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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
COMMISSION FILE NUMBER: 000-21729
THE VIALINK COMPANY
(Name of Small Business Issuer in its Charter)
DELAWARE 73-1247666
(State of Other Jurisdiction (I.R.S. Employer
Incorporation or Organization) Indemnification No.)
13155 NOEL ROAD, SUITE 800
DALLAS, TEXAS 75240
(Address of Principal Executive Offices) (Zip Code)
(972) 934-5500
(Issuer's Telephone Number, Including Area Code)
13800 Benson Road
Edmond, Oklahoma 73013-6417
(Former Address)
Securities registered under Section 12(b) of the Exchange Act:
(none)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days. Yes [X] No [ ]
As of August 9, 2000, the issuer had 21,291,688 outstanding shares of
Common Stock. This number, as well as all other share numbers in this Form
10-KSB reflect the 2-for-1 split of our common stock effected on March 28, 2000.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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PART 1 -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE VIALINK COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND JUNE 30, 2000
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
------------ ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................... $ 8,616,305 $ 15,967,512
Short-term investments, held to maturity ................ 6,479,443 --
Accounts receivable-- trade, net of allowance for
doubtful accounts of $41,000 and $35,000,
respectively ......................................... 122,796 339,136
Prepaid expenses and other current assets ............... 868,112 1,078,642
------------ ------------
Total current assets ............................ 16,086,656 17,385,290
Furniture, equipment and leasehold improvements, net ...... 2,473,281 3,267,137
Software development costs, net ........................... 1,523,588 1,516,966
Deferred service fees ..................................... 3,046,302 4,428,348
Other assets .............................................. 108,762 139,234
------------ ------------
Total assets .................................... $ 23,238,589 $ 26,736,975
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ................ $ 2,236,521 $ 2,586,150
Long-term debt ............................................ 4,230,720 6,571,119
------------ ------------
Total liabilities ............................... 6,467,241 9,157,269
Commitments and Contingencies
Stockholders' equity:
Common stock, $.001 par value; 150,000,000 shares
authorized; 9,784,822 and 21,249,795 shares issued and
outstanding, respectively ............................ 9,785 21,250
Additional paid-in capital .............................. 31,750,749 53,190,496
Unearned stock compensation ............................. (1,389,079) (791,471)
Accumulated deficit ..................................... (13,600,107) (34,840,569)
------------ ------------
Total stockholders' equity ...................... 16,771,348 17,579,706
------------ ------------
Total liabilities and stockholders' equity ...... $ 23,238,589 $ 26,736,975
============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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THE VIALINK COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS) FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------------- -------------------------------
1999 2000 1999 2000
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues ...................................... $ 117,220 $ 302,646 $ 225,398 $ 710,143
Operating expenses:
Customer operations ......................... 472,842 2,028,074 751,342 3,755,887
Development ................................. 228,035 1,665,752 370,666 3,522,789
Selling and marketing ....................... 371,229 3,040,461 710,822 5,757,294
General and administrative .................. 1,270,475 2,457,533 2,256,002 6,485,654
Depreciation and amortization ............... 84,582 337,055 169,345 602,108
------------ ------------- ------------ -------------
Total operating expenses ............ 2,427,163 9,528,875 4,258,177 20,123,732
------------ ------------- ------------ -------------
Loss from operations .......................... (2,309,943) (9,226,229) (4,032,779) (19,413,589)
Interest expense, net ......................... (1,136,179) (970,139) (1,770,677) (1,951,292)
Gain on sale of assets ........................ 300,000 124,419 1,035,041 124,419
------------ ------------- ------------ -------------
Net loss ...................................... (3,146,122) (10,071,949) (4,768,415) (21,240,462)
Other comprehensive income:
Unrealized gain on marketable securities,
net of tax .................................. -- -- 1,447,856 --
------------ ------------- ------------ -------------
Comprehensive loss ............................ $ (3,146,122) $ (10,071,949) $ (3,320,559) $ (21,240,462)
============ ============= ============ =============
Net loss per common share--
Basic and diluted ........................... $ (0.27) $ (0.49) $ (0.41) $ (1.06)
============ ============= ============ =============
Weighted average common shares outstanding--
Basic and diluted ........................... 11,521,372 20,411,894 11,494,440 20,062,203
============ ============= ============ =============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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THE VIALINK COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNEARNED
--------------------------- PAID-IN STOCK ACCUMULATED
SHARES AMOUNTS CAPITAL COMPENSATION (DEFICIT) TOTAL
----------- ------------ ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 .... 9,784,822 $ 9,785 $ 31,750,749 $ (1,389,079) $ (13,600,107) $ 16,771,348
Exercise of stock options and
warrants .................. 309,192 309 387,844 388,153
Stock issued under employee
stock purchase plan ....... 8,668 9 53,624 53,633
Issuance of stock options to
service providers ......... 3,180,091 3,180,091
Issuance of stock options to
employees ................. 997,500 (997,500) --
Amortization of unearned
stock compensation ........ 1,595,108 1,595,108
Proceeds from issuance of
common stock, net ......... 1,161,018 1,161 15,166,639 15,167,800
Issuance of common stock for
Services .................. 80,817 81 1,663,954 1,664,035
Two-for-one stock split,
March 2000 (Note 7) ....... 9,905,278 9,905 (9,905) --
Net loss .................... (21,240,462) (21,240,462)
------------ ------------ ------------ ------------ ------------- ------------
Balance, June 30, 2000 ........ 21,249,795 $ 21,250 $ 53,190,496 $ (791,471) $ (34,840,569) $ 17,579,706
============ ============ ============ ============ ============= ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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THE VIALINK COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
1999 2000
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................... $ (4,768,415) $ (21,240,462)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................ 364,644 841,736
Gain on sale of assets ................................... (462,042) --
Amortization of unearned stock compensation .............. 176,627 1,595,108
Amortization of deferred service fee ..................... -- 1,613,670
Non-cash interest expense on convertible debt ............ 1,868,411 2,340,399
Professional fees paid with common shares ................ -- 1,185,883
Increase (decrease) in cash for changes in:
Accounts receivable, net ............................... 96,763 (216,340)
Other receivables ...................................... 193,115 460,578
Prepaid expenses and other assets ...................... (160,037) (389,138)
Accounts payable and accrued liabilities ............... 95,157 534,004
------------ -------------
Net cash used in operating activities ............... (2,595,777) (13,274,562)
------------ -------------
Cash flows from investing activities:
Capital expenditures ........................................ (1,606,081) (917,811)
Collection on note receivable from sale of ijob ............. 800,000 --
Purchase of short-term investments .......................... (3,033,960) (1,524,698)
Proceeds upon maturity of short-term investments ............ -- 8,004,141
Capitalized expenditures for software development ........... (267,507) (233,007)
------------ -------------
Net cash provided by (used in) investing
activities ....................................... (4,107,548) 5,328,625
------------ -------------
Cash flows from financing activities:
Proceeds from convertible debt .............................. 6,000,000 --
Proceeds from exercise of stock options, warrants and
stock purchase plans ..................................... 244,099 441,786
Proceeds from issuance of common stock, net of
expenses ................................................. -- 15,167,800
Payments of capital lease obligations ....................... (37,754) --
Payments of deferred offering costs ......................... (203,759) (312,442)
------------ -------------
Net cash provided by financing activities ........... 6,002,586 15,297,144
------------ -------------
Net increase (decrease) in cash and cash equivalents .......... (700,739) 7,351,207
Cash and cash equivalents, beginning of period ................ 715,446 8,616,305
------------ -------------
Cash and cash equivalents, end of period ...................... $ 14,707 $ 15,967,512
============ =============
Supplemental schedule of non-cash investment activities:
Issuance of common stock for software development
Services ................................................. $ -- $ 478,152
============ =============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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THE VIALINK COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
We provide subscription-based, business-to-business electronic commerce
services that enable the consumer packaged goods (CPG), grocery and food service
industries to more efficiently manage their highly complex supply chain
information. Our services allow manufacturers, wholesalers, distributors and
retailers to communicate, exchange and synchronize item, pricing and promotion
information in a more cost-effective and accessible way than has been possible
using traditional electronic and paper-based methods.
Our objective is to become the industry-accepted electronic commerce
provider for synchronizing item, price and promotion information for the CPG,
grocery and food service industries. We expect to continue our investment in
marketing and sales activities, development of our viaLink services and customer
support services to facilitate our plan to penetrate the market and build
recurring revenues generated from subscriptions to our services. In order to
implement this strategy, we believe that we will need significant additional
capital resources, and we are seeking additional financing sources and other
potential technology, strategic and marketing partners. Consequently, we
resemble a development stage company and will face many of the inherent risks
and uncertainties that development stage companies face. There can be no
assurance, however, that these efforts will be successful or that we will be
able to obtain additional financing or agreements with other partners on
commercially reasonable terms, if at all. Our failure to successfully negotiate
such arrangements would have a material adverse effect on our business,
financial condition and results of operations, including our viability as an
enterprise. As a result of the high level of expenditures for investment in
technology development, implementation, customer support services, and selling
and marketing expenses, we expect to continue to incur losses in the foreseeable
future periods until such time, if ever, as the recurring revenues from our
services are sufficient to cover the expenses.
Our clients and customers range from small retailers and suppliers to large
corporations in the consumer packaged goods and grocery industries and are
geographically dispersed throughout the United States.
