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As filed with the Securities and Exchange Commission on April 3, 2000
File No. 0-29495
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1 to
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
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WORLD COMMERCE ONLINE, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 52-2205697
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
9677 TRADEPORT DRIVE
ORLANDO, FLORIDA 32827
(407) 240-8999
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Principal Executive Offices)
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Copies of communications to:
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RANDOLPH H. FIELDS, ESQ. MARK E. PATTEN
GREENBERG TRAURIG, P.A. WORLD COMMERCE ONLINE, INC.
111 N. ORANGE AVENUE, 20TH FLOOR 9677 TRADEPORT DRIVE
ORLANDO, FLORIDA 32801 ORLANDO, FLORIDA 32827
(407) 420-1000/(407) 420-5909 (TELECOPY) (407) 240-8999/(407) 240-9228 (TELECOPY)
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Securities to be Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange on Which
Title of Each Class to be so Registered Each Class is to be Registered
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NONE NONE
Securities to be Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK ($.001 PAR VALUE)
(Title of Class)
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS REGISTRATION
STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
DIFFERENT FROM THAT CONTAINED IN THIS REGISTRATION STATEMENT. THE INFORMATION
CONTAINED IN THIS REGISTRATION STATEMENT IS ACCURATE ONLY AS OF THE DATE OF THIS
REGISTRATION STATEMENT. IN THIS REGISTRATION STATEMENT, REFERENCES TO "WORLD
COMMERCE," "THE COMPANY," "WE," "OUR" AND "US" REFER TO WORLD COMMERCE ONLINE,
INC.
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TABLE OF CONTENTS
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Item 1. Business..................................................................................................1
Corporate History And Development.......................................................................20
Risk Factors............................................................................................21
Cautionary Note Regarding Forward-Looking Statements....................................................28
Item 2. Financial Information....................................................................................29
Selected Financial Data.................................................................................29
Management's Discussion And Analysis Of Financial Condition And Results Of Operations...................30
Item 3. Properties...............................................................................................36
Item 4. Security Ownership Of Certain Beneficial Owners And Management...........................................37
Item 5. Directors And Executive Officers.........................................................................39
Item 6. Executive Compensation...................................................................................42
Item 7. Certain Relationships And Related Transactions...........................................................47
Item 8. Legal Proceedings........................................................................................48
Item 9. Market Price Of And Dividends On Registrant's Common Equity And Related Stockholder Matters..............49
Item 10. Recent Sales Of Unregistered Securities.................................................................50
Item 11. Description Of Registrant's Securities..................................................................53
Item 12. Indemnification Of Directors And Officers...............................................................57
Item 13. Financial Statements And Exhibits.......................................................................58
Index To Financial Statements...................................................................................F-1
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All statements, trend analyses and other information contained in this
registration statement regarding markets for our products and trends in net
revenues, gross margin and anticipated expense levels, and any statement that
contains the words "anticipate," "believe," "plan," "estimate," "expect,"
"should," "intend" and other similar expressions, constitute forward-looking
statements within the meaning of the federal securities laws, relating to, among
other things, our future prospects and financial performance, expansion plans,
business strategies and their intended results. Individuals considering an
investment in the Company are cautioned that these forward-looking statements
are subject to business and economic risks, including those risks identified in
"Risk Factors" and elsewhere in this registration statement and our actual
results of operations may differ significantly from those contained in the
forward-looking statements because of those risks. The cautionary statements
made in this registration statement apply to all forward-looking statements
wherever they appear in this registration statement.
ITEM 1. BUSINESS
OVERVIEW
We develop Internet-based technology products that enable
business-to-business electronic commerce, or B2B e-commerce, intended for the
global perishable products industries. Our B2B e-commerce products include a
broad range of Internet-based technology including basic Internet storefronts
for advertising, e-mail and messaging tools for communications, basic websites
with information content, and complex trading systems that enable our customers
to buy and sell product in a secure e-commerce network. Our core business model
involves the aggregation of our B2B e-commerce products into an Internet-based
environment, which we refer to as a Global Trade Community. Our Global Trade
Community Floraplex(TM) enables our customers within the worldwide floriculture
vertical supply chain to utilize the Internet to execute commercial
transactions, access industry information and, access communication tools. Our
Global Trade Community FreshPlex(TM), which is in the development stage, is
designed to enable customers within the worldwide produce vertical supply chain
to utilize the Internet to execute commercial transactions, access industry
information, and access communication tools. Our Global Trade Communities
consist of proprietary and licensed software, hardware and the related technical
services necessary to support our customers that are executing transactions with
the implementation and use of our Global Trade Communities. Our Global Trade
Communities are designed to be the Internet-based conduit for our customers to
interact and transact business online.
Through our wholly-owned subsidiary, World Commerce Online-Floraplex, Inc.,
we designed and implemented our first Global Trading Community, Floraplex(TM)
for the global floriculture industry. Our trading system products in Floraplex
include the Flower Purchase Network(TM), Tradelink(TM), the Supply Purchase
Network, Floramall(TM), and Florashops.com(TM). (See "Products and Services").
As of December 31, 1999, Floraplex was fully operational and was the only
product offering from which we have derived revenue in 1999 under our B2B
e-commerce business model. Through our wholly-owned subsidiary, World Commerce
Online-FreshPlex, Inc., we have designed our second Global Trading Community,
FreshPlex(TM), for the global fresh produce industry. FreshPlex is still in the
development stage. We anticipate that the information and communication product
components of FreshPlex will be operational in the second quarter of 2000 and
the trading system will be operational in the third quarter of 2000. We
anticipate that FreshPlex will generate revenue in 2000. We believe Floraplex
and FreshPlex will provide significant benefits to supply chain participants and
industry professionals, by creating efficiency and improving the effectiveness
of sales, marketing and distribution of perishable products.
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We believe the worldwide perishable products industries are well-suited for
our Global Trade Communities due to the following characteristics:
- Highly fragmented market of buyers and sellers;
- Large transaction volumes;
- Inefficiencies in the supply chain and related cost structure;
- Large variety of non-homogeneous products;
- The time-sensitive nature of perishable products with regard to the
relationship between quality and pricing;
- Large number of buyers and sellers; and
- Highly fragmented industry information, including product varieties
and pricing.
Our B2B e-commerce business model was initiated in September 1998. Our
operating history and financial results prior to that time were reflective of
our previous business model including the import and resale of fresh cut flowers
and the development of Internet web-sites. Our B2B e-commerce business model is
based upon three primary sources of revenue including transaction fees,
advertising revenue, and subscription fees. (See "Revenue Model" for a detailed
description of these revenue sources.) The B2B e-commerce industry is a highly
competitive market. We believe that in order for our business to be competitive
in this market we must focus on the following objectives:
- develop and sustain technology products that are functional and
scalable;
- retain personnel with applicable professional experience in the
perishable products markets globally;
- establish contractual relationships with supply chain participants
with significant annual revenue, market share, or customer base and/or
with operating capabilities or geographic reach;
- establish our brands including Floraplex and FreshPlex; and
- integrate logistics and financial payment systems technology to
enhance our overall product value.
We have incurred significant losses since our inception and we anticipate
that we will continue to incur net losses for the foreseeable future.
INDUSTRY BACKGROUND
THE INTERNET AND E-COMMERCE
The Internet has emerged as potentially the most significant force in
global commerce, communication and information for businesses as well as
consumers. International Data Corporation, or IDC, estimates the number of
Internet users will grow from nearly 150 million at the end of 1998 to
approximately 500 million by 2002. The dramatic increase in the number of users
as well as the enhanced sophistication of content and capability have
transformed the Internet from a one-dimensional medium for information and
marketing to a complex tool for conducting business and facilitating
communication. The evolution of Internet acceptance and functionality parallels
the shift of the medium as primarily a tool for business-to-consumer, or B2C,
interaction and commerce to a business-to-business, or B2B, model that offers
business organizations significant strategic opportunities. The strategic
opportunity for B2B e-commerce includes the ability of a business to leverage
resources to reach a global customer base, deliver customized content and open
new or expand existing channels of connectivity for distribution and sourcing.
In addition, B2B e-commerce enables companies to
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streamline complex, often manual, processes, lower costs, and enhance
productivity. The following highlights are indicative of the significant growth
projected for e-commerce:
- According to IDC, B2B e-commerce is projected to grow to $1.5 trillion
by 2003.
- According to Jupiter Communications, Internet advertising expenditures
are expected to grow from an estimated $1.9 billion in 1998 to $7.7
billion in 2002 while B2B advertising is projected to grow from just
under $300 million in 1998 to $2.6 billion in 2002.
B2B e-commerce impacts the fundamental business practices of an enterprise.
B2B e-commerce SOLUTIONS alter the nature of business relationships with
suppliers, partners, customers and, frequently, competitors. In addition, the
B2B e-commerce SOLUTION often represents significant automation to processes and
workflows that were traditionally paper-based and phone-based practices. The
magnitude of the B2B e-commerce transformation on a business operation is
heavily influenced by the level of requisite integration of the B2B e-commerce
technology with the business' existing information systems. The integration
process introduces elements of complexity, cost and timing that will be affected
by the relative sophistication of the business participant. B2B e-commerce
integration and transformation inherently requires training of personnel and
provision of an ongoing customer service capability. The adoption, selection and
implementation of a B2B e-commerce technology represents a significant strategic
decision and level of commitment for a business. Consequently, we believe the
costs of switching to an alternative B2B e-commerce SOLUTION would likely be
high.
B2B e-commerce models are being introduced in a large number of industries.
We believe that the B2B e-commerce technology designed to provide measurable
value by providing competitive advantage and the opportunity of improved
automation, reduced costs and increased productivity has the greatest potential
for acceptance and adoption. We believe the potential adoption rate will be
greatest in industries characterized by a highly fragmented network of supply
chain participants, an inefficient supply chain with related inefficient cost
structure, large transaction volume, a large number of buyers and sellers and a
high level of user acceptance of the Internet or desire to be Internet-enabled.
THE FLORICULTURE MARKET
The estimated $150 billion global floriculture market encompasses the
production, distribution and marketing of fresh cut flowers and greens, bulbs,
bedding plants, perennials, trees, potted plants, bouquets and other
consumer-ready products and floral-related hard-goods, including vases,
glassware, foam, tools, and supplies. Through a network of growers,
manufacturers, importers, brokers, and wholesalers, flowers are delivered from
growing regions around the world to retail florists and mass-market distributors
such as supermarkets and discount stores. The estimated $150 billion global
floriculture market represents the cumulative transaction volume at each B2B
supply chain segment (e.g., grower to wholesaler) as well as the B2C volume
(retailer to consumer). The global market is comprised of the following three
geographic markets:
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ESTIMATED ESTIMATED
MARKETS % SUPPLIED TO
MARKETS SIZE(7) SUPPLIERS GEOGRAPHIC MARKET
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Europe(1) $98B Holland(4) 40%
Germany(4) 15%
Africa(5) 10%
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Middle East(5) 14%
Italy(6) 9%
Spain(5) 5%
Denmark(6) 5%
Colombia & Ecuador(5) 2%
Americas(2) $30B Colombia(5) 70%
Ecuador(5) 12%
Holland(5) 13%
Caribbean & other
Latin America(5) 5%
Asia(3) $22B Thailand(5) 23%
Taiwan(5) 16%
New Zealand(4) 15%
China(4) 14%
Singapore(5) 9%
Other(4) 23%
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(1) The vast majority of supply in the European market is channeled through the
auction system in Holland. The auction system is a unique component of the
European market providing logistics functions and financial credit and
payment services. The auctions are sales cooperatives that are associations
of Dutch growers.
(2) Over 85% of product supply imported into the U.S. is handled through
importers in Miami, Florida on a consignment basis.
(3) The significant majority of product produced in these markets is consumed
within the market of origin.
(4) Broad range of floriculture products.
(5) Primarily fresh cut flower product.
(6) Primarily potted plants (shrubs/trees).
(7) Estimates based upon data from the Association of International Producers
of Horticulture - Union Fleurs 1998 yearbook (Volume 46), edited by the
University of Hannover, the 1999 yearbook of the Dutch Flower Council
titled MartData 1999, and the 1996 Floriculture and Environmental
Horticulture Briefing Room report updated as of May 1999 issued by the
Economic Research Service of the United States Department of Agriculture
primarily pertaining to production and consumption of cut flowers and
potted plants. Estimated market data includes estimates for hardgoods,
bulbs, and other floriculture based upon referenced data sources and
information supplied by Hortimarc B.V., a horticulture consulting firm in
Holland.
At each stage of the distribution chain, the pricing of cut flowers varies
both with supply and demand, as well as quality and freshness. Inherently, fresh
products have to be sold or at least delivered to a buyer immediately after
harvesting. In Europe this problem is addressed by the auction system using a
clock as the pricing mechanism between demand and supply. Growers deliver their
products to the auction where the products are sold `at the clock'. The auction
system essentially guarantees that nearly all offered products are sold although
the price can vary enormously. In the Americas, growers, like Colombian and
Ecuadorian growers, send a significant majority of their products on consignment
to the buyers/importers in Miami with the expectation that the market will
generate a fair price dependant upon conditions of supply or demand. Generally,
the freshest, most consistent and highest-quality flowers command the highest
prices. A key contributing factor impacting prices is brand recognition relative
to the grower as well as the growing region. Thus, the distribution system
effectively rewards the growers that produce the best product, the importers and
brokers that clear and match product with buyers most efficiently, and the
wholesalers and bouquet-producing companies that distribute product most
effectively while efficiently bringing a quality product to market.
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The distribution channel in the floriculture industry is highly fragmented.
The majority of suppliers are small, family-owned farms that operate from a
single location or from a small number of outlets in a single region. However,
in the Americas market we estimate that more than 50% of the imported product in
fresh cut flowers is grown or distributed by two corporate operations, including
Dole Fresh Flowers and U.S.A. Floral Products Inc. Floral products have
historically been sold at retail through a large number of traditional retail
florists. Currently, more consumers have begun to purchase floral products from
mass-market retailers such as supermarkets, discount retailers and chain stores.
According to estimates of the Floral Index, a floral product marketing company,
pertaining to 1999 (as published in the January 2000 issue of Flowers &
Magazine, a publication by Teleflora, one of the worlds largest wire service
companies) sales in the retail segment of the U.S. floriculture industry
totaled approximately $15 billion in 1999, of which $7 billion is fresh cut
flowers, with mass-market retailers generating approximately 50% of the retail
sales.
The floriculture industry is built on production cycles, not on
traditional, market-driven sales operations. An increasing number of growers are
producing product year around, in part, to mitigate the impact of seasonality on
their operations and achieve standardized quality for their buyers. The current
supply chain utilizes telephones and facsimiles to execute transactions. Growers
or importers fax their offerings to existing and prospective wholesale and
retail clients. These faxes include product types, volumes offered and sales
prices desired. The fax is followed up by a call in which the salesperson
reviews the product offerings and attempts to get the wholesaler or retailer to
buy the product. Because of the current communication process, many growers are
not knowledgeable of consumer demand levels and market information. The window
of time to execute transactions between importer and wholesaler is approximately
5-6 hours per day, due to current logistics constraints and a lack of available
information, which makes planning and forecasting difficult. Once the sale is
made, the logistics carrier is notified and the product is either picked up or
delivered to the carrier's refrigerated trucks. We estimate that 12-15% of
imported flowers sold are sold direct by the growers to wholesalers or
retailers.
THE PRODUCE MARKET
The estimated $550 billion global produce market encompasses the
production, distribution and marketing of bulk fresh produce, value-added fresh
produce products (fresh-cut salads, baby peeled carrots, etc.) and supplies and
services for the fresh produce industry. Through a network of growers, packer/
shippers, importer/exporters, brokers, wholesalers and transportation companies,
fresh produce is brought from growing regions around the world to food service
establishments and retail grocers. The estimated $550 billion global produce
market represents the cumulative transaction volume at each B2B supply chain
segment only (e.g., packer/shipper to wholesaler). The global market is
comprised of the following four geographic markets:
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ESTIMATED ESTIMATED
MARKETS % SUPPLIED TO
MARKETS SIZE(7) SUPPLIERS GEOGRAPHIC MARKET
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North America(1) $215B(5) Domestic 70%
Imported 30%
Latin America(2) $ 35B(6) Domestic 80%
Imported 20%
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ESTIMATED ESTIMATED
MARKETS % SUPPLIED TO
MARKETS SIZE(7) SUPPLIERS GEOGRAPHIC MARKET
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Europe(3) $215B(6) Domestic 60%
Imported 40%
Asia(4) $ 85B(6) Domestic 85%
Imported 15%
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(1) The majority of the product supply for North America originates from 10
states primarily in the Western and Southern United States. During the
winter months, product is imported from countries in the Southern
Hemisphere, including Mexico (50%), other Latin American countries (40%)
and Europe (including The Netherlands, Spain and Israel) (10%).
(2) The majority of product supply for Latin America is grown domestically.
Product that is not grown domestically is imported from the United States
or Canada.
(3) Product that is not provided by countries on the Continent is imported from
Africa, the Middle East, South America and the United States.
(4) China is also a major producer of fresh produce but due to a lack of
distribution infrastructure and unfavorable trade policies, it has not
become a global or even regional supplier.
(5) North American estimates based upon data in the 1999 Fresh Track report
published by the Produce Marketing Association, the 1992 Census of
Agriculture published by the National Agricultural Statistics Service (part
of the USDA), and the 1994 report of the Economic Research Service (also
part of the USDA).
(6) Estimates provided by Novelle Consulting, L.L.C. based upon data from
statistical reports of North American market and internal data collection.
The produce industry has experienced significant consolidation in recent
years, including both retail as well as supply, and is a highly competitive
industry. Buyers have increasingly more responsibilities and sellers are finding
the need to become year-round, multi-national suppliers in order to serve their
customers' needs and thereby retain their customers' business.
Most produce items are very time and temperature sensitive. Consequently,
the supply chain contains a complex distribution/logistics system to get the
product from farm level to consumers around the world. Almost all produce is
shipped to a distribution center before being sent to a retail location.
