Committee of the Board of Directors reviews and recommends to the Board of Directors the salaries, benefits and stock option grants of all employees, consultants, directors and other individuals compensated by us. The Compensation Committee also administers our equity compensation plan and other employee benefits plans that we may adopt from time to time. Currently, the members of the Compensation Committee are Messrs. Garlock, Houlihan and Kite. Mr. Houlihan serves as the Chairman of the Compensation Committee. CODE OF ETHICS The Company adopted a Code of Ethics at the meeting of the Board of Directors heldon May 19, 2004. EXECUTIVE COMPENSATION The following table sets forth, for 2003, 2002 and 2001, certain compensation paid by us, including salary, bonuses and certain other compensation, to our Chief Executive Officer and all other executive officers whose annual compensation for the years ended December 31, 2003, 2002 and 2001 exceeded $100,000 (the "Named Executive Officers"). SECURITIES NAME AND UNDERLYING ALL OTHER PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION ($) ($) (#) ($) JON R. LATORELLA 2003 58,209(1) - 9,350,000(2) 13,200(3) President and 2002 50,100(1) - - 13,200(3) Chief Executive Officer 2001 48,850(1) - - 13,200(3) JAMES C. FIELDS(4) 2003 112,901 - 1,250,000(5) - Acting Chief Financial 2002 104,160 - - - Officer, Treasurer and 2001 86,673 - 500,000 - Secretary ROBERT A. GODDARD(6) 2003 61,539 - - - Former Chief Financial 2002 123,658 - - 8,079(7) Officer, Treasurer and 2001 123,802 - - 8,079(7) Secretary (1) Mr. Latorella elected to reduce his annual salary to $50,100 in September 2000. On June 17, 2002, the Board of Directors voted to return Mr. Latorella's salary to his pre-reduction salary of $150,000 per annum. Notwithstanding the Board's vote, Mr. Latorella decided to forego the increase and, as a result, his salary was not modified in 2002. Mr. Latorella's salary was increased to $250,000 per annum in June 2004. (2) On December 18, 2003, Mr. Latorella was granted incentive stock options to purchase 4,250,000 and 5,000,000 Class A Voting Common Stock, and on November 3, 2003, 100,000 Class B Non-voting Common Stock, with exercise prices of $0.25, $1.00, and $0.20 per share, respectively. (3) Mr. Latorella and his family are allowed use of two company cars, the value of which is approximately $1,100 per month to Mr. Latorella. (4) On December 18, 2003, Mr. Fields commenced his employment with us in 2001. Mr. Fields became an executive officer on March 31, 2003. (5) On December 18, 2003, Mr. Fields was granted an incentive stock option to purchase 750,000 shares of 31 Class A Voting Common Stock, with an exercise price of $0.25 per share. (6) Mr. Goddard ceased employment with us on March 31, 2003. As part of a severance arrangement that we entered into with Mr. Goddard, an incentive stock option to purchase 1,000,000 shares of Class A Voting Common Stock owned by Mr. Goddard was cancelled and, in lieu of that option, Mr. Goddard was issued a fully vested non-qualified stock option to purchase 250,000 shares of Class A Voting Common Stock with an exercise price of $0.15 per share. (7) Mr. Goddard received a monthly automobile allowance of $523 and a fuel allowance as part of his compensation and severance. This benefit terminated on June 30, 2003. OPTION/SAR GRANTS IN LAST FISCAL YEAR

NUMBER OF SECURITIES PERCENT OF TOTAL UNDERLYING OPTIONS/SARS OPTIONS/SARS GRANTED TO EXERCISE OF GRANTED EMPLOYEES IN BASE PRICE EXPIRATION NAME (#) FISCAL YEAR ($/SH) DATE ---- --- ----------- ------ ---- JON R. LATORELLA 4,250,000(1) 38% $0.25 December 18, 2008 President and Chief Executive 5,000,000(1) 44% $1.00 December 18, 2008 Officer 100,000(2) 2% $0.20 November 3, 2008 JAMES C. FIELDS 500,000(1) 4% $0.15 March 31, 2013 Acting Chief Financial Officer 750,000(1) 6% $0.25 December 18, 2013

(1) Class A Voting Common Stock. (2) Class B Non-voting Common Stock. DIRECTORS' COMPENSATION On February 1, 2002, we adopted a Non-employee Director Stock Option Policy. Under the Non-employee Director Stock Option Policy, as originally adopted, we would make annual grants (beginning on the date of adoption of the policy or the first day that a director is elected to our Board of Directors, if later) to our non-employee directors of warrants to purchase 35,000 shares of our Class B Non-voting Common Stock as compensation for service on our Board of Directors (and any committees). Each of these warrants is immediately exercisable and will have an exercise price that is equal to the fair market value of our Class B Non-voting Common Stock as of the date of grant. On May 19, 2004, our Board of Directors modified the Non-employee Directors' Stock Option Policy (now named the Non-employee Directors' Stock Option and Compensation Policy) to provide an option to purchase 1,000,000 shares of our Class A Voting Common Stock as compensation for service on our Board of Directors (and any committees). No separate compensation is provided to directors for service on either of our two committees. Directors who are also employees of LocatePLUS Holdings Corporation or any of its subsidiaries (currently, Mr. Latorella and Ms. Bejjani) are not paid any compensation for their service as directors. We also reimburse our directors for out-of-pocket costs associated with their activities on the Board of Directors. Pursuant to the Non-employee Directors Stock Option Policy: o On February 1, 2002, Messrs. Garlock and Houlihan were each issued a warrant to purchase 35,000 shares of our Class B Non-voting Common Stock for $0.15 per share. o On August 27, 2002, Dr. Richard B. Yules, a former member of our Board of Directors, was issued a warrant to purchase 35,000 shares of our Class B Non-voting Common Stock for $0.22 per share. 32 o On August 27, 2002, Mr. Scalley was issued a warrant to purchase 35,000 shares of our Class B Non-voting Common Stock for $0.22 per share. o On March 28, 2003, Messrs. Garlock, Houlihan, and Kite were each issued a warrant to purchase 35,000 shares of our Class B Non-voting Common Stock for $0.15 per share. o On November 3, 2003, Messrs. Scalley, Murphy, Kite, Houlihan, and Garlock were each granted an option to purchase 100,000 shares of Class B Non-voting Common Stock with an exercise price of $0.20 per share. o On May 19, 2004, Messrs. Scalley, Murphy, Kite, Houlihan, and Garlock were each granted an option to purchase 1,000,000 shares of Class A Voting Common Stock with an exercise price of $1.50 per share. BENEFIT PLANS 1999 STOCK OPTION PLAN On November 16, 1999, our Board of Directors ratified and adopted an Incentive and Non-Qualified Stock Option Plan, which we refer to as the "1999 Stock Option Plan". The 1999 Stock Option Plan set aside 15,000,000 shares of our Class A Voting Common Stock (then referred to as our "Common Stock") for issuance pursuant to the exercise of incentive and non-qualified stock options to be awarded to our employees, officers and directors at the recommendation of the equity compensation plan's administrator and subject to the approval of our Board of Directors. We strongly believe in the concept of each employee having some form of equity participation as an incentive toward excellence in individual performance and our further success. In June 2000, our 1999 Stock Option Plan was amended and restated to provide greater flexibility to the equity compensation plan's administrator in the granting of various forms of equity compensation. As of December 31, 2003, 9,849,750 incentive stock options and 2,426,016 non-qualified stock options were outstanding under the 1999 Stock Option Plan. The weighted average exercise price of all options granted under the equity compensation plan was $0.21 per share as of December 31, 2003. As of December 31, 2003, options to purchase 1,419,450 shares of Class A Voting Common Stock had been exercised. The 1999 Stock Option Plan is administered by the Compensation Committee of the Board of Directors. 2003 STOCK PLAN On March 28, 2003, the Board of Directors adopted the 2003 Stock Plan, an equity compensation plan which will allow us to grant awards of incentive and non-qualified (also referred to as "non-statutory") stock options, rights to acquire stock subject to forfeiture (I.E., restricted stock), and shares of stock not subject to forfeiture (I.E., stock bonuses) to our employees and consultants in consideration for services rendered for us. By means of the 2003 Stock Plan, we seek to retain the services of eligible recipients and to provide incentives for eligible recipients to exert efforts for our success, with the goal of maximizing shareholder value. We anticipate that we will file a registration statement on Form S-8 with respect to the shares available for issuance under that plan within 30 days of this prospectus. A total of 25,000,000 shares of Class A Voting Common Stock, and 25,000,000 shares of Class B Non-voting Common Stock, are available under the 2003 Stock Plan. If there is a change of the number or kind of shares issuable under the 2003 Stock Plan as a result of declaration of stock dividend, stock split, combination, exchange, merger, consolidation, reclassification or any similar extraordinary event affecting either class of our Common Stock, an adjustment will be made in the maximum aggregate number of shares that will be subject to the 2003 Stock Plan, as well as in the number of shares subject to outstanding options and the exercise price of options granted under the 2003 Stock Plan. The Compensation Committee of the Board of Directors is authorized to determine the employees, officers, directors and consultants to whom awards will be granted and the number of shares subject to each award. The Compensation Committee also interprets the 2003 Stock Plan and the awards granted under that plan and is authorized to adopt, amend or rescind the rules and regulations and make all other determinations necessary or advisable for the administration of the 2003 Stock Plan. The Board may amend the 33 2003 Stock Plan at any time, although certain amendments would require stockholder approval, the approval of award recipients, or both. Among other things, the Compensation Committee of the Board of Directors has the discretion to determine the extent to which an option may be exercised in part and the extent to which any part may or may not be exercised prior to expiration of specified periods of time after the grant. However, no option will be exercisable to any extent after the expiration of ten years (five years in the case of an incentive stock option granted to a greater than 10% stockholder). The exercise price of incentive stock options granted under the 2003 Stock Plan must be at least equal to the fair market value of our Common Stock on the date of grant. The exercise price of incentive stock options granted to an option recipient who is a 10% or greater stockholder must equal at least 110% of the fair market value of the Common Stock on the date of grant. The exercise price of non-qualified stock options must be at least 85% of the fair market value of our Common Stock on the date of grant. As of June 30, 2004, 20,000,000 Class A and 5,700,000 Class B incentive stock options were outstanding under the 2003 Stock Option Plan. The weighted average exercise price of Class A and Class B options granted under the equity compensation plan were $0.91 and $0.20 per share respectively as of June 30, 2004. As of June 30, 2004, no options to purchase shares of Common Stock had been exercised under the 2003 Stock Option Plan. 30 SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table reflects equity compensation granted or issued by us as of July 31, 2004, to employees and non-employees (such as directors, consultants, advisors, vendors, customers, suppliers and lenders) in exchange for consideration in the form of goods or services.

NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE EXERCISE NUMBER OF SECURITIES ISSUED UPON EXERCISE OF PRICE OF OUTSTANDING REMAINING AVAILABLE FOR OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND FUTURE ISSUANCE UNDER EQUITY WARRANTS AND RIGHTS RIGHTS COMPENSATION PLANS(1) ------------------- ------ ------------------ EQUITY COMPENSATION PLANS APPROVED BY SECURITY HOLDERS: Class A Voting Common Stock 31,030,166 $0.67 6,021,784 ----------------------------------------------------------------------------------------------------------------------------------- Class B Non-voting Common Stock 5,700,000 0.20 19,300,000 EQUITY COMPENSATION PLANS NOT APPROVED BY SECURITY HOLDERS: Class A Voting Common Stock 4,625,989 0.33 N/A ----------------------------------------------------------------------------------------------------------------------------------- Class B Non-voting Common Stock 10,983,249 0.20 N/A TOTAL: Class A Voting Common Stock 35,656,155 0.63 N/A ----------------------------------------------------------------------------------------------------------------------------------- Class B Non-voting Common Stock 16,683,249 0.20 N/A

(1) Excludes securities reflected in column titled "Number of securities to be issued upon exercise of outstanding options, warrants and rights". 34 401(K) PLAN We sponsor a defined contribution plan under the provisions of Section 401(k) of the Internal Revenue Code, which covers substantially all of our employees. We may make discretionary matching contributions up to 1% of annual employee contributions. Employees are eligible to participate in the 401(k) Plan after one year of service. Our matching contributions vest ratably over a five-year period. We pay the administrative expenses of this plan. ADVISORY BOARD On December 2, 1999, our Board of Directors authorized the formation of an Advisory Board, consisting of up to eight members, to provide ongoing advice and consultation to the Board of Directors to enhance the development and operation of our LocatePLUS(TM) product. The Advisory Board members (none of whom will be employees or directors) are selected by the Board of Directors based on each candidate's experience, accomplishments and national recognition in the fields encompassed by our target markets. Compensation for members of our advisory board consists of expense reimbursement and a grant of a fully vested non-qualified stock option or immediately exercisable warrant. The Advisory Board meets informally from time to time with management. DALE C. JENKINS, JR. On December 2, 1999, we appointed Dale C. Jenkins, Jr., as the first member of our Advisory Board. In 1999, Mr. Jenkins was appointed to the position of Special Assistant for Law Enforcement and Public Safety to the Chancellor of Higher Education of the Commonwealth of Massachusetts. Mr. Jenkins was also appointed to the Advisory Board of the U.S. Commission on Civil Rights and the Massachusetts Governor's Crime Watch Committee and was a consultant to the U.S. Department of Justice. In addition, Mr. Jenkins directed the Lead Advanced Security Team for Presidents Ronald Reagan and George H. W. Bush and acted as Deputy Director of Inaugural Security for then President-Elect George H. W. Bush. On November 17, 1999, our Board of Directors granted a ten-year option to Mr. Jenkins to purchase 25,000 shares of our Class A Voting Common Stock with an exercise price of $0.20 per share as compensation for his services on the Advisory Board. JAMES A. CORRY On July 20, 2000, our Board of Directors appointed James A. Corry as the second member of our Advisory Board. Since July 2001, Mr. Corry has been the Chief Operating Officer of Abel Telecom, Inc., based in Scottsdale, Arizona. Prior to that, Mr. Corry was a criminal investigation and security expert for the United States Secret Service. During his more than twenty years with that agency, Mr. Corry worked on security issues globally, conducting criminal and fraud investigations and managing the security of political personnel, including President George H. W. Bush. On June 1, 2001, the Board of Directors issued to Mr. Corry a ten-year option to purchase 25,000 shares of our Class A Voting Common Stock with an exercise price of $0.20 per share as compensation for his services on the Advisory Board. WILLIAM H. SHAHEEN On October 1, 2001, our Board of Directors appointed William H. Shaheen to our Advisory Board. Mr. Shaheen is currently the Managing Partner of the law firm of Shaheen and Cohen, with offices in Concord and Dover, New Hampshire. Mr. Shaheen served as U.S. Attorney for the District of New Hampshire from 1976 to 1981. In 1981, he was appointed a New Hampshire District Court Judge in Durham, New Hampshire. Mr. Shaheen resigned his judgeship in 1997 upon the election of his wife as Governor of the State of New Hampshire. On October 12, 2001 in consideration for his services on the Advisory Board, Mr. Shaheen received a ten-year warrant to purchase 25,000 shares of our Class B Non-voting Common Stock, with an exercise price of $0.20. DAVID G. DUCHESNEAU On October 1, 2001, our Board of Directors also appointed David G. Duchesneau to our Advisory Board. From 1991 to the present, Mr. Duchesneau has been General Manager of Standa, Inc., a full service private investigative agency and consulting firm. From 1971 to 1991, Mr. Duchesneau was the Commander and Senior Officer of the Organized Crime Unit and Fugitive Apprehensive Unit of the New Hampshire State Police. On October 12, 2001 Mr. Duchesneau was issued a ten-year warrant to purchase 25,000 shares of our Class B Non-voting Common Stock, with an exercise price of $0.20 per share in consideration for his services on the Advisory Board. 35 CHARLES LYONS On November 20, 2001, our Board of Director appointed Charles Lyons to the Advisory Board. Mr. Lyons is the Superintendent Director of the Shawsheen Valley Technical School District located in Billerica, Massachusetts. He is also the Chairman of the Arlington, Massachusetts Board of Selectmen. On that date, our Board of Directors granted a ten-year warrant to Mr. Lyons to purchase 12,500 shares of our Class B Non-voting Common Stock with an exercise price of $0.20 per share as compensation for his services on the Advisory Board. ORGANIZATION WITHIN THE PAST FIVE YEARS We were incorporated in Massachusetts in 1996 as Worldwide Information, Inc. In July 1999, we reincorporated in Delaware to take advantage of certain favorable corporate excise tax rates relative to Massachusetts as well as Delaware's well-established corporate law. As part of that re-incorporation, we changed our name to LocatePLUS.com, Inc. On August 1, 2001, we changed our name from LocatePLUS.com, Inc. to LocatePLUS Holdings Corporation as part of a corporate restructuring. In conjunction with that corporate restructuring, we created two wholly-owned subsidiaries, LocatePLUS Corporation, a Delaware corporation, and Worldwide Information, Inc., a Delaware corporation. We capitalized LocatePLUS Corporation with all of our Internet-based LocatePLUS(TM) business, in consideration for all of its equity, 100 shares of common stock, par value $0.01. We capitalized Worldwide Information, Inc. with all of our CD-ROM-based Worldwide Information(TM) business, in consideration for all of its equity, 100 shares of common stock, par value $0.01. We created these subsidiaries for two primary reasons: o We wished to isolate any potential liabilities in one of our products in a manner that would reduce the impact of any such liabilities on our other product line. There are no claims pending relating to errors or omissions in either of our two product lines, nor does management currently anticipate any such claims. However, as disclosed above, claims associated with defects in our databases may arise from time to time. o We wished to administratively separate the operations associated with our LocatePLUS(TM) product from our Worldwide Information(TM) product. Operations associated with our Worldwide Information(TM) product have historically been conducted through our Byfield, Massachusetts office. Operations associated with our LocatePLUS(TM) product have been conducted through our Beverly, Massachusetts office. Although each of these products is marketed to similar users, the acquisition and integration of data for and the operation of these two products differs significantly. Subsequently, we acquired all of the securities of Entersect Corporation and Dataphant, Inc. and formed Metrigenics, Inc. We presently hold all of the equity of each of these five subsidiaries, and we account for each subsidiary on a consolidated basis. LocatePLUS Holdings Corporation provides certain administrative and executive functions on behalf of each of its subsidiaries, such as management of payroll and other accounts payable. No options, warrants or similar rights to acquire equity in any subsidiary currently exists, nor do we anticipate any such rights being created in the future. We have no present intention of selling or otherwise disposing of any subsidiary. * * * 36 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On June 17, 2002, the Board of Directors adopted our Interested Parties Transaction Policy, pursuant to which we will not enter into any agreement, arrangement or understanding with any director, officer, or 5% or greater stockholder of unless (I) the terms of such agreement, arrangement or understanding are consistent with the terms of equivalent agreements or arrangements that the we could obtain from third parties; and (II) the agreement, arrangement or understanding is fair to us. JON R. LATORELLA Mr. Latorella is our President and Chief Executive Officer and is Chairman of our Board of Directors. INCENTIVE LOAN On January 3, 2000, the Board of Directors approved, and we made, a term loan to Mr. Latorella for $275,000, which we refer to as Mr. Latorella's "Incentive Loan." This Incentive Loan was intended to provide a bonus to Mr. Latorella for services rendered in conjunction with the development and launch of our LocatePLUS(TM) product and to deter Mr. Latorella from terminating his employment with us. The loan was evidenced by a promissory note, pursuant to which interest on the loan is computed at an annual rate equal to the 90-day Treasury Bill Rate. Among other things, the promissory note provided that, if Mr. Latorella were still employed by us as of January 3, 2003, then the obligations and debt evidenced by the note would be immediately canceled, and we would be required to make a tax equalization payment to Mr. Latorella. As Mr. Latorella was employed by us on January 3, 2003, this loan has been forgiven in accordance with its terms, and we anticipate that, in accordance with the loan's terms, we will make a tax equalization payment to Mr. Latorella in 2004 in the amount of approximately $147,000. TEMPORARY SALARY WAIVER Mr. Latorella elected to reduce his annual salary to $50,000 in September 2000. On June 17, 2002, the Board of Directors voted to return Mr. Latorella's salary prospectively to its pre-reduction level of $150,000 per annum. However, Mr. Latorella decided to forego the increase and as such his salary was not restored to the pre-reduced level in 2002. Mr. Latorella's salary was increased to $250,000 per annum in June 2004. INCENTIVE STOCK OPTION Mr. Latorella was granted a fully vested incentive stock option to purchase 190,000 shares of Class A Voting Common Stock on November 16, 1999, with an exercise price of $0.22 per share in consideration for services rendered. This option expires on November 16, 2004. During 2003, Mr. Latorella was granted fully vested incentive stock options to purchase 4,250,000 and 5,000,000 shares of Class A Voting Common Stock and 100,000 shares of Class B Non-Voting Common Stock with exercise prices of $0.25, $1.00, and $0.20 per share, respectively. On May 19, 2004, Mr. Latorella was issued an option to purchase 2,500,000 shares of our Class A Voting Common Stock with an exercise price of $0.39 per share and an option to purchase 1,000,000 shares of our Class A Voting Common Stock with an exercise price of $1.50 per share and an option to purchase 5,000,000 shares of our Class A Voting Common Stock with an exercise price of $0.39 per share that vests upon the convergence of the Class A and Class B stock. USE OF COMPANY CARS Mr. Latorella and his family are allowed use of two company cars, the value of which is approximately $1,100 per month to Mr. Latorella. ROBERT A. GODDARD Mr. Goddard was formerly our Chief Financial Officer. Mr. Goddard ceased his employment with us on March 31, 2003. 37 INCENTIVE LOAN On January 3, 2000, the Board of Directors approved, and we made, a term loan to Mr. Goddard for $125,000, which we refer to as Mr. Goddard's "Incentive Loan." This Incentive Loan was intended to provide a bonus to Mr. Goddard for services rendered in conjunction with the development and launch of the LocatePLUS(TM) product and to deter Mr. Goddard from terminating his employment with us. As Mr. Goddard was employed by us on January 3, 2003, this loan has been forgiven in accordance with its terms, and we anticipate that, in accordance with the loan's terms, we will make a tax equalization payment in 2004 to Mr. Goddard in the amount of approximately $67,012. STOCK OPTION Mr. Goddard was issued an option to purchase 1,000,000 shares of Class A Voting Common Stock on November 16, 1999, with an exercise price of $0.20 per share in conjunction with our retention of him. This option was fully vested, and it expires on November 16, 2009. In connection with a severance agreement that we entered into with Mr. Goddard, that option has been cancelled, and we issued to him, in lieu of that option, a ten year non-qualified stock option to purchase 250,000 shares of our Class A Voting Common Stock with an exercise price of $0.15 per share. JAMES C. FIELDS Mr. Fields is our Acting Chief Financial Officer. STOCK OPTION On June 1, 2001, Mr. Fields was issued an incentive stock option to purchase 500,000 shares of our Class A Voting Common Stock with an exercise price of $0.20 per share. On March 31, 2003, was issued an incentive stock option to purchase 500,000 shares of our Class A Voting Common Stock with an exercise price of $0.15 per share. On December 18, 2003, Mr. Fields was issued incentive stock options to purchase 750,000 shares of our Class A Voting Common Stock with an exercise price of $0.25 per share. On May 19, 2004, Mr. Fields was issued an option to purchase 1,000,000 shares of our Class A Voting Common Stock with an exercise price of $0.39 per share. THOMAS GARLOCK Mr. Garlock is a member of our Board of Directors. EQUITY COMPENSATION FOR SERVICES RENDERED Mr. Garlock was issued options under our 1999 Stock Option Plan to purchase an aggregate of 1,034,720 shares of our Class A Voting Common Stock (with an average exercise price of $0.31), of which options to purchase 836,112 were granted in November 1999, options to purchase 38,067 were granted in June 2001, and options to purchase 160,541 were granted in 2002, in consideration for his strategic advisory and shareholder relations services. In consideration service as a member of our Board of Directors and for strategic advisory and shareholder relations services rendered for us, we also issued warrants to Mr. Garlock to purchase 386,670 shares of our Class B Non-voting Common Stock to Mr. Garlock, of which warrants to purchase 324,581 were granted in December 2001, and warrants to purchase 62,089 were granted in February 2002. These ten-year warrants have an exercise price of $0.15 per share. NON-EMPLOYEE DIRECTORS STOCK OPTION AND COMPENSATION POLICY On February 1, 2002, Mr. Garlock was issued an option to purchase 35,000 shares of our Class B Non-voting Common Stock with an exercise price of $0.15 per share pursuant to our Non-employee Directors Stock Option Policy. On March 28, 2003, Mr. Garlock was issued an additional option to purchase 35,000 shares of our Class B Non-voting Common Stock with an exercise price of $0.15 per share pursuant to our Non-employee Directors Stock Option Policy. On November 3, 2003, Mr. Garlock was issued an option to purchase 100,000 shares of our Class B Non-voting Common Stock with an exercise price of $0.20 per share and paid was $10,000 pursuant to our Non- 38 employee Directors Stock Option and Compensation Policy. On May 19, 2004, Mr. Garlock was issued an option to purchase 1,000,000 shares of our Class A Voting Common Stock with an exercise price of $1.50 per share. JOHN HOULIHAN Mr. Houlihan is a member of our Board of Directors. DEBT FINANCING OF LOCATEPLUS HOLDINGS CORPORATION On March 7, 2001, we borrowed $15,000 from Mr. Houlihan pursuant to a promissory note providing for an interest rate of 12% per annum. The interest on this loan was paid on April 26, 2001. On that date, the principal on this loan was exchanged for 150,000 shares of Class B Non-voting Common Stock. In conjunction with this note, we also issued to Mr. Houlihan a warrant to purchase 75,000 shares of our Class A Voting Common Stock with an exercise price of $0.20 per share. NON-EMPLOYEE DIRECTORS STOCK OPTION POLICY On February 1, 2002, Mr. Houlihan was issued an option to purchase 35,000 shares of our Class B Non-voting Common Stock for $0.15 per share pursuant to our Non-employee Directors Stock Option Policy. On March 28, 2003, Mr. Houlihan was issued an additional option to purchase 35,000 shares of our Class B Non-voting Common Stock for $0.15 per share pursuant to our Non-employee Directors Stock Option Policy. On November 3, 2003, Mr. Houlihan was issued an option to purchase 100,000 shares of our Class B Non-voting Common Stock with an exercise price of $0.20 per share and was paid $10,000 pursuant to our Non-employee Directors Stock Option and Compensation Policy. On May 19, 2004, Mr. Houlihan was issued an option to purchase 1,000,000 shares of our Class A Voting Common Stock with an exercise price of $1.50 per share. GERARD SCALLEY Mr. Scalley is a member of our Board of Directors. NON-EMPLOYEE DIRECTORS STOCK OPTION AND COMPENSATION POLICY On August 27, 2002, Mr. Scalley was issued a warrant to purchase 35,000 shares of our Class B Non-voting Common Stock for $0.22 per share pursuant to our Non-employee Directors Stock Option Policy. On November 3, 2003, Mr. Scalley was issued an option to purchase 100,000 shares of our Class B Non-voting Common Stock with an exercise price of $0.20 per share and was paid $10,000 pursuant to our Non-employee Directors Stock Option and Compensation Policy. On May 19, 2004, Mr. Scalley was issued an option to purchase 1,000,000 shares of our Class A Voting Common Stock with an exercise price of $1.50 per share. ROBERT KITE Mr. Kite is member of our Board of Directors. DEBT FINANCING OF LOCATEPLUS HOLDINGS CORPORATION On March 7, 2001, we borrowed $250,000 from Mr. Kite pursuant to a promissory note providing for an interest rate of 10% per annum payable monthly. This loan, plus accrued interest, was repaid in January 2004. In conjunction with the issuance of that note, we also issued to Mr. Kite a warrant to purchase shares of our Class B Non-voting Common Stock. This warrant currently permits Mr. Kite to purchase 250,000 shares of the Company's Class B Non-Voting Common Stock with an exercise price of $0.22 per share. NON-EMPLOYEE DIRECTORS STOCK OPTION AND COMPENSATION POLICY On March 31, 2003, Mr. Kite was issued a warrant to purchase 35,000 shares of our Class B Non-voting Common Stock for $0.15 per share pursuant to our Non-employee Directors Stock Option Policy. On November 3, 2003, Mr. Kite was issued an option to purchase 100,000 shares of our Class B Non-voting Common Stock for $0.20 per share and was paid $10,000 pursuant to our Non-employee Directors Stock Option and Compensation 39 Policy. On May 19, 2004, Mr. Kite was issued an option to purchase 1,000,000 shares of our Class A Voting Common Stock with an exercise price of $1.50 per share. THOMAS MURPHY Mr. Murphy is a member of our Board of Directors. BROKERAGE FEES PAID TO OFTRING & COMPANY, INC. Mr. Murphy was formerly the Vice President at Oftring & Company, Inc., the underwriter of our initial public offering. In connection with certain private offerings prior to our initial public offering, we issued to him a five year warrant to purchase 300,000 shares of our Class B Non-voting Common Stock with an exercise price of $0.30 per share. Oftring was paid $166,000 in fees by us during 2002 for services as a placement agent in connection with the initial public offering. NON-EMPLOYEE DIRECTORS STOCK OPTION AND COMPENSATION POLICY On March 28, 2003, Mr. Murphy was issued a warrant to purchase 35,000 shares of our Class B Non-voting Common Stock with an exercise price of $0.15 per share pursuant to our Non-employee Directors Stock Option Policy. On November 3, 2003, Mr. Murphy was issued an option to purchase 100,000 shares of our Class B Non-voting Common Stock with an exercise price of $0.20 per share and was paid $10,000 pursuant to our Non-employee Directors Stock Option and Compensation Policy. On May 19, 2004, Mr. Murphy was issued an option to purchase 1,000,000 shares of our Class A Voting Common Stock with an exercise price of $1.50 per share. DR. RICHARD B. YULES Dr. Yules is a former member of our Board of Directors. Dr. Yules resigned from our Board of Directors on March 12, 2003. NON-EMPLOYEE DIRECTORS STOCK OPTION POLICY On August 27, 2002, Dr. Yules was issued a warrant to purchase 35,000 shares of our Class B Non-voting Common Stock for $0.22 per share pursuant to our Non-employee Directors Stock Option Policy. GREGORY LINDAE Mr. Gregory Lindae was a member of our Board of Directors until he resigned on April 12, 2001. Mr. Lindae and his wholly-owned corporation, Castlerock Ventures, provided a variety of public relations and investment banking services for us, and worked with our sales force in connection with the launch of our LocatePLUS(TM) product in California. PAYMENTS FOR SERVICES RENDERED On January 31, 2002, we issued a ten-year warrant to Mr. Lindae to purchase 1,177,680 shares of our Class B Non-voting Common Stock with an exercise price of $0.15 per share in consideration for strategic advisory, investment banking and public relations services rendered by him. * * * 40 MARKET FOR COMMON EQUITY The following tables set forth the high and low closing sales prices per share (and per public warrant), for our Class A Voting Common Stock, Class B Non-voting Common Stock and public warrants as reported by OTC Bulletin Board since our initial listing of these securities on the Over the Counter Bulletin Board.