In April 2000, we formed viaLink International, Inc., a wholly owned
subsidiary. viaLink International is a Delaware corporation formed to include
our international operations. The consolidated financial statements include the
accounts of the Company and viaLink International. All intercompany transactions
and balances have been eliminated in consolidation.
2. BASIS OF PRESENTATION
Reference is made to our Annual Report on Form 10-KSB for the year ended
December 31, 1999.
We have prepared the accompanying unaudited financial statements in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of our
management, the accompanying unaudited financial statements contain all
adjustments (consisting solely of normal recurring adjustments) considered
necessary to present fairly our financial position and results of operations and
cash flow. These interim unaudited financial statements should be read in
conjunction with the audited financial statements and related notes included in
our Annual Report on Form 10-KSB, for the year ended December 31, 1999, as filed
with the Securities and Exchange Commission on March 21, 2000.
Operating results for the six month period ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 2000.
3. DIVESTITURES
Effective September 1, 1998, we sold the assets related to our management
consulting and systems integration services (including our proprietary Retail
Services Application ("RSA") software) to The NetPlex Group, Inc. ("Consulting
Assets Sale"). We received $3.0 million in cash and 643,770 shares of NetPlex
preferred stock, with a market value of approximately $1.0 million at the date
of the sale.
In conjunction with the Consulting Assets Sale, we entered into an earn-out
agreement that provides for quarterly cash payments aggregating up to $1.5
million based on revenues generated from the assets sold to NetPlex through
March 31, 2000. As of June 30,
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2000, we have received $1.2 million of the $1.5 million potential payments under
the earn-out agreement. We are recognizing amounts received under the earn-out
agreement as gain on sale of assets in the period received. During the six
months ended June 30, 2000, we recognized a gain on sale of $124,419 for
payments received.
Our financial statements do not include the assets and operations of the
consulting and systems integration assets.
4. RECONCILIATION FOR BASIC AND DILUTED EARNINGS PER SHARE ("EPS")
A reconciliation of the numerators and the denominators used in the
calculation of earnings (loss) per share is as follows for the three months and
six months ended June 30:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,: SIX MONTHS ENDED JUNE 30,:
------------------------------- -------------------------------
1999 2000 1999 2000
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Basic:
Net loss ............................................ $ (3,146,122) $ (10,071,949) $ (4,768,415) $ (21,240,462)
Weighted average common shares outstanding .......... 11,521,372 20,411,894 11,494,440 20,062,203
------------ ------------- ------------ -------------
Loss per share ...................................... $ (0.27) $ (0.49) $ (0.41) $ (1.06)
============ ============= ============ =============
Diluted:
Net loss ............................................ $ (3,146,122) $ (10,071,949) $ (4,768,415) $ (21,240,462)
Weighted average common shares outstanding .......... 11,521,372 20,411,894 11,494,440 20,062,203
Add: Net effect of dilutive potential shares ....... -- -- -- --
------------ ------------- ------------ -------------
11,521,372 20,411,894 11,494,440 20,062,203
------------ ------------- ------------ -------------
Loss per share ...................................... $ (0.27) $ (0.49) $ (0.41) $ (1.06)
============ ============= ============ =============
</TABLE>
For the periods ended June 30, 2000, options to purchase 11,140,476 shares
at a weighted average exercise price of $6.94 and warrants to purchase 40,000,
746,268, 768,492, 45,608 and 32,732 shares of common stock at $1.50, $6.70,
$12.06, $13.15 and $41.92, respectively, and 3,895,000 shares of common stock to
be issued upon the conversion of the note issued to Hewlett-Packard were
outstanding, but were not included in the computation of diluted earnings per
share because the effect of these outstanding options, warrants and stock
issuable upon conversion of debt would be antidilutive.
For the periods ended June 30, 1999, options to purchase 9,372,000 shares at
a weighted average exercise price of $1.80 and warrants to purchase 3,680,000,
648,000 and 1,000,000 shares of common stock at $1.25, $1.50 and $2.00,
respectively, and 3,428,572 shares of common stock to be issued upon the
conversion of the note issued to Hewlett-Packard were outstanding, but were not
included in the computation of diluted earnings per share because the effect of
these outstanding options, warrants and stock issuable upon conversion of debt
would be antidilutive.
5. LONG-TERM DEBT
On February 4, 1999, the Company entered into a financing agreement and note
purchase agreement with Hewlett-Packard pursuant to which Hewlett-Packard
purchased a $6.0 million secured subordinated promissory note. This note bears
interest at 11.5% per annum, with interest payments deferrable to maturity in
February 2004. The Company received stockholders' approval at its 1999 annual
meeting to exchange the original note for a subordinated secured convertible
promissory note, convertible into common stock at the option of Hewlett-Packard
beginning August 2000 at a conversion price of $1.75 per share. The Company may
prepay the note in whole or in part beginning September 30, 2000. Additionally,
the Company may demand conversion at maturity. The closing of the purchase of
the note occurred as of February 5, 1999. At June 30, 2000, contractual interest
of $966,000 is included in the note payable balance as the amounts become
convertible with the note balance and are not due until maturity.
The Emerging Issues Task Force ("EITF") Issue 98-5 requires that beneficial
conversion features present in convertible securities should be recognized and
measured by allocating a portion of the proceeds equal to the value of that
feature to additional paid-in capital. The value of the beneficial conversion
feature in the note with Hewlett-Packard was approximately $20.0 million at the
commitment date. However, the value allocated to additional paid-in capital is
limited to the $6.0 million proceeds based on the prescribed accounting.
Accordingly, we have allocated the full amount of proceeds to the beneficial
conversion feature and recorded $6.0 million as additional paid-in capital at
the time of closing. This amount is being accreted by charges to interest
expense and corresponding increases in long-term debt during the period from
issuance of the note to August 2000 when the note becomes convertible. Non-cash
interest charges of $1.0 million were recognized during the three months ended
June 30, 2000, and 1999. Non-cash
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charges of $2.0 million and $1.6 million were recognized during the six months
ended June 30, 2000 and 1999, respectively. The Company will recognize the
remaining balance of $400,000 in non-cash interest expense through August 2000.
6. INCOME TAXES
SFAS 109 requires that the Company record a valuation allowance when it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of the deferred tax asset depends on
the Company's ability to generate sufficient taxable income in the future. The
Company has recognized a full valuation allowance for the amount of net deferred
tax asset at December 31, 1999 and June 30, 2000 since the Company resembles a
development stage company and has no history of profitability.
7. COMMON STOCK
On March 1, 2000, the Company's board of directors declared a two-for-one
split of the common stock in the form of a stock dividend. Par value of the
common stock remained $0.001 per share. The stock split was effective March 28,
2000. Stockholders' equity accounts have been adjusted to reflect the
reclassification of an amount equal to the par value of the increase in issued
shares from additional paid-in capital to the common stock account.
On March 22, 2000, the Company entered into a Securities Purchase Agreement
pursuant to which i2 Technologies, Inc., Hewlett-Packard Company and Millennium
Partners, L.P., paid us an aggregate of $6.0 million in consideration for (1)
200,403 shares of our common stock and (2) warrants to purchase 30,063 shares of
our common stock at an exercise price of $41.92 per share. The warrants can be
exercised at any time on or before March 24, 2003. Additionally, we issued
warrants to purchase 2,672 shares of our common stock at an exercise price of
$44.91 to an investment bank as compensation for services rendered to us as our
financial advisor in connection with that transaction. All of these warrants
contain anti-dilution protection provisions.
On March 22, 2000, we filed a registration statement with the Securities and
Exchange Commission for the offering of approximately $120 million of our common
stock. On July 14, 2000, the Securities and Exchange Commission granted an order
to remove our offering under this registration statement.
On May 31, 2000, we entered into a Securities Purchase Agreement pursuant to
which RGC International Investors, LDC paid us an aggregate of $10.0 million in
consideration for (1) 960,315 shares of our common stock and (2) a warrant to
purchase 768,492 shares of our common stock at initial exercise price of $12.06
per share. The exercise price may be subject to certain adjustments beginning
one year from issuance, based on the market price of our common stock. The
warrants can be exercised at any time on or before March 24, 2003. Upon closing
of the transaction with RGC, we issued a warrant to purchase 45,608 shares of
our common stock at an exercise price of $13.15 to an investment bank as partial
compensation for services rendered to us as our financial advisor in connection
with that transaction.
On June 15, 2000, we entered into a Settlement Agreement with Investor
Awareness pursuant to which we issued options to purchase 20,000 shares of our
common stock to two principals of Investor Awareness at an exercise price of
$0.78125 and sold an aggregate of 20,000 shares of our common stock to these
individuals and legal counsel to Investor Awareness.
8. COMMITMENTS & CONTINGENCIES
In December 1997, we entered into an agreement with Investor Awareness to
provide investor relations services. Subject to certain criteria in the
agreement, Investor Awareness would be granted an option to purchase 40,000
shares of our common stock at $1.5625 per share. During June 2000, we issued
options to purchase 20,000 additional shares of our common stock as settlement
in full with Investor Awareness of a lawsuit alleging we failed to issue the
option under the terms of the agreement. We have recorded an expense of $185,000
included in general and administrative expense for the six month period ended
June 30, 2000, representing the fair value the options issued.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements of our management's intentions, beliefs, anticipations,
expectations and similar expressions concerning future events contained in this
Report constitute "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Any forward-looking
statements are made by us in good faith, pursuant to the safe-harbor provisions
of the
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Reform Act. As with any future event, we cannot assure you that the events
described in forward-looking statements made in this Report will occur or that
the results of future events will not vary materially from those described in
the forward-looking statements. These forward-looking statements reflect our
management's current views and projections regarding economic conditions,
industry environments and our performance. Important factors that could cause
our actual performance and operating results to differ materially from the
forward-looking statements include, but are not limited to, changes in the
general level of economic activity in the markets served by us, introduction of
new products or services by competitors, sales performance, expense levels,
interest rates, changes in our financial condition, availability of capital
sufficient to support our anticipated level of activity, delays in implementing
further enhancements to our services and our ability to implement our business
strategies.