The produce industry is built on supply and demand curves. These market
dynamics create wide fluctuations in market prices and provide a business
atmosphere in which up-to-date information that is easy to access and use is a
critical strategic tool.
THE OPPORTUNITY
We believe there is a significant need for a neutral, Internet-based B2B
e-commerce solution for the global perishable products industries, bringing
buyers and sellers together in a single trading system to execute transactions
online. In addition, we believe there is a significant need for a consolidated
information source providing current industry knowledge relative to the
worldwide markets and educational resources.
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The fragmentation and complexities of the global perishable products
industries and the current paper-based, telephone-based buying processes provide
the core opportunity for a B2B e-commerce solution that seamlessly links
suppliers with buyers of perishable product. To be an effective solution meeting
the needs of supply chain participants, a solution must be cost-effective,
easily implemented and maintained, enable the business to sustain existing
buying policies, offer opportunities for increased access to suppliers and
customers and must represent minimal disruption to the existing trading model.
We believe it is critical that the B2B e-commerce solution offer an impartial
and fair environment for buying and selling with adequate and accurate product
pricing data and product descriptions.
OUR SOLUTION
Our Global Trade Communities are the Internet-based marketplace for the
global perishable products industries facilitating interactions and transactions
by our customers. We utilize Internet-based technology, our management's
industry experience, and relationships with industry participants with
significant annual revenue, market share, or customer base geographic reach, or
organizational capabilities in marketing, sales, or distribution to provide a
B2B e-commerce trading system designed to enhance sales and marketing
productivity, reduce costs, increase customer access, increase supply chain
efficiency (i.e. order and fulfillment cycles) and meet user demand for online
trading capability. We assist our customers in using the Internet for B2B
e-commerce in a secure Internet-based trading environment. Our Global Trade
Communities provide our customers with the ability to utilize the Internet for
expanded access to new and existing customers and suppliers globally, and enable
them to conduct B2B e-commerce.
BENEFITS TO OUR CUSTOMERS
We believe our Global Trade Communities provide our customers with the
following potential benefits:
- Increased product quality based upon the enhanced supply chain
efficiency and effectiveness providing growers with opportunities for
improved profitability;
- Single site access to multiple suppliers and buyers, permitting
efficient product procurement and expanded sourcing;
- New market access and global reach providing cost effective strategic
growth opportunities without the impediment of geographic boundaries;
- 24 hour/7 day access to "available for sale" inventory expanding the
window of time for procurement processes;
- Internet-based, automated, order processing should reduce error and
discrepancy rates, increase process efficiency through access to
expanded supply scheduling, and decrease dependency on and cost of
traditional telecommunication tools;
- Paperless record of transaction histories and communications,
providing enhanced demand forecast analysis and reorder capability;
- Increased human resource productivity by eliminating manual
interactions (phone and fax) and creating excess capacity for human
capital allocation;
- Reduced marketing costs by allowing targeted marketing campaigns
online (i.e. e-brochures) and utilization of less expensive mediums
for supplementary advertising;
- Opportunity for increased market share from existing and expanded
customer base due to ease of operating system and online features;
- Stronger business relationships from the enhanced connectivity within
a more efficient supply chain;
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- Improved logistics, inventory management and production processes
relating to reduced spoilage and improved production scheduling and
forecasting;
- Enhanced profitability potential from expanded revenue opportunity and
increased productivity of personnel;
- Increased access to comprehensive global industry news, daily, weekly
and monthly features, as well as the year-long calendar of industry
events and registration; and
- Convenient, online messaging, teleconferencing and real time audio and
video.
STRATEGY
Our goal is to be the B2B e-commerce solution for the global perishable
products industries, providing an Internet-based technology utility, which
facilitates global trade and, provides a centralized online resource with
communication capability and consolidated industry information relative to
global markets and educational tools. We intend to capitalize on our technology
and market position to establish the standard for global B2B e-commerce in the
perishable products industries. To accomplish our goals, we are pursuing a
strategy built on the following initiatives:
TARGET THE LEADERS IN THE FLORICULTURE AND PRODUCE SUPPLY CHAIN TO ACHIEVE
ACCEPTANCE AND ADOPTION
We believe successful execution of our B2B e-commerce business model must
begin with acceptance and adoption by the supply chain participants with
significant market share, customer base or annual revenues, with significant
scale in sales and marketing capability or distribution capacity, or with large
multi-national or national operations, which we consider collectively as
industry leaders. We displayed and demonstrated a prototype of the Floraplex
products and business model at the Wholesale Florist & Florist Suppliers of
America trade show in January 1999 and displayed a prototype of the FreshPlex
product and business model at the Produce Marketing Association trade show in
October 1999. Since their introductions we have entered into agreements with
supply chain participants including the Flower Auction Aalsmeer and Flower
Auction Holland, two of the largest auctions in Holland, with Dole Fresh
Flowers, the largest grower of fresh cut flowers worldwide, and with Charles
Kremp and the Kremp Network, a network of some of the largest retail florists in
the U.S. We are seeking to expand our penetration into other leading
organizations at each component of the supply chain in each geographic market
for floriculture and produce. We are continuing to expand our sales force. Our
sales and marketing programs are intended to attract the most influential
organizations or network of organizations at each component of the supply chain
to promote our B2B e-commerce products to their customers and suppliers and to
develop our brand. These programs include our `hub and spoke' strategy which
targets the large regional wholesale florists to promote our B2B e-commerce
products to their customer base, the retail florist, and promote product
purchases from the wholesaler through our trading systems.
ESTABLISH FLORAPLEX AND FRESHPLEX AS LEADING BRANDS FOR B2B E-COMMERCE.
We plan to establish Floraplex and FreshPlex as the industry standard for
B2B e-commerce relative to product quality and operational effectiveness in the
global perishable products marketplaces. We plan to achieve significant
penetration among the leading supply chain participants in our targeted
perishables product industries by promotion of our brands. We believe the
combination of strong brand awareness, the functionality of our Global Trade
Communities, and our customer base and strategic alliances will create
competitive advantage in our market.
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BUILD STRATEGIC ALLIANCES TO STRENGTHEN MARKET POSITION.
We have established and will continue to develop agreements with capital
investors, leading supply chain participants, technology providers,
Internet-based companies, logistics providers, and financial services
organizations to accelerate acceptance and adoption of our Global Trade
Communities and expand our global reach. During 1999 and as of March 31, 2000,
we entered into the following agreements which we view as strategic alliances.
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- Capital investors Interprise Technology Partners, L.P.
- Supply chain participants - Floraplex
Europe Flower Auction Aalsmeer
Flower Auction Holland
Americas Dole Fresh Flowers
Wholesale Florists and Florist
Suppliers of America
International Floral Distributors
Charles Kremp III
Premier Floral Distributors
- Supply chain participants - FreshPlex Novelle Consulting, L.L.C.
- Technology providers AnswerThink Consulting Group, Inc.
Netera, Inc.
- Financial services eCredit.com Inc.
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We will continue to selectively pursue strategic relationships with other
leading supply chain participants, Internet technology providers, Internet
service providers, web site developers and systems integrators, as well as
strategic investors. Our strategic alliances will focus on complementary
Internet-based products as well as products complementary to our targeted
supply chains including logistics and financial payment systems. We believe
these relationships will accelerate the adoption and penetration of our B2B
e-commerce solutions, increase our brand recognition and enhance the value of
the supply chain to our customer base.
LEVERAGE FLORAPLEX AND ITS BUSINESS MODEL TO FRESHPLEX AND OTHER GLOBAL
TRADE COMMUNITIES.
We have developed and are implementing a business model and technology
infrastructure for Floraplex. We intend to leverage our technology
infrastructure and business model into subsequent Global Trade Communities,
including FreshPlex during 2000. We believe certain similarities in the
perishable products industries provide us with the opportunity to benefit from
our experience with Floraplex and effectively replicate the technology
development and the sales and marketing operations structure.
CREATE AN INTERNET-BASED SALES AND MARKETING TOOL FOR OUR CUSTOMERS.
We believe a functional goal of our Global Trade Communities is to provide
our customers with a secure Internet-based system that significantly enhances
their sales and marketing capabilities. A critical element to achieving our goal
is to have significant industry experience on our management team. Our industry
experience allows us to understand our customers, optimize our relationships
with key supply chain participants, and efficiently meet the functional
requirements of our customer in the development or advancement of our technology
and related B2B e-commerce tools.
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EXPAND AND ENHANCE OUR TECHNOLOGY AND CONTENT TO INCREASE THE VALUE AND
FUNCTIONALITY OF OUR GLOBAL TRADE COMMUNITIES.
We plan to continue to expand and enhance our network content as well as
our Internet-based B2B e-commerce technology to increase performance and
emphasize quality for our customers. We intend to continuously evaluate the
content provided in our information portals and improve or expand the
information to promote quality as well as relevance to our global customer base.
Further, we will evaluate our existing infrastructure of hardware and software
on an ongoing basis to assess performance and customer demand, as well as
identify current advancements in technology that may enhance the quality of our
products or the integration of our customer's or strategic partner's
technology.
INTEGRATE LOGISTICS AND FINANCIAL SERVICES IN OUR TRADING SYSTEMS TO
ENHANCE THE VALUE OF OUR GLOBAL TRADE COMMUNITIES.
We believe the B2B e-commerce trading system for the global perishable
products industries must provide customers with the ability to access logistics
services for efficient and cost effective product movement and financial
services for enhanced payment options and timely credit information. In 1999, we
executed an agreement with an Internet-based technology provider to facilitate
financial services between supplier and wholesaler in the Americas market
segment of Floraplex. We will continue to pursue arrangements and strategic
alliances with providers of technology or services specializing in logistics
fulfillment as well as financial services.
REVENUE MODEL
FLORAPLEX
- TRANSACTION FEES: In the year ended December 31, 1999, we earned
revenue from the seller in each transaction conducted within Floraplex
with transaction fees ranging from 2% to 8% of the transaction order
value. The percentage varies based upon a sliding scale of total
transaction volume conducted within a specified time period. We intend
to earn revenue from transactions between retailers and end consumers
by charging the retailer a flat fee for each transaction and a fee
equal to 5% of the transaction order value.
- ADVERTISING REVENUE: In the year ended December 31, 1999, we earned
revenue from advertising fees paid by business enterprises wishing to
reach our customers. Business enterprises are charged varying rates
for advertising space through banner displays and "click-through"
advertisements. Floraplex provides a concentration of industry
participants which we believe provides significant opportunity for
cost efficient and effective targeted marketing for a business seeking
to reach our customers. We also earned revenue from advertising fees
paid by our customers who utilize our web-marketing products and
services. We anticipate that our revenue opportunities from
advertising will continue to expand as we pursue affinity marketing
arrangements and strategic sponsorship agreements.
- SUBSCRIPTION FEES: In the year ended December 31, 1999, we earned
revenue from subscription fees paid by our customers for access to
Floraplex. Subscription fees are determined according to the nature of
a customer's participation and the number of subscribers. Customers
generally will be charged $9.95 per month for access to the
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information and communication portal and $99 per month for access and
participation in the trading systems.
FRESHPLEX
- TRANSACTION FEES: We intend to earn revenue from both the buyer and
seller in each transaction conducted within FreshPlex based upon a
charge per carton which approximates fees ranging from 1% to 2% of the
transaction value. In addition, we plan to earn revenue from
transactions involving industry suppliers such as fertilizer or
pesticide producers with transaction fees ranging from 3% to 5% of the
transaction value.
- ADVERTISING REVENUE: We intend to generate revenue from advertising
fees in substantially the same manner as Floraplex.
- SUBSCRIPTION FEES: Subsequent to development of the portal component
of FreshPlex, we intend to earn revenue from subscription fees paid by
our customers for access to FreshPlex. Subscription fees are
determined according to the nature of a customer's participation and
the number of subscribers.
We did not earn revenue from any source relative to FreshPlex in the year
ended December 31, 1999.
TECHNOLOGY
We have developed and implemented a broad array of technologies using a
combination of proprietary technologies and commercially available, licensed
technologies. Approximately 60% of the technology we currently use is licensed
technology; the remaining 40% is proprietary technology. Our current strategy is
to license commercially available technology whenever possible while also having
internal resources capable of systems development and third party development
arrangements. We expect that commercially licensed technology will continue to
be available at reasonable costs.
We developed the majority of our applications using the Microsoft
Development Suite tools. This allows our customers to buy and sell product over
the Internet quickly and easily. In addition, we developed an XML application
available in our trading systems which allows our customers to upload their
available inventory and other pertinent business information into our trading
system as well as download inventory and sales data.
Our web-marketing products incorporate advanced software applications to
enable Internet-based promotions through banners, direct e-mail programs,
electronic brochures and electronic catalog distribution with interactive
ordering capability.
Scalability. The scalable structure of our hardware and software allows for
rapid deployment of our Global Trade Community framework to new geographic
markets or industries while maintaining desired user performance standards. In
the rapidly changing Internet environment, the ability to update an application
to stay current with new technologies is critical. The system's base technology
and database design allow for the addition, modification, or replacement of Web
site based applications in a cost-efficient and expeditious manner.
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Reliability and Security. Our Web server architecture is redundant with no
single point of failure. All components of the system architecture, both
software and hardware, are duplicated. Under normal operations both sets of
components operate. In the event that one component fails the duplicate
component will seamlessly provide all system support required for uninterrupted
operation.
We use CheckPoint Firewall-1 software to protect our Web servers. Our Web
server production machines are located at the facilities of SunGard Data
Systems, Inc. in Philadelphia, Pennsylvania. SunGard provides professional data
center hosting facilities and redundant high-speed Internet connectivity.
SunGard also provides monitoring and support 24 hours a day, seven days a week
supplementing our own system administrators. We encrypt all data internally and
externally using DES encryption, Secure Socket Layer, and the Hyper-Text
Transmission Protocol Secure browser protocol.
Our existing infrastructure for Floraplex has the system capacity for
approximately 1 million transactions per day relative to trading activities and
for 3 million discrete hits per week relative to overall usage of our aggregate
B2B e-commerce products. Our current transaction usage is less than 1% of
capacity on a daily basis and we are experiencing approximately 200,000 hits per
week on our combined systems and sites.
We have developed our own content and Web site management tools to
facilitate the maintenance and updating of our Global Trade Communities. Our Web
site management tools allow our editors to update our Web sites from remote
locations throughout the day.
PRODUCTS AND SERVICES
Floraplex contains specific trading systems for buying and selling tailored
to the different segments of the floriculture supply chain and an information
and communication portal providing comprehensive global industry news and
information and Internet-based communication tools. Our products and services
within Floraplex include:
<TABLE>
<CAPTION>
PRODUCT/SERVICE AREA PRODUCT NAME PRODUCT DESCRIPTION
- -------------------- ------------ -------------------
<S> <C> <C>
Trading Systems Flower Purchase Online trading systems dedicated
Network(TM) to transactions for growers and
Trade Link(TM)(1) importers of floriculture products selling
to wholesalers. Users can build
"available for sale" inventory
listings, schedule their inventory
according to an annual calendar,
browse new buyers, view purchase reports,
and edit purchase points.
Supply Purchase Network Online trading systems dedicated
to transactions for manufacturers
and suppliers of hardgoods selling
to wholesalers. Users can build
"available for sale" inventory
listings, browse new buyers, view
purchase reports, and edit purchase
points.
</TABLE>
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<PAGE> 15
<TABLE>
PRODUCT/SERVICE AREA PRODUCT NAME PRODUCT DESCRIPTION
- -------------------- ------------ -------------------
<S> <C> <C>
Floramall A trading system specifically
tailored for product sales by
the wholesaler to the retailer,
providing 24-hour online sales
of product. Product enhancements
include tools designed to enhance
marketing capabilities including
product catalogs and e-brochures.
Technology tools also provide
wholesaler with the ability to load
'available for sale' inventory. Wholesale
florists can also pre-allocate
inventory for regular buying customers.
Florashops.com Primarily a trading system to
facilitate the retailer link
into Floramall and trading
activities with the wholesale
florist. Specifically the
product enables transactions by
retail florists to consumers. A
dedicated search engine allows
consumers to actively seek and
find retailers by location or
desired product.
Information Floraplex Website with global industry news
content (including features, profiles,
letters to the editor), calendar of
industry events, USDA market reports,
education links, product library and
breeder's showcase, web-casts, membership
directory, and general world news content.
Communications Floraplex `Web-based' tools for industry contact and
communication providing e-mail system,
chat rooms, and message boards.
</TABLE>
- --------------------
(1) Trading system originally built for the Americas market. We plan to merge
our global trading systems technology as a single platform under the Flower
Purchase Network.
The FreshPlex products and services are currently in the development stage.
We anticipate the component parts of FreshPlex will consist of the same products
and services as Floraplex excluding a B2C component similar to Florashops.com.
Due to the nature of the produce market, we intend for the FreshPlex trading
system to be a single product that incorporates all the participants in the
supply chain from the grower to the retailer. We intend to have the information
and communication product components of FreshPlex available in the 2nd quarter
of 2000 and the first version of the trading system available beginning in the
3rd quarter of 2000.
STRATEGIC ALLIANCES
We have agreements which we view as strategic alliances with Interprise
Technology Partners, Flower Auction Aalsmeer, Flower Auction Holland, Dole Fresh
Flowers, Wholesale Florists and Florist Suppliers of America, Charles Kremp III,
International Floral Distributors, Premier Floral Distributors,
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<PAGE> 16
Novelle Consulting, L.L.C., AnswerThink Consulting Group, Inc., Netera, Inc. and
eCredit.com, Inc. We intend to enter into additional arrangements we deem
strategically important with supply chain participants that are leaders relative
to annual revenue levels, customer base, or market share, geographic scale or
operational capability, as well as with technology companies, logistics
companies, and financial services companies with leading technology
capabilities, global reach or service expertise to accelerate market acceptance
of our products and services and to expand and enhance the value of our Global
Trade Communities. We believe strategic relationships can increase our brand
recognition and improve access to our target customer base.