--------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Q4 2002(1) Q1 2003(2) Q2 2003(3) Q3 2003(4) Q4 2003(5) Q1 2004(6) Q1 2004(7) --------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW --------- -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ LPLHA.OB 0.50 0.15 0.40 0.14 0.42 0.12 0.38 0.28 0.34 0.24 0.63 0.29 0.58 0.37 --------- -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ LPLHB.OB 0.95 0.12 0.29 0.10 0.29 0.10 0.35 0.20 0.25 0.13 0.41 0.20 0.44 0.32 --------- -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ LPLHW.OB 0.05 0.02 0.10 0.00 0.12 0.00 0.13 0.03 0.09 0.05 0.26 0.07 0.19 0.09 --------- -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------

(1) The three months ended December 31, 2002. (2) The three months ended March 31, 2003. (3) The three months ended June 30, 2003. (4) The three months ended September 30, 2003. (5) The three months ended December 31, 2003. (6) The three months ended March 31, 2004. (7) The three months ended June 30, 2004. The quotations set forth above reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. PRINCIPAL STOCKHOLDERS As of July 31, 2004, we had 90,766,428 shares of Class A Voting Common Stock and 72,898,596 shares of Class B Non-voting Common Stock issued and outstanding. The table on the following page sets forth certain information known to us with respect to the beneficial ownership of our Class A Voting Common Stock and Class B Non-voting Common Stock on July 31, 2004, by: o each of our directors; o each of our executive officers; o each person known to us to beneficially own more than 5% of either class of our common stock; and o all of our directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, shares of common stock underlying options or warrants held by that person that are currently exercisable or will become exercisable within 60 days after the effective date of the offering are deemed outstanding, while such shares are not deemed outstanding for computing percentage ownership of any other person. For the purpose of this table, "Class A Stock" refers to our Class A Voting Common Stock and "Class B Stock" refers to our Class B Non-voting Common Stock. To our knowledge, except as indicated in the footnotes to this table, each stockholder identified in the table possesses sole voting and investment power with respect to all shares of common stock shown as beneficially owned by such stockholder. Each of our directors and executive officers can be contacted at 100 Cummings Center, Suite 235M, Beverly, Massachusetts 01915. 41 OWNERSHIP OF LOCATEPLUS HOLDINGS CORPORATION SECURITIES

CLASS A VOTING COMMON STOCK CLASS B NON-VOTING COMMON STOCK --------------------------- ------------------------------- NUMBER OF SHARES PERCENTAGE OF NUMBER OF SHARES PERCENTAGE OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED SHARES ---------------- ------------------ ------ ------------------ ------ DIRECTORS JON R. LATORELLA 40,440,500(1) 39.3% 125,000(2) * SONIA P. BEJJANI 4,500,000(3) 4.7% 125,380(4) * THOMAS GARLOCK 2,577,838(5) 2.8% 582,560(6) * JOHN P. HOULIHAN 1,510,000(7) *1.7 2,519,750(8) 3.4% ROBERT KITE 1,333,333(9) *1.5 743,083(10) * GERARD SCALLEY 1,000,000(11) *1.0 155,610(12) * THOMAS MURPHY 1,075,000(13) *1.2 457,500(14) * OFFICERS JAMES C. FIELDS 2,250,000(15) 2.4% -- * All directors and executive officers as a group (8 persons) 54,686,671(16) 47.1% 4,708,883(17) 6.3%