Our expectations with respect to future results of operations that may be
embodied in oral and written forward-looking statements, including any
forward-looking statements that may be included in this Report, are subject to
risks and uncertainties that must be considered when evaluating the likelihood
of our realization of such expectations. Our actual results could differ
materially. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed in "Additional Factors That May Affect
Future Results."
OVERVIEW
We are a provider of subscription-based, business-to-business electronic
commerce services that enable CPG, grocery and food service industry
participants to efficiently manage their highly complex supply chain
information. Our services allow manufacturers, wholesalers, distributors and
retailers to communicate and synchronize item, price and promotion information
in a more cost-effective and accessible way than has been possible using
traditional electronic and paper-based methods.
We were originally formed in 1985 as Applied Intelligence Group, Inc. From
inception, our operations consisted primarily of consulting services related to
the planning, designing, building and installation of computerized information
management systems and computerized checkout or point-of-sale systems in the
retail and distribution industry. We also provided a Web-based human resource
recruiting application.
In 1993, we began the design and development of viaLink, an Internet-based
subscription service to complement our existing consulting business. We
introduced our syncLink service, formerly marketed and sold as Item Catalog, in
January 1997. In 1998, we made the strategic decision to focus primarily on our
viaLink services. As a result, we sold our management consulting and systems
integration assets to The NetPlex Group, Inc. in September 1998 and changed our
name to The viaLink Company in October 1998. In December 1998, we sold ijob, our
wholly-owned subsidiary which operated our Web-based human resources recruiting
application, to DCM Company.
Prior to 1999, we derived substantially all of our revenues from our
consulting and systems integration assets. As a result of the sales of our
management consulting and systems integration assets and ijob, we resemble a
development stage company because our planned principal operations have not yet
generated significant revenues. This fundamental change in our business is
extremely risky, and we cannot be certain that our strategic decision to shift
our focus from our historical businesses to our viaLink services ultimately will
be successful.
We expect to generate our future revenues primarily from monthly
subscriptions to our services. For use of our syncLink service, retailers pay us
a flat monthly subscription rate and suppliers pay us based on the number of
retailers that subscribe to their data. Our basic syncLink subscription service
fee is a monthly flat fee per trading partner depending on the size and
complexity of the trading relationship. Our other services, distribuLink,
clearLink (formerly Item Movement) and sbtLink, are available for additional
fees.
We also charge an implementation fee ranging from $1,200 for an on-line
implementation to over $100,000 for more complex supplier and retailer
installations. Our implementation fees are separately priced based on time and
materials. Implementation costs consist primarily of labor by technical support
personnel to configure customer data and establish a connection to our services.
Additionally, we receive revenues from the performance of certain Web-hosting
services, but we expect to reduce our focus and reliance on providing these
services in the future.
We recognize revenues for our subscription and Web-hosting services as they
are provided. Revenues collected in advance are deferred and recognized as
earned. Revenues for implementations are recognized as the implementations are
completed.
We reported a substantial loss from operations for the fiscal year ended
December 31, 1999 and for the three and six months ended June 30, 2000, and we
expect to report substantial losses for the foreseeable future. The extent of
these losses will depend primarily on
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the amount of revenues generated from implementations of and subscriptions to
our viaLink services, which have not yet achieved market acceptance or
significant market penetration. In order to achieve market penetration, we
expect to continue our high level of expenditures for sales and marketing and
development of our viaLink services. These expenses substantially exceed our
revenues, which to date have been minimal. As a result, we expect to incur
losses in future periods until such time as the recurring revenues from these
services are sufficient to cover expenses.
During the second quarter of 2000, we began the extension of our solution to
the food service industry including hiring two key executives. Additionally, we
initiated our expansion into international markets by opening an office in
Australia as part of a joint venture with Cap Gemini Ernst & Young Australia
Pty, Ltd. We expect this expansion into the foodservice industry and
internationally will continue to be facilitated be leveraging our strategic
relationships and alliances.
RESULTS OF OPERATIONS
Revenues. Our revenues are comprised of revenues for subscriptions to our
services, implementation revenues and certain revenues for Web-hosting services.
We expect Web-Hosting revenues to continue to decrease in the future. The
following table sets forth for the periods indicated the components of revenue
included in our consolidated statements of operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,: SIX MONTHS ENDED JUNE 30,:
---------------------------- ---------------------------
1999 2000 1999 2000
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Subscription .......................... $ 8,695 $ 121,146 $ 14,575 $ 220,551
Implementation......................... 31,125 113,850 54,948 353,542
Hosting................................ 77,400 67,650 155,875 136,050
---------- ---------- ---------- ----------
Total revenues......................... $ 117,220 $ 302,646 $ 225,398 $ 710,143
========== ========== ========== ==========
</TABLE>
Customer Operations. Customer operations expense consists of personnel costs
associated with implementation, consulting and other services and costs of
operating, maintaining and accessing our technical operations and hosting
facilities. Customer operations expense also includes the cost of providing
support and maintenance to customers. Our customer operations expense increased
from $473,000 to $2.0 million for the quarter ended June 30, 1999 and 2000,
respectively and from $751,000 to $3.8 million for the six months ended June 30,
1999 and 2000, respectively. These increases are largely due to our expanded
operations platform including the hosting of our technical operations by
Hewlett-Packard and increased personnel costs for our implementation and
customer service teams.
Development. Development expense includes personnel and contract labor costs
and professional fees incurred for product development, enhancements, upgrades,
quality assurance and testing. Our development expenses increased from $228,000
to $1.7 million for the three months ended June 30, 1999 and 2000, respectively,
and from $371,000 to $3.5 million million for the six months ended June 30, 1999
and 2000, respectively. These increases were due primarily to an increase in
personnel costs and professional fees for product development. Additionally,
$250,000 and $501,000 of non-cash service costs is included in development
expense for the three and six month periods ended June 30, 2000, respectively,
for the amortization of a portion of the fair value of the warrants and options
issued to Cap Gemini Ernst & Young, i2 Technologies and other service providers,
reflecting the development efforts provided. Additionally, during the three and
six month periods ended June 30, 2000, we incurred professional fees of $910,000
and $1,186,000, respectively, which were paid with common stock in-lieu of cash.
We are utilizing and will increase our reliance on our alliance partners and
other vendors to advance our development efforts. We are currently undertaking
various projects that we expect will result in continued increases in these
expenses for the foreseeable future.
Selling and Marketing. Selling and marketing expense consists primarily of
personnel costs, travel, promotional events, including trade shows, seminars and
technical conferences, advertising and public relations programs. Selling and
marketing expense increased from $371,000 to $3.0 million for the three months
ended June 30, 1999 and 2000, respectively, and from $711,000 to $5.8 million
for the six months ended June 30, 1999 and 2000, respectively. These increases
were primarily due to the expansion of our sales, business development and
marketing team from four persons at January 1, 1999 to 19 persons at June 30,
2000 and our new marketing and promotional program to promote our viaLink
services. This new program resulted in an increase in advertising, travel and
other professional fees of approximately $1.4 million and $2.6 million for the
three and six month periods ended June 30, 2000, respectively. Additionally
selling and marketing expense includes $630,000 and $983,000 of non-cash service
costs for the amortization of a portion of the fair value of the warrants and
options issued to Cap Gemini Ernst & Young, i2 Technologies and other service
providers reflecting the selling and marketing efforts provided during the three
and six month periods ended June 30, 2000. We expect selling and marketing
expenses to continue to increase in the foreseeable future.
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General and Administrative (G&A). G&A expense consists primarily of the
personnel and other costs of the finance, human resources, administrative and
executive departments and the fees and expenses associated with legal,
accounting and other services. G&A expense increased from $1.3 million to $2.5
million for the three months ended June 30, 1999 and 2000, respectively and from
$2.3 million to $6.5 million for the six months June 30, 1999 and 2000,
respectively. These increases in G&A expense are attributable to increased
personnel costs for key executive and management staff and the related increase
in personnel expenses for the administrative infrastructure built to support
future operations. During the three and six month periods ended June 30, 2000,
G&A expense also includes $450,000 related to the relocation of the executive
offices from Edmond, Oklahoma to Dallas, Texas and such costs are expected to
increase throughout 2000. In addition, G&A expense also increased due to an
increase in legal, consulting and other professional fees. We anticipate that
our G&A expense will continue to increase in absolute dollars for the
foreseeable future as we continue our significant efforts to develop internal
processes and infrastructure to support the expected increase in operational
activity and scale and the aforementioned relocation of our operations from
Oklahoma to Dallas.
Depreciation and Amortization. Depreciation and amortization expense
increased from $85,000 in 1999, to $337,000 during the first quarter of 2000 and
from $169,000 in 1999, to $602,000 in 2000 for the six months ended June 30.
These increases reflect the effect of capital expenditures in 1999 and 2000 for
new computer hardware and software to support the viaLink services.