INTERPRISE TECHNOLOGY PARTNERS
In February 1999, we executed an offering of 4,000,000 shares of Series A
convertible preferred stock funded entirely by Interprise Technology Partners,
or ITP, for approximately $8 million. In October 1999 we executed an offering of
5,000,000 shares of Series B convertible preferred stock lead by ITP for
approximately $20 million of which ITP provided 25% of the funding. In addition
to capital funding, ITP provided introductions to AnswerThink Consulting Group,
Inc. and Netera Inc., an investment of ITP. See "Description of Registrant's
Securities" and "Certain Relationships and Related Transactions."
FLOWER AUCTION AALSMEER
In December 1999, we reached a cooperative agreement with Flower Auction
Aalsmeer, or the VBA, the world's largest flower and plant auction with
estimated annual sales of $1.5 billion. The VBA is a cooperative organization
owned by Dutch growers providing three key supply chain services, product
trading through an auction system, logistics, and a payment system for growers.
Our agreement provides for the utilization of Floraplex and specifically our
trading system technology for transactions between growers and the
exporter/wholesaler buyers by the VBA at an agreed upon transaction fee rate. We
believe this relationship represents an opportunity for revenue as well as an
important step in the evolution of the auction system in Holland. Under this
agreement, the VBA will continue to provide their payment system and logistics
services for product purchased on Floraplex.
FLOWER AUCTION HOLLAND
In October 1999, we entered into an agreement to implement Floraplex at the
Flower Auction Holland, or BVH, the second largest auction in Holland with
estimated annual sales of $1.4 billion. The BVH is a cooperative organization
owned by Dutch growers providing the same supply chain services as the VBA. Our
agreement targeted the sale of cut flowers occurring prior to auction and
required that we conduct a pilot test of our Floraplex trading system. The BVH
was required to affirm the successful completion of the test, commercially and
technically, in order for the application of transaction fees at agreed upon
rates to become effective. In November 1999, we began the pilot project. The
pilot program was completed in February 2000 and we received written notice from
BVH confirming the successful test. In connection with the ongoing agreement,
BVH will continue to provide their finance and logistics services.
DOLE FRESH FLOWERS
In December 1999, we entered into a strategic agreement with Dole Fresh
Flowers, the floriculture division of Dole Food Company, a produce and
floriculture company with estimated annual sales of $5 billion, to integrate
Floraplex as their preferred B2B e-commerce solution and provide training,
systems
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<PAGE> 17
operation materials, cost benefit analyses and discounted rates on our web
marketing products. Under the two year agreement we will conduct cooperative
marketing efforts targeting Dole's primary customer base to promote Floraplex as
the industry standard for B2B e-commerce and as a web-marketing opportunity.
Dole provides an estimated 25% of the fresh cut flower supply in the Americas
market and is the largest single grower in the world.
As part of our agreement, we issued Dole a warrant representing the right
to purchase 1,000,000 shares of our common stock at an exercise price of $7.50
per share. See "Description of Registrant's Securities."
WHOLESALE FLORISTS AND FLORIST SUPPLIERS OF AMERICA
In January 1999, we entered into an agreement with WF&FSA in which we
developed their Internet web-site in return for which WF&FSA promoted Floraplex
exclusively to its approximately 800 members. WF&FSA includes a membership of
wholesale florists and hardgoods suppliers in the U.S. with annual sales
estimated at $1.5 billion.
CHARLES KREMP III
In October 1999, we entered into a strategic alliance with Charles Kremp
III, former Chairman of the Society of American Florists and formerly a member
of the board of the FTD Association, to exclusively promote Floramall and
Florashops.com to retail florists. Specifically, our agreement requires Kremp to
exclusively promote our products to the Kremp Network, a group of large retail
florists throughout the United States. Our strategic alliance with Mr. Kremp is
structured as a three year consulting agreement paying Mr. Kremp approximately
$100,000 annually, paid in quarterly installments. In connection with the
promotional exclusivity with the Kremp Network, we issued Kremp a warrant
representing the right to purchase 250,000 shares of common stock at an exercise
price of $8 per share and 20,000 shares of our common stock.
INTERNATIONAL FLORAL DISTRIBUTORS
In March 1999, we entered into an agreement with IFD to provide their
members with our B2B e-commerce products for selling to retail florists in the
U.S. using the Internet. IFD is an organization of 27 wholesale florists
throughout the U.S. with annual sales of approximately $350 million, or
approximately 10% of the U.S. wholesale market. In connection with this
agreement, we have entered into several agreements with individual IFD members
including Kennicott Brothers, a wholesale florist serving primarily the
mid-western U.S. for more than 120 years, to provide them with our B2B
e-commerce products.
Several members of the IFD purchased 137,500 shares of our Series B
redeemable convertible preferred stock.
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PREMIER FLORAL DISTRIBUTORS
In March 1999, we entered into an agreement with PFD to provide their
members with our B2B e-commerce products for selling to retail florists in the
U.S. using the Internet. PFD is an organization of 7 wholesale florists
throughout the U.S. with estimated annual sales of $80 million. In connection
with this agreement, we have entered into agreements with several members to
provide them with our B2B e-commerce products.
NOVELLE CONSULTING, L.L.C.
We entered into a strategic agreement with the Novelle Consulting, L.L.C.,
a recognized consulting firm of former executives in the global produce
business, to, among other things, develop and assist in the implementation of
the strategic plan and operational structure for FreshPlex.
As part of our agreement, in April 1999, we issued 5,357 shares of our
common stock to Novelle as consideration for services rendered and a warrant
representing the right to purchase 250,000 shares of our common stock at an
exercise price of $12.38 per share. See "Description of Registrant's
Securities."
ANSWERTHINK CONSULTING GROUP, INC.
In July 1999, we entered into a strategic services contract with
AnswerThink, Inc., a leading consulting firm of systems architects and
integrators, to design the integrated technology for our trading systems.
As part of our arrangement with AnswerThink, Inc., in March 2000, we issued
two warrants representing the right to purchase 155,000 and 95,000 shares of our
common stock at an exercise price of $18 per share. See "Description of
Registrant's Securities."
NETERA, INC.
In July 1999, we entered into a strategic services contract with Netera,
Inc., a designer and developer of Internet hardware architectures, to design and
build our Global Trade Communities infrastructure. In November 1999, we
implemented the architectural design and installed our web-server infrastructure
at the SunGard Data Systems, Inc. facilities in Philadelphia, Pennsylvania.
ECREDIT.COM, INC.
In December 1999, we entered into a strategic services arrangement with
eCredit.com Inc. to integrate eCredit's Internet-based financial services
product into Floraplex for the Americas market segment providing Internet-based
sourcing of financial payment and credit services. Our three year agreement is
contingent upon the identification and selection of financial partners
acceptable to us to facilitate the payment system for the grower to wholesaler
transactions. Upon satisfaction of the implementation requirements, we are
committed to specified transaction levels in each of the three years beginning
with fiscal year 2000 at agreed-upon pricing levels. Our minimum commitment
relative to fees per payment transactions processed in an annual period is
approximately $1 million over three years with the third year representing
nearly 60% of the commitment.
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SALES AND MARKETING
Our sales and marketing team includes several individuals who have spent
the majority of their professional careers, in all instances more than 10
years, in the floriculture and produce industries in areas including
supply/production, and distribution. Our industry professionals have assisted in
the overall development, introduction, and implementation of our Global Trade
Communities. The following information regarding our sales and marketing
operations pertains primarily to Floraplex.
We currently sell Floraplex primarily through a direct sales force that is
actively targeting supply chain participants that have the largest annual
transaction volume, or turnover, and are the recognized leaders in the European
and the Americas market segments. As of December 31, 1999, we had 43 full-time
employees in our sales and marketing organization. As of December 31, 1999, we
had 11 full-time employees in direct sales.
Our technical consulting group directly supports our sales and distribution
efforts by providing technical consulting and integration assistance to our
current and prospective customers. As of December 31, 1999, we had 6 full-time
employees in our technical consulting group.
We believe that a high level of customer service and support is critical to
the successful marketing and sales of our Global Trade Communities. We are
building a service and support organization to meet the needs of our customers.
As of December 31, 1999, we had 4 full-time employees in our customer service
and support organization and 6 full-time employees in our product management
organization. We are seeking to hire additional customer service and support
personnel as our customer base grows and as we introduce new products and
services.
To support our sales efforts and actively promote Floraplex and FreshPlex,
we conduct targeted marketing programs. Our marketing programs include an active
public relations campaign, print advertisements, online advertisements, trade
shows, strategic relationships with professional associations within the
industry and on-going customer communications programs. We focus our marketing
efforts on business and trade publications, online media outlets, industry
events and sponsored activities. We participate in a variety of Internet,
floriculture and produce industry conferences and encourage our officers and
employees to pursue speaking engagements at these conferences. As of December
31, 1999, we had 20 full-time employees in our marketing organization.
RESEARCH AND DEVELOPMENT
We recognize that strong product and service development capabilities are a
critical component of our strategic success. We believe the development
capability is essential for enhancing our technologies, developing or
integrating new applications for our Global Trade Communities, and maintaining
our competitiveness. We believe these development capabilities need to represent
internal resource strengths as well as third party providers sourced and
selected based upon criteria such as quality, scalability and strategic fit. We
have invested and intend to continue to invest a significant amount of human and
capital resources in our research and development organization and activities.
As of December 31, 1999, we had 14 full-time employees and 5 third-party
professionals dedicated to our development efforts. Our development team is
primarily focused on developing and enhancing our Global Trade Communities, as
well as developing applications that advance our customer's capability to
integrate their internal systems to our Global Trade Communities, and the
functionality of our information content. We are currently in the process of
developing and integrating
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new technology or updated versions of existing technology into our Global Trade
Communities as part of our planned release of product enhancements in 2000.
Product and technology development expenditures were approximately $7.6 million,
$0.4 million and $0.1 million in 1999, 1998 and 1997, respectively. Our
development costs include expenditures for third-party development and systems
integration organizations. We expect to continue to commit resources to research
and development in the future.
In 1998 and 1997, all expenses for product and technology development were
expensed as incurred. In 1999 we capitalized $4.8 million of our product and
technology development costs as computer software assets to be amortized over 3
years in accordance with the AICPA's Statement of Position 98-1.
COMPETITION
The market for B2B e-commerce and Internet-based ordering and trading is
new, rapidly evolving, and intensely competitive. We expect competition to
increase both from existing competitors as well as new entrants, for various
components of our Global Trade Communities. We face competition from the
following areas:
- Other e-commerce companies;
- Traditional supply chain participants;
- Enterprise software companies that offer or develop an alternative
trading product.
Competition from other B2B e-commerce companies in the produce market
segment is particularly extensive with between 8 to 10 organizations
specifically targeting the U.S. and European supply chains including
domestically; Produce Online, Buyproduce.com, and DTN, and in Europe; World of
Fruit.com and Produce World. Our competition in the B2B component of the
floriculture market segment includes Flower Web, a B2B e-commerce company in
Holland, as well as organizations competing in the domestic B2C component such
as: FTD.com, 1-800-flowers.com, ProFlowers and Gerald Stevens, Inc. Competition
may also include B2C e-commerce companies in markets other than perishable
products seeking expanded revenue sources in the B2B market. We are unaware of
competitors for the Asian market for floriculture or produce that are located in
that market.
We could face further competition in the future from traditional supply
chain participants that enter into B2B e-commerce with an Internet-based trading
system of their own or by partnering with other companies. Traditional
enterprise software companies such as IBM, Oracle, or SAP could in the future
develop and offer a competitive set of products. Additionally, B2B e-commerce
companies currently focused on other industry segments could offer their
products in our targeted industries.
Our current and potential competitors may develop Internet-based trading
products that are superior to our Global Trade Communities and achieve greater
market acceptance. Many of our current and potential competitors have longer
operating histories, greater name recognition, larger customer bases and
significantly greater financial resources as well as technical and marketing
capabilities. These competitors could adopt more aggressive pricing structures,
initiate more aggressive sales and marketing programs and make offers to
customers, strategic partners, employees or third parties with more alternatives
providing complementary supply chain products.
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Consequently, we cannot be certain that we will be able to expand our
customer base and retain our existing customers. We may not be able to compete
successfully against our current or future competitors and competition could
have a material adverse effect on our business, financial condition and results
of operations.
INTELLECTUAL PROPERTY
We rely on copyright, trademark, and trade secret laws, confidentiality
agreements with employees and third parties, and license agreements with
consultants, vendors, and customers to protect our proprietary technology.
Despite such protections, a third party could, without authorization, copy or
otherwise appropriate information from our Global Trade Communities. Our
agreements with employees, consultants and others who participate in development
activities could be breached, we may not have adequate remedies for any breach,
and our trade secrets may otherwise become known or independently developed by
competitors.
We rely upon certain licenses from third parties for the majority of our
content and technology and may be required to license additional technology in
the future for use in managing our Global Trade Communities and providing
related services to our customers. There can be no assurance that these
third-party licenses will continue to be available to us on acceptable terms, or
at all. We do not, however, believe that we are dependent upon any single
licensor of technology or content.
We have applied for numerous trademarks, none of which have been issued to
date. We currently have pending applications for trademarks. Generally, we
cannot protect certain of our Web addresses for our Global Trade Communities as
trademarks due to the fact that they are too generic. The laws of some foreign
countries do not protect our proprietary rights to the same extent as do the
laws of the United States, and effective copyright, trademark and trade secret
protection may not be available in such jurisdictions.
There have been substantial amounts of litigation in the computer industry
regarding intellectual property assets. Third parties may claim infringement by
us with respect to current and future products, trademarks or other proprietary
rights, or we may counterclaim against such parties in such actions. Any such
claims or counterclaims could be time-consuming, result in costly litigation,
diversion of management's attention, cause product release delays, require us to
redesign our products or require us to enter into royalty or licensing
agreements, any of which could have a material adverse effect upon our business,
financial condition and operating results. Such royalty and licensing
agreements, if required, may not be available in terms acceptable to us, or at
all.
SEASONALITY
We anticipate that our revenues and operating results relative to Floraplex
will be subject to seasonality. Specifically, we anticipate that our revenues
and operating results in the third quarter relative to Floraplex will tend to be
lower due to the lack of popular holidays for which floriculture consumption is
increased. Our actual results for the year ended December 31, 1999, the only
period for which results are derived from our B2B e-commerce business model, are
insufficient to indicate the degree of seasonality we may experience. However,
we believe, for instance, that greater than 30% of the annual gross revenue for
the average retail florist in the United States is generated from Valentine's
Day and Mother's Day.
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EMPLOYEES
As of December 31, 1999, we had a total of 95 full-time employees
worldwide. We expect to hire additional employees in 2000. We believe our
relations with our employees are good. Our future success will depend, in part,
on our ability to attract, retain and motivate highly qualified technical, sales
and marketing, and management personnel, for whom competition is intense.
CORPORATE HISTORY AND DEVELOPMENT
- The Floral Foundation, Inc., or FFI, was incorporated in the State of
Florida on March 30, 1994.
- From its inception, FFI conducted limited activities related to
importing fresh cut flowers.
- In July 1996, FFI changed its name to World Commerce Online, Inc.
which we refer to as WCO Florida.
- On August 23, 1989, we were incorporated in the State of Nevada, and
our initial name was "Sunrise Express, Inc."
- On September 10, 1998, we entered into a voluntary share exchange with
the stockholders of WCO Florida, whereby WCO Florida became our
wholly-owned Florida subsidiary.
- Pursuant to the share exchange, we issued 7,020,000 shares of our
common stock to the stockholders of WCO Florida for their 7,020,000
outstanding shares of common stock.
- In September 1998, we changed our name to "World Commerce Online,
Inc." and in March 1999, WCO Florida changed its name to World
Commerce Online-Floraplex, Inc.
- We have acquired all the intellectual property rights and other assets
from World Commerce Online-Floraplex in exchange for the assumption of
its liabilities.
- We have since licensed the technology back to World Commerce
Online-Floraplex.
- We commenced operations of Floraplex in the third quarter of 1999.
- In October 1999, we changed our state of incorporation from the State
of Nevada to the State of Delaware.
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RISK FACTORS
Before you invest in our common stock, you should be aware of various
risks described below and carefully consider these risk factors, together with
all of the other information included in this registration statement, before
you decide whether to purchase shares of our common stock.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, THERE IS LIMITED
INFORMATION UPON WHICH TO BASE AN INVESTMENT DECISION
We did not engage in any operations from the date of our inception
until after our share exchange with World Commerce Online-Floraplex in
September 1998. From September 1998 until we commenced operations of Floraplex
in the third quarter of 1999 we generated no revenue and engaged in only
limited operations including hiring personnel, raising capital and developing
software for Floraplex. As a result of our limited operating history, we have
limited meaningful historical financial data that can be used in evaluating our
business and prospects and in projecting future operating results.
WE HAVE A HISTORY OF OPERATING LOSSES AND CANNOT GUARANTEE THAT WE
WILL EVER BE PROFITABLE
We have incurred annual losses from operations since our inception,
and we expect to continue to incur losses from operations on both a quarterly
and an annual basis for the foreseeable future. We had operating losses of
approximately $12.6 million during fiscal year 1999. At December 31, 1999, we
had an accumulated deficit of approximately $45.6 million. Our business is
still in the development stage, and revenue and income potential from our
business is unproven, making an evaluation of us and our prospects difficult.
There can be no assurance that our revenues will significantly increase or that
we will achieve or maintain profitability or generate cash from operations in
future periods.
DUE TO THE SEASONALITY OF THE FLORAL PRODUCTS INDUSTRY IN THE UNITED
STATES OUR REVENUES MAY BE SUBJECT TO FLUCTUATIONS OR THE RESULTS OF OUR
OPERATIONS MAY SUFFER
Our revenues and operating results may vary from quarter to quarter
due to factors beyond our control. For example, in the domestic floral industry,
revenues and operating results typically tend to be lower for the quarter that
ends on September 30 because none of the most popular floral holidays, which
include Valentine's Day, Easter, Mothers Day, Thanksgiving and Christmas, fall
within that quarter. In addition, the popular floral holiday of Easter
sometimes falls within the quarter that ends on March 31 and sometimes falls
within the quarter that ends on June 30. As a result of this seasonality, our
revenues may fluctuate significantly. In addition, due to the fixed nature of
some of our expenses, fluctuations in revenue due to seasonality may adversely
impact our interim results of operations.