--------------------------- * Less than one percent of outstanding shares. (1) Includes 12,240,000 shares issuable upon exercise of a fully vested stock options, with a weighted average exercise price of $0.69 per share. (2) Includes 100,000 shares issuable upon exercise of a fully vested stock options, with an average exercise price of $0.20 per share. (3) Consists of fully vested options to purchase 4,500,000 shares with a weighted average exercise price of $0.52 per share. (4) Includes 100,000 shares issuable upon exercise of a fully vested stock options, with an average exercise price of $0.20 per share. (5) Includes (i) 543,118 shares held by the Kenai River Trust, over which Mr. Garlock has voting and dispositional authority; and (ii) includes 2,034,720 shares issuable upon exercise of fully vested stock options, with a weighted average exercise price of $0.84 per share. (6) Consists of (i) 386,670 shares issuable upon exercise of immediately exercisable warrants with an exercise price of $0.15 per share, and (ii) options to purchase 170,000 shares, with a weighted average exercise price of $0.18 per share pursuant to a warrant granted on under our Non-employee Directors Stock Option Policy. (7) Includes 75,000 shares held by the Houlihan Trust, over which Mr. Houlihan has voting and dispositional authority. Also includes 1,075,000 shares of issuable upon exercise of certain immediately exercisable warrants, with a weighted average exercise price of $1.41 per share. (8) Includes (i) 425,000 shares held by the Houlihan Trust, over which Mr. Houlihan has voting and dispositional authority; (ii) 66,667 shares held by Failte Investments, over which Mr. Houlihan has voting and dispositional authority; and (iii) warrants to purchase 170,000 shares, with a weighted average exercise price of $0.18 per share granted under our Non-employee Directors Stock Option Policy. (9) Includes 1,000,000 shares issuable upon exercise of a fully vested stock options, with an average exercise price of $1.50 per share. 42 (10) Includes fully vested and immediately exercisable warrants to purchase 250,000 shares, with an exercise price of $0.22 per share issued in December 2002 and options to purchase 135,000 shares with a weighted average exercise price of $0.19 per share pursuant to a warrant and option granted on under our Non-employee Directors Stock Option Policy. (11) Includes 1,000,000 shares issuable upon exercise of a fully vested stock options, with an average exercise price of $1.50 per share. (12) Includes 135,000 shares issuable upon the exercise of warrants, with a weighted average exercise price of $0.21 per share pursuant to a warrant and option granted on under our Non-employee Directors Stock Option Policy. (13) Includes 1,000,000 shares issuable upon exercise of a fully vested stock options, with an average exercise price of $1.50 per share. (14) Includes 135,000 shares issuable upon the exercise of warrants, with a weighted average exercise price of $0.21 per share pursuant to a warrant and option granted on under our Non-employee Directors Stock Option Policy. (15) Includes the vested portion of stock incentive stock options to purchase up to 2,250,000 shares with a weighted average exercise price of $0.33 per share. (16) Includes 25,508,053 shares issuable upon the exercise of convertible securities. (17) Includes 1,881,670 shares issuable upon the exercise of warrants. * * * 43 DESCRIPTION OF CAPITAL STOCK The authorized capital of LocatePLUS Holdings Corporation consists of: o 150,000,000 shares of Class A Voting Common Stock; and o 250,000,000 shares of Class B Non-voting Common Stock. The following description of our capital stock does not purport to be complete and is governed by and qualified by our Second Amended and Restated Certificate of Incorporation (which we refer to as our "Charter") and By-laws, which are included as exhibits to the registration statement of which this prospectus forms a part, and by the provisions of applicable Delaware law. COMMON STOCK As of July 31, 2004, there were 90,766,428 shares of Class A Voting Common Stock and 72,898,596 shares of Class B Non-Voting Common Stock issued and outstanding. The holders of both classes of our common stock are entitled to receive ratably dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available for that purpose. In the event of our liquidation, dissolution or winding up, the holders of both classes of our common stock are entitled to share ratably in all assets remaining after payment of liabilities. Neither class of our common stock has any preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to either class of our common stock. CLASS A VOTING COMMON STOCK Shares of Class A Voting Common Stock are entitled to one vote per share held of record on all matters submitted to a vote of stockholders. Holders of Class A Voting Common Stock do not have cumulative voting rights. CLASS B NON-VOTING COMMON STOCK Shares of Class B Non-voting Common Stock have no voting rights, but are otherwise identical to shares of Class A Voting Common Stock. CLASS A REDEEMABLE WARRANTS (ALSO KNOWN AS "PUBLIC WARRANTS") GENERAL Each Class A Redeemable Warrant entitles the holder to purchase one share of our Class A Voting Common Stock for $0.50 per share. The exercise price is subject to adjustment upon the occurrence of certain events as provided in the Class A Redeemable Warrant certificate and as summarized below. Subject to certain limitations which are described below, our Class A Redeemable Warrants may be exercised at any time until October 12, 2005, which is their expiration date. Those of our Class A Redeemable Warrants which have not previously been exercised will expire on October 12, 2005 at the close of business (5:00 p.m. Boston time). A Class A Redeemable Warrant holder will not be deemed to be a holder of the underlying shares of our Class A Voting Common Stock for any purpose until the Class A Redeemable Warrant has been properly exercised. EXERCISE A Class A Redeemable Warrant holder may exercise our Class A Redeemable Warrants only if an appropriate registration statement is then in effect with the Securities and Exchange Commission and if the shares of Class A Voting Common Stock underlying our Class A Redeemable Warrants are qualified or registered for sale under the securities laws of the state in which the holder resides (or an exemption from registration is available). We will use commercially reasonable efforts to maintain the registration of the Class A Voting Common Stock underlying the warrants until October 12, 2005, and to qualify for sale the shares of Class A Voting Common Stock in each U.S. jurisdiction in which our Class A Redeemable Warrant holders reside, although we can give no guarantee that such registration will be permitted under applicable state law. 44 Our Class A Redeemable Warrants may be exercised by delivering to our Transfer Agent the applicable Public Warrant certificate on or prior to the expiration date, with the form on the reverse side of the certificate executed as indicated, accompanied by payment of the full exercise price for the number of Class A Redeemable Warrants being exercised plus payment of any taxes required by the holder's jurisdiction. Fractional shares of Class A Voting Common Stock will not be issued upon exercise of our Class A Redeemable Warrants. ADJUSTMENTS OF EXERCISE PRICE If we effect any stock split or stock combination with respect to our Class A Voting Common Stock, the exercise price in effect immediately prior to such stock split or combination will be proportionately reduced or increased, as the case may be. Any adjustment of the exercise price will also result in an adjustment of the number of shares purchasable upon exercise of a Class A Redeemable Warrant. REDEMPTION We may repurchase the Class A Redeemable Warrants for $0.001 per warrant upon 30 days' notice to the holders of the Class A Redeemable Warrants in the event that the closing bid on the Over-the-Counter Bulletin Board for our Class A Voting Common Stock is at or above $1.25 per share for five consecutive days. RESTRICTED WARRANTS As of July 31, 2004, we had issued restricted warrants to purchase an aggregate of 4,625,989 shares of our Class A Voting Common Stock, for which the weighted average exercise price of these warrants is $0.33 per share. As of July 31, 2004, we also had issued restricted warrants to purchase an aggregate of 10,683,249 shares of our Class B Non-voting Common Stock, for which the weighted average exercise price of these warrants is $0.20 per share. These restricted warrants include "net issuance" provisions, permitting a holder to exchange a portion of the warrants for shares of the underlying security in lieu of payment of a cash exercise price. CONVERTIBLE NOTE In consideration for a $10,000 loan made to us on March 9, 2001, we issued a convertible promissory note. This convertible promissory note bears interest at the rate of 12% per annum. This note is convertible into 44,444 shares of our Class A Voting Common Stock at the election of the holder. The note originally matured on September 9, 2001. On July 22, 2002, the holder of the note agreed with us to convert the note into a demand note providing for quarterly payments of interest on the note until the principal of the note is repaid or converted. On June 17, 2004 we entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Islands company, relating to the private placement of a convertible term note issued by the Company in the principal amount of $3,000,000 due June 17, 2007 (the "Note"), and a common stock purchase warrant (the "Warrant"). We also entered into related security documents and a Registration Rights Agreement. The Note is convertible into 7,500,000 shares of our Class A Voting Common Stock at a fixed conversion rate of $0.40 per share and the Warrant provides for the purchase of up to 1,320,000 shares of Class A Common Stock at a price of $0.45 each, subject to customary adjustments, until June 17, 2009. Therefore, an aggregate of 8,820,000 shares of Class A Common Stock are issuable upon conversion of the Note and exercise of the Warrant. LIMITATIONS ON DIRECTORS' LIABILITIES AND INDEMNIFICATION Our Charter provides that members of our Board of Directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director except for liability: o for any breach of the director's duty of loyalty to the corporation or its stockholders; o for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; o under Section 174 of the General Corporation Law of the State of Delaware (relating to distributions by insolvent corporations); or o for any transaction from which the director derived an improper personal benefit. 45 Our Charter also provides that if the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of members of our Board of Directors will be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. Our Charter and By-laws also provide that we may indemnify our directors and officers to the fullest extent permitted by Delaware law. A right of indemnification shall continue as to a person who has ceased to be a director or officer and will inure to the benefit of the heirs and personal representatives of such a person. The indemnification provided by our Charter and By-laws will not be deemed exclusive of any other rights that may be provided now or in the future under any provision currently in effect or hereafter adopted by our Charter, By-laws, by any agreement, by vote of our stockholders, by resolution of our directors, by provision of law or otherwise. We have also secured directors' and officers' liability insurance on behalf of our directors and officers. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons in accordance with the provisions contained in our Charter and By-laws, Delaware law or otherwise, we have been advised that, in the opinion of the Securities and Exchange Commission, this indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit, or proceeding) is asserted by such director, officer or controlling person, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and we will follow the court's determination. SHARES ELIGIBLE FOR FUTURE SALE The following table outlines our capital stock as of July 31, 2004: Shares of Class A Voting Common Stock outstanding................................ ...........90,766,428(1) Shares of Class B Non-voting Common Stock outstanding............................................72,898,596(2) Total shares of both classes of Common Stock outstanding...........................................163,655,024(1)(2) -------------- (1) Assuming no exercise or conversion of: o warrants to purchase 16,624,989 shares of Class A Voting Common Stock outstanding as of July 31, 2004; o options to purchase up to 12,048,700 shares of Class A Voting Common Stock pursuant to our 1999 Incentive and Non-qualified Stock Option Plan; o a put option which permits us to sell up to $1,575,288 in shares of Class A Voting Common Stock as of July 31, 2004; o options to purchase up to 25,000,000 shares of Class A Voting Common Stock pursuant to our 2003 Stock Plan; o debt convertible into 44,444 shares of Class A Voting Common Stock at the election of one debtholder; or o debt convertible into 7,500,000 shares of Class A Voting Common Stock at the election of one debt holder. (2) Assuming no exercise or conversion of: o warrants and options to purchase up to 10,683,249 shares of Class B Non-voting Common Stock outstanding as of July 31, 2004; or o options to purchase up to 25,000,000 shares of Class B Non-Voting Common Stock pursuant to our 2003 Stock Plan. 46 As of July 31, 2004, our affiliates held 29,178,618 shares of our Class A Voting Common Stock and 2,827,213 shares of our Class B Non-voting Common Stock. In general, under Rule 144, as currently in effect, after the date of this prospectus, a person (or persons whose shares are aggregated) who has beneficially owned shares of our common stock for at least one year, including any person who is deemed to be our affiliate, will be entitled to sell, within any three-month period, a number of shares that does not exceed the greater of: o 1% of the number of shares of such class of common stock then outstanding, which will equal approximately 907,664 shares (in the case of Class A Voting Common Stock) and 728,985 shares (in the case of our Class B Non-voting Common Stock); or o the average weekly trading volume of our Common Stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. Sales under Rule 144 are also governed by other requirements regarding the manner of sale, notice filing and the availability of current public information about us. Under Rule 144(k), however, a person who is not, and for the three months prior to the sale of such shares has not been, an affiliate of the company will be free to sell "restricted securities" (E.G., shares issued in a private placement) which have been held for at least two years without regard to the limitations described above. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our securities is Transfer Online, Inc. Transfer Online's address is 227 SW Pine Street, Suite 300, Portland, Oregon 97204. LEGAL MATTERS The validity of the securities offered by this prospectus will be passed upon for us by Kirkpatrick & Lockhart LLP. EXPERTS The financial statements as of December 31, 2002 and 2003 and for each of the years in the period ended December 31, 2002 and 2003 included in this prospectus have been so included in reliance on the report (which contains an explanatory paragraph relating to our ability to continue as a going concern as described in Note 1 to the financial statements) of Carlin, Charron, & Rosen, LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. ADDITIONAL INFORMATION We filed with the Securities and Exchange Commission a registration statement on Form SB-2 under the Securities Act of 1933 for the shares of Common Stock in the offering, of which this prospectus is a part. This prospectus does not contain all of the information in the registration statement and the exhibits and schedule that were filed with the registration statement. For further information with respect to us and our securities, we refer you to the registration statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement. A copy of the registration statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the Public Reference Room maintained by the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part of the registration statement may be obtained from the Securities and Exchange Commission upon payment of the prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. 47 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 SEC. The address of the site is WWW.SEC.GOV. * * * 48 LOCATEPLUS HOLDINGS CORPORATION INDEX TO FINANCIAL STATEMENTS Page ---- Report of Independent Accountants F-1 Consolidated Balance Sheet as of December 31, 2003 and June 30, 2004 (unaudited) F-2 Consolidated Statements of Operations for the years ended December 31, 2002 and 2003, and for the six months ended June 30, 2004 and 2003 (unaudited) F-3 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2002 and 2003 F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2002 and 2003, and for the six months ended June 30, 2004 and 2003 (unaudited) F-5 Notes to Consolidated Financial Statements F-6 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of LocatePLUS Holdings Corporation: Beverly, Massachusetts We have audited the accompanying consolidated balance sheet of LocatePLUS Holdings Corporation as of December 31, 2003, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of LocatePLUS Holdings Corporation as of December 31, 2003, and the results of its consolidated operations and its consolidated cash flows for each of the two years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in the financial statements, the Company has an accumulated deficit at December 31, 2003 and has suffered substantial net losses in each of the last two years, which raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are disclosed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. CARLIN, CHARRON & ROSEN LLP Worcester, Massachusetts The accompanying financial statements as of June 30, 2004 and for the six months ended June 30, 2004, and 2003 have not been audited as disclosed in Note 1. March 18, 2004 F-1 LOCATEPLUS HOLDINGS CORPORATION CONSOLIDATED BALANCE SHEET