Interest Expense, Net. Interest expense, net, decreased from $1.1 million to
$1.0 million for the three month periods ended June 30, 1999 and 2000,
respectively, reflecting increases in interest income on short-term investments.
Interest expense, net, increased from $1.8 million to $2.0 million for the six
month periods ending June 30, 1999 and 2000, respectively. This increase
reflects the partial period inclusion of interest on the promissory note we
issued to Hewlett-Packard in February 1999. Interest expense is primarily
comprised of interest on the promissory note we issued to Hewlett-Packard in
February 1999 for $6.0 million at 11.5% interest and the amortization of the
beneficial conversion feature of the note as more fully discussed in Note 5 to
the financial statements. We will continue to record non-cash interest charges
until the conversion date of August 5, 2000.
Interest expense is offset in-part by interest income on short-term
investments of $82,000 and $200,000 for the three month periods and $98,000 and
$389,000 for the six month periods ended June 30, 1999 and 2000, respectively.
Gain on Sale of Assets. Gain on sale of assets decreased from $300,000 to
$124,000 for the three month periods ending June 30, 1999 and 2000 and decreased
from $1.0 million to $124,000 for the six month period ended June 30, 1999 and
2000, respectively. Gain on sale of assets represents income recognized under
the earn-out agreement with NetPlex and during the six months ended June 30,
1999 reflects the recognition of the deferred gain of $462,000 upon collection
of the note receivable due to us in connection with the sale of ijob. We have
received approximately $1.2 million under the earn-out agreement through June
30, 2000 and will continue to record income under the earn-out agreement as we
receive payments.
Tax Provision. Deferred tax assets and deferred tax liabilities are
separately recognized and measured at currently enacted tax rates for the tax
effect of temporary differences between the financial reporting and tax
reporting bases of assets and liabilities, and net operating loss and tax credit
carryforwards for tax purposes. A valuation allowance must be established for
deferred tax assets if it is not "more likely than not" that all or a portion
will be realized. We have established a full valuation allowance for the net
deferred tax assets as of December 31, 1999 and June 30, 2000, generated by
losses recorded in 1999 and during 2000. We will continue to provide a full
valuation allowance for future and current net deferred tax assets until such
time as we believe it is more likely than not that the asset will be realized.
Other Comprehensive Income. Other comprehensive income in 1999 includes an
unrealized gain of $1.4 million, representing the net increase in market value
of the 643,770 shares of NetPlex capital stock from January 1, 1999 to June 30,
1999 received as consideration from the sale of our consulting and systems
integration assets. These securities were sold in December 1999.
LIQUIDITY AND CAPITAL RESOURCES
Due to the sale of our consulting and systems integration assets and the
sale of ijob, we are unable to rely on our historical revenues and we expect
future cash requirements in connection with sales and marketing and investment
in our viaLink services will be substantial. As a result of these sales, we now
resemble a development stage company because our planned principal operations
have not yet generated significant revenues. As of June 30, 2000, we had cash,
cash equivalents and short-term investments of $16.0 million.
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During the six months ended June 30, 2000, we used $13.3 million in
operating activities, reflecting a net loss of $21.2 million. Cash used in
operating activities also reflects $5.5 million for non-cash stock compensation
and interest expense for the conversion feature of the Hewlett-Packard note,
$842,000 of depreciation and amortization, $1.2 million in professional fees
paid by issuing common shares and a $389,000 increase in cash provided by other
working capital changes.
During the six months ended June 30, 2000, investing activities provided
$5.3 million in net cash resulting from $8.0 million in maturities of short-term
investments offset by reinvestment of $1.5 million. Investment activities also
reflects $1.2 million in capital expenditures and capitalized software
development costs.
During the six months ended June 30, 2000, financing activities provided net
cash of $15.3 million, primarily the result of the issuance of 1.2 million
shares of our common stock. Additionally, we received $442,000 in proceeds from
the exercise of our stock options and warrants and stock purchase plans, offset
in part by approximately $312,000 of deferred offering costs.
We currently do not have a credit facility available to borrow additional
funds. We have incurred operating losses and negative cash flow in the past and
expect to incur operating losses and negative cash flow for the foreseeable
future. We expect our spending to increase steadily for the foreseeable future
for further technology and product development, increased sales and marketing
expenditures and other technology and database costs. We also expect to hire
additional management, development and support/service employees. To support
this level of spending, we must use our current cash, cash equivalents and
collection of accounts receivable to operate the business and/or eventually
obtain additional financing. We cannot be certain when operating revenues will
exceed operating costs, if ever.
Our future capital requirements will depend on our revenue growth,
profitability, working capital requirements, level of investment in long term
assets and other financing sources. Increases in these capital requirements or a
lack of revenue due to delayed or less than expected market acceptance of our
viaLink services would accelerate the use of our cash, cash equivalents and
short-term investments.
Subsequent to June 30, 2000, we withdrew our registration statement for the
offering of our common stock. We expect that we will raise capital again during
2000, and we are currently working with our financial advisors to determine the
best source and timing of such capital raising including financial and strategic
investors.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board, issued SFAS No. 133.
SFAS No. 133, as amended, establishes new standards of accounting and reporting
for derivative instruments and hedging activities. SFAS No. 133 requires that
all derivatives be recognized at fair value in the balance sheet, and that the
corresponding gains or losses be reported either in the statement of operations
or as a component of comprehensive income, depending on the type of hedging
relationship that exists. SFAS No. 133 will be effective for fiscal years
beginning after June 15, 2000. We do not expect SFAS No. 133 to have a material
effect on our financial position or results of operations.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
You should carefully consider these factors that may affect future results,
together with all of the other information included in this Form 10-QSB, in
evaluating our business. The risks and uncertainties described below are those
that we currently believe may materially affect us. Additional risks and
uncertainties that we are unaware of or that we currently deem immaterial also
may become important factors that affect us.
Keep these risks in mind when you read "forward-looking" statements
elsewhere in this Form 10-QSB. These are statements that relate to our
expectations for future events and time periods. Generally, the words
"anticipate," "expect," "intend," and similar expressions identify
forward-looking statements. Forward-looking statements involve risks and
uncertainties, and future events and circumstances could differ significantly
from those anticipated in the forward-looking statements. Please see "Special
Cautionary Note Regarding Forward-Looking Statements" below in this Item 2.
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DUE TO THE RECENT SALE OF OUR CONSULTING AND SYSTEMS INTEGRATION ASSETS AND THE
SALE OF OUR SUBSIDIARY, IJOB, INC., WE NEED TO REPLACE MOST OF OUR HISTORICAL
REVENUES WITH REVENUES FROM OUR VIALINK SERVICES.
We have historically derived substantially all of our revenues from
providing management consulting services and computer systems integration
services to the retail and wholesale distribution industries. In order to permit
us to focus our resources primarily on developing and marketing our viaLink
services, we sold the assets underlying our management consulting services and
computer systems integration services, and we sold our wholly-owned subsidiary,
ijob, Inc. We had previously generated over 90% of our total revenues from these
operations.
As a result of these sales, we are now substantially dependent on revenues
generated from our viaLink services. Our viaLink services have achieved limited
market acceptance and, to date, have accounted for an insignificant amount of
our historical revenues. Consequently, we resemble a development stage company
and will face many of the inherent risks and uncertainties that development
stage companies face.
These risks include, but are not limited to, our:
o Need for our services to achieve market acceptance and produce a
sustainable revenue stream;
o Need to expand sales, support and product development capabilities;
o Need to manage rapidly changing operations;
o Dependence upon key personnel;
o Reliance on strategic alliances and relationships;
o Ability to obtain financing on acceptable terms; and
o Ability to offer greater value than our competitors.
Our business strategy may not successfully address these risks. If we fail
to recognize significant revenues to replace the revenues lost in these sales,
our business, financial condition and operating results would be materially
adversely affected.
WE MAY BE UNABLE TO OBTAIN THE ADDITIONAL CAPITAL REQUIRED TO GROW OUR BUSINESS
We intend to continue our investment in and development of our services and
technology, expansion of our sales and marketing activities and expansion into
other industries and geographic markets and expect to incur significant
expenditures upon relocation of our corporate headquarters. We have incurred
operating losses and negative cash flow in the past and expect to incur
operating losses and negative cash flow in the future. Our ability to fund our
planned working capital and capital expenditures will depend largely upon our
ability to obtain sufficient capital. Our future capital requirements will
depend on a number of factors, including our:
o Services achieving market acceptance;
o Services producing a sustainable revenue stream;
o Working capital requirements; and
o Level of our investment in and development of our services and technology.
We may not be able to obtain the additional capital resources necessary to
satisfy our cash requirements or to implement our growth strategy successfully.
If we cannot obtain adequate additional capital resources, we will be forced to
curtail our planned business expansion. We may also be unable to fund our
ongoing operations, including investment in and development of our services and
technology, expansion of our sales and marketing activities and expansion into
other industries and geographic markets. If we issue equity securities,
stockholders may experience additional dilution or the new equity securities may
have rights, preferences or privileges senior to those of our common stock.
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WE ARE SUBSTANTIALLY DEPENDENT ON OUR VIALINK SERVICES. IF OUR VIALINK SERVICES
FAIL TO BECOME ACCEPTED BY THE CONSUMER PACKAGED GOODS AND GROCERY INDUSTRIES,
OUR BUSINESS WILL BE MATERIALLY ADVERSELY AFFECTED.