OUR FUTURE GROWTH AND THE GENERATION OF REVENUE DEPENDS ON THE SUCCESS
OF FLORAPLEX
Currently, all of our revenues are derived from Floraplex, and we do
not anticipate deriving any revenues from FreshPlex until the second half of
fiscal year 2000. Floraplex may not achieve the widespread market acceptance
necessary for us to succeed. Failure of Floraplex to operate as anticipated
could delay or prevent its adoption by our customer base. If our targeted
customers do not adopt Floraplex and successfully implement our trading system,
our revenue will not grow significantly and our business prospects will suffer.
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<PAGE> 24
OUR FUTURE EARNINGS WILL BE DECREASED DUE TO THE SIGNIFICANT AMOUNT OF
STOCK OPTIONS AWARDED TO OUR EMPLOYEES AND THE GRANTING OF WARRANTS TO PURCHASE
OUR COMMON STOCK
We have awarded a significant amount of stock options to our employees
and granted warrants to purchase our common stock at exercise prices below
market value on the date of award or grant, for which we have incurred
compensation expense. For fiscal year 1999, we incurred in the amount of
$2,828,369 in connection with stock options awarded to our employees and the
grant of warrants to purchase our common stock. Our earnings have been
decreased by the corresponding amount of compensation expense. We anticipate
that we will incur additional expense in the amount of $5,378,825 for the
fiscal year ended 2000, $3,297,265 for the fiscal year ended 2001, $1,746,265
for the fiscal year ended 2002 and $275,292 for the fiscal year ended 2003. Our
earnings will be decreased by the corresponding amount of compensation expense
in each of the stated fiscal years. We also may compensate our employees with
stock options or grant warrants to purchase our common stock at exercises prices
below market value in the future which will have a dilutive effect on our
earnings.
OUR DEPENDENCE ON THIRD PARTIES TO SUPPLY OUR TRADING SYSTEMS WITH
PRODUCT AND PRODUCT VARIETY MAY ADVERSELY AFFECT OUR BUSINESS OPERATIONS
Our success depends on the availability of product and product variety
in our trading systems. We must convince suppliers, including growers,
manufacturers and wholesalers that our trading systems provide a more efficient
means to sell their products. If we fail to convince suppliers to sell their
products through our trading system or if a significant number of suppliers do
not maintain and increase their offered inventory of product, use of our
trading systems and our revenues will decrease.
OUR SALES AND MARKETING STRATEGY HAS NOT BEEN TESTED AND MAY NOT
RESULT IN SUCCESS
Our sales and marketing efforts have been largely untested in the
marketplace, and may not result in sales of our products and services. To
penetrate our market, we will have to exert significant effort and incur
significant costs to create awareness of, and demand for, our Global Trade
Communities. We anticipate our cash-based costs for executing our sales and
marketing strategy in 2000 will exceed 1999 cash expenditure levels by
approximately 25%. Our failure to further develop our sales and marketing
capabilities and successfully market our Global Trade Communities could have a
negative effect on our business.
OUR STRATEGIC RELATIONSHIPS MAY COMPROMISE THE PERCEPTION THAT WE
PROVIDE A NEUTRAL AND IMPARTIAL TRADING COMMUNITY, WHICH WOULD HAVE A NEGATIVE
IMPACT ON OUR REVENUES
To the extent that we are perceived by our customers as favoring one
supplier over another, customers may lose confidence in our Global Trade
Communities as an impartial trading community and choose alternative means to
purchase and sell their products. The perishables product markets consist of
complex relationships among growers, manufacturers, wholesalers and retailers.
Adoption of our Global Trade Communities by our customers is dependent on their
perception that we provide a neutral, impartial trading community to buy and
sell perishable products. Any bias, whether perceived or actual, could have a
negative impact on our ability to maintain or increase our customer base
resulting in reduced revenues and therefore having a negative impact on our
business.
MARKET COMPETITION AMONG OUR EXISTING AND POTENTIAL COMPETITORS MAY
ADVERSELY AFFECT OUR BUSINESS
Increased competition may result in lower revenues due to transaction
fee reductions and loss of market share. Our existing and potential competitors
may develop superior Internet trading systems
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<PAGE> 25
that achieve greater market acceptance than our products. We cannot assure you
that we will be able to compete successfully or that competitive pressures will
not adversely affect our business. We compete with both traditional distribution
channels including 1-800-Flowers.com, Inc., FTD.com, Inc., and Gerald Stephens,
Inc. as well as other e-commerce companies and enterprise software companies
that offer or develop alternative trading products such as IBM, Oracle or SAP.
Some of our existing and potential competitors may have significant competitive
advantages, including large customer bases and greater technical expertise,
brand recognition or superior Internet commerce experience. In addition, some
of our existing and potential competitors may be able to devote significantly
greater resources than we do to marketing campaign. Consequently, we may not be
able to compete successfully against our current or future competitors and
competition could have a negative effect on our business. See "Business --
Competition in our Industry."
OUR DEPENDENCE ON OUR INTERNATIONAL OPERATIONS FOR A SIGNIFICANT
PORTION OF OUR REVENUES EXPOSES US TO DIFFICULTIES OFTEN NOT ENCOUNTERED BY
EXCLUSIVELY DOMESTIC COMPANIES
Approximately 50% of our revenues to date have been derived from our
international operations which are located in Europe, the Middle East and South
America. We are increasingly subject to a number of risks associated with
international business activities which may decrease our revenue, increase our
costs, lengthen our sales cycle or require significant management attention.
These risks include:
- Inability to adapt to multiple cultural environments and therefore to
achieve expanded sales and marketing activities;
- Ability to understand and adapt to diverse business standards;
- Increased expenses associated with sales and marketing activities in
foreign countries;
- General economic conditions in international markets;
- Currency exchange rate fluctuations;
- Unexpected changes in regulatory requirements in foreign countries
resulting in unanticipated costs and delays;
- Tariffs, export controls and other trade barriers;
- Longer accounts receivable payment cycles and difficulties in
collecting accounts receivable;
- Potentially adverse tax consequences, including restrictions on the
repatriation of earnings;
- Possible misappropriation of our intellectual property rights; and
- Risks related to global economic turbulence and adverse economic
circumstances.
OUR BUSINESS MAY SUFFER IF WE FAIL TO MANAGE OUR GROWTH
Failure to effectively manage our growth could impair our ability to
execute our business strategy. The evolution of our operations in 1999 has
resulted in a significant increase in number of employees from 18 at January 1,
1999 to 95 at January 1, 2000. We expect to continue to increase the number of
employees as our business grows, and may expand operations to locations other
than those in which we currently operate.
Continued growth is likely to place a greater burden on our operating
and financial systems as well as our senior management and other personal.
Existing and new members of management may not be able to improve existing
systems and controls or implement new systems and controls in response to
anticipated growth. Management of our operations in diverse locations may also
complicate the task of managing our growth.
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<PAGE> 26
BECAUSE WE DEPEND UPON A SINGLE SITE FOR OUR COMPUTER AND
COMMUNICATIONS SYSTEMS, WE ARE MORE VULNERABLE TO THE EFFECTS OF NATURAL
DISASTERS, COMPUTER VIRUSES, AND SIMILAR DISRUPTIONS
The continued and uninterrupted performance of our computer system is
critical to our success. Our ability to successfully process transactions and
provide high-quality customer service largely depends on the efficient and
uninterrupted operation of our computer and communications hardware and
software systems. Our proprietary and licensed software resides solely on our
servers, all of which, as well as all of our communications hardware, are
located in a monitored server facility in Philadelphia, Pennsylvania. Our
systems and operations are in a secured facility with hospital-grade electrical
power, redundant telecommunications connections to the Internet backbone,
uninterruptible power supplies, and generator back-up power facilities. In
addition, we maintain redundant systems for backup and disaster recovery.
Despite these safeguards, we remain vulnerable to damage or interruption from
fire, flood, power loss, telecommunications failure, break-ins, and similar
events. In addition, we do not, and may not in the future, carry sufficient
business interruption insurance to compensate us for losses that may occur.
Despite our implementation of Internet security measures, our servers are
vulnerable to computer viruses, physical or electronic break-ins, and similar
disruptions which could lead to interruptions, delays, loss of data or the
inability to process transactions.
WE MAY FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY AND,
THEREFORE, LOSE OUR COMPETITIVE ADVANTAGE
Our success depends upon our ability to maintain the proprietary
nature of our software and the proprietary software of others with which we
have entered into software licensing agreements. If we fail to protect our
proprietary rights, other companies might copy our technology and introduce
products or services which compete with ours, without paying us for our
technology. This could have a material adverse effect on our business,
operating results and financial condition. We hold no patents and rely on a
combination of trade secrets and copyright laws, nondisclosure and other
contractual agreements and technical measures to protect our rights in our
proprietary technology. There can be no assurance that these laws will provide
sufficient or complete protection to us, that others will not develop
technologies that are similar or superior to ours, or that third parties will
not copy or otherwise obtain and use our technologies without authorization.
Policing unauthorized use of our proprietary technology and other intellectual
property rights could entail significant expense and could be difficult or
impossible, particularly given that we have operations in foreign countries and
the fact that the laws of other countries may provide us little or no effective
protection of our intellectual property against misappropriation. See "Business
- -- Intellectual Property."
WE MAY BE HELD LIABLE FOR ONLINE CONTENT PROVIDED BY THIRD PARTIES
As a provider of information online, we face potential liability for
defamation, negligence, copyright, patent, or trademark infringement and other
claims based on the nature and content of the materials that appear on our
Global Trade Communities. In these and other instances, we may be required to
engage in protracted and expensive litigation, which could have the effect of
diverting management's attention and require us to spend significant financial
resources. Our general liability insurance may not cover all claims or may not
be adequate to indemnify us for any liability that may be imposed. Any
imposition of liability, particularly liability that is not covered by
insurance or is in excess of our insurance coverage, could have a material
adverse effect on our brand and our business.
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<PAGE> 27
OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS,
AND THESE OFFICERS AND PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE
We depend upon the continuing contributions of our key management,
sales and product development personnel. The loss of the services of any of
Robert H. Shaw, our Chief Executive Officer and Chairman of the Board, Mark E.
Patten, our Executive Vice President and Chief Financial Officer, J. Keith
Money, our Executive Vice President and Chief Marketing Officer, Henry R.
Winogrond, our Executive Vice President of Business Development, John R. Daniel
II, our Executive Vice President of Operations, and Jacobus N. Kras, our
Executive Vice President for Europe could have an adverse affect on our
business. Although all of these individuals are subject to employment
agreements, we cannot be sure that we will retain their services. In addition,
we are the sole beneficiary of key person life insurance in the amount of $1
million on the life of Robert Shaw, our Chairman of our board of directors and
our Chief Executive Officer. See "Executive Compensation -- Employment
Agreements."
WE HAVE ANTI-TAKEOVER PROVISIONS THAT COULD PREVENT AN ACQUISITION OF
OUR COMPANY
Some provisions of our certificate of incorporation and the provisions
of Delaware law may be deemed to have anti-takeover effects and may delay,
defer or prevent a takeover attempt of us. We are subject to the "business
combination" provisions of the Delaware General Corporation Law. These
provisions prohibit a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years following the date the person became an interested stockholder, unless
the "business combination" or the transaction in which the person became an
interested stockholder is approved in a prescribed manner. Also, our
certificate of incorporation authorizes the issuance of up to 10,000,000 shares
of preferred stock with such rights and preferences as may be determined from
time to time by the board of directors, of which 640,000 shares remain without
designation and available for issuance as of December 31, 1999. We include such
preferred stock in our capitalization in order to enhance our financial
flexibility. However, the issuance of large blocks of preferred stock may have
a dilutive effect with respect to existing holders of our common stock.
WE DO NOT PLAN TO PAY CASH DIVIDENDS
Holders of our common stock are entitled to cash dividends when, as
and if declared by the board of directors out of funds legally available for
the payment of dividends. We have never paid dividends and our management does
not anticipate the declaration or payments of any dividends in the foreseeable
future. We intend to retain earnings, if any, to finance the development and
expansion of our business. Our future dividend policy will be subject to the
discretion of our board of directors and will be contingent upon future
earnings, if any, our financial condition, capital requirements, general
business conditions and other factors.
INTERNET SECURITY POSES RISKS TO OUR ENTIRE BUSINESS
The processing of B2B e-commerce transactions by means of our
technology and infrastructure involves the transmission and analysis of
confidential and proprietary information of our customers, as well as our own
confidential and proprietary information. For example, currently all of our
customers pay for their subscriptions to Floraplex with a credit card. Also,
almost all of the transactions currently being processed on Floraplex between
suppliers and purchasers involve either credit cards or electronic funds
transfers. Anyone who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our
operations, as well as the operations of the
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<PAGE> 28
merchant. We may be required to expend significant capital and other resources
to protect against security breaches or to minimize problems caused by security
breaches. We rely on encryption and authentication technology licensed from
other companies to provide the security and authentication necessary to effect
secure Internet transmission of confidential information, such as credit
information and proprietary consumer information. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments may result in a compromise or breach of the technology used by us
to protect client transaction data. Concerns over the security of the Internet
and other B2B e-commerce transactions and the privacy of consumers and
merchants may also inhibit the growth of the Internet and other online services
generally, especially as a means of conducting commercial transactions. To the
extent that our activities or the activities of others involve the storage and
transmission of proprietary information, security breaches could damage our
reputation and expose us to a risk of loss or litigation and possible
liability. Our security measures may not prevent security breaches. The
compromise of our security or misappropriation of proprietary information could
harm our business.
OUR FUTURE SUCCESS WILL DEPEND ON THE INTERNET'S ABILITY TO
ACCOMMODATE GROWTH
The recent growth in the use of the Internet has caused frequent
periods of performance degradation. Any failure in performance or reliability
of the Internet could adversely affect our ability to provide our products and,
consequently, hurt our operating results. To the extent that the Internet
continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements of users, the Internet infrastructure may not
continue to support the demands placed on it and, as a result, the performance
or reliability of the Internet may be adversely affected. Furthermore, the
Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure or otherwise. While no previous
outages or delays have materially affected our operations, the relatively
complex and unproven technology that makes up the Internet infrastructure poses
a risk of material outages or delays that could adversely affect the ability of
our customers to use our trading systems. In addition, the Internet could lose
its viability as a form of media due to delays in the development or adoption
of new standards and protocols that can handle increased levels of activity.
The infrastructure and complementary products and services necessary to
maintain the Internet as a viable commercial medium may not be developed or
maintained.
WE ARE HIGHLY DEPENDENT ON THE ACCEPTANCE AND EFFECTIVENESS OF THE
INTERNET AS A MEDIUM FOR B2B E-COMMERCE
Our future revenues and any future profits are substantially dependent
upon the widespread acceptance and use of the Internet as an effective medium
of commerce by businesses. The failure of the Internet to continue to develop
as a means of commerce by businesses may harm our business, operating results
and financial condition. A number of factors could prevent the acceptance and
growth of the Internet as a medium for B2B e-commerce, including the following:
- B2B e-commerce is at an early stage and buyers may be unwilling to
shift their traditional purchasing to online purchasing;
- Businesses may not be able to implement B2B e-commerce applications
on these networks;
- Increased government regulations or taxation may adversely affect
the viability of e-commerce;
- Insufficient availability of telecommunication services or changes
in telecommunication services may result in slower response times;
and
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<PAGE> 29
- Adverse publicity and consumer concern about the reliability,
cost, ease of access, quality of services, capacity, performance
and security of B2B e-commerce transactions could discourage its
acceptance and growth.
WE MAY NOT BE ABLE TO KEEP PACE WITH THE EVOLVING STANDARDS OF OUR
INDUSTRY AND DEMANDS OF OUR CUSTOMERS
The Internet, B2B e-commerce, and the B2B e-commerce services industry
are characterized by:
- Rapid technological change;
- Changes in customer requirements and preferences;
- Frequent new product and service introductions embodying new
technologies; and
- The emergence of new industry standards and practices that could
render proprietary technology and hardware and software
infrastructure obsolete.
Our success will depend, in part, on our ability to enhance existing
or integrate new technology into our Global Trade Communities that keeps pace
with rapid technological developments and addresses the changing needs of our
customers. If we are unable to adapt our technology in a cost-effective manner
and on a timely basis, we may lose customers or experience difficulty obtaining
new customers which would negatively impact revenues and our business.
REGULATORY AND LEGAL UNCERTAINTIES SURROUND THE DEVELOPMENT OF THE
INTERNET
We are not currently subject to direct regulation by any government
agency other than laws or regulations applicable to business and generally to
B2B e-commerce directly. However, due to the increasing popularity and use of
the Internet and other online services, federal, state, and local governments,
as well as foreign governments, may adopt laws and regulations, or amend
existing laws and regulations, with respect to the Internet or other online
services covering issues such as user privacy, pricing, sales tax, content,
copyrights, distribution, and characteristics and quality of products and
services. The adoption of any additional laws or regulations may decrease the
growth of the Internet or other online services, which could, in turn, decrease
the demand for our services and increase our cost of doing business, or
otherwise have a negative effect on our business. Furthermore, the growth and
development of the market for B2B e-commerce may prompt calls for more
stringent consumer protection laws to impose additional burdens on companies
conducting business over the Internet.
