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Virtual Communities Completes Acquisition and Listing

As part of to gain control of a Nasdaq listing, ethnic community Web site developer Virtual Communities Inc. has completed its $4.3 million acquisition of Heurisitic Development Group.

The transaction allotted shareholders of Heuristic $6.8 million dollars worth of shares in the merged company, while the newly formed company inherited $2.5 million dollars in way of a cash shell from Heuristic.

VCI shareholders will own 88.6 percent of the new VCI, while HDG shareholders own the remainder. One of the primary reasons for the merger was to give VCI a listing, while allowing it to focus on new business rather than completing an initial share offering itself.

VCI has said that it wants to acquire technology which will allow it to better compete with other Web content management companies such as Vignette Corp.

"Since we commenced operations in 1996, VCI has moved quickly and decisively to pursue our goal of playing a significant role in the development of online communities," said VCI's CEO Avi Moskowitz. "This merger is important to us because it will enable us to increase our operational capabilities and further our strategic growth plan."

"The direction of the Internet is moving toward communities, people are moving from saying 'Hey, let's look up some information on the Internet' to 'Hey, I want to be a part of something.'"

Moscowitz said that the three-year-old company is actively looking to license its software, which VCI claims can get Web communities up and running within 90 days, a third of the average in-house development time. The software is used to help site developers convert written content and create interactive features to establish a site following.

VCI which owns and operates Virtual Jerusalem, a 140,000 member Web site targeting Jewish users, lost $1.43 million dollars on $819,000 in sales last year, and has said that it is planning to start Virtual India, its fifth ethnic Web site.

Shares of Virtual Communities, which began trading on Monday, November 1st under the symbol VCIX, replacing the IFIT ticker of Heuristic Development Group, dropped to 3-3/4 on Wednesday, down from 4-1/4 on Monday.



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