Virtually all of our revenues for the foreseeable future will be derived
from implementation fees and subscription revenues from our viaLink services,
which may not achieve market acceptance. To date we have received an
insignificant amount of revenues from these services. The acceptance of our
syncLink service as an industry-wide shared database will depend upon
subscriptions from a large number of industry manufacturers, suppliers and
retailers. We cannot predict when a significant number of manufacturers,
suppliers and retailers will subscribe to our services, if ever. If our services
do not achieve market acceptance, or if market acceptance develops more slowly
than expected, our business, operating results and financial condition will be
seriously damaged.
A number of factors will determine whether our services achieve market
acceptance, including:
o Performance and functionality of our services;
o Ease of adoption;
o Satisfaction of our initial subscribers;
o Success of our marketing efforts;
o Success of our strategic relationships and alliances;
o Continued acceptance of the Internet for business use.
The market for business-to-business electronic commerce services is evolving
rapidly. As the market evolves, customers, including our current customers, may
not choose our services.
WIDESPREAD INDUSTRY ADOPTION OF OUR SERVICES IS DEPENDENT UPON A CRITICAL MASS
OF LARGE NATIONAL RETAILERS AND SUPPLIERS SUBSCRIBING TO OUR SERVICES.
Our success depends on a significant number of large retailers using our
services and linking with manufacturers, wholesalers and distributors over the
Internet through syncLink. To encourage purchasers to use our services, syncLink
must offer a broad range of product, price and promotion information from a
large number of suppliers. However, to attract suppliers to subscribe to
syncLink, we must increase the number of retailers who use our services. If we
are unable to quickly build a critical mass of retailers and suppliers, we will
not be able to benefit from a network effect where the value of our services to
each subscriber significantly increases with the addition of each new
subscriber. Our inability to achieve this network effect would reduce the
overall value of our services to retailers and suppliers and, consequently,
would harm our business.
OUR SALES CYCLE CAUSES UNPREDICTABLE VARIATIONS IN OUR OPERATING RESULTS WHICH
COULD CAUSE OUR STOCK PRICE TO DECLINE.
Our customers often view the purchase of our services as a strategic
decision. As a result of the importance of this decision, the length of our
sales cycle is uncertain, which may cause our revenues and operating results to
vary from quarter to quarter. We spend considerable time and expense providing
information to prospective customers about the use and benefits of our services
without generating corresponding revenue. Our expense levels are relatively
fixed and there is substantial uncertainty as to when particular sales efforts
will begin to generate revenues.
Prospective customers of our services often require long testing and
approval processes before making a purchase decision. The process of entering
into a subscription arrangement with a potential customer may involve lengthy
negotiations. Our sales cycle has been and may continue to be unpredictable. Our
sales cycle is also subject to delays because we have little or no control over
customer-specific factors, including customers' budgetary constraints and
internal acceptance procedures. Because our technology must often be integrated
with the products and services of other vendors, there may be a significant
delay between entering into a subscription agreement and generation of revenues
from the agreement. The length of the sales cycle makes it difficult to
accurately forecast the quarter in which our implementation and subscription
services will occur. This may cause our revenues from those services to be
delayed from the expected quarter to a subsequent quarter or quarters.
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<PAGE> 15
We also have a limited implementation services backlog, which makes revenues
in any quarter substantially dependent upon agreements entered into in that
quarter. Because of these factors, our revenues and results of operations in any
quarter may not meet market expectations or be indicative of future performance
and it may be difficult for you to evaluate our prospects. Our failure to meet
these expectations would likely cause the market price of our common stock to
decline.
WE DO NOT HAVE AN ADEQUATE HISTORY WITH THE RECENT CHANGE IN OUR PRICING
STRUCTURE FOR OUR SYNCLINK SERVICES TO PREDICT OUR REVENUE OR OPERATING RESULTS,
WHICH MAY PREVENT INVESTORS FROM ASSESSING OUR PROSPECTS.
Previously, we priced our syncLink service for retailers based on the number
of suppliers from whom they received data and for suppliers based on the number
of retailers that subscribed to their data. We recently introduced a new pricing
structure for our syncLink services pursuant to which retailers pay us a flat
monthly subscription rate and suppliers can either pay a flat subscription rate
or pay us based on the number of retailers that subscribe to their data. We
believe the changes in the pricing structure will result in accelerating the
network effect critical to achieving long-term revenue growth. However, we do
not have an adequate history with this new pricing structure to be able to
predict customers' acceptance of this arrangement or to forecast our revenue or
operating results accurately.
BECAUSE OUR CUSTOMERS MAY NOT RENEW THEIR SUBSCRIPTIONS, OUR REVENUES MAY NOT
INCREASE AS ANTICIPATED.
We have only recently made our services available and we do not have a
history of customers renewing their subscriptions with us. If a significant
portion of our customers do not renew their subscriptions for our services, our
revenues could decline and our business could be harmed.
WE DEPEND ON SUPPLIERS FOR THE SUCCESS AND ACCURACY OF OUR SERVICES.
We depend on suppliers to subscribe to our services in sufficient and
increasing numbers to make our services attractive to retailers and,
consequently, other suppliers. In order to provide retailers accurate data, we
rely on suppliers to update their item, price and promotion information stored
in our database. We cannot guarantee that the item, price and promotion
information available from our services will always be accurate, complete and
current, or that it will comply with governmental regulations. Incorrect
information could expose us to liability if it harms users of our services or
result in decreased adoption and use of our services.
WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT FUTURE OPERATING LOSSES.
We have a history of operating losses, and we expect to incur net losses for
the foreseeable future. We incurred net operating losses of approximately $2.9
million in 1997, $1.5 million in 1998 and $13.8 million in 1999. As of June 30,
2000, we had an accumulated deficit of approximately $34.8 million representing
the sum of our historical net losses. We expect to expend significant resources
to aggressively develop and market our services into an unproven market.
Therefore, we expect to have negative cash flow and net losses from operations
for the foreseeable future. We may never generate sufficient revenues to achieve
or sustain profitability or generate positive cash flow.
THE UNPREDICTABILITY OF OUR QUARTER-TO-QUARTER RESULTS COULD CAUSE OUR STOCK
PRICE TO BE VOLATILE OR DECLINE.
Our future operating results may vary significantly from quarter to quarter
due to a variety of factors, many of which are outside our control. Our expense
levels are based primarily on our estimates of future revenues and are largely
fixed in the short term.
Due in large part to our uncertainty regarding the success of our services,
we cannot predict with certainty our quarterly revenues and operating results.
We may be unable to adjust spending rapidly enough to compensate for any
unexpected revenue shortfall caused by factors such as delayed or lack of market
acceptance of our services. Further, we believe that period-to-period
comparisons of our operating results are not necessarily a meaningful indication
of future performance, especially in light of the significant changes in our
business that we have undertaken. It is possible that in one or more future
quarters, our results may fall below the expectations of securities analysts or
investors. If this occurs, the trading price of our common stock would likely be
volatile or decline.
OUR STOCK PRICE MAY BE VOLATILE.
The market price of our common stock has been volatile in the past and may
be volatile in the future. The market price of our common stock may be
significantly affected by various factors, including but not limited to:
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o Fluctuations in our operating results;
o Changes in financial estimates by securities analysts or our failure to
perform in line with these estimates;
o Timing of large national retailers and suppliers subscribing to our
services;
o Changes in market valuations of other technology companies;
o Announcements by us or our potential competitors relating to significant
technical innovations, acquisitions, strategic alliances and
relationships, joint ventures or investments;
o Departures of key personnel;
o Fluctuations in the stock market price and volume of traded shares
generally, especially fluctuations in the traditionally volatile
technology sector; and
o Downturns in the general economy.
IF OUR STRATEGIC ALLIANCES AND RELATIONSHIPS DO NOT PRODUCE THE ANTICIPATED
BENEFITS OR IF WE ARE UNABLE TO ENTER INTO ADDITIONAL FUTURE ALLIANCES AND
RELATIONSHIPS, OUR SERVICES MAY NOT ACHIEVE MARKET ACCEPTANCE.
Our business depends substantially on developing and maintaining strategic
alliances and relationships to develop, market and sell our services. We believe
our current and future strategic alliances and relationships will help us to
validate our technology, facilitate broad market acceptance of our services and
enhance our sales and marketing. Our current strategic alliances and
relationships may not provide the benefits we expect or the access to new
customers we anticipate, and they may not be sustained on favorable terms, if at
all. Further, we may not be able to enter into successful new strategic
alliances and relationships in the future. If we are unable to develop key
alliances and relationships or maintain and enhance existing alliances and
relationships, our business, operating results and financial condition would be
harmed.
A PROMISSORY NOTE WE ISSUED TO HEWLETT-PACKARD HAS LEVERAGED US CONSIDERABLY,
CAUSING FINANCIAL AND OPERATING RISK, AND MAY RESULT IN SIGNIFICANT DILUTION TO
OUR STOCKHOLDERS.
As a result of our issuing a $6.0 million subordinated secured convertible
promissory note to Hewlett-Packard, our debt service requirements will increase
substantially when we are required to repay the note in February 2004. The
degree to which we are leveraged could materially adversely affect our ability
to obtain future financing and could make us more vulnerable to industry
downturns, general economic downturns and competitive pressures. Our ability to
meet our debt obligations will be dependent upon our future performance, which
will be subject to financial, business and other factors affecting our
operations. Additionally, beginning in August 2000, all principal and interest
due under the note may be converted into shares of our common stock at $1.75 per
share, a substantial discount from our current stock price, which would result
in substantial dilution to our stockholders.