The tax treatment of the Internet and e-commerce is currently
unsettled. A number of proposals have been made at the federal, state and local
level and by some foreign governments that could impose taxes on the sale of
goods and services and other internet activities. In October 1998, the Internet
Tax Freedom Act was signed into law, placing a three year moratorium on new
state and local taxes on e-commerce. However, it is possible that future laws
imposing taxes or other regulations on e-commerce could substantially impair
the growth of e-commerce and as a result have a negative effect on our
business.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, trend analyses and other information contained in this
registration statement regarding markets for our products and trends in net
revenues, gross margin and anticipated expense levels, and any statement that
contains the words "anticipate," "believe," "plan," "estimate," "expect,"
"should," "intend" and other similar expressions, constitute forward-looking
statements. These forward-looking statements are subject to business and
economic risks, including those risks identified in "Risk Factors" and
elsewhere in this registration statement and our actual results of operations
may differ significantly from those contained in the forward-looking statements
because of those risks. The cautionary statements made in this registration
statement apply to all forward-looking statements wherever they appear in this
registration statement.
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ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction
with our consolidated financial statements and related notes and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial data included elsewhere in this registration
statement. The selected financial data as of December 31, 1999 and 1998 and for
the years ended December 31, 1999, 1998 and 1997 are derived from financial
statements audited by PricewaterhouseCoopers, LLP, our independent auditors and
are included elsewhere in this registration statement. The selected financial
data as of December 31, 1997, 1996 and 1995 and for the years ended December 31,
1996 and 1995 are derived from financial statements audited by
PricewaterhouseCoopers, LLP, but are not included in this registration
statement. Operating results for the year ended December 31, 1999 are not
necessarily indicative of the results that may be expected for any other period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue ..................................... $ 43,130 $ 292,406 $ 90,185 $ 110,834 $ 237,788
Operating expenses:
Cost of floral products .................. -- -- -- 124,924 182,076
Product and technology development ....... 2,836,605 381,192 136,089 36,546 31,369
Sales and marketing ...................... 5,464,989 316,966 81,954 86,943 71,543
General and administrative ............... 3,848,221 3,223,123 507,342 179,542 160,895
Depreciation and amortization ............ 421,167 7,401 1,888 1,829 --
------------ ----------- ----------- ----------- -----------
Total costs and operating expenses . 12,570,982 3,928,682 727,273 429,784 445,883
------------ ----------- ----------- ----------- -----------
Loss from operations ........................ $(12,527,852) $(3,636,276) $ (637,088) $ (318,950) $ (208,095)
Net interest expense ........................ 166,129 4,026 -- 1,384 4,769
Net loss .................................... $(12,750,568) $(3,640,302) $ (637,088) $ (320,334) $ (212,864)
Deemed dividend on redeemable convertible
preferred stock(1) ...................... (28,000,000) -- -- -- --
Net loss available to common stockholders ... $(40,750,568) $(3,640,302) $ (637,088) $ (320,334) $ (212,864)
Basic and diluted net loss per common
share ................................... $ (2.67) $ (0.40) $ (0.09) $ (0.04) $ (0.09)
Weighted average number of shares
outstanding ............................. 15,271,152 9,181,923 6,930,865 5,589,740 3,671,112
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ................... $ 10,553,021 $ 42,335 $ 707 $ 37,814 $ (146)
Working capital ............................. 12,271,904 (174,695) (396,135) (130,145) (56,382)
Total assets ................................ 22,669,016 101,244 7,901 43,026 16,260
Long-term liabilities ....................... 91,927 26,983 -- 32,793 30,555
Redeemable convertible preferred stock ...... 27,598,983 -- -- -- --
Total stockholders' deficit ................. $ (7,320,765) $ (144,366) $ (389,814) $ (157,726) $ (86,937)
</TABLE>
(1) Deemed dividend on convertible preferred stock resulted from the estimated
fair value of the common stock exceeding the conversion price on the date
of issuance.
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<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with "Selected Financial Data," and the consolidated financial statements and
the notes to those statements that appear elsewhere in this registration
statement. The following discussion and analysis contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ from those discussed in the forward-looking statements. Factors
that could cause or contribute to any differences include, but are not limited
to, those discussed below and elsewhere in this registration statement,
particularly in "Risk Factors."
OVERVIEW
We develop B2B e-commerce technology products for the perishable
products industries providing trading systems, industry-specific information
resources and Internet-based communication tools. Our Global Trade Communities,
including Floraplex and FreshPlex, which we market to supply chain participants
and other businesses with an Internet focus, deliver our customers' web-enabled
procurement tools and an industry-specific Internet portal.
Since our inception, we have incurred significant losses, and as of
December 31, 1999, we had an accumulated deficit of $45.6 million. We have not
achieved profitability on a quarterly or an annual basis, and anticipate that
we will continue to incur net losses for the foreseeable future. We expect to
incur costs for technology development, sales and marketing, and general and
administrative expenses in the future in amounts at least equal to the expenses
incurred in 1999. As a result, we will need to generate significant revenue to
achieve and maintain profitability.
We are in the early stage of operations and, as a result, the
relationships between revenue, cost of revenue, and operating expenses
reflected in the financial information included in this registration statement
do not represent future expected financial relationships. Much of the cost of
revenue and operating expenses reflected in our financial statements represent
salaries and related personnel costs including stock-based compensation and
other costs which are impacted by revenue growth and expanding operations.
The formulation of our B2B e-commerce strategy and business model
occurred in the second half of 1998. Prior to this period, we generated revenue
and incurred costs in connection with importing and resale of fresh cut flowers
from 1994 through December 31, 1996. In the year ended December 31, 1997, and
the first several months of 1998, we also generated revenue from the development
of Internet web-sites for a third party and a company under the control of one
of our senior executives. We do not intend to generate revenues from these
sources in the future.
We intend to derive our revenue from B2B e-commerce sales transactions
of perishable product on our trading systems with fees typically ranging from
2% to 8% of transaction order value in the floriculture market and 1% to 5% of
transaction order value in the produce market and its related industry
suppliers. We also intend to derive revenue from advertisement and sponsorship
in our Global Trade Communities. We will record advertising revenues at the
time advertisements are displayed and will record sponsorship revenues ratably
over the period of sponsorship. We also intend to derive revenue from monthly
subscription fees. During 1999, we derived revenue from all three sources. See
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"Results of Operations Comparison of Year Ended December 31, 1999 to Year Ended
December 31, 1998--Revenues." In the future, we may also derive revenue from
one-time implementation fees which would be recognized ratably over the period
of the related implementation. As of December 31, 1999, we had not recognized
revenue related to implementation fees. Also in the future we may derive license
fees for the development of private trade communities in lieu of transaction
and subscription fees.
The revenue we generated in 1999 was derived equally from Floraplex
customers based in the United States and Europe. Due to the level of revenues
derived from our business model as of December 31, 1999, we are not able to
determine perceivable trends in the allocation of revenues from transaction
fees, advertisement revenue, and subscription fees. We expect that revenue
from customers based outside the United States will increase in future periods.
We did not generate any revenue from FreshPlex during 1999.
Cost of floral product sales consists of costs incurred to acquire
imported fresh cut flower product. These costs were incurred in 1994 through
1996 prior to the formulation and commencement of our B2B e-commerce business
model. We do not intend to have similar costs in any future period.
Product and technology development expenses consist primarily of
salaries and related personnel costs for our internal development team
including costs related to the design, development, testing, deployment and
enhancement of our Global Trade Community technology and our Web-server
infrastructure including costs for third party consultants and costs for
customer support, technology, maintenance, and training. We expensed our
product and technology development costs as they were incurred in 1998. During
the year ended December 31, 1999, we capitalized $4.8 million of costs incurred
in the development of our technology in accordance with the AICPA's Statement
of Position No. 98-1 "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use." We believe that research and development is critical
to our strategic product development objectives and we intend to enhance our
technology to meet the changing requirements of the market and advancements in
functionality. As a result, we expect our product and technology development
expenses to increase in the future.
Sales and marketing expenses consist primarily of salaries and related
personnel costs including stock-based compensation for our sales and marketing
organization and marketing costs for activities including advertisements and
trade shows. We expect that sales and marketing expenses will increase in the
future as we hire additional personnel, expand our operations globally,
initiate additional marketing programs, establish sales offices in new
locations worldwide and incur additional costs related to the increase in
revenues and the growth of our business and our operations.
General and administrative expenses consists primarily of salaries and
related costs of operations and finance personnel including stock-based
compensation as well as costs for our operating facilities, recruiting
expenses, professional fees and telecommunication costs. We expect that our
general and administrative expenses will increase in the future as we hire
additional personnel, expand our operations domestically and internationally
and incur additional costs related to the increase in revenues and the growth
of our business and our operations as a public company.
In February 1999, we entered into a private placement of our Series A
redeemable convertible preferred stock which provided proceeds of approximately
$8 million net of transaction costs. We used the proceeds from this transaction
to begin hiring personnel in all areas, to begin a significant advertising and
branding campaign and to continue design and development of our technology
products and infrastructure. Additionally, we completed the private placement
of our Series B redeemable convertible preferred stock in October 1999, which
provided proceeds of approximately $19.6 million net of
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<PAGE> 34
transaction costs. The proceeds from the Series B private placement were also
reduced by $2.4 million relating to the conversion of a bridge loan provided by
ITP prior to completion of the Series B transaction.
We completed the acquisition of the Flower Purchase Network in August
1999. The aggregate purchase price for this acquisition was approximately $1.5
million, primarily paid for in our common stock and the assumption of
approximately $0.3 million in debt. Although the acquisition involved an
established B2B e-commerce trading platform with user traffic, the trading
system had minimal revenues associated with them prior to our acquisition. The
acquisition was accounted for under the purchase method of accounting.
We have a limited operating history and have incurred losses in every
quarter of operations. Our accumulated deficit as of December 31, 1999 was
$45.6 million and we expect to continue to incur losses as we build brand
identity and develop our technology products to allow us to maintain our
position as a leader in the B2B e-commerce market for the perishable products
industries.
RESULTS OF OPERATIONS
The following is derived from our audited consolidated financial
statements.
COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO YEAR ENDED DECEMBER 31, 1998
REVENUES. Revenue for the year ended December 31, 1999 was $0.04
million compared to $0.3 million for the year ended December 31, 1998, a
decrease of approximately $0.26 million. In 1999, revenue was generated
primarily from three sources: $21,076, or 48.9% of total revenue, in
transaction fees, $14,145, or 32.8% of total revenue, in advertising fees, and
$7,909, or 18.3% of total revenue, in subscription fees. We did not recognize
revenue from any of these three sources during 1998.
The decrease in revenues from 1998 to 1999 is attributable to our
change in strategy and business model that resulted in our offering different
products and services. In 1998, revenue was generated from the development of
Internet web-sites.
PRODUCT AND TECHNOLOGY DEVELOPMENT. Product and technology development
expenses consist primarily of salaries and related personnel costs for our
internal development team including costs related to the design, development,
testing, deployment and enhancement of our Global Trade Community technology
and our Web-server infrastructure including costs for third party consultants
and costs for customer support, technology, maintenance, and training. Product
and technology development expenses for the year ended December 31, 1999 were
$2.8 million compared to $0.4 million for the year ended December 31, 1998, an
increase of approximately $2.4 million. The primary reasons for this increase
was an increase in non-cash charges in the amount of approximately $0.6 million
related to stock based compensation and the issuance of warrants to third party
consultants and an increase in headcount from 6 as of December 31, 1998 to 29
as of December 31, 1999, as a result of the change in our strategy and business
model.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries and related personnel costs including stock-based compensation for our
sales and marketing organization and marketing costs for activities including
advertisements and trade shows. Sales and marketing expenses for the year ended
December 31, 1999 were $5.5 million compared to $0.3 million for the year ended
December 31, 1998, an increase of approximately $5.2 million. The primary
reason for this increase was
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the launch of our domestic and international branding campaign which included
advertisements in several industry and trade publications, and participation at
trade shows worldwide. Additionally, our sales and marketing department
increased from 5 employees as of December 31, 1998 to 43 employees as of
December 31, 1999, as a result of the change in our strategy and business model
to B2B e-commerce. This increase also reflects a non-cash charge of
approximately $1.2 million for warrants issued for professional fees and stock
based compensation.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
consists primarily of salaries and related costs of operations and finance
personnel including stock-based compensation as well as costs for our operating
facilities, recruiting expenses, professional fees and telecommunication costs.
General and administrative expenses for the year ended December 31, 1999 were
$3.8 million compared to $3.2 million for the year ended December 31, 1998, an
increase of approximately $0.6 million. The primary reason for this increase was
the hiring of personnel in all support departments and the increased cost of
professional fees including legal costs. Our headcount increased from 7 as of
December 31, 1998 to 23 as of December 31, 1999, as a result of the change in
our strategy and business model to B2B e-commerce. As a result of the overall
increased headcount, our occupancy costs increased as we expanded our
headquarter offices and added offices in other locations outside the U.S. This
increase also reflects a non-cash charge of approximately $0.9 million in stock
grants and stock based compensation offset by stock issued for professional
services in the amount of $2.6 million incurred in 1998 but not in 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
consist primarily of depreciation and amortization of goodwill relating to our
acquisition. Depreciation and amortization expenses for the year ended December
31, 1999 were $0.4 million compared to $0.01 million for the year ended
December 31, 1998, an increase of approximately $0.4 million due to the
acquisition of FPN in August 1999 and additions in property and equipment.
STOCK-BASED COMPENSATION. Stock-based compensation expenses consist of
the amortization of deferred stock compensation resulting from the grant of
stock options at exercise prices deemed to be less than the fair value of the
common stock on the grant date. At December 31, 1999, deferred stock
compensation, which is a component of stockholders' equity, was $4.9 million.
This amount is being amortized ratably over the vesting periods of the
applicable stock options, typically four years, with either 25% cliff vesting
or 28% vesting on the first anniversary of the grant date and the balance
vesting 2% monthly thereafter. We expect to incur stock-based compensation
expense of at least $1.6 million in 2000, 2001 and 2002.
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
REVENUES. Revenue for the year ended December 31, 1998 was $0.3
million compared to $0.1 million for the year ended December 31, 1997, an
increase of $.2 million. Revenue in 1998 and 1997 was generated primarily from
the development of Internet web-sites. Revenues increased during 1998 as a
result of an increase in web-site development activities.
PRODUCT AND TECHNOLOGY DEVELOPMENT. Product and technology development
expenses for the year ended December 31, 1998 were $0.4 million compared to
$0.1 million for the year ended December 31, 1997, an increase of $0.3 million.
The increase resulted primarily from increases in professional fees and
employee related expenses due to an increase in head count during the last
quarter of the year associated with the preliminary stages of the development
of our B2B e-commerce strategy.
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SALES AND MARKETING. Sales and marketing expenses for the year ended
December 31, 1998 were $0.3 million compared to $0.1 million for the year ended
December 31, 1997, an increase of $0.2 million. The increase was a result of the
increased use of professionals associated with the launch of our domestic and
international branding campaign in 1998.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$3.2 million for the year ended December 31, 1998 compared to $.5 million for
the year ended December 31, 1997, an increase of $2.7 million. The increase
resulted primarily due to an increase in non-cash charges related to
professional service fees.
NET OPERATING LOSSES AND TAX CREDIT CARRYFORWARDS
As of December 31, 1999, we had approximately $8.6 million of state
and federal net operating loss carryforwards for tax reporting purposes
available to offset future taxable income. Such net operating loss
carryforwards begin to expire in 2009, to the extent that they are not
utilized. We have not recognized any benefit from the future use of loss
carryforwards since inception. Management's evaluation of all the available
evidence in assessing realizability of the tax benefits of such loss
carryforwards indicates that the underlying assumptions of future profitable
operations contain risks that do not provide sufficient assurance to recognize
the tax benefits currently. In addition, the net operating loss carryforwards
could be limited in future years if there is a significant change in our
ownership.
LIQUIDITY AND CAPITAL RESOURCES
From inception, we have financed our operations through private sales
of our common stock and redeemable convertible preferred stock. During the year
ended December 31, 1999, we raised approximately $28 million through sales of
our redeemable convertible preferred stock, including $8 million and $20
million raised in the first and fourth quarters of 1999, respectively.
Net cash used in operating activities was approximately $0.5 million
for the year ended December 31, 1998 and $7.7 million for the year ended
December 31, 1999. This use of cash was primarily attributable to our net
losses in each of those periods. In 1999, the net loss was offset by a non-cash
stock-based compensation charge and a significant increase in our accounts
payable and accrued compensation.
Net cash used in investing activities was approximately $0.02 million
for the year ended December 31, 1998 and $5.7 million for the year ended
December 31, 1999 an increase primarily attributable to the acquisition of
technology equipment and the development of software which represented $2.9
million of cash payments as of December 31, 1999.
Net cash provided by financing activities was approximately $0.6
million for the year ended December 31, 1998 and $24 million for the year ended
December 31, 1999. In addition to the sales of our Series A and Series B
redeemable convertible preferred stock, which provided proceeds of
approximately $21.4 million, we obtained an advance of $2.4 million from an
investor during the year ended December 31, 1999. The advance was subsequently
discharged in exchange for shares of our Series B redeemable convertible
preferred stock.
As of December 31, 1999, we had approximately $10.6 million in cash
and cash equivalents. In addition, we had a $3.8 million receivable from
investors in the Series B private placement. As of February 4, 2000,
approximately $3.3 million had been received.
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We expect to continue to incur losses and to utilize cash in our
operations for the next several years. We expect that revenues generated in
2000 will contribute substantive cash flow for our operations over the next 12
months. We believe that our current cash and cash equivalents and expected cash
from operations will be sufficient to meet our anticipated requirements for our
Floraplex operations and strategy as well as the initial implementation of
FreshPlex for at least the next 12 months. We expect that we will need to raise
additional funds, including through equity offerings, in the future in order to
successfully implement our FreshPlex strategy in 2001.
If cash generated from operations is insufficient to satisfy our
liquidity requirements, we may seek to sell additional equity or debt
securities. If additional funds are raised through the issuance of debt
securities, these securities could have rights, preferences and privileges
senior to those accruing to holders of our common stock, and the terms of this
debt could impose restrictions on our operations. The sale of additional equity
or debt securities could result in additional dilution to our stockholders, and
we cannot be certain that additional financing will be available in amounts or
on terms acceptable to us, if at all. If we are unable to obtain this
additional financing, we may be required to reduce the scope of our planned
technology or product development and sales and marketing efforts, which could
harm our business.