MARCH 31, 2004 DECEMBER 31, 2003 -------------- ----------------- ASSETS Current assets: Cash and cash equivalents $ 3,268,207 $ 1,522,922 Accounts receivable, trade - net 779,597 568,811 Prepaid expenses and other current assets 497,460 972,256 Related party notes receivable 17,500 37,500 Notes receivable 689,539 901,728 ------------ ------------ Total current assets 5,252,303 4,003,217 Property and equipment, net 2,746,192 2,475,080 Other assets 805,679 735,869 ------------ ------------ Total assets $ 8,804,174 $ 7,214,166 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 1,343,866 $ 1,671,819 Accounts payable 1,183,982 1,222,801 Accrued expenses 373,542 458,452 Deferred revenue 79,329 100,347 Current portion of capital lease obligation 688,718 934,594 Note payable - related party -- 250,000 Convertible notes payable 10,000 10,000 ------------ ------------ Total current liabilities 3,679,437 4,648,013 Capital lease obligation, net of current portion 111,896 336,158 Notes payable 3,643,536 225,509 ------------ ------------ Total liabilities 7,434,869 5,209,680 ------------ ------------ Commitments and contingencies -- -- Stockholders' equity: Class A common stock, $0.01 par value; 150,000,000 shares authorized; 76,076,691 shares issued and outstanding at December 31, 2003 904,586 760,767 Class B common stock, $0.01 par value, 250,000,000 shares authorized; 72,898,596 shares issued and outstanding at December 31, 2003 728,986 728,986 Additional paid-in capital 24,610,062 20,967,472 Warrants 2,237,448 2,237,448 Common stock subscriptions receivable (500,000) -- Accumulated deficit (26,611,777) (22,690,187) ------------ ------------ Total stockholders' equity 1,369,305 2,004,486 ------------ ------------ Total liabilities and stockholders' equity $ 8,804,174 $ 7,214,166 ============ ============

See independent auditors' report and notes to consolidated financial statements. F-2 LOCATEPLUS HOLDINGS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED JUNE 30, DECEMBER 31, -------------------------------- -------------------------------- 2004 2003 2003 2002 ------------- ------------- ------------- ------------- (UNAUDITED) Revenues Information sales - CD Rom $ 298,894 $ 232,068 $ 478,278 $ 345,003 Information sales - online 1,860,777 1,143,496 2,543,581 1,471,188 Information sales - channel 376,198 95,165 263,834 32,284 Information sales - wireless 3,128 2,970 7,417 1,980 Engineering services 47,200 96,167 105,667 53,333 ------------- ------------- ------------- ------------- Total revenues 2,586,197 1,569,866 3,398,777 1,903,788 ------------- ------------- ------------- ------------- Costs and expenses: Costs of revenues CD Rom 45,643 40,856 91,775 90,397 Online and channel 1,902,073 1,088,778 2,606,875 1,217,809 Wireless -- 23,339 2,749 1,100 Engineering 871 1,375 26,025 9,297 Selling and marketing 594,999 415,154 1,049,381 1,001,529 General and administrative 3,432,506 1,732,455 3,804,200 3,257,546 Research & Development 164,074 -- -- -- ------------- ------------- ------------- ------------- Total operating expenses 6,140,796 3,301,957 7,581,005 5,577,678 ------------- ------------- ------------- ------------- Operating loss (3,554,599) (1,732,091) (4,182,228) (3,673,890) Other income (expense): Interest income 45,595 67,365 137,253 53,835 Interest expense (428,330) (251,795) (686,315) (397,674) Other income 15,744 21,478 40,605 21,122 Write-off accrued license fees -- 283,500 283,500 -- ------------- ------------- ------------- ------------- Net loss $ (3,921,590) $ (1,611,543) $ (4,407,185) $ (3,996,607) ============= ============= ============= ============= Basic and diluted net loss per share $ (0.02) $ (0.01) $ (0.03) $ (0.04) Shares used in computing basic and diluted net loss per share 157,150,404 124,617,401 130,299,353 111,798,301

See independent auditors' report and notes to consolidated financial statements. F-3 LOCATEPLUS HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

CLASS A CLASS B ADDITIONAL COMMON STOCK COMMON STOCK PAID-IN SHARES AMOUNT SHARES AMOUNT CAPITAL ---------- ------------ ---------- ------------ ------------ Balance at December 31, 2001 53,108,580 $ 531,086 48,527,054 $ 485,270 $ 14,213,637 Issuance of common stock at $0.15 per share, net of issuance costs of $28,478 8,113,672 81,137 1,107,436 Issuance of warrants to purchase common stock in exchange for services Payment of stock subscription receivable Issuance of Units at $0.30 per unit net of $590,662 issuance cost 12,000,000 120,000 1,929,338 Exchange of convertible notes payable plus accrued interest at $0.22 per share 1,681,712 16,817 386,794 Exercise of detachable warrants 60,000 600 8,040 Beneficial conversion feature on convertible debt 104,503 Issuance of detachable warrants to purchase common stock in conjunction with debt and lease financing Net loss for the year ended December 31, 2002 ---------- ------------ ---------- ------------ ------------ Balance at December 31, 2002 54,850,292 $ 548,503 68,640,726 $ 686,407 $ 17,749,748 Payment of stock subscription receivable Issuance of detachable warrants to purchase common stock in conjunction with debt and lease financing Issuance of common stock in exchange for services 3,547,519 35,475 1,262,500 12,625 551,900 Issuance of units at $0.16 per unit 2,477,250 24,773 257,695 Issuance of common stock in exchange for services 125,000 1,250 12,500 Issuance of detachable warrants to purchase common stock in exchange for service Issuance of options to purchase common stock as part of severance agreement 17,870 Exercise of options @ $0.20 1,414,450 14,145 268,746 Net Issuance options exercised 2,170,909 21,709 (21,709) Issuance of units at $0.16 per unit 370,370 3,704 55,227 Issuance of shares throughout the year 8,907,634 89,076 1,189,013 Issuance of shares in accordance with put option 2,708,637 27,086 623,982 Issuance of common stock for investment in subsidiary 2,500,000 25,000 262,500 Net loss for the year ended December 31, 2003 ---------- ------------ ---------- ------------ ------------ Balance at December 31, 2003 76,076,691 $ 760,767 72,898,596 $ 728,986 $ 20,967,472 ========== ============ ========== ============ ============ COMMON STOCK TOTAL SUBSCRIPTIONS ACCUMULATED STOCKHOLDERS' WARRANTS RECEIVABLE DEFICIT EQUITY ------------ ------------ ------------ ------------ Balance at December 31, 2001 $ 547,994 $ (4,500) (14,286,395) $ 1,487,092 Issuance of common stock at $0.15 per share, net of issuance costs of $28,478 1,188,573 Issuance of warrants to purchase common stock in exchange for services 236,177 236,177 Payment of stock subscription receivable 4,500 4,500 Issuance of Units at $0.30 per unit net of $590,662 issuance cost 960,000 (174,908) 2,834,430 Exchange of convertible notes payable plus accrued interest at $0.22 per share 403,611 Exercise of detachable warrants 8,640 Beneficial conversion feature on convertible debt 104,503 Issuance of detachable warrants to purchase common stock in conjunction with debt and lease financing 80,662 80,662 Net loss for the year ended December 31, 2002 (3,996,607) (3,996,607) ------------ ------------ ------------ ------------ Balance at December 31, 2002 $ 1,824,833 $ (174,908) $(18,283,002) $ 2,351,581 Payment of stock subscription receivable 174,908 174,908 Issuance of detachable warrants to purchase common stock in conjunction with debt and lease financing 208,481 208,481 Issuance of common stock in exchange for services 600,000 Issuance of units at $0.16 per unit 113,892 396,360 Issuance of common stock in exchange for services 13,750 Issuance of detachable warrants to purchase common stock in exchange for service 49,173 49,173 Issuance of options to purchase common stock as part of severance agreement 17,870 Exercise of options @ $0.20 282,891 Net Issuance options exercised -- Issuance of units at $0.16 per unit 41,069 100,000 Issuance of shares throughout the year -- 1,278,089 Issuance of shares in accordance with put option -- 651,068 Issuance of common stock for investment in subsidiary 287,500 Net loss for the year ended December 31, 2003 (4,407,185) (4,407,185) ------------ ------------ ------------ ------------ Balance at December 31, 2003 $ 2,237,448 $ -- $(22,690,187) $ 2,004,486 ============ ============ ============ ============

See independent auditors' report and notes to consolidated financial statements. F-4 LOCATEPLUS HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED FOR THE YEARS ENDED MARCH 31, DECEMBER 31, ---------------------------- ---------------------------- 2004 2003 2003 2002 ------------ ------------ ------------ ------------ (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($3,921,590) ($1,611,543) ($ 4,407,185) ($ 3,996,607) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization of property and equipment 443,393 268,798 571,527 475,542 Provision for doubtful accounts 87,182 38,386 150,603 32,180 Interest expense related to warrants issued with debt 69,224 42,244 327,420 4,020 Interest expense related to beneficial conversion feature -- -- -- 104,503 Interest expense recorded on mandatorially convertible debt -- -- -- 40,773 Amortization of notes receivable from related parties -- 9,722 9,722 133,334 Amortization of intangible assets 95,790 -- 28,512 -- W rite down of accrued license fees -- 283,500 283,500 -- Expense recorded for fair value of stock, options, and warrants issued for services -- 47,861 261,309 238,603 Changes in assets and liabilities: Accounts receivable (297,968) (206,676) (449,848) (148,156) Prepaid expenses and other assets (474,796) (212,753) (5,006) (154,432) Accounts payable (38,819) (296,954) (113,772) 50,488 Accrued expenses (84,910) 99,287 (292,170) 115,678 Deferred revenue (21,018) (56,620) 24,510 101,550 Security Deposits 142,550 5,611 (24,112) (145,545) ------------ ------------ ------------ ------------ Net cash used in operating activities (3,051,370) (1,787,711) (3,634,990) (3,148,069) ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Principal repayment of purchased note receivable 235,000 281,492 539,767 1,018,525 Purchase of note receivable (22,812) (135,449) (210,021) (1,250,000) Purchases of property and equipment (519,024) (15,005) (74,568) (150,636) Proceeds from sale of property and equipment 1,500 -- ------------ ------------ ------------ ------------ Net cash provided by investing activities (286,837) 131,038 256,678 (382,111) ------------ ------------ ------------ ------------ Cash flows from financing activities: Repayment of debt (494,564) (48,126) (561,790) (600,000) Proceeds from issuance of debt 3,250,000 1,416,000 1,816,000 1,382,900 Financing fees on issuance of debt (297,000) -- -- -- Payments of obligations under capital lease (643,353) (315,041) (737,504) (169,514) Proceeds from issuance of common stock and collection of stock subscriptions receivable, net of issuance costs 3,268,408 628,608 2,723,315 -- Deposit for Units -- -- -- 3,662,143 ------------ ------------ ------------ ------------- Net cash provided by financing activities 5,083,491 1,681,441 3,240,021 4,275,529 ------------ ------------ ------------ ------------- Net (decrease) increase in cash and cash equivalents 1,745,285 24,768 (138,291) 745,349 Cash and cash equivalents, beginning of period 1,522,922 1,661,213 1,661,213 915,864 ------------ ------------ ------------ ------------- Cash and cash equivalents, end of period $ 3,268,207 $ 1,685,981 $ 1,522,922 $ 1,661,213 ============ ============ ============ ============= Supplemental disclosures of cash flows information: Cash paid for interest $ 378,894 $ 144,215 Supplemental disclosure of non-cash investing and financing activities: Acquisition of property and equipment under capital leases $ 1,658,416 $ 211,436 Exchange of convertible debt for common stock -- $ 312,000 Relative fair value of detachable warrants issued in conjunction with convertible debt $ 327,420 $ 4,020 Value ascribed to beneficial conversion features on convertible debt -- $ 104,503 Issuance of common stock for subscription receivable -- $ 174,908 Fair value of warrants issued in conjunction with services $ 261,308 $ 241,103