WE ARE DEPENDENT UPON THE OPERATION OF HEWLETT-PACKARD'S DATA CENTER FOR THE
TIMELY AND SECURE DELIVERY OF OUR SERVICES.
We use Hewlett-Packard's data center as the host for our services. We are
dependent on our continued relationship with Hewlett-Packard and on their data
center for the timely and secure delivery of our services. If Hewlett-Packard's
data center fails to meet our expectations in terms of reliability and security,
our ability to deliver our services will be seriously harmed, resulting in the
potential loss of customers and subscription revenue. Furthermore, if our
relationship with Hewlett-Packard were terminated, we would be forced to find
another service provider to host our services. The transition to another service
provider could result in interruptions of our services and could increase the
cost of providing our services.
OUR SINGLE-SITE INFRASTRUCTURE AND SYSTEMS MAY BE VULNERABLE TO NATURAL
DISASTERS AND OTHER UNEXPECTED EVENTS, AND LOSSES WE INCUR AS A RESULT OF THESE
EVENTS COULD EXCEED THE AMOUNT OF INSURANCE WE CARRY.
The performance of our server and networking hardware and software
infrastructure is critical to our business, reputation and ability to provide
high quality services and attract and retain users of our services. We depend on
our single-site infrastructure and systems which are located at a secure,
underground Hewlett-Packard facility in Atlanta, Georgia. Any disruption to this
infrastructure
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resulting from a natural disaster or other event could result in an interruption
in our services. These interruptions, if sustained or repeated, could impair our
reputation, the quality of our services and our ability to attract and retain
users of our services.
Our systems and operations may be vulnerable to damage or interruption from
human error, natural disasters, power loss, telecommunications failures,
break-ins, sabotage, computer viruses, intentional acts of vandalism and similar
events. We do not have a formal disaster recovery plan or alternative provider
of hosting services. In addition, our business interruption insurance may not be
sufficient to compensate us for losses that could occur. Any system failure that
causes an interruption in services could result in fewer transactions and, if
sustained or repeated, could impair our reputation and the attractiveness of our
services or prevent us from providing our services entirely.
THE ROYALTIES WE MUST PAY TO CAP GEMINI ERNST & YOUNG AND I2 TECHNOLOGIES COULD
ADVERSELY AFFECT OUR ABILITY TO BECOME PROFITABLE.
Pursuant to an alliance agreement, we must pay Cap Gemini Ernst & Young a
royalty of 7% of our total revenues, subject to certain exceptions, until May
2001. Upon meeting specified milestones relating to significant Cap Gemini Ernst
& Young clients becoming our customers, these royalty payments to Cap Gemini
Ernst & Young will continue in perpetuity.
Pursuant to a separate alliance agreement, we must pay i2 Technologies a
royalty of 5% of syncLink and Chain Pricing subscription services revenues over
the term of the agreement through December 31, 2003. The royalty payments we are
obligated to pay could inhibit our ability to become profitable and could have
an adverse effect on our operating results and financial condition.
WE EXPECT TO FACE INCREASED COMPETITION. IF WE ARE UNABLE TO COMPETE
SUCCESSFULLY, OUR BUSINESS WILL BE HARMED.
Currently, we do not know of any direct competition for our electronic
commerce services. However, we believe direct competition for our services will
develop and increase in the future. If we face increased competition, we may not
be able to sell our viaLink services on terms favorable to us. Furthermore,
increased competition could reduce our market share or require us to reduce the
price of our services.
To achieve market acceptance and thereafter to increase our market share, we
will need to continually develop additional services and introduce new features
and enhancements. Our potential competitors may have significant advantages over
us, including:
o Significantly greater financial, technical and marketing resources;
o Greater name recognition;
o Broader range of products and services; and
o Larger customer bases.
Consequently, they may be able to respond more quickly to new or emerging
technologies and changes in customer requirements.
WE MUST ADAPT TO TECHNOLOGY TRENDS AND EVOLVING INDUSTRY STANDARDS TO REMAIN
COMPETITIVE.
The Web-based electronic commerce market is characterized by rapid changes
due to technological innovation, evolving industry standards and changes in
subscriber needs. Our future success will depend on our ability to continue to
develop and introduce a variety of new services and enhancements that are
responsive to technological change, evolving industry standards and customer
requirements on a timely basis. We cannot be certain that technological
developments and products and services our competitors introduce will not cause
our existing services, and new technologies in which we invest, to become
obsolete.
OUR OPERATING RESULTS MAY BE HARMED IF BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE
OVER THE INTERNET DOES NOT CONTINUE TO GAIN ACCEPTANCE, PARTICULARLY IN THE
CONSUMER PACKAGED GOODS, GROCERY AND FOOD SERVICE INDUSTRIES.
Our ability to achieve market acceptance depends upon the consumer packaged
goods, grocery and food service industries' widespread acceptance of the
Internet as a vehicle for business-to-business electronic commerce. There are a
number of critical issues concerning commercial use of the Internet, including
security, reliability, cost, quality of service and ease of use and access.
Organizations that have already invested substantial resources in other means of
exchanging information may be reluctant to
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implement Internet-based business strategies. We cannot assure you that
Internet-based information management utilizing viaLink, or any other product,
will become widespread. If the Internet fails to become widely accepted by the
consumer packaged goods, grocery and food service industries, our subscribers
may be forced to use private communications networks which would materially
adversely affect our operating results.
UNDETECTED SOFTWARE ERRORS OR FAILURES FOUND IN OUR PRODUCTS MAY RESULT IN LOSS
OF OR DELAY IN MARKET ACCEPTANCE OF OUR PRODUCTS WHICH COULD MATERIALLY
ADVERSELY AFFECT OUR OPERATING RESULTS.
Errors or defects in our database or software may result in loss of revenues
or delay in market acceptance of our services and could materially adversely
affect our business, operating results and financial condition. Applications
such as ours may contain errors or defects, sometimes called "bugs,"
particularly when first introduced or when new versions or enhancements are
released. Despite our testing, current versions, new versions or enhancements of
our products may still have defects and errors after commencement of commercial
operation. As a result of "bugs" in our database or software, customers may
experience data loss, data corruption or other business disruption, which could
subject us to potential liability.
PERFORMANCE PROBLEMS WITH OUR DATABASE OR SOFTWARE COULD SUBJECT US TO PRODUCT
LIABILITY CLAIMS WHICH, WHETHER OR NOT SUCCESSFUL, COULD MATERIALLY ADVERSELY
AFFECT OUR BUSINESS.
Our subscribers depend on our database to provide, access, manage and share
item, pricing and promotion information in an efficient and cost-effective
manner. Any errors, defects or other performance problems with our database,
software or services could result in financial or other damages to our
subscribers. A product liability claim, whether or not successful, could damage
our reputation and our business, operating results and financial condition. Our
service agreements with our subscribers typically contain provisions designed to
limit our exposure to potential liability claims. However, these contract
provisions may not preclude all potential claims. Product liability claims in
excess of insurance limits could require us to spend significant time and money
in litigation or to pay significant damages.
THE SECURITY OF OUR DATABASE COULD BE BREACHED, WHICH COULD DAMAGE OUR
REPUTATION AND DETER CUSTOMERS FROM USING OUR SERVICES.
We must protect our computer systems and networks from break-ins, security
breaches and other disruptive problems associated with the unauthorized use of
the Internet. Our database and services may be vulnerable to break-ins and
similar security breaches that jeopardize the security of the information stored
in our database and transmitted through our computer systems and networks and
those of our subscribers. In addition, we could, in the future, be subjected to
denial of service, vandalism and other attacks on our systems by Internet
hackers. Due to the highly proprietary information that we retain in our
database, any security breach could adversely affect our ability to attract and
retain subscribers, damage our reputation and subject us to litigation.
Moreover, the security and privacy concerns of potential subscribers, as well as
concerns related to computer viruses, may inhibit the marketability of our
services.
Our services contain security protocols. We have also contracted with
third-party providers to provide security protocols for the transmission of data
over the Internet. Although we intend to continue our current security efforts
and to implement security technology and operational procedures to prevent
break-ins, damage and failures, these security efforts may fail. Our insurance
coverage may be insufficient in certain circumstances to cover claims that may
result from these events.
WE EXPECT OUR PLANNED AGGRESSIVE GROWTH TO STRAIN OUR RESOURCES.
We intend to expand our operations rapidly in the foreseeable future to
pursue existing and potential market opportunities. If this rapid growth occurs,
it will place significant demands on our management and operational resources.
We will need to hire additional sales and marketing, research and development
and technical personnel to increase and support our sales. We will also need to
hire additional support and administrative personnel, expand our customer
service capabilities, contract for third-party implementation resources and
expand our information management systems. From time to time, we have
experienced, and we expect to continue to experience, difficulty in hiring and
retaining talented and qualified employees. Our failure to attract and retain
the highly trained technical personnel that are essential to our product
development, marketing, service and support teams may limit the rate at which we
can generate revenue and develop new products or product enhancements. In order
to manage our growth effectively, we must implement and improve our operational
systems, procedures and controls on a timely basis. If we fail to implement and
improve these systems, our business, operating results and financial condition
may be materially adversely affected.
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<PAGE> 19
WE ARE EXPANDING INTO INTERNATIONAL MARKETS, WHICH WILL CAUSE OUR BUSINESS TO
BECOME SUSCEPTIBLE TO ADDITIONAL RISKS.