YEAR 2000 READINESS
The Year 2000 issue refers to the potential for system and processing
failures of date-related calculation, and is the result of computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
operate our sites, send invoices, or engage in similar normal business
activities.
To date, we have not experienced any material Year 2000 issues and
have not been informed by our material suppliers and vendors that they have
experienced material Year 2000 issues. We have not spent a material amount on
Year 2000 compliance issues. Most of our expenses have related to the operating
costs associated with time spent by employees and consultants in the evaluation
process and Year 2000 compliance matters generally.
If we fail to identify a remedy to any non-compliant internal or
external Year 2000 problems, or Year 2000 problems create a systemic failure
beyond our control, including a prolonged telecommunications or electrical
failure or a prolonged failure of third party software on which we rely, we
could be prevented from operating our business and permitting users access to
our sites. Such an occurrence would have a negative impact on our business.
MARKET RISK
To date, our results of operations have not been impacted materially
by inflation in the United States, Holland or in the countries that comprise
Latin America. Approximately 50% of our revenues generated in 1999 were
denominated in Dutch guilders.
Although approximately 50% of our revenues generated in 1999 are
denominated in U.S. dollars, an increasing percentage of our revenues will
likely be denominated in foreign currencies, specifically the Dutch guilder or
the Euro. As a result, our revenues may be impacted by fluctuations in these
currencies and the value of these currencies relative to the U.S. dollar. In
addition, a portion of our monetary assets and liabilities and our accounts
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<PAGE> 38
payable and operating expenses are denominated in foreign currencies. Therefore,
we are exposed to foreign currency exchange risks. We have not tried to reduce
our exposure to exchange rate fluctuations by using hedging transactions.
However, we may choose to do so in the future. We may not be able to do this
successfully. Accordingly, we may experience economic loss and a negative
impact on earnings and equity as a result of foreign currency exchange rate
fluctuations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Historically, we have not entered into derivative contracts to hedge existing
risks or for speculative purposes. Accordingly, we do not expect the adoption
of the new standard on January 1, 2001 to affect our financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). The bulletin draws on existing accounting rules and provides specific
guidance on how those accounting rules should be applied, and specifically
addresses gross versus net basis of reporting revenues for companies which
operate Internet sites and up-front fees. SAB 101 is effective for fiscal years
beginning after December 15, 1999. The Company is evaluating SAB 101 and the
effect it may have on its financial statements. At this time, the Company
believes that SAB 101 will not have a material impact on its financial position
or results of operations.
ITEM 3. PROPERTIES
Our corporate headquarters are located at 9677 Tradeport Drive in an
office facility in Orlando, Florida, where we lease approximately 24,675 square
feet under the terms of a lease which expires in April 2003 for a monthly fee
of $25,000. For our European operations, we maintain two offices in Amsterdam,
Netherlands where we lease approximately 5,400 square feet under leases which
expire in 2002 for a monthly fee of $5,200. We also lease a small corporate
office in Jerusalem, Israel under a lease that expires in December 2000 for a
monthly fee of $750. We utilize sales offices in Quito, Ecuador and Bogota,
Colombia for which we are not obligated to pay rent but for which we incur
costs related to consulting arrangements with third parties. We believe that
our existing facilities are adequate to support our existing operations and
that, if needed, we will be able to obtain suitable additional facilities on
commercially reasonable terms.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information regarding the beneficial
ownership of World Commerce's common stock as of December 31, 1999, by the
following individuals or groups:
- each person or entity who we know beneficially owns more than 5.0% in
the aggregate of our outstanding common stock;
- each of the executive officers named in the Summary Compensation
Table;
- each of our directors; and
- all directors and executive officers as a group.
Unless otherwise indicated, the address of each of the individuals
listed in the table is c/o World Commerce, 9677 Tradeport Drive, Orlando,
Florida 32827. To our knowledge, except as otherwise indicated, and subject to
community property laws where applicable, the persons named in the table have
sole voting and investment power with respect to all shares of common stock
held by them.
The percentage of beneficial ownership in the following table is based
upon 15,435,357 shares of common stock outstanding as of December 31, 1999.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of our common stock issuable under
options, warrants or other conversion rights that are presently exercisable or
exercisable within 60 days of December 31, 1999 are deemed to be outstanding
and beneficially owned by the person holding the options, warrants or
conversion rights for the purpose of computing the percentage of ownership of
that person, but are not treated as outstanding for the purpose of computing
the percentage of any other person.
<TABLE>
<CAPTION>
NUMBER OF SHARES SHARES BENEFICIALLY OWNED AS A
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE OF CLASS OUTSTANDING
------------------------ ------------------ -------------------------------
<S> <C> <C>
Robert H. Shaw ............................................. 1,299,776(1) 8.3%
Mark E. Patten ............................................. 25,000 *
J. Keith Money ............................................. 377,500(2) 2.4%
Henry R. Winogrond ......................................... 80,000(3) *
John R. Daniel II .......................................... 81,070(4) *
Jacobus N. Kras ............................................ 80,000(5) *
Michael W. Poole ........................................... 225,000(6) 1.4%
David R. Parker ............................................ 5,645,000(7) 26.8%
Interprise Technology Partners, L.P. ....................... 5,610,000(8) 26.7%
William A. Mobley, Jr ...................................... 1,767,500(9) 11.5%
Larry L. Murphy ............................................ 2,510,750(10) 16.3%
Kenneth B. Cobb II ......................................... 615,000(11) 4.0%
All directors and executive officers as a
group (9 persons) ....................................... 7,878,346 36.1%
</TABLE>
- ---------------
* Less than one percent.
(1) Includes 139,776 shares of common stock subject to options either
currently exercisable or exercisable by Mr. Shaw within 60 days of
December 31, 1999. Includes 1,160,000 shares of common stock held jointly
between Mr. Shaw and his spouse, and each person, acting individually, may
vote and/or dispose of all of such shares.
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<PAGE> 40
(2) Includes 96,000 shares of common stock subject to options either currently
exercisable or exercisable by Mr. Money within 60 days of December 31,
1999.
(3) All 80,000 shares of common stock are subject to options either currently
exercisable or exercisable by Mr. Winogrond within 60 days of December 31,
1999.
(4) Includes 80,000 shares of common stock subject to options either currently
exercisable or exercisable by Mr. Daniel within 60 days of December 31,
1999. Also includes 70 shares of common stock in the name of Mr. Daniel's
grandson as to which Mr. Daniel has sole voting and dispositive power over
such shares.
(5) All 80,000 shares of common stock are subject to options either currently
exercisable or exercisable by Mr. Kras within 60 days of December 31,
1999.
(6) Includes 25,000 shares of Series B preferred stock which are immediately
convertible into 25,000 shares of common stock. Includes a warrant
representing the right to purchase 100,000 shares of common stock held by
a trust of which Mr. Poole is the sole trustee and exercises sole voting
and dispositive power over such shares. Includes a warrant representing
the right to purchase 100,000 shares of common stock held by Poole Carbone
Capital Partners, Inc. for which Mr. Poole is the controlling principal
and exercises sole voting and dispositive power over such shares.
(7) Mr. Parker, individually, owns 10,000 shares of common stock and 25,000
shares of Series B preferred stock which are immediately convertible into
25,000 shares of common stock. Interprise Technology Partners, L.P., a
Delaware limited partnership, owns 4,000,000 shares of Series A preferred
stock which are immediately convertible into 4,000,000 shares of common
stock; 1,250,000 shares of Series B preferred stock which are immediately
convertible into 1,250,000 shares of common stock; an option, which is
immediately exercisable, to purchase 250,000 shares of Series A preferred
stock which are immediately convertible into 250,000 shares of common
stock; and a warrant, which is immediately exercisable, representing the
right to purchase 110,000 shares of Series B preferred stock which are
immediately convertible into 110,000 shares of common stock. Miller
Technology Management, L.P., a Delaware limited partnership, is the
general partner of Interprise Technology Partners, L.P. MTM I, LLC, a
Delaware limited liability company, is the general partner of Miller
Technology Management, L.P. Mr. David Parker and Mr. Edmund Miller each
own a 50% interest in MTM I, LLC, and Mr. Parker and Mr. Miller must both
agree on the voting and disposition of shares held by Interprise
Technology Partners, L.P. The address for each of Interprise Technology
Partners, L.P., Miller Technology Management, L.P., MTM I, LLC, Mr. Parker
and Mr. Miller is 1001 Brickell Bay Drive, 30th Floor, Miami, Florida
33131.
(8) See Footnote No. 7.
(9) Shares are held jointly between Mr. Mobley and his spouse, and each
person, acting individually, may vote and/or dispose of all of such
shares. The address of Mr. and Mrs. Mobley is 57 West Pine Street,
Orlando, Florida 32801.
(10) The address of Mr. Murphy is 210 Riverside Drive, Melbourne Beach, Florida
32951.
(11) Includes 315,000 shares held jointly between Mr. Cobb and his spouse, and
each person, acting individually, may vote and/or dispose of all of such
shares. Includes 250,000 shares held jointly between Mr. Cobb and Charles
T. Black, Jr., and each person, acting individually, may vote and/or
dispose of all of such shares. Includes a warrant representing the right
to purchase 50,000 shares of common stock and such warrant is exercisable
immediately. The address of Mr. Cobb and Mr. Black is 740 Florida Central
Parkway, Suite 2000, Longwood , Florida 32750.
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ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Our directors, executive officers and significant employees, and their
ages as of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- ----------------------------------------------------
<S> <C> <C>
Robert H. Shaw 56 Chairman of the Board and Chief Executive Officer
Mark E. Patten 36 Chief Financial Officer and Executive Vice President
J. Keith Money 45 Chief Marketing Officer and Executive Vice President
Henry R. Winogrond 57 Executive Vice President of Business Development
John R. Daniel II 55 Executive Vice President of Operations
Eugenio M. Valdes 42 Chief Operating Officer Floraplex Americas
Jacobus N. Kras 50 Executive Vice President for Europe
David R. Parker(1)(2) 56 Director
Michael W. Poole(1)(2) 43 Director
</TABLE>
- ---------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
Set forth below is certain information regarding the professional
experience for each of the above-named persons.
ROBERT H. SHAW has served as our Chairman and Chief Executive Officer
since October 1998. From October 1997 to October 1998 Mr. Shaw was Chief
Executive Officer of Roundabout Logic, Inc., a leader in immersive imaging
technology. From 1995 to October 1997 Mr. Shaw was Chairman and Chief Executive
Officer of Galacticom, Inc., a worldwide leader of multi-user communications
software and e-commerce systems with an international customer base of more
than 20,000 users. Mr. Shaw received a bachelors degree in electrical
engineering from Northeastern University.
MARK E. PATTEN has served as our Chief Financial Officer and Executive
Vice President since October 1999. From February 1998 to October 1999, Mr.
Patten was Vice President and Chief Accounting Officer of Vistana, Inc., a
publicly traded timeshare resort developer. Prior to that, Mr. Patten was a
partner in the Information Risk Management practice of KPMG Peat Marwick LLP
from July 1997 to January 1998 and a Senior Manager with KPMG for a period of
four years prior to his election into the partnership including a two year
rotation in KPMG's Executive Office in the Department of Professional Practice.
Mr. Patten has a bachelors degree in accounting from the University of Florida
and is a Certified Public Accountant in Georgia.
J. KEITH MONEY has served as our Chief Marketing Officer and Executive
President since October 1998. From October 1997 to September 1998 Mr. Money was
Vice President of Sales and Marketing and Chief Operating Officer of Roundabout
Logic, Inc. From 1995 to September 1997
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<PAGE> 42
Mr. Money was Director of Sales for Galacticom, Inc. Mr. Money received a
bachelors degree in liberal arts and history from Wingate University.
HENRY R. WINOGROND has served as our Executive Vice President of
Business Development since January 1999. From January 1996 to December 1998 Mr.
Winogrond was President of Great Lakes Floral Services, Inc., a provider of
investment consulting services in the floriculture industry. From January 1995
to December 1995 Mr. Winogrond was President of Bouquet Connection de los
Andes, a fresh cut flower importer. For the preceding seven years Mr. Winogrond
was President of Southern Rainbow, a fresh cut flower grower and importer. Mr.
Winogrond was also with Dole Food Company for seventeen years. Mr. Winogrond
has a bachelors degree in business administration from the University of
Wisconsin and an MBA from Stanford University.
JOHN R. DANIEL II has served as our Executive Vice President of
Operations since April 1999. Prior to joining WCO Mr. Daniel served in several
positions at U.S. Petroleum Construction, a petroleum equipment installation
company, including his last position as Vice President and General Manager,
from October 1997 to April 1999. From October 1993 to July 1997 Mr. Daniel
served in several positions with Omega, a petroleum equipment installation
company, including his last position as President of the Southeast region. The
previous 25 years of Mr. Daniel's career were spent in various management
positions in the computer technology industry.
EUGENIO M. VALDES has served as our Chief Operating Officer of the
Floraplex Americas division since July 1999. From May 1998 to June 1999 Mr.
Valdes was President of Dole Fresh Flowers, a division of Dole Food Company.
From June 1996 to May 1998 Mr. Valdes was President of Sunburst Farms, the
largest grower and leading distributor of fresh-cut flowers worldwide, prior to
its acquisition by Dole. For the preceding 10 years Mr. Valdes served in
varying sales, marketing and financial executive management positions with
Sunburst. Mr. Valdes received his bachelors degree in business from the
University of Miami and MBA from Nova Southeastern University.
JACOBUS N. KRAS has served as Executive Vice President for Europe
since July 1999. Since 1991, Mr. Kras has served as President of Hortimarc
B.V., a consultancy company to the horticulture industry based in Amsterdam,
The Netherlands. From 1980 to 1991 Kras was with the Dutch Association of
Flower Auctions serving as Chief Executive Officer from 1985 to 1991. Mr. Kras
is Chairman of the Board of Jac van Dillewijn B.V., a hardgood supplier in
Aalsmeer, Holland, and a director of Hazera Holding International, an Israeli
breeder of vegetable seeds. Mr. Kras is also member of the board of directors
of the Dutch Association of Agriculture Law. Mr. Kras has a bachelors degree
and masters degree in law from the University of Amsterdam and an MBA from the
University of Nijenrode.
DAVID R. PARKER has served as a Director since February 1999. Mr.
Parker is founder and Managing Principal of Interprise Technology Partners,
L.P., a venture capital fund focused on Internet and information technology
investments founded in January 1999. From 1992 to May 1998 Mr. Parker was
Chairman of ProSource Distribution Services, Inc., a leading U.S. food services
distributor which was sold for cash to AmeriServe Inc. in May 1998. From May
1998 to August 1998, Mr. Parker was Vice Chairman of AmeriServe, Inc.
overseeing the integration of ProSource into AmeriServe, until he resigned from
the Company in August 1998, but remained on the board of directors until he
resigned from the board in November 1999. Mr. Parker is a director of
Tupperware, Inc. and Applied Graphics Technologies Inc. Mr. Parker earned a
bachelors degree in engineering from the University of Texas and an MBA from
Harvard University, where he was a Baker Scholar.
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<PAGE> 43
MICHAEL W. POOLE has served as a Director since February 1999. Mr.
Poole is a member of the Board of Directors of the Federal Reserve Bank of
Atlanta (Jacksonville, Florida branch). Since 1997, Mr. Poole has been a
principal with Poole Carbone Eckbert, Inc., an investment banking firm
providing traditional corporate finance services to middle market companies.
Since 1986 Mr. Poole has been President of Blaker Investment Company, a private
investment firm owned by Mr. Poole. Mr. Poole received his bachelors degree in
finance from the University of Florida and his MBA from Rollins College.
BOARD OF DIRECTORS AND COMMITTEES
Our bylaws provide for a board of directors consisting of at least 1
but no more than 9 individuals who are elected at the annual meeting and serve
for 1 year and until their successor is elected and qualified.
The board of directors has a compensation committee and an audit
committee.
COMPENSATION COMMITTEE. The compensation committee of the board of
directors reviews and makes recommendations to the board regarding all forms of
compensation provided to the executive officers and directors of World Commerce
and its subsidiaries including stock compensation and loans. In addition, the
compensation committee reviews and makes recommendations on stock compensation
arrangements for all of our employees. The compensation committee also
administers our 1999 Stock Option Plan. The current members of the compensation
committee are David Parker and Michael Poole, with Mr. Parker chairing the
committee.
AUDIT COMMITTEE. The audit committee of the board of directors is
responsible for reviewing and monitoring the corporate financial reporting and
the internal and external audits of World Commerce, including, among other
things, our internal audit and control functions, the results and scope of the
annual audit and other services provided by our independent auditors and our
compliance with legal requirements that have a significant impact on our
financial reports. The audit committee also is responsible for consulting with
our management and our independent auditors regarding the preparation of
financial statements and, as appropriate, initiating inquiries into aspects of
our financial affairs. In addition, the audit committee has the responsibility
to consider and recommend the appointment of, and to review fee arrangements
with, our independent auditors. The current members of the audit committee are
Mr. Parker and Mr. Poole, with Mr. Poole chairing the committee.
DIRECTOR COMPENSATION
We reimburse directors for reasonable out-of-pocket expenses incurred
in attending meetings of the board of directors. We may, at our discretion,
grant stock options and other equity awards to our non-employee directors from
time-to-time pursuant to our 1999 Stock Option Plan or otherwise. In January
1999, we issued a warrant to the Michael W. Poole Trust representing the right
to purchase 100,000 shares of our common stock of which Mr. Poole is the
trustee, at an exercise price of $2.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the board of directors consisted in
1999, and currently consists of, David Parker and Michael Poole. There were no
compensation committee interlocks during our last fiscal year.
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ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the fiscal
year ended December 31, 1999 paid by us for services by our Chief Executive
Officer and our other executive officers whose total salary and bonus for that
fiscal year exceeded $100,000, collectively referred to below as the "named
executive officers." None of the executive officers received total compensation
of at least $100,000 prior to fiscal year 1999.