See independent auditors' report and notes to consolidated financial statements. F-5 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements LOCATEPLUS HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION LocatePLUS Holdings Corporation (the "Company") was initially incorporated in Massachusetts in 1996 as Worldwide Information, Inc. In July 1999, the Company reincorporated in Delaware and changed its name to LocatePLUS.com, Inc. On August 1, 2001, the Company changed its name from LocatePLUS.com, Inc. to LocatePLUS Holdings Corporation as part of a corporate restructuring. Also, as part of the restructuring, the Company created two wholly-owned subsidiaries, LocatePLUS Corporation and Worldwide Information, Inc. The restructuring was completed by commonly-controlled entities and, accordingly, was accounted for based on historical cost. In September 2003, the Company, through its newly formed wholly owned subsidiary Certifion Corporation, acquired all of the assets of Project Entersect Corporation. The acquisition was accounted for as a purchase and is recorded with the Company's operations from the date of purchase through December 31, 2003. In October 2003, the Company merged Voice Power Technology into its newly formed wholly owned subsidiary Dataphant, Inc. There were no assets acquired in this acquisition and the Company issued 2,500,000 shares of its Class B Non-Voting common stock to the stock holders of Voice Power Technology in consideration for a two year non-competition agreement with these stock holders. The Company formed Metrigenics, Inc., a wholly owned subsidiary on January 6, 2004. Metrigenics, Inc. was formed to develop a new technology that the Company can utilize in its existing product line. Through June 30, 2004 approximately $160,000 has been expensed relating to this new subsidiary and $21,000 remains in prepaid expenses. The prepaid expenses are to fund the salary of the principal scientist (a related party to the CEO) through July 2004 and other expenses through an oral agreement with a Foundation. All intercompany accounts and transactions have been eliminated in consolidation. The Company provides access to public information such as bankruptcies, real estate transactions, motor vehicles, and drivers' licenses to commercial, private sector and law enforcement entities in the United States. In 1999 and prior periods, this information was delivered to customers on compact disks. In March 2000, the Company began providing information through the Internet and in 2002 began providing information through the use of handheld wireless devices. UNAUDITED INTERIM FINANCIAL STATEMENTS The accompanying interim consolidated condensed financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America. These statements include the accounts of LocatePlus Holdings Corporation and its subsidiaries. Certain information and footnote disclosures normally included in LocatePlus Holdings Corporation's annual consolidated financial statements have been condensed or omitted in accordance with Securities and Exchange Commission ("SEC") rules for interim financial statements. The interim consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring accruals) necessary to fairly present the financial position as of June 30, 2004 and the results of operations and cash flows for the six months then ended. There were no material unusual charges or credits to operations during the recently completed fiscal quarter. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2003, which are contained in LocatePlus Holdings Corporation's F-6 Annual Report filed on Form 10-KSB filed with the Securities and Exchange Commission on March 30, 2004. LIQUIDITY AND OPERATIONS The financial statements included in this report have been prepared assuming that the Company will continue as a going concern, and contemplate continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred significant net losses in each of the last two years as well as during the six months ended June 30, 2004. In addition, the Company has incurred an accumulated deficit of approximately $27 million through June 30, 2004. The Company raised approximately $2.4 million of equity during 2003 through the sale of its equity securities and $3.3 million in the six months ended June 30, 2004 through the issuance and sale of equity. The ultimate success of the Company is still dependent upon its ability to secure additional financing to meet its working capital and ongoing project development needs. Management believes the Company's current sources of liquidity, funding, and customer demand are adequate to sustain its current level of operations through the end of 2004. Management's plans include increasing sales, expanding infrastructure, and hiring additional staff that will require the Company to obtain additional financing (through sales of equity securities or debt instruments). There can be no assurance, however that the Company's operations will be profitable or will generate sufficient cash to fund the Company's business in the future or that the Company will be able to obtain additional financing if needed. The Company's financial statements do not include any adjustments that might result from the outcome of this uncertainty. During August 2003, the Company issued a put to one investor through an equity agreement, which provides that the Company, subject to certain limitations, has the right to sell, at its discretion, up to $5 million in shares of the Company's Class A Voting Common Stock to the investor at a purchase price equal to 95% of the lowest closing bid price for the Company's Class A Voting Common Stock during a ten-day pricing period. The number of shares that the Company may sell to that investor is limited by the trading volume of the Company's Class A Voting Common Stock and certain customary closing conditions. The Company sold 9,003,850 shares for a total $3,340,731 in net proceeds from the investor through June 30, 2004. The remaining amount available under the put at June 30, 2004 was $1,659,269. During June 2004, the company paid $500,000 to NFC Corporation, in the form of 4,000,000 restricted shares of the Company's Class A Voting Common Stock, for future investor relation services. These additional shares were valued at $0.13 per share, a discount to market for restricted shares based on the agreed upon contract value. In June of 2004, the Company received $3 million by issuing a secured convertible term note bearing interest at "prime rate" plus two percent per annum. The balance of this debt at June 30, 2004 is $3,000,000. This debt is payable in 33 installments commencing September 2004. The Note is convertible into 7,500,000 shares of our Class A Voting Common Stock at a fixed conversion rate of $0.40 per share and the Warrant provides for the purchase of up to 1,320,000 shares of Class A Common Stock at a price of $0.45 each, subject to customary adjustments, until June 17, 2009. Therefore, an aggregate of 8,820,000 shares of Class A Common Stock are issuable upon conversion of the Note and exercise of the Warrant. Management believes the Company's current sources of liquidity, funding, and customer demand are adequate to sustain its current level of operations through the end of 2005. Management's plans include increasing sales, expanding infrastructure, and hiring additional staff. To F-7 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements accomplish this will require additional financing. Management plans to explore both debt and equity options, which the board of directors is willing to pursue. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH EQUIVALENTS The Company considers all money market funds, bank certificates of deposit, and short term investments with original maturities of three months or less at the date of purchase to be cash equivalents. CONCENTRATION OF CREDIT RISK Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and notes receivable. The risk with respect to cash and cash equivalents is minimized by the Company's policies in which such investments are placed only with highly rated financial institutions and in instruments with relatively short maturities. The financial stability of these financial institutions is constantly reviewed by senior management. The notes receivable are placed with unrelated companies that are also reviewed by management. Consequently, the carrying value of cash and cash equivalents, and notes receivable approximates their fair value based on the short-term maturities of these instruments. The risk with respect to accounts receivable is minimized by the large number of customers comprising the Company's customer base, none of which are individually significant, and by their dispersion across many geographical regions. The Company generally does not require collateral, but evaluations of customers' credit and financial condition are performed periodically. PROPERTY AND EQUIPMENT Property and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method at rates sufficient to write off the cost of the assets over their estimated useful lives. INTANGIBLE ASSETS Costs of acquiring businesses, such as customer lists and non-compete agreements, are being amortized on a straight-line basis over 2-3 years, while deferred financing costs are being amortized over the term of the related debt. INCOME TAXES The Company accounts for income taxes using the liability method under which deferred tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The majority of the Company's deferred tax asset has been established for the expected future benefit of net operating tax loss and credit carryforwards. A valuation reserve against net deferred tax assets is required if, based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. REVENUE RECOGNITION The Company provides access to public information such as bankruptcies, real estate transactions and motor vehicles and drivers' licenses. The Company provides this information as an online service through its website, wirelessly to handheld wireless devices, via XML over the Internet to Channel Partners, or through licenses of the information on compact disks. F-8 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements The Company updates the information contained in compact disks (CDRoms) either quarterly or semi-annually. Revenue is recognized upon delivery to the customer of a compact disk, provided that no significant obligations remain, evidence of the arrangement exists, the fees are fixed or determinable, and collectibility is reasonably assured. In October 2002, the Company changed its method of selling compact disks. Prior to October, compact disks were sold with an upfront purchase of an annual supply of compact disks, with the purchase price allocated equally based on the number of compact disks to which the customer was entitled. Deferred revenue principally related to undelivered compact disks. Subsequent to October 2002, compact disks are sold individually. Customers may choose to have the disks automatically shipped and billed. Online customers are charged fees which vary based on the type of information requested. Revenue is recognized when the information requested is downloaded, there is evidence of an arrangement, the fees are fixed or determinable, and collectibility is reasonably assured. Wireless customers using LocatePlus Anywhere are charged a monthly subscription fee billed in arrears. Revenue is recognized on a monthly basis when there is evidence of an arrangement, the fees are fixed or determinable, and collectibility is reasonably assured. Channel partners are charged royalty fees, which vary based on the type of information requested. Revenue is recognized when the information requested is downloaded, there is evidence of an arrangement, the fees are fixed or determinable, and collectibility is reasonably assured. Engineering services in 2003 and 2002 relate to integration services provided to a third party database provider with whom the Company has an arrangement whereby the Company provides the third party access to the Company's database. Revenue is recognized over the term of the contract when there is evidence of an arrangement, the fees are fixed or determinable, and collectibility is reasonably assured. COSTS OF REVENUES AND SOFTWARE DEVELOPMENT COSTS Costs of revenues relating to CD Rom sales consist primarily of costs for data acquisition, materials and costs associated with compilation of compact disks, such as labor. Costs of revenues relating to online sales consist primarily of costs for license agreements related to data acquisition, software development and maintenance costs and costs associated with delivery of such services that include labor and depreciation. Software development costs are generally charged to operations as incurred, as they relate to ongoing maintenance of data and the Company's website. The Company evaluates certain software development costs for capitalization in accordance with the American Institute of Certified Public Accountants Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Costs incurred relating to the Company's own personnel and outside consultants who are directly associated with software developed for internal use may be capitalized. Costs eligible for capitalization under SOP 98-1 have been immaterial to date. STOCK COMPENSATION PLANS The Company applies the disclosure only provisions of the Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") and SFAS No. 148, "Accounting for Stock-Based Compensation - Transition Disclosure" (SFAS 148") for employee stock option awards. Had compensation cost for the Company's stock option plan been determined in accordance with the fair value-based method prescribed under SFAS F-9 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements 123, the Company's net loss and basic and diluted net loss per share would have approximated the pro forma amounts indicated below.

YEAR ENDED DECEMBER 31 ----------------------------- 2003 2002 ----------- ----------- Net loss - reported $(4,383,229) $(3,996,607) Amortization of stock compensation expense (84,246) (100,407) ----------- ----------- Pro forma net loss $(4,467,475) $(4,097,014) =========== =========== Pro forma net loss per share - basic and diluted $(0.03) $(0.04)