As part of our strategy, we are expanding our presence and the sales of our
services outside the United States. Conducting international operations subjects
us to risks we do not face in the United States including:
o Currency exchange rate fluctuations;
o Unexpected changes in regulatory requirements;
o Longer accounts receivable payment cycles and difficulties in collecting
accounts receivables;
o Difficulties in managing and staffing international operations;
o Potentially adverse tax consequences, including restrictions on the
repatriation of earnings;
o The burdens of complying with a wide variety of foreign laws and
regulatory requirements;
o Reduced protection for intellectual property rights in some countries;
and
o Political and economic instability.
Each country may have unique operational characteristics in each of their
CPG, grocery and food service industries that may require significant
modifications to our existing services. In addition, we have limited experience
in marketing, selling and supporting our services in foreign countries.
Development of these skills may be more difficult or take longer than we
anticipate, especially due to language barriers, currency exchange risks and the
fact that the Internet may not be used as widely in other countries, and the
adoption of electronic commerce may evolve slowly or may not evolve at all. As a
result, we may not be successful in marketing our services to retailers and
suppliers in markets outside the United States.
WE HAVE ANNOUNCED OUR PLAN TO MOVE OUR CORPORATE HEADQUARTERS TO DALLAS, TEXAS.
THIS MOVE MAY ADVERSELY AFFECT OUR OPERATIONS AND CAUSE US TO LOSE KEY
PERSONNEL.
We intend to complete the move of our corporate headquarters from Edmond,
Oklahoma to Dallas, Texas within the next 12 months. We believe the move to
Dallas will give us greater access to technology and development personnel and
resources. However, we may not achieve the benefits we anticipate from this
move. Moreover, if we are unable to successfully integrate our operations and
our employees into our new location, our business, financial condition and
operating results may be materially adversely affected. In addition, the lease
on our facilities in Oklahoma extends until 2005. If we are unable to sublease
or assign these premises on acceptable terms or if our landlord refuses to
release us from our obligations under the lease, we will remain liable for all
or a portion of the remaining rental payments, which would negatively affect our
operating results.
OUR SUCCESS IS SUBSTANTIALLY DEPENDENT ON OUR ABILITY TO RETAIN AND ATTRACT KEY
PERSONNEL.
Our future performance depends on the continued service of our key senior
management team, Smalltalk programmers and sales personnel. The loss of the
services of one or more of our key personnel, in particular Lewis B. Kilbourne,
our Chief Executive Officer, could seriously harm our business. On October 1,
1998, we entered into an employment agreement with Dr. Kilbourne. This agreement
has a three-year term, with year-to-year renewals. We do not maintain a key man
life insurance policy for Dr. Kilbourne. Our future success also depends on our
continuing ability to attract, hire, train and retain a substantial number of
highly skilled managerial, technical, sales, marketing and customer support
personnel. Competition for qualified personnel is intense, and we may fail to
retain our key employees or to attract or retain other highly qualified
personnel.
IF WE MAKE FUTURE ACQUISITIONS OR ENTER INTO JOINT VENTURES OR ADDITIONAL
ALLIANCE ARRANGEMENTS, OUR MANAGEMENT'S ATTENTION MAY BE DIVERTED FROM OUR
OPERATIONS, WE MAY INCUR ADDITIONAL LIABILITIES AND WE MAY NOT SUCCESSFULLY
INTEGRATE ACQUIRED OPERATIONS.
In the future we may acquire additional businesses, products and
technologies, or enter into joint ventures or alliance arrangements that could
complement or expand our business. Management's negotiations of potential
acquisitions or joint ventures and alliance agreements and management's
integration of acquired businesses, products or technologies could divert their
time and resources. Any
19
<PAGE> 20
future acquisitions could require us to issue dilutive equity securities, incur
debt or contingent liabilities, amortize goodwill and other intangibles or
write-off in-process research and development and other acquisition-related
expenses. Further, we may not be able to successfully integrate any acquired
business, product or technology into our existing operations or retain the key
employees of the acquired business. If we are unable to fully integrate an
acquired business, product or technology, we may not receive the intended
benefits of that acquisition.
IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR FACE A
CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, WE COULD LOSE OUR
INTELLECTUAL PROPERTY RIGHTS OR BE LIABLE FOR SIGNIFICANT DAMAGES.
Our success is in part dependent upon our proprietary software technology.
Companies in the software industry have experienced substantial litigation
regarding intellectual property. Our subscription agreements contain provisions
prohibiting the unauthorized use, copying and transfer of our proprietary
information. We own no patents; rather, we rely on a combination of trade
secret, copyright and trademark laws as well as non-disclosure and
confidentiality agreements to protect our proprietary technology. However, these
measures provide only limited protection, and we may not be able to detect
unauthorized use and take appropriate steps to enforce our intellectual property
rights.
Any litigation to enforce our intellectual property rights may divert
management resources and may not be adequate to protect our business. We also
could be subject to claims that we have infringed the intellectual property
rights of others. In addition, we may be required to indemnify our subscribers
for similar claims made against them. Any claims against us or any claims we may
seek to bring against others could require us to spend significant time and
money in litigation, pay damages, develop new intellectual property or acquire
licenses to intellectual property that is the subject of the infringement
claims. These licenses, if required, may not be available on acceptable terms.
Intellectual property claims against us could have a material adverse effect on
our business, operating results and financial condition.
WE DEPEND ON THIRD-PARTY TECHNOLOGY FOR USE IN OUR PROPRIETARY TECHNOLOGY. IF WE
ARE UNABLE TO CONTINUE TO USE THESE SOFTWARE LICENSES, OUR BUSINESS MAY BE
MATERIALLY ADVERSELY AFFECTED.
We currently, and in the future we expect to continue to, license or
otherwise obtain access to intellectual property of third parties. We rely upon
software that we license from third parties, including software that is
integrated with our internally developed software to perform key functions as
part of our service offerings. These third-party software licenses may not
continue to be available to us on commercially reasonable terms. The loss of, or
inability to maintain or obtain, any of these software licenses, could result in
delays in our ability to provide our services or in reductions in the services
we provide until we integrate equivalent software that we develop internally or
that we identify and license from a third-party. Any delay in product
development or in providing our services could damage our business, operating
results and financial condition.
OUR CUSTOMER BASE IS CONCENTRATED AND OUR SUCCESS DEPENDS IN PART ON OUR ABILITY
TO RETAIN EXISTING CUSTOMERS AND SUBSCRIBERS.
If one or more of our major customers were to substantially reduce or
terminate their use of our services, our business, operating results and
financial condition would be harmed. In 1999, we derived 70% of our total
revenues from our five largest customers. Our largest customer in 1999 accounted
for approximately 27% of our total revenues. The amount of our revenues
attributable to specific customers is likely to vary from year to year. We do
not have long-term contractual commitments with any of our current subscribers,
and our subscribers may terminate their contracts with little or no advance
notice and without significant penalty. As a result, we cannot be certain that
any of our current subscribers will be subscribers in future periods. A
subscriber termination would not only result in lost revenue, but also the loss
of subscriber references that are necessary for securing future subscribers.
THE PRICE OF OUR COMMON STOCK MAY DECLINE DUE TO SHARES ELIGIBLE FOR FUTURE
SALE.
Sales of a substantial number of shares of common stock could adversely
affect the market price of the common stock and could impair our ability to
raise capital through the sale of equity securities. As of August 9, 2000, we
had outstanding 21,291,688 shares of common stock. Of these shares:
o 17,292,801 shares are freely tradable without restriction or further
registration under the Securities Act unless purchased by our
"affiliates;" and
o 3,998,887 shares of common stock are "restricted securities" as defined in
Rule 144 of the Securities Act.
20
<PAGE> 21
An additional 2,078,950 shares of common stock are issuable upon the
exercise of currently exercisable options. Substantially all shares issued
following the exercise of these options will be freely tradable.
An additional 768,492 shares of common stock are issuable upon the exercise
of currently exercisable warrants. These warrants are subject to certain
exercise price reset provisions that, after one year from the date of issuance,
could result in an additional warrants to purchase 714,390 shares of common
stock which would be immediately exercisable. All of the shares issued upon the
exercise of these warrants will be freely tradable.
An additional 40,000 shares of common stock are issuable upon the exercise
of currently exercisable warrants. All of the shares issued upon the exercise of
these warrants will be freely tradable.
Pursuant to the $6.0 million subordinated secured convertible promissory
note we issued to Hewlett-Packard, Hewlett-Packard may convert the note into
shares of our common stock at a conversion price of $1.75 per share beginning in
August 2000. Hewlett-Packard is also entitled to request the registration of
66,801 shares of our common stock purchased by them and 10,670 shares of our
common stock currently issuable to them upon the exercise of a warrant we issued
to them in connection with a private placement.
Pursuant to our agreement with Cap Gemini Ernst & Young, Cap Gemini Ernst &
Young is entitled to request the registration of 750,000 shares of our common
stock which were purchased by them upon the exercise of a warrant.
Pursuant to our agreements with i2 Technologies, i2 Technologies is entitled
to request the registration of 962,337 shares of our common stock which were
purchased by them and 766,979 shares of common stock issuable to them upon
exercise of the warrants.
Pursuant to our agreement with AGE Investments, Inc., we have granted AGE
unlimited piggyback registrations rights prior to March 22, 2005 with respect to
the 48,452 shares of our common stock issuable upon exercise of the warrants we
issued to AGE.