SUMMARY COMPENSATION IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION AWARDS
------------- -----------------------------
RESTRICTED STOCK SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(3)($) AWARD(S)($) UNDERLYING OPTIONS(#) COMPENSATION ($)
- ----------------------------------- ------------ ----------- --------------------- ----------------
<S> <C> <C> <C> <C>
Robert H. Shaw,(1) 132,700 -- 436,800 25,400(6)(7)
Chief Executive Officer
Mark E. Patten, 32,400 134,500(4) 200,000 1,000(8)
Chief Financial Officer
J. Keith Money, 111,900 -- 300,000 26,600(6)(7)
Chief Marketing Officer
Henry R. Winogrond, 142,000 -- 250,000 16,400(6)(7)
Executive VP of Bus. Development
John R. Daniel II, 114,300 -- 250,000 4,200(7)
Executive VP of Operations
Jacobus N. Kras, 90,000 -- 250,000 --
Executive VP for Europe
Kenneth B. Cobb II,(2) 136,500 -- 100,000(5) 4,200(7)
former Chief Financial Officer
</TABLE>
- ---------------
(1) For the fiscal year ended December 31, 1998, Mr. Shaw received
compensation in the form of consulting fees paid to a company controlled
by Mr. Shaw in the amount of $30,045. Also, Mr. Shaw was issued 1,200,000
shares of our common stock in September 1998 for services rendered in
facilitating the voluntary share exchange between us and World Commerce
Online-Floraplex.
(2) Mr. Cobb held the position of Chief Financial Officer until his resignation
in September 1999.
(3) Does not represent a full year of salary because no person listed, other
than Mr. Cobb, was paid a salary at the beginning of the fiscal year.
Mr. Shaw became an employee on March 29, 1999, at an annual salary of
$125,000, which was raised to $225,000 on July 1, 1999; Mr. Patten became
an employee on October 18, 1999, at an annual salary of $180,000; Mr.
Money became an employee on March 29, 1999, at an annual salary of
$125,000, which was raised to $180,000 on July 1, 1999; Mr. Winogrond
became an employee on February 1, 1999, at an annual salary of $125,000,
which was raised to $180,000 on July 1, 1999; Mr. Daniel became an
employee on March 22, 1999, at an annual salary of $125,000, which was
raised to 180,000 on July 1, 1999; Mr. Kras became an employee on July 1,
1999, at an annual salary of $180,000; and Mr. Cobb was an employee from
January 1, 1999 until September 30, 1999, at an annual salary of
$125,000, which was raised to $180,000 on July 1, 1999.
(4) Represents 25,000 shares valued at $5.38 per share issued in October 1999
in connection with the start of employment.
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<PAGE> 45
(5) Reflects issuance of two warrants in September 1999 representing the right
to purchase 50,000 shares of our common stock at an exercise price of $8
and $2 per share, respectively.
(6) Other compensation includes payments to Mr. Shaw, Mr. Money and Mr.
Winogrond as consultants prior to full-time employment in the amount of
$21,200, $22,400, and $12,200, respectively.
(7) Includes an automobile allowance in an amount of $4,200.
(8) Automobile allowance in an amount of $1,000.
OPTION GRANTS TABLE
The following table sets forth each grant of stock options during the
fiscal year ended December 31, 1999 to each of the named executive officers. No
stock appreciation rights were granted to these individuals during that year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN OR BASE FOR OPTION TERM(4)
OPTIONS FISCAL PRICE EXPIRATION MARKET PRICE ------------------------------
NAME GRANTED(1) YEAR ($)/(SH) DATE(2) ($)(SH)(3) 5%($) 10%($) 0%($)
- ------------------ ---------- ------------ -------- ---------- ------------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Shaw 236,800 8.4% 2.00 10/18/09 5.38 1,596,175 2,821,223 797,680
200,000 7.1% 8.00 10/18/09 5.38 152,691 1,190,867 --
Mark E. Patten 126,876 4.5% 2.00 10/18/09 5.38 858,959 1,518,200 429,260
73,124 2.6% 5.38 10/18/09 5.38 246,992 625,926 --
J. Keith Money 300,000 10.6% 2.00 10/18/09 5.38 2,029,036 3,586,300 1,014,000
Henry R. Winogrond 250,000 8.9% 2.00 10/18/09 5.38 1,690,863 2,988,584 845,000
John R. Daniel II 200,000 7.1% 2.00 10/18/09 5.38 1,352,691 2,390,867 676,000
50,000 1.8% 8.00 10/18/09 5.38 38,173 297,717 --
Jacobus N. Kras 250,000 8.9% 2.00 10/18/09 5.38 1,690,863 2,988,584 845,000
Kenneth B. Cobb II -- -- -- -- -- -- -- --
</TABLE>
- -------------
(1) All options were granted as of October 18, 1999. All options granted to
everyone other than Mr. Patten vest 28% on January 1, 2000, and 2% on the
first of each successive month thereafter. The options granted to Mr.
Patten vest 28% on October 18, 2000 and 2% on the eighteenth of each
successive month thereafter.
(2) Each of the options has a ten-year term. However, the options will
terminate earlier if the optionee's employment is terminated or the
Company is liquidated, dissolved, reorganized or there is a change in
control.
(3) The fair market value of our common stock was determined on the basis of
the closing sale price of our common stock on the OTC Bulletin Board on
October 15, 1999, pursuant to the terms of our 1999 Stock Option Plan.
(4) The assumed 5%, 10% and 0% rates of stock price appreciation are provided
in accordance with rules of the SEC and do not represent our estimate or
projection of our common stock price. Actual gains, if any, on stock
option exercises are dependent on the future performance of our common
stock, overall market conditions, and the optionholder's continued
employment through the vesting period. Unless the market price of our
common stock appreciates over the option term, no value will be realized
from the option grants made to these executive officers. The potential
realizable value is based on the assumption that the common stock price
appreciates at the annual rate shown, compounded annually, from the date
of grant until the end of the option period. The actual value, if any, a
named executive officer may realize will depend upon the excess of the
stock price over
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<PAGE> 46
the exercise price on the date the option is exercised, if the executive
were to sell the shares on the date of exercise, so there is no assurance
that the value realized will be equal to or near the potential realized
value as calculated in this table.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information concerning the year-end
number and value of unexercised options for each of the named executive
officers. None of the individuals listed below exercised any options during the
last fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999(#) DECEMBER 31, 1999($)(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert H. Shaw -- 436,800 -- 5,517,984
Mark E. Patten -- 200,000 -- 2,828,865
J. Keith Money -- 300,000 -- 4,614,000
Henry R. Winogrond -- 250,000 -- 3,845,000
John R. Daniel II -- 250,000 -- 3,545,000
Jacobus N. Kras -- 250,000 -- 3,845,000
Kenneth B. Cobb II -- -- -- --
</TABLE>
- ---------------
(1) The fair market value of our common stock (based on the closing sale price
of our common stock on the OTC Bulletin Board on December 31, 1999) was
$17.38. These values have been calculated based on a price of $17.38 per
share, minus the applicable per share exercise price.
EMPLOYMENT AGREEMENTS
The following named executive officers have signed employment
agreements with us:
Pursuant to an employment agreement dated October 18, 1999, we agreed
to pay Robert H. Shaw an annual salary of $225,000 to serve as our Chief
Executive Officer. In accordance with the offer terms, Mr. Shaw, on October 18,
1999, was granted 236,800 options to purchase our common stock at an exercise
price per share of $2 and 200,000 options to purchase our common stock at an
exercise price per share of $8. See "Option Grants Table."
Pursuant to an employment agreement with substantially similar
provisions as Mr. Shaw dated October 18, 1999, we agreed to pay Mark E. Patten
an annual salary of $180,000 to serve as Executive Vice President and Chief
Financial Officer and as of October 18, 1999 granted Mr. Patten 126,876 options
to purchase our common stock at an exercise price per share of $2.00 and 73,124
options to purchase our common stock at an exercise price per share of $5.38.
In addition, on October 18, 1999, Mr. Patten was granted and issued 25,000
shares of our common stock and provided $25,000, as well as, a loan of up to
$25,000 in connection with the related tax impact. See "Option Grants Table."
44
<PAGE> 47
Pursuant to an employment agreement with substantially similar
provisions as Mr. Shaw dated October 18, 1999, we agreed to pay J. Keith Money
an annual salary of $180,000 to serve as our Chief Marketing Officer and as of
October 18, 1999, granted Mr. Money 300,000 options to purchase our common
stock at an exercise price per share of $2. See "Option Grants Table."
Pursuant to an employment agreement with substantially similar
provisions as Mr. Shaw dated October 18, 1999, we agreed to pay Henry R.
Winogrond an annual salary of $180,000 to serve as our Executive Vice President
of Business Development and as of October 18, 1999, granted Mr. Winogrond
250,000 options to purchase our common stock at an exercise price per share of
$2. See "Option Grants Table."
Pursuant to an employment agreement with substantially similar
provisions as Mr. Shaw dated October 18, 1999, we agreed to pay John R. Daniel
II an annual salary of $180,000 to serve as our Executive Vice President of
Operations and as of October 18, 1999, granted Mr. Daniel 200,000 options to
purchase our common stock at an exercise price per share of $2 and 50,000
options to purchase our common stock at an exercise price per share of $8. See
"Option Grants Table."
Pursuant to an employment agreement with substantially similar
provisions as Mr. Shaw dated October 18 1999, we agreed to pay Jacobus N. Kras
an annual salary of $180,000 to serve as our Executive Vice President for
Europe and as of October 18, 1999, granted Mr. Kras 250,000 options to purchase
our common stock at an exercise price per share of $2. See "Option Grants
Table."
Each of the employment agreements described above provide that in the
event we terminate the executive without "cause" (as defined), or the executive
terminates his employment with "good reason" (as defined), other than in the
case of a "change in control" (as discussed below), that executive will be
entitled to severance payments equaling that executive's annual salary and
benefits for a one-year period from the date of termination. In the event the
terminated executive finds a new employment, we will be able to cease making or
reduce the severance payments and benefits. If an executive's employment is
terminated by us without cause or by the executive with good reason, in either
case in anticipation of, in connection with or within one year after a "change
in control" (as defined), his salary will be continued for one year, his
benefits will be continued for one year (subject to cessation if the executive
is entitled to similar benefits from a new employer), each executive will agree
to preserve the confidentiality and the proprietary nature of all information
relating to the Company and our business. Each executive's agreement includes
certain non-competition and non-solicitation provisions.
EMPLOYEE BENEFIT PLANS
Our board of directors adopted our 1999 Stock Option Plan in July 1999
and our stockholders approved the adoption of the plan on October 18, 1999. The
compensation committee of the board of directors amended the plan in December
1999 by deleting a method of payment of the exercise price. We have reserved
3,000,000 shares of common stock for issuance under the plan, of which options
to purchase 2,813,800 shares were outstanding as of December 31, 1999.
The plan provides for grants of incentive stock options, and
nonqualified stock options, to our designated employees, advisors and
consultants, and to non-employee directors. No more than 500,000 shares in the
aggregate may be granted to any individual in any calendar year. If options
granted under the plan expire or are terminated for any reason without being
exercised, or are forfeited, the shares of common stock underlying such grant
will again be available for purposes of the plan.
45
<PAGE> 48
The compensation committee of the board of directors administers and
interprets the plan. The compensation committee will consist of two or more
persons appointed by the board of directors from among its members, each of
whom must be a "non-employee director" as defined by Rule 16b-3 under the
Securities Exchange Act of 1934, and an "outside director" as defined by
Section 162(m) of the Internal Revenue Code of 1986 and related Treasury
regulations. The compensation committee has complete discretion to make all
decisions relating to the interpretation and operation of the Plan, including
the discretion to determine which eligible individuals are to receive any
award, and to determine the type, number, vesting requirements and other
features and conditions of each award.
The exercise price for incentive stock options granted under the plan,
which may only be granted to employees, may not be less than 100% of the fair
market value of the common stock on the option grant date. The exercise price
may be paid in cash or by other means, including a cashless exercise method as
determined by the committee.
The compensation committee may amend or terminate the plan at any
time. If the compensation committee amends the plan, stockholder approval of
the amendment will be sought only if required by an applicable law. The plan
will continue in effect until the tenth anniversary of its effective date,
unless the compensation committee decides to terminate the plan earlier or
extend it with the approval of the stockholders.
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<PAGE> 49
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ISSUANCES OF STOCK
On February 12, 1999, our board of directors agreed to sell to
Interprise Technology Partners 4,000,000 shares of our Series A preferred stock
at a purchase price of $2 per share. We issued the 4,000,000 shares to ITP on
March 30, 1999. The per share closing sale price of our common stock on the OTC
Bulletin Board was $4.00 and $5.44 on February 12 and March 30, 1999,
respectively. Our board of directors determined that a $2.00 per share purchase
price for the preferred stock was fair for a transaction of this magnitude with
ITP. Pursuant to the terms of the Stock Purchase Agreement, ITP has the right to
elect one member to our board of directors. David Parker, ITP's managing
principal,has been ITP's representative on our board of directors since
February 12, 1999. In addition, in connection with the Series A transaction, we
granted an option to ITP to purchase an additional 250,000 shares of Series A
convertible preferred stock at a purchase price of $2.00 per share, exercisable
at any time over the next 5 years. We received no separate tangible
consideration in exchange for the granting of the option.
On October 15, 1999, we received an approximately $2.4 million bridge
loan from ITP, and granted ITP a warrant representing the right to purchase up
to 110,000 shares of our Series B convertible preferred stock at an exercise
price of $4 per share. The bridge loan was in the form of our Series B
convertible preferred stock at an exercise price of $4 per share. The bridge
loan was in the form of a senior secured convertible note, convertible into
shares of our Series B preferred stock. Interest on the note was 8% per annum,
and principal and interest were due and payable upon 30 days written notice.
The warrant was granted to ITP in lieu of payment of interest on the note, and
had a fair market value (based on the closing sale price on the date of grant
of our common stock on the OTC Bulletin Board) on the date of grant of $151,800.
On November 11, 1999 we executed a Stock Purchase Agreement to sell to
ITP, and other accredited investors selected by ITP, a minimum of 1,250,000 and
a maximum of 5,000,000 shares of our Series B convertible preferred stock at a
purchase price of $4 per share. We issued 1,250,000 shares to ITP on December
16, 1999. The per share closing sale price of our common stock on the OTC
Bulletin Board was $7.81 and $11.50 on November 11 and December 16, 1999,
respectively. Our board of directors determined that a $4.00 per share purchase
price for the preferred stock was fair for a transaction of this magnitude with
ITP. See "Description of Registrant's Securities."
On December 16, 1999, we also issued 25,000 shares of our Series B
convertible preferred stock to each of David Parker and Michael W. Poole,
members of our board of directors, individually, at a purchase price of $4 per
share. The per share closing sale price of our common stock on the OTC Bulletin
Board was $11.50 on December 16, 1999. Our board of directors determined that it
was fair to issue these shares at the same price as those sold to ITP on the
same date. After the Series B convertible preferred stock offering, both ITP and
David Parker were the beneficial holders of 26.7% of our common stock.
On October 18, 1999, we issued 25,000 shares of our common stock to
Mark E. Patten in connection with the start of his employment with us as our
Chief Financial Officer and Executive Vice President. The per share closing sale
price of our common stock on the OTC Bulletin Board was $5.25 on the date of
issuance.
CONSULTING ARRANGEMENTS
In 1996, we entered into a five year exclusive agreement with
Hortimarc B.V., a consulting business owned by Jacobus N. Kras, an employee of
ours since July 1, 1999 and our Executive Vice President for Europe as of
October 1999, for the development of our marketing and sales initiatives in the
European market. The contract provided for compensation to Hortimarc based upon
time and materials billed. This agreement was terminated when Mr. Kras became
an employee in July 1999. However, we continue to utilize limited services of
Hortimarc for which we incur costs for time and materials. In 1999, we remitted
$98,300 to Hortimarc under the aforementioned agreement and activities
conducted after the termination of such agreement.
In January 1999, we entered into a two year agreement with Poole
Carbone Capital Partners, Inc., of which Mr. Poole, a member of our board of
directors since January 1999, was the controlling principal as of December 31,
1999, to receive financial and investment banking services. In connection
47
<PAGE> 50
with this agreement we granted to Poole Carbone Capital Partners two warrants
each representing the right to purchase 50,000 shares of our common stock at
exercise prices of $12 and $10 per share, respectively. We also granted to the
Michael W. Poole Trust a warrant representing the right to purchase 100,000
shares of our common stock at an exercise price of $2 per share. The warrants
were granted on January 15, 1999, at which time our common stock had a per share
closing sale price on the OTC Bulletin Board of $4.25. The fair market values
(based on the closing sale price on the date of grant of our common stock on the
OTC Bulletin Board) of the $12, $10 and $2 warrants on the date of grant were
$18,700, $12,900 and $212,000, respectively.
The foregoing transactions between us and our affiliates were
negotiated upon our behalf by our management. We believe that such transactions
are in compliance with our policy that transactions with affiliates be on terms
at least as favorable as could have been reasonably obtained from an
unaffiliated third party. We anticipate that all future transactions with our
affiliates will be approved by a majority of our board of directors, including
a majority of the independent and disinterested directors, and will continue to
be on terms no less favorable to us then could be obtained from unaffiliated
third parties.
ITEM 8. LEGAL PROCEEDINGS
We are not aware of any pending legal proceedings against us that,
individually or in the aggregate, would have a material adverse effect on our
business, results of operation or financial condition. We may in the future be
party to litigation arising in the course of our business, including claims
that we allegedly infringe third party trademarks and other intellectual
property rights. These claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources.
48
<PAGE> 51
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Our shares of common stock are traded over-the-counter on the OTC
Bulletin Board under the symbol "WCOL." The following table sets forth for the
periods indicated the high and low bid prices of our common stock, as reported
in published financial sources. The quotations reflect prices between dealers
in securities, without retail mark-up, mark-down or commission, and may not
represent actual transactions.