The weighted average fair value of options granted during 2003 and 2002 was $0.05 and $0.03 respectively. The Company recognizes forfeitures as they occur. For purposes of this disclosure, the estimated fair value of the options is amortized to expense over the options' vesting periods. In 2003, the fair value of stock options used to compute pro forma net loss and net loss per share disclosures was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0%; expected volatility of 25%; average risk-free interest rate of 3.54%; and an expected option holding period of 6 years. In 2002, the fair value of options was estimated at the date of grant using the minimum value option pricing method since all employee options were issued prior to the Company's Initial Public Offering. The value was calculated using expected life of 5 years, average risk free rate of 2.8%, volatility of 0%, and dividend yield of 0%. ADVERTISING The Company charges advertising costs to operations when incurred. Advertising expense was $9,225 in 2003 and $2,363 in 2002. EARNINGS PER SHARE Basic earnings per share is based upon the weighted average number of common shares outstanding during each period. Diluted earnings per share gives effect to all dilutive potential common shares outstanding during the period. The computation of diluted earnings per share does not assume the issuance of potential common shares that have an anti-dilutive effect. Diluted per share computations are not presented since the effect would be antidilutive. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 results could differ from those estimates. RECENT PRONOUNCEMENTS In December 2002, the FASB issued SFAS 148, "Accounting for Stock-based Compensation and Disclosure - an amendment of FASB Statement No.123" (SAS 148). This statement amends SFAS 123, "Accounting for Stock-Based Compensation," to provide alternative transition methods for a voluntary change to fair value accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS 123 to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has not adopted the fair value recognition principles of SFAS 123; F-10 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements therefore this Statement has had no effect upon the Company's consolidated financial condition or results of operations. The Company has provided the additional disclosure required by SFAS 148. 3. ACCOUNTS RECEIVABLE, TRADE Trade accounts receivable are presented net of an allowance for doubtful collections of $110,458 at December 31, 2003. In determining this allowance, objective evidence that a single receivable is uncollectible as well as a historical pattern of collections of accounts receivable that indicate that the entire face amount of a portfolio of accounts receivable may not be collectible is considered at each balance sheet date. 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS Included in prepaid expenses is $240,000 paid to NFC Corporation, in the form of 2,500,000 shares of the Company's Class A Voting Common Stock, for investor relation services. These shares were valued at $0.18 per share, the market price on the date of issue, or $450,000. To date, $210,000 of the original amount of $450,000 has been used to pay for services provided to the Company by NFC. Also included in prepaid expenses and other current assets is a $13,300 balance on employee expenses per verbal agreement with an employee that allowed the employee to exercise 800,000 option with an exercise price of $0.20 at no cost to the employee. The Company is expensing this balance over a one year period. The employee is expected to pay the Company for any unamortized balance if employment is terminated before the one year period expires. Also included in prepaid expenses and other current assets is a $17,500 finder's fee which is refundable to the company in the second quarter of 2004. 5. NOTES RECEIVABLE RELATED PARTIES During 2000, the Company issued cash loans of $400,000 in exchange for promissory notes from certain officers. Although the notes were due January 3, 2010, in the event that, as of January 3, 2003, the officers were (i) still employed by the Company; (ii) an independent contractor of the Company; or (iii) a member of the Company's Board of Directors, then the obligations and debt evidenced by the notes would be canceled without further action by any party. In the event that the note is canceled pursuant to the conditions noted above, the Company agrees to pay to the officer, no later than two months after the end of the officer's applicable tax year in which such cancellation occurs, an amount in cash sufficient to fulfill the officer's tax liability attributable to the cancellation of the notes. As such, the Company has been expensing the principal of the notes on a monthly basis and in 2003 and 2002 recognized $9,722 and $133,000 of amortization expense, respectively, on notes receivable from related parties. At December 31, 2003, the net amount of these notes is $0. Additionally, the Company has accrued approximately $6,701 in 2003 and $71,480 in 2002 ($215,929 cumulative through December 31, 2003 included in accrued expenses in the balance sheet) relating to an estimate of the officers' tax liability expected to be reimbursed by the Company. At December 31, 2003, there were non-interest bearing demand notes receivable in the amount of $37,500 due from company officers and employees. These notes are expected to be repaid in 2004. UNRELATED PARTIES Included in Notes Receivable is a demand promissory note receivable from an unrelated leasing company, which carries an 11% interest rate. $1,000,000 was advanced to the leasing company in the fourth quarter of 2002 as proceeds from the Company's initial public offering were collected. There is no business relationship between the Company and this leasing company or F-11 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements any officers or directors of either company. The remaining principal balance at June 30, 2004 was approximately $604,000. Included in Notes Receivable is an unsecured note receivable from an unaffiliated entity. There is an oral agreement between this third party and the Company pursuant to which the Company will advance up to $250,000 on this note. The Company is currently performing administrative and bookkeeping services for that third party in exchange for fees of approximately $1,000 per month. The balance of the note receivable at June 30, 2004 was approximately $85,000. There is no stated interest rate on this note, and certain terms and conditions related to this arrangement (including, among other things, the Company's right to receive warrants to purchase shares of the third party's stock) are to be negotiated. 6. INVESTMENT During 2000, the Company entered into certain agreements, as amended, with an unrelated party ("IntelliCorp") under which the Company invested cash of $500,000 in exchange for contingently convertible promissory notes. The Company reserved all amounts owed to it by IntelliCorp. On January 22, 2002 both parties agreed to the repayment of the $500,000 through an addendum to the Channel Partner Agreement signed in August 2001 between the parties. The addendum provides for a 75:25 sharing of revenues received by the unrelated party resulting from this Channel Partner Agreement in favor of the Company. One third of proceeds remitted to the Company under this arrangement will be treated as repayment of the $500,000 plus accrued interest and the balance will be recorded as revenue. On full repayment of the $500,000 plus accrued interest, the revenue sharing arrangement will change to a 50:50 basis. Interest on the note ceased to accrue on January 21, 2002 in accordance with the arrangement. As of that date, interest receivable of $76,280 was due but not recorded as income. In 2003 and 2002, the Company recognized $10,106 and $16,000, respectively, as partial repayment towards the $500,000, recorded as other income. 7. PROPERTY AND EQUIPMENT Property and equipment at December 31, 2003, consists of the following: Equipment $ 3,136,525 Vehicles 89,635 Software 157,559 Furniture and fixtures 388,493 Leasehold improvements 539,563 ----------- 4,311,775 Less accumulated depreciation and amortization 1,836,695 ----------- Property and equipment, net $ 2,475,080 =========== The carrying value of assets under capital leases was $1,903,160, net of amortization of $639,008 as of December 31, 2003. Depreciation and amortization expense was $576,081 and $475,542 for the years ended December 31, 2003 and 2002, respectively, which includes amortization expense on the equipment under capital lease of $277,828 and $163,532 for the years ended December 31, 2003 and 2002, respectively. F-12 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements 8. OTHER ASSETS Other assets consist of the following at December 31, 2003: Customer lists and non-compete agreement $ 328,486 Accumulated amortization (28,512) Deferred financing costs 459,000 Accumulated amortization (193,639) Security deposits 95,534 Deposit on Subsidiary formed after year end 75,000 ----------- Total $ 735,869 =========== Other assets consist of the following at June 30, 2004: Customer lists and non-compete agreement 259,768 Security deposits 103,660 Patents 17,574 Deferred Financing Costs 424,677 ----------- Total $ 805,679 =========== 9. ACCRUED EXPENSES Accrued expenses consist of the following at December 31, 2003: Payroll and related taxes $ 314,605 Sales tax 26,385 Accounting, legal and professional fees 96,667 Other 20,795 ----------- Total $ 458,452 =========== 10. NOTES PAYABLE On October 12, 2002 the Company completed its initial public offering and as a result certain convertible notes with detachable warrants were converted at $0.24 into 1,681,712 Class A Common Shares and the Company recorded $100,903 of interest expense as a result of the beneficial conversion. In addition, all detachable warrants were exercised either through purchase or cashless conversion into 60,000 shares of Class A Common Stock. Convertible promissory note, due on demand, that bears interest at the rate of 12% per annum. The note is convertible into 44,444 shares of Class A Voting Common Stock at the note holder's option. The note requires quarterly payment of interest until the principal is repaid or converted. During 2003, the Company received $2.3 million, net of issuance costs, by issuing subordinated promissory notes bearing simple interest ranging from 10% to 12% per annum. The balance of this debt at June 30, 2004 is $1,997,402. The remaining debt is due in 2004, except for $1,500,000 due in 2005. In conjunction with the issuance of these notes, warrants to purchase 2,500,000 shares of Class B Non-Voting Common stock with a weighted average exercise price of $0.14 were also issued. F-13 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements The Company allocated the investment proceeds between the notes and warrants based on their relative fair values. The relative fair value of the warrants was determined to be $199,329, which was recorded as debt discount, a reduction of the carrying amount of the notes. This amount is being amortized to interest expense over the term of the debt. The fair value of the warrants was based on the Black-Scholes model. The Black-Scholes calculation incorporated the following assumptions: 0% dividend yield, 29% volatility, 3.6% average risk-free interest rate, a ten-year life and an underlying Class B Non-voting Common Stock value of $0.14 per share. In June of 2004, the Company received $3 million by issuing a secured convertible term note bearing interest at "prime rate" plus two percent per annum. The principal balance of this debt at June 30, 2004 is $3,000,000. This debt is payable in 33 installments commencing September 2004. The Note is convertible into 7,500,000 shares of our Class A Voting Common Stock at a fixed conversion rate of $0.40 per share and the Warrant provides for the purchase of up to 1,320,000 shares of Class A Common Stock at a price of $0.45 each, subject to customary adjustments, until June 17, 2009. Therefore, an aggregate of 8,820,000 shares of Class A Common Stock are issuable upon conversion of the Note and exercise of the Warrant. 11. NOTE PAYABLE - RELATED PARTY In December 2002, the Company issued a note with detachable warrants payable to one of its current board members in exchange for $250,000 in cash. The note has a twelve-month term with interest at a rate of 10% per annum payable monthly. The detachable warrants were for the purchase of 250,000 shares of the Company's Class B Non-Voting Common Stock at $0.22 per share. The warrants had a term of ten years and became exercisable upon issue. Subsequent to year end this note was repaid in full. The Company allocated the investment proceeds to the debt and warrants based on their relative fair values. The relative fair value of the warrants was determined to be $41,599, which was recorded as debt discount, a reduction of the carrying amount of the debt. This amount is being amortized to interest expense over the term of the debt. The fair value of the warrants was based on the Black-Scholes model. The Black-Scholes calculation incorporated the following assumptions: 0% dividend yield, 100% volatility, 4.1% average risk-free interest rate, a ten-year life and an underlying Class B Non-Voting Common Stock value of $0.22 per share. 12. RELATED PARTY TRANSACTIONS On January 31, 2002, the Company granted a warrant to purchase 1,177,680 shares of Class B Non-voting Common Stock at $0.15 per share for consulting services rendered by the former board member and recorded expense of $161,026 associated with the warrants. In 2002, the Company granted options to purchase 160,541shares of Class A Voting Common Stock with an average exercise price of $.90 per share and warrants to purchase 27,089 shares of Class B Non-voting Common Stock at $0.15 per share in consideration for services rendered by a member of the Company's Board of Directors. The Company recorded expense of $40,238 associated with these options and warrants. On February 1, 2002, the Company issued warrants to purchase a total of 70,000 shares of Class B Non-voting Common Stock to two directors of the Company and recorded expense of $9,569 associated with the warrants. The fair value of the options granted in 2002 to purchase shares of Class A Voting Common Stock was based on the Black-Scholes model. The Black-Scholes calculation incorporated the F-14 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements following assumptions: 0% dividend yield, 100% volatility, 5.0% average risk-free interest rate, a ten-year life and an underlying Class A Voting Common Stock value of $0.90 per share. The fair value of the warrants granted in 2002 to purchase shares of Class B Non-voting Common Stock was based on the Black-Scholes Model. The Black-Scholes calculation incorporated the following assumptions: 0% dividend yield, 100% volatility, 5.0% average risk-free interest rate, a ten-year life and an underlying Class B Voting Common Stock value of $0.15 per share. 13. COMMITMENTS AND CONTINGENCIES OPERATING LEASES The Company leases office space and equipment under various non-cancelable operating lease agreements which terminate on various dates through 2005. Rent expense amounted to $579,419 and $494,466 for 2003 and 2002, respectively. Future minimum payments under non-cancelable operating leases are as follows: YEAR ENDING DECEMBER 31, 2004 $ 522,027 2005 87,005 ----------- Total $ 609,032 =========== CAPITAL LEASES The Company acquired equipment under long-term capital leases. The economic substance of the leases is that the Company is financing the acquisition of the assets through the leases. The following is a schedule by years of future minimum lease payments under the capital leases, together with the net present value of the minimum lease payments at December 31, 2003. YEAR ENDING DECEMBER 31, 2004 $ 1,023,457 2005 353,733 2006 3,044 2007 1,268 ----------- 1,381,502 Less: amounts representing interest and executory costs 110,750 ----------- Present value of future minimum lease payments 1,270,752 Less: current portion of obligation under capital lease 934,594 ----------- Long-term obligation under capital lease $ 336,158 =========== LICENSE AGREEMENTS The Company obtains its data from multiple sources and has entered into various license agreements with the related data providers. In 2003 and 2002, the Company recorded $1,738,849 and $665,366 respectively in costs related to these agreements. In the event that any of the primary sources of data are no longer available to the Company, management believes that it would be able to integrate alternate sources of data without significant disruption to the business F-15 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements or operations, as there are currently a number of providers of such data. The Company is required to make minimum payments under these agreements as follows: YEAR ENDING DECEMBER 31, 2004 $ 2,051,427 2005 679,565 2006 20,000 ----------- $ 2,750,992 =========== The Company's operations depend upon information that includes public records. If material changes were to occur in federal or state laws regulating or prohibiting the distribution of public records, particularly credit header records, the Company's financial condition and results of operations could be materially affected. In the event that such a termination occurred, management believes it could acquire replacement data from other sources; however, such termination might have an adverse effect on the Company's operations. LEGAL PROCEEDINGS The Company is from time to time subject to legal proceedings and claims which arise in the normal course of its business. At June 30, 2004, there are no pending or known actions for which management believes the amount of ultimate liability could have a material adverse effect outcome on the Company's financial position or results of operations. 14. INCOME TAXES Deferred tax assets consist of the following at December 31: 2003 ----------- Net operating loss carry forwards $ 7,421,500 Depreciation and amortization 481,400 Bad debt reserve 44,750 Investment loss 202,500 Capitalized research and development 810,000 Other 87,450 ----------- Gross deferred tax assets 9,047,600 Valuation allowance (9,047,600) ----------- $ -- =========== The Company has provided a valuation allowance for the full amount of the deferred tax assets since realization of these future benefits is not sufficiently assured. As the Company achieves profitability, these deferred tax assets may be available to offset future income tax liabilities and expenses. F-16 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements At December 31, 2003, the Company had net operating loss carryforwards for federal and state income tax reporting purposes of approximately $18,300,000. The federal and state net operating loss carryforwards expire through 2023. Certain substantial changes in the Company's ownership may occur. As a result, under the provisions of the Internal Revenue Code, the amount of net operating loss carryforwards available annually to offset future taxable income may be limited. The amount of this annual limitation is determined based upon the Company's value prior to the ownership changes taking place. Subsequent ownership changes could further affect the limitation in future years. 15. COMMON STOCK DESCRIPTION OF COMMON STOCK On March 23, 2001, the Company amended its articles of incorporation wherein it renamed all of the authorized 150,000,000 shares of common stock, par value $0.01 per share, Class A Voting Common Stock and authorized the issuance of 250,000,000 shares of Class B Non-voting Common Stock. Each Class A Voting Common stockholder is entitled to one vote for each share held on all matters submitted to a vote of stockholders. The holders of both classes of common stock are entitled to dividends on a pro rata basis, when and if declared by the Company's board of directors. Through December 31, 2003, no dividends have been declared or paid. On August 12, 2002, the Company commenced its initial public offering of securities (Registration No. 333-85154, effective August 12, 2002), pursuant to which the Company offered up 12,000,000 units for $0.30 per unit. Each unit consisted of one share of Class B Non-voting Common Stock and a three year redeemable warrant to purchase one share of Class A Voting Common Stock with an exercise price of $0.50 per share. As of December 31, 2003, a total of 16,082,239 shares of Class A Voting Common Stock were reserved for issuance upon exercise of outstanding stock option and warrant agreements. As of December 31, 2003, 10,283,249 shares of Class B Non-voting Common Stock were reserved for issuance upon exercise of outstanding warrant agreements. STOCK OPTIONS AND WARRANTS During 2002, the Company issued options to purchase 261,739 shares of Class A Voting Common Stock at an average exercise price of $0.90 per share and warrants to purchase 1,304,158 shares of Class B Non-Voting Common Stock at an average exercise price of $0.15 per share to third parties in exchange for services. The Company recorded expense of $59,573 and $190,586, respectively, associated with these options and warrants. During 2002, the Company issued warrants to purchase 307,184 shares of Class B Non-Voting Common Stock at an average exercise price of $0.23 per share to third parties as part of financing arrangements. The Company will record interest expense of $51,549 over the life of the financing agreements associated with these warrants. During 2002, the Company issued warrants to purchase 250,000 shares of Class B Non-Voting Common Stock at an exercise price of $0.22 per share to third parties in exchange for legal services. The Company will record legal expense of $29,113 over the life of the contract associated with these warrants. F-17 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements During 2002, the Company issued 36,000 shares of Class A Common Stock for the exercise of warrants associated with manditorily convertible debt. During 2002, the Company issued 24,000 shares of Class A Common Stock for the cashless exercise of 120,000 warrants associated with manditorily convertible debt. During 2002, the fair value of the options and warrants to purchase shares of Class A Voting Common Stock was based on the Black-Scholes model. The Black-Scholes calculation incorporated the following assumptions: 0% dividend yield, 100% volatility, 5.0% average risk-free interest rate, a ten-year life and an underlying Class A Voting Common Stock average value of $0.90 per share. During 2002, the fair value of the warrants to purchase shares of Class B. Non-voting Common Stock was based on the Black-Scholes Model. The Black-Scholes calculation incorporated the following assumptions: 0% dividend yield, 100% volatility, 4.4% average risk-free interest rate, a ten-year life and an underlying Class B Voting Common Stock average value of $0.18 per share. During 2003, the Company issued notes payable with detachable warrants for the purchase of 2,880,000 shares of Class B Non-voting Common Stock with an average exercise price of $0.17 per share that are exercisable for a period of ten years from the date of issuance. During 2003, the Company issued units consisting of one share of Class B Non-Voting Common Stock and a warrant that is convertible into three shares of Class B Non-Voting Common Stock with an exercise price at $0.27 per share. A price adjustment mechanism included in the warrants provides that, if the stock price decreases, the warrants will nevertheless permit the holder to receive, upon a cashless exercise of the warrants, at least one share of Class A Voting Common Stock per unit without any cash payment. Warrants convertible into 1,111,110 shares were issued under this agreement. During 2003, the Company issued units consisting of one share of Class A Voting Common Stock and a warrant that is convertible into three shares of Class A Voting Common Stock with an exercise price at $0.16 per share. A price adjustment mechanism included in the warrants provides that, if the stock price decreases, the warrants will nevertheless permit the holder to receive, upon a cashless exercise of the warrants, at least one share of Class A Voting Common Stock per unit without any cash payment. Warrants convertible into 7,431,750 shares were issued under this agreement. As of December 31, 2003, 4,218,750 warrants had been exercised resulting in a net issuance of 2,107,909 shares of Class A Common Stock. During 2003, the Company issued warrants to purchase 1,775,000 shares of Class B Non-Voting Common Stock at an average exercise price of $0.22 per share to third parties in exchange for services. The Company recorded expense of $49,173 associated with these warrants. During 2003, the fair value of the options and warrants to purchase shares of Class A Voting Common Stock was based on the Black-Scholes model. The Black-Scholes calculation incorporated the following assumptions: 0% dividend yield, 100% volatility, 5.0% average risk- free interest rate, a ten-year life and an underlying Class A Voting Common Stock average value of $0.90 per share. During 2003, the fair value of the warrants to purchase shares of Class B Non-voting Common Stock was based on the Black-Scholes Model. The Black-Scholes calculation incorporated the F-18 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements following assumptions: 0% dividend yield, 100% volatility, 4.4% average risk-free interest rate, a ten-year life and an underlying Class B Voting Common Stock average value of $0.18 per share. As of December 31, 2003, not including the Company's publicly traded warrant for the purchase of 12,000,000 shares of Class A Voting Common Stock, there were a total of 4,082,239 and 10,283,249 options and warrants outside the Stock Plans for Class A Voting and Class B Non-Voting Stock, respectively. 16. STOCK OPTION PLANS On November 16, 1999, the Board of Directors approved the Incentive and Non-Qualified Stock Option Plan as amended (the "1999 Plan"). Under the terms of the 1999 Plan, the Company is authorized to grant incentive and nonqualified stock options to purchase shares of common stock to its employees, officers and directors, and consultants or advisors. The Board of Directors administers the Plan. A maximum of 15,000,000 shares of Class A Voting Common Stock has been approved for issuance under the 1999 Plan of which 1,304,784 are available for grant at December 31, 2003. The options are not transferable except by will or domestic relations order. On March 28, 2003, the Board of Directors approved the Incentive and Non-Qualified Stock Option Plan (the "2003 Plan") which was approved by the stockholders at the May 29, 2003 annual meeting. Under the terms of the 2003 Plan, the Company is authorized to grant incentive and nonqualified stock options to purchase shares of common stock to its employees, officers and directors, and consultants or advisors. The Board of Directors administers the 2003 Plan. A maximum of 25,000,000 shares of Class A Voting Common Stock and 25,000,000 shares of Class B Non-Voting Common Stock has been approved for issuance under the 2003 Plan of which 17,500,000 and 19,300,000 Class A and Class B, respectively, are available for grant at December 31, 2003. The options are not transferable except by will or domestic relations order. The Board of Directors determines the exercise price and vesting period of the options at the date of grant. The exercise price for incentive stock options shall not be less than 100% of the fair market value of the Company's stock on the date of grant. The option exercise period will not exceed ten years from the date of grant. The options are generally fully exercisable when issued to directors and consultants and exercisable 25% per year and continuing over four years for employees (based on continual employment). If a grantee owns stock representing more than 10% of the outstanding shares on the date such an incentive option is granted, the price shall be at least 110% of fair market value and the maximum term of the options will be five years. The following table presents activity under the Plans for the years ended December 31, 2003 and 2002:

CLASS A CLASS B WEIGHTED WEIGHTED AVERAGE AVERAGE EXERCISE EXERCISE SHARES PRICE SHARES PRICE Outstanding at December 31, 2001 10,602,716 0.20 - - Issued 300,000 0.25 - - Canceled (170,000) 0.20 - - --------------- ------------ Outstanding at December 31, 2002 10,732,716 0.20 - - Issued 11,480,000 0.57 5,700,000 0.20

F-19 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements

Exercised (1,414,450) 0.20 - - Canceled (1,022,500) 0.20 - - --------------- ------------ Outstanding at December 31, 2003 19,775,766 0.42 5,700,000 0.20 ===============

F-20 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements The following table summarizes information relating to options outstanding at December 31, 2003:

CLASS A OPTIONS OPTIONS OUTSTANDING EXERCISABLE WEIGHTED AVERAGE WEIGHTED WEIGHTED RANGE OF REMAINING AVERAGE AVERAGE EXERCISE CONTRACTUAL EXERCISE EXERCISE PRICE SHARES LIFE (YEARS) PRICE SHARES PRICE $0.15 250,000 9.25 $ 0.15 250,000 $ 0.15 $0.20 - $0.25 14,445,766 7.51 $ 0.22 12,880,766 $ 0.22 $0.30 80,000 7.01 $ 0.30 80,000 $ 0.30 $1.00 5,000,000 4.97 $ 1.00 5,000,000 $ 1.00 ------------ ------------ 19,775,766 6.45 $ 0.42 18,210,766 $ 0.43 ============ ============ CLASS B OPTIONS OPTIONS OUTSTANDING EXERCISABLE WEIGHTED AVERAGE WEIGHTED WEIGHTED RANGE OF REMAINING AVERAGE AVERAGE EXERCISE CONTRACTUAL EXERCISE EXERCISE PRICE SHARES LIFE (YEARS) PRICE SHARES PRICE $.20 5,700,000 9.69 $ 0.20 5,700,000 $ 0.20 ------------ ------------ 5,700,000 9.69 $ 0.20 5,700,000 $ 0.20 ============ ============

17. DEFINED CONTRIBUTION RETIREMENT PLAN The Company sponsors a defined contribution retirement plan under the provisions of Section 401(k) of the Internal Revenue Code, which covers substantially all employees. The Company may make discretionary matching contributions up to 1% of employee contributions. Company contributions vest ratably over a six-year period. Company matching contributions amounted to $5,925 and $2,806 in 2003 and 2002, respectively. F-21 LocatePLUS Holdings Corporation Notes to Consolidated Financial Statements 18. SEGMENT INFORMATION The Company has two reportable segments that management operates as distinct sales organizations; these two segments are segregated by the nature of products and services provided. The Company measures and evaluates its two reportable segments based on revenues and costs of revenues. The CD ROM segment provides information on motor vehicles and drivers' licenses, contained on compact disks. The Online and Channel Partner segment provides information on individuals throughout the United States of America through the Company's website and through wireless devices. No material operating costs, other than costs of revenues, or assets and liabilities relate to the CD ROM segment. The Company's operations are entirely in the United States of America and as a result no geographical information has been presented.

FOR THE SIX MONTHS FOR THE YEAR ENDED JUNE 31, DECEMBER 31, ----------------------- ----------------------- 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Information sales: CD Rom $ 298,894 $ 232,068 $ 478,278 $ 345,003 Online and Channel 2,236,975 1,238,661 2,807,415 1,503,472 Wireless 7,417 1,980 ---------- ---------- ---------- ---------- Total information sales $2,535,869 $1,470,729 $3,293,110 $1,850,455 ========== ========== ========== ========== Costs of Information sales: CD Rom 45,643 40,856 91,775 90,397 Online and Channel 1,902,703 1,088,778 2,606,875 1,217,809 Wireless 2,749 1,100 ---------- ---------- ---------- ---------- Total costs of Information sales $1,948,346 $1,129,634 $2,701,399 $1,309,306 ========== ========== ========== ==========

19. SUBSEQUENT EVENTS On January 6, 2004, the Company formed a new wholly-owned subsidiary, Metrigenics, Inc., with operations located in New York state. Metrigenics was formed to develop new ways to integrate biometrics with data. See Independent Auditors' Report F-22 TABLE OF CONTENTS ----------------- Prospectus Summary.................................................. 1 Risk Factors........................................................ 4 Forward-Looking Statements.......................................... 11 Use of Proceeds..................................................... 11 Dividend Policy..................................................... 11 Selling Security Holders.............................................11 Plan of Distribution................................................ 12 Capitalization...................................................... 14 Selected Consolidated Financial Data................................ 15 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 16 Business............................................................ 22 Executive Officers and Directors.................................... 29 Organization Within the Past Five Years............................. 36 Certain Transactions................................................ 37 Market for Common Equity ........................................... 41 Principal Stockholders.............................................. 41 Description of Capital Stock........................................ 44 Shares Eligible for Future Sale..................................... 46 Transfer Agent and Registrar........................................ 47 Legal Matters....................................................... 47 Experts............................................................. 47 Additional Information.............................................. 47 Index to Financial Statements....................................... F * * * [LOGO] LPHC LOCATEPLUS HOLDINGS CORPORATION Please read this prospectus carefully. It describes our business, products and services, and financial condition and results of operations. We have prepared this prospectus so that you will have the information necessary to make an informed investment decision. You should rely only on the information contained in this prospectus. The information contained in this prospectus is accurate only as of its date, regardless of the time this prospectus is delivered or that our securities are sold.