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT, DELAY OR
IMPEDE A CHANGE IN CONTROL OF US AND MAY REDUCE THE MARKET PRICE OF OUR COMMON
STOCK.
Provisions of our certificate of incorporation and bylaws, including those
relating to our classified board and our ability to offer "blank check"
preferred stock, could have the effect of discouraging, delaying or preventing a
merger or acquisition that a stockholder may consider favorable. We are also
subject to the anti-takeover laws of Delaware which may discourage, delay or
prevent someone from acquiring or merging with us, which may adversely affect
the market price of our common stock. Please see "Description of Securities --
Anti-Takeover Effects" for more information concerning anti-takeover provisions.
This Form 10-QSB contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as "may," "will," "expect," "intend," "anticipate,"
"believe," "estimate," "continue" and other similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, make projections of our future results of operations or of our
financial condition or state other "forward-looking" information. We believe
that it is important to communicate our future expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or control. The factors listed in the sections captioned "Additional
Factors That May Affect Future Results" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," as well as any
cautionary language in this Form 10-QSB, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements.
ITEM 1. LEGAL PROCEEDINGS
On July 16, 1999, Investor Awareness, Inc. filed a lawsuit against us in the
Law Division of the Circuit Court of Cook County, Illinois, entitled Investor
Awareness, Inc. v. The viaLink Company, f/k/a Applied Intelligence Group, Inc.,
Case No. 99 L 07909, alleging that we breached a contract between Investor
Awareness and us relating to investor relations services. On June 15, 2000, we
agreed to a settlement of this claim with Investor Awareness pursuant to which
we granted certain individual principals of Investor Awareness non-qualified
options to purchase an aggregate of 20,000 shares of common stock and sold these
individuals and the legal
21
<PAGE> 22
counsel to Investor Awareness an aggregate of 20,000 shares of our common stock
at a price of $0.78125 per share. On June 21, 2000, the court entered it order
dismissing this lawsuit with prejudice.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 31, 2000, we entered into a Securities Purchase Agreement pursuant to
which RGC International Investors, LDC paid us an aggregate of $10.0 million in
consideration for (1) 960,315 shares of our common stock and (2) a warrant to
purchase 768,492 shares of our common stock at initial exercise price of $12.06
per share. The exercise price may be subject to certain adjustments beginning
one year from issuance, based on the market price of our common stock. The
warrants can be exercised at any time on or before March 24, 2003. Upon closing
of the transaction with RGC, we issued to AGE Investments, Inc., a warrant to
purchase 45,608 shares of our common stock at an exercise price of $13.15, as
compensation for services rendered to us by A.G. Edwards & Sons, Inc. as our
financial advisor in connection with that transaction.
The net proceeds of this issuance will be used to fund further investment in
and the development of our services and technology, expansion of our sales and
marketing activities, expansion into other industries and geographical markets
and working capital and other general corporate purposes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 5, 2000, we held our annual meeting of stockholders at which the
matters set forth below were considered and voted upon. Set forth below is a
summary of the voting results:
1. Election of two (2) Class I directors to the Company's Board of Directors to
serve for a three-year term each ending in the year 2003 or until their
respective successors are duly elected and qualified:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD AUTHORITY
------- --- ------------------
<S> <C> <C>
Lewis B. Kilbourne 18,787,509 35,278
Sue A. Hale 18,738,979 83,808
</TABLE>
2. Approval of an amendment to the Company's Certificate of Incorporation to
increase the number of shares of Common Stock authorized for issuance thereunder
by an additional 100,000,000 shares to a total of 150,000,000 shares of Common
Stock:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
<S> <C> <C> <C>
18,482,532 305,125 35,131 ----
</TABLE>
3. Approval of an amendment to the Company's 1999 Stock Option/Stock Issuance
Plan (the "1999 Plan") to increase the number of shares of Common Stock
authorized for issuance over the term of the 1999 Plan by an additional
5,371,184 shares to 20,000,000 and to increase the number of shares by which the
share reserve under the 1999 Plan will automatically increase on the first
trading day of each calendar year, beginning with calendar year 2001, from one
percent (1%) of the shares of Common Stock outstanding on the last trading day
of the immediately preceding calendar year (subject to a maximum annual increase
of 200,000 shares) to five percent (5%) of the total number of such outstanding
shares, subject to a maximum annual increase of 500,000 shares:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
<S> <C> <C> <C>
9,916,937 697,245 69,334 8,139,911
</TABLE>
4. Ratification of the appointment of KPMG LLP as independent auditors of the
Company for the fiscal year ending December 31, 2000:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
<S> <C> <C> <C>
18,785,783 16,371 20,633 ----
</TABLE>
22
<PAGE> 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following instruments are included as exhibits to the report. Exhibits
incorporated by reference are so indicated.
EXHIBIT
NUMBER DESCRIPTION
3.1(1) Form of Certificate of Incorporation
3.2(2) Form of Certificate of Amendment to Certificate of Incorporation
4.1(2) Securities Purchase Agreement dated as of May 31, 2000 by and
between the Registrant and RGC International Investors, LDC.
4.2(2) Common Stock Warrant dated May 31, 2000, by the Registrant in
favor of RGC International Investors, LDC.
4.3(2) Registration Rights Agreement dated as of May 31, 2000 by and
between the Registrant RGC International, Inc.
4.4(2) Common Stock Purchase Warrant dated May 31, 2000 by the
Registrant in favor of AGE Investments, Inc.
4.5(2) Amendment No. 1 to Registration Rights Agreement dated as of May
31, 2000 by and between the Registrant and AGE Investments, Inc.
4.6(3) Settlement Agreement dated as of June 15, 2000, by and between
the Registrant, Investor Awareness, Inc., Tony Schor, Brad
Fishman and Harvey Barnett
9.1(4) Amendment No. 1 to The viaLink Company 1999 Stock Option/Stock
Issuance Plan
10.1 Employment Agreement effective April 21, 2000 by and between the
Registrant and Mark L. Bromberg.
27 Financial Data Schedule
----------
(1) Incorporated herein by reference to the Registrant's Definitive Proxy
Statement on Schedule 14A filed with the SEC on April 19, 1999.
(2) Incorporated herein by reference to the Registrant's Current Report on
Form 8-K dated May 31, 2000.
(3) Incorporated herein by reference to the Registrant's Registration
Statement of Form S-3 (Reg. No. 333-39764) filed with the SEC on June
21, 2000.
(4) Incorporated herein by reference to the Registrant's Registration
Statement of Form S-8 filed with the SEC on July 13, 2000.
(b) Reports on Form 8-K.
The Registrant filed a Current Report on Form 8-K, dated April 7, 2000,
reporting pursuant to Item 5 of such Form that its common stock would begin
trading on the Nasdaq National Market under the trading symbol "VLNK" effective
April 17, 2000.
The Registrant filed a Current Report on Form 8-K, dated June 5, 2000,
reporting pursuant to Item 5 of such Form that we entered into a Securities
Purchase Agreement pursuant to which RGC International Investors, LDC paid us an
aggregate of $10.0 million in consideration for (1) 960,315 shares of our common
stock and (2) a warrant to purchase 768,492 shares of our common stock at
initial exercise price of $12.06 per share.
23
<PAGE> 24
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE VIALINK COMPANY
(Registrant)
By: /s/ LEWIS B. KILBOURNE
-----------------------------------------
Lewis B. Kilbourne
Chief Executive Officer
Date: August 14, 2000
By: /s/ J. ANDREW KERNER
-----------------------------------------
J. Andrew Kerner
Senior Vice President, Finance
Chief Financial Officer
(principal financial and accounting officer)
Date: August 14, 2000
24
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1(1) Form of Certificate of Incorporation
3.2(2) Form of Certificate of Amendment to Certificate of Incorporation
4.1(2) Securities Purchase Agreement dated as of May 31, 2000 by and
between the Registrant and RGC International Investors, LDC.
4.2(2) Common Stock Warrant dated May 31, 2000, by the Registrant in
favor of RGC International Investors, LDC.
4.3(2) Registration Rights Agreement dated as of May 31, 2000 by and
between the Registrant RGC International, Inc.
4.4(2) Common Stock Purchase Warrant dated May 31, 2000 by the
Registrant in favor of AGE Investments, Inc.
4.5(2) Amendment No. 1 to Registration Rights Agreement dated as of May
31, 2000 by and between the Registrant and AGE Investments, Inc.
4.6(3) Settlement Agreement dated as of June 15, 2000, by and between
the Registrant, Investor Awareness, Inc., Tony Schor, Brad
Fishman and Harvey Barnett
9.1(4) Amendment No. 1 to The viaLink Company 1999 Stock Option/Stock
Issuance Plan
10.1 Employment Agreement effective April 21, 2000 by and between the
Registrant and Mark L. Bromberg.
27 Financial Data Schedule
</TABLE>
----------
(1) Incorporated herein by reference to the Registrant's Definitive Proxy
Statement on Schedule 14A filed with the SEC on April 19, 1999.
(2) Incorporated herein by reference to the Registrant's Current Report on
Form 8-K dated May 31, 2000.
(3) Incorporated herein by reference to the Registrant's Registration
Statement of Form S-3 (Reg. No. 333-39764) filed with the SEC on June
21, 2000.
(4) Incorporated herein by reference to the Registrant's Registration
Statement of Form S-8 filed with the SEC on July 13, 2000.
25