Upon the effectiveness of this registration statement, we intend to
apply to list our shares on the Nasdaq National Market, whereupon our shares
would cease to be quoted on the OTC Bulletin Board. There can be no assurance
that we will be able to obtain or maintain any such listing for our shares.
<TABLE>
<CAPTION>
Common Stock
------------------------------
Fiscal Year Ending December 31, 2000 High Low
--------- ---------
<S> <C> <C>
First Quarter....................................................- 28 13 11/16
<CAPTION> ------------------------------
Fiscal Year Ended December 31, 1999 High Low
--------- ---------
<S> <C> <C>
Fourth Quarter.................................................... 16 1/2 5 1/6
Third Quarter..................................................... 16 5/8 5
Second Quarter.................................................... 14 1/8 4 7/8
First Quarter..................................................... 7 3/8 2 1/8
<CAPTION> ------------------------------
Fiscal Year Ended December 31, 1998 High Low
--------- ---------
<S> <C> <C>
Fourth Quarter.................................................... 3 3/4 2
Third Quarter (commencing September 9, 1998)(1)................... 2 1/2 2 1/2
</TABLE>
- -------------------
(1) Trading was commenced under the symbol SUEX.
As of December 31, 1999, there were 15,435,357 shares of common stock
outstanding, held by approximately 74 shareholders of record.
We have never declared or paid any cash dividends on our common stock
and do not anticipate declaring or paying cash dividends on our common stock in
2000 or in the foreseeable future. We currently intend to retain future
earnings to finance operations and fund the growth of our business. Any payment
of future dividends will be at the discretion of our board of directors and
will depend upon, among other things, our earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions in
respect of the payment of dividends and other factors that our board of
directors may deem relevant.
49
<PAGE> 52
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below in chronological order is information regarding the
number of shares of common stock and preferred stock sold by us and the number
of options and warrants issued by us within the past three years, and the
consideration received by us for such shares, options and warrants. None of the
securities were registered under the Securities Act. In the opinion of World
Commerce, the sale or issuance of the above securities was deemed to be exempt
from registration under the Securities Act in reliance upon Section 4(2) of the
Securities Act, except as otherwise noted for the 1,705,000 shares sold or
issued in reliance upon Rule 504, as transactions by an issuer not involving
any public offering. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof, and
appropriate legends were fixed to the share certificates issued in such
transactions. All recipients had an opportunity to ask questions about us and
had adequate access to information about us. No sales of securities involved
the use of an underwriter and no commissions were paid in connection with the
sale or issuance of any securities.
On September 10, 1998, we issued 7,020,000 shares of our common stock
to World Commerce Online-Floraplex in exchange for all its outstanding shares
of common stock.
On September 23, 1998, we issued 3,380,000 shares of our common stock
to Consolidated Capital Group, Inc., PowWow, Inc., Roger Tichenor, Douglas
Hackett, Robert Shaw, Keith Money and Charles T. Black, Jr. and Kenneth B.
Cobb, II, as joint tenants, as consideration for services rendered in
facilitating the voluntary share exchange between us and World Commerce
Online-Floraplex.
Between September 25, 1998 and February 1, 1999, we sold 1,615,000
shares of our common stock, at a purchase price of $.50 per share to 27 persons
for $807,500. The sale of the securities was deemed to be exempt from
registration under the Securities Act in reliance upon Rule 504 of the
Securities Act as a transaction by an issuer not involving any public offering.
On October 21, 1998, we issued 300,000 shares of our common stock,
determined by our board of directors to have a value of $150,000, to Kenneth B.
Cobb, II as consideration for services rendered in his capacity as acting chief
financial officer.
On October 31, 1998, we issued 100,000 shares of our common stock,
determined by our board of directors to have a value of $52,000, to Larry L.
Murphy; on November 20, 1998, we issued 20,000 shares of our common stock, at
a fair market value of $45,000 (based on the closing sale price on the date of
issuance of our common stock on the OTC Bulletin Board), to William A. Mobley,
Jr.; and on January 18, 1999, we issued 35,000 shares of our common stock, at
a fair market value of $78,750 (based on the closing sale price on the date of
issuance of our common stock on the OTC Bulletin Board), to Tucker H. Byrd and
5,000 shares of our common stock, at a fair market value of $11,250 (based on
the closing sale price on the date of issuance of our common stock on the OTC
Bulletin Board), to Jack L. Byrd, Jr., for satisfaction of all loans, notes
and debts of any kind made to World Commerce on each of Mr. Murphy's, Mr.
Mobley's, and Tucker Byrd's behalf. The 5,000 shares issued to Jack L. Byrd,
Jr. were for satisfaction of loans made by Tucker H. Byrd. The issuance of the
securities was deemed to be exempt from registration under the Securities Act
in reliance upon Rule 504 of the Securities Act as a transaction by an issuer
not involving any public offering.
On December 7, 1998, we issued 200,000 shares of our common stock, at
a fair market value of $500,000 (based on the closing sale price on the date
of issuance of our common stock on the OTC Bulletin Board), to Noble House of
Boston, Inc. as consideration for services rendered in performing public
relations work.
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<PAGE> 53
On December 17, 1998, we issued 30,000 shares of our common stock, at a
fair market value of $75,000 (based on the closing sale price on the date of
issuance of our common stock on the OTC Bulletin Board), to William Armellini as
consideration for consulting services rendered.
On January 15, 1999, we granted to Michael W. Poole Trust a warrant
representing the right to purchase 100,000 shares of our common stock at an
exercise price of $2 per share. The warrant was granted as consideration for Mr.
Michael Poole being a member of our board of directors and had a fair market
value (based on the closing sale price on the date of grant of our common stock
on the OTC Bulletin Board) on the date of grant of $212,000. We also granted
Poole Carbone Capital Partners, Inc., two warrants each representing the right
to purchase 50,000 shares of our common stock at exercise prices of $12 and $10
per share as consideration for consulting services to be performed by Poole
Carbone Capital Partners. The warrants had a fair market value on the date of
grant of $18,700 and $12,900 (based on the closing sale price on the date of
grant of our common stock on the OTC Bulletin Board), respectively.
On March 30, 1999, we sold 4,000,000 shares of our Series A convertible
preferred stock, at a purchase price of $2 per share, to Interprise Technology
Partners for $8 million and granted ITP an option to purchase an additional
250,000 shares of our Series A convertible preferred stock at an exercise price
of $2.00 per share. We received no tangible consideration in exchange for the
granting of the option.
On April 22, 1999, we issued 5,357 shares of our common stock, at a
fair market value of $37,500 (based on the closing sale price on the date of
issuance of our common stock on the OTC Bulletin Board), to Novelle Consulting,
L.L.C. as consideration for services rendered and granted a warrant representing
the right to purchase 250,000 shares of our common stock as consideration for
consulting services performed by Novelle in connection with FreshPlex. The
warrant had a fair market value (based on the closing sale price on the date of
grant of our common stock on the OTC Bulletin Board) on the date of grant of
$276,560.
In July 1999, we issued 80,000 shares of our common stock, at a fair
market value of $945,000 (based on the closing sale price on the date of
issuance of our common stock on the OTC Bulletin Board), to Peter Giarrusso as
consideration for consulting services performed from January 1999 to July 1999
relating to the design and development of our B2B e-commerce technology.
On August 26, 1999, in connection with our acquisition of FPN, we
issued 100,000 shares of our common stock, at a fair market value of $1,126,150
(based on the closing sale price on the date of issuance of our common stock on
the OTC Bulletin Board), to the sole stockholder of FPN, JoBo Holding B.V., and
we granted to Nils Van Beek, owner of JoBo, a warrant representing the right to
purchase 100,000 shares of our common stock. The warrant had a fair market value
(based on the closing sale price on the date of grant of our common stock on the
OTC Bulletin Board) on the date of grant of $724,000.
On September 20, 1999, we granted to Kenneth B. Cobb II warrants
representing the right to purchase 100,000 shares of our common stock as
consideration for past services as our Chief Financial Officer. The warrant had
a fair market value (based on the closing sale price on the date of grant of our
common stock on the OTC Bulletin Board) on the date of the grant of $290,625.
On October 1, 1999, we issued 20,000 shares of our common stock, at a
fair market value of $110,000 (based on the closing sale price on the date of
issuance of our common stock on the OTC Bulletin Board), and granted a warrant
representing the right to purchase 250,000 shares of our common stock to Charles
Kremp, III in connection with the consulting agreement with Mr. Kremp and the
discontinuance of the Kremp Network. The warrant had a fair market value (based
on the closing sale price on the date of grant of our common stock on the OTC
Bulletin Board) on the date of the grant of $525,270.
On October 15, 1999, we granted to Interprise Technology Partners a
warrant representing the right to purchase up to 110,000 shares of our Series B
convertible preferred stock at an exercise price of $4 per share. The warrant
was granted to ITP in lieu of interest on an approximately $2.4 million bridge
loan provided to us by ITP. The warrant had a fair market value (based on the
closing sale price on the date of grant of our common stock on the OTC Bulletin
Board) on the date of grant of $151,800.
On October 18, 1999, we issued 25,000 shares of our common stock, at a
fair market value of $134,375 (based on the closing sale price on the date of
issuance of our common stock on the OTC Bulletin Board), to Mark E. Patten, our
Chief Financial Officer, in connection with the commencement of his employment
at World Commerce.
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<PAGE> 54
On October 18, 1999, we granted to each of Tucker H. Byrd, Jr. and
Elizabeth Walsh a warrant representing the right to purchase 30,000 shares and
1,000 shares of our common stock, respectively, in connection with legal
services provided to us. The warrants had a fair market value (based on the
closing sale price on the date of grant of our common stock on the OTC
Bulletin Board) on the date of the grant of $33,074 and $1,101, respectively.
During the period from October 18, 1999 through December 16, 1999, we
granted to our employees stock options exercisable for an aggregate of 2,813,800
shares of our common stock at prices ranging from $2 to $11.75 per share.
On December 10, 1999, we granted to Dole Fresh Flowers, Inc. a warrant
representing the right to purchase 1,000,000 shares of our common stock in
connection with Dole Fresh Flowers agreeing to sell its flowers through
Floraplex. The warrant had a fair market value (based on the closing sale price
on the date of grant of our common stock on the OTC Bulletin Board) on the
date of the grant of $5,170,000.
On December 16, 1999, we sold 5,000,000 shares of our Series B
convertible preferred stock, at a purchase price of $4 per share, to
approximately 60 accredited investors for $20 million, including 1,250,000
shares for $5 million to Interprise Technology Partners.
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<PAGE> 55
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES
GENERAL
Our authorized capital stock consists of 90,000,000 shares of common
stock, par value $.001 per share, and 10,000,000 shares of preferred stock, par
value $.001 per share.
COMMON STOCK
As of December 31, 1999, there were 15,435,537 shares of common stock
outstanding, all of which are fully paid and nonassessable. The holders of
common stock are entitled to one vote per share on all matters to be voted upon
by the stockholders. Subject to any preferential rights of preferred stock
holders, the holders of common stock are entitled to receive dividends on a pro
rata basis, if any, declared from time to time by the board of directors out of
legally available funds. In the event of our liquidation, dissolution or
winding up, subject to any preferential rights of preferred stock holders, the
holders of common stock are entitled to share on a pro rata basis in all assets
remaining after payment of liabilities. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. We have never paid
dividends in the past and do not intend to do so in the future.
PREFERRED STOCK
The following is a description of certain terms of our Series A and
Series B convertible preferred stock, or collectively referred to as our
preferred stock, which is intended as a summary only, and is qualified in its
entirety by reference to the complete text of each Certificate of Designations
which contain the voting powers, designations, preferences and rights of the
Series A and Series B convertible preferred stock. A copy of each certificate
is filed as an exhibit to this registration statement. As of December 31, 1999,
there were 9,000,000 shares of preferred stock issued and outstanding, all of
which are fully paid and non-assessable. Except as otherwise noted, the Series
A and Series B redeemable convertible preferred stock had the same powers,
designations, preferences and rights.
RANKING. The preferred stock will, with respect to dividend rights and
rights upon liquidation, dissolution and winding up, rank senior to our common
stock.
DIVIDENDS. The holders of outstanding shares of preferred stock are
not as a matter of right entitled to be paid or receive any dividends or
distributions. The board of directors may decide, at its discretion, whether or
not to pay dividends and in what amount. The board of directors shall not pay
or declare any dividend or make any distribution to the holders of shares of
common stock as long as their remains any shares of preferred stock
outstanding.
LIQUIDATION. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of World Commerce, the holders of the
outstanding shares of Series A and Series B preferred stock are entitled to
receive $2.00 and $4.00, respectively, in cash for each respective outstanding
share of preferred stock (plus all accrued and unpaid dividends), before any
distribution or payment to the holders of outstanding shares of any other
capital stock of World Commerce. In addition to and after payment in full of
all other amounts payable to the holders of the outstanding shares of preferred
stock upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of World Commerce, the holders of the outstanding shares of the
preferred stock shall be entitled to
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<PAGE> 56
participate on an as-if-converted basis with the holders of the outstanding
shares of our common stock as a single class in the distribution of our assets
with respect to the common stock.
REDEMPTION. No outstanding shares of preferred stock shall be callable
or redeemable by us. The holders of a majority of the outstanding shares of
preferred stock may require World Commerce to redeem all of the preferred stock
owned by such holders at a price equal to $2.00 per share for the Series A
(plus all accrued and unpaid dividends thereon) and $4.00 per share for the
Series B (plus all accrued and unpaid dividends thereon) at any time after
April 1, 2001, upon the occurrence of a change in ownership of a majority of
our outstanding shares of common stock, and/or upon the sale or transfer of
more than 50% of our assets.
VOTING RIGHTS. The holders of the outstanding shares of Series A and
Series B preferred stock, voting separately as a single class to the exclusion
of all other classes of our capital stock, are each entitled to elect one
member to our board of directors until such time as no shares of their
respective preferred stock are outstanding. The holders of a majority of the
outstanding shares of both the Series A and Series B preferred stock must
approve any increase in the number of directors on our board of directors
beyond five. The holders of the outstanding shares of preferred stock shall be
entitled to notice of all stockholders' meetings in accordance with our Bylaws,
and except in the election of directors, shall be entitled to vote on all
matters submitted to the stockholders for a vote together with the holders of
the outstanding shares of common stock voting together as a single class with
each share of preferred stock entitled to one vote for each share of common
stock issuable upon conversion of the preferred stock.
CONVERSION RIGHTS. At any time any holder of preferred stock may
convert all or any portion of the preferred stock held by such holder into a
number of shares of common stock computed by: (i) for Series A preferred stock,
multiplying the number of shares of Series A preferred stock to be converted by
$2.00 and dividing the result by the conversion price of $2.00; or (ii) for
Series B preferred stock, multiplying the number of shares of Series B
preferred stock to be converted by $4.00 and dividing the result by the
conversion price of $4.00. The conversion price of both the Series A and Series
B preferred stock is subject to adjustment pursuant to customary anti-dilution
provisions. The conversion of the preferred stock at the election of the holder
thereof shall take effect as of the close of business on the date on which the
certificate or certificates representing the preferred stock to be converted
have been surrendered for conversion at our principal office. Furthermore, we
may at any time require the mandatory conversion of all outstanding shares of
preferred stock at such time as we close a public offering of our common stock
in which we raise at least $15,000,000, the price per share paid for our common
stock was at least three hundred percent above the conversion price of the
preferred stock then in effect, and the holders of the preferred stock were
permitted to include their shares in the public offering, subject to
underwriting limitations. The mandatory conversion would be effective upon the
closing of the public offering provided written notice of such mandatory
conversion was given to all holders of the preferred stock at least seven days
prior to such closing.
REGISTRATION RIGHTS. The holders of the outstanding shares of
preferred stock have registration rights relative to the common stock issuable
upon conversion of their preferred stock. All registration rights become
available on the earlier of April 1, 2001 or one hundred eighty days after the
close of our first registered public offering of our common stock under the
Securities Act with net proceeds of not less than $15,000,000, and end three
years thereafter. The registration rights are provided under the terms of an
agreement between us and the holders of the preferred stock. Subject to
limitations in the agreement, the holders of a majority of preferred stock can
demand up to five times that we register their shares of common stock, and if
we register any of our common stock either for our own account or for the
account of other security holders, each holder of shares of preferred stock is
entitled to "piggyback"
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<PAGE> 57
its shares of common stock in such registration, subject to the ability of the
underwriters to limit the number of shares included in the offering. We will be
responsible for paying all registration expenses relating to any piggyback
registrations and all but one demand registration.
WARRANTS
We have issued warrants representing the right to purchase our common
stock to the warrant holders set forth below for the number of shares of common
stock and at the exercise price set forth opposite each warrant holders' name.
We have reserved from our authorized but unissued shares a sufficient number of
shares of common stock for issuance upon the exercise of the warrants. As of
December 31, 1999, no warrants have been exercised. The warrants do not confer
upon the warrant holder any voting or other rights of a stockholder of World
Commerce. Except as otherwise indicated, the warrants and all rights thereunder
are freely transferable in whole or in part. Except as otherwise indicated, the
warrants provide for customary anti-dilution provisions in the event of certain
events which may include mergers, consolidations, reorganizations,
reclassifications, stock dividends, stock splits and other changes in our
capital structure. Except as otherwise indicated, the warrant holders are
entitled to certain "piggyback" registration rights enabling them, under
certain conditions, to include the common stock underlying the warrants in a
registration statement in the event that we propose to register any of our
common stock under the Securities Act. The foregoing is a summary of the terms
generally applicable to the warrants, however, the terms of each individual
warrant may vary according to negotiation between us and the various warrant
holders. The following table provides certain information with respect to the
warrants as of December 31, 1999.
<TABLE>
<CAPTION>
EXERCISE PRICE
HOLDER AMOUNT OF SHARES PER SHARE EXPIRATION DATE
- ------------------------------------ ---------------- -------------- ----------------
<S> <C> <C> <C>
Michael W. Poole Trust 100,000(5) $ 2.00(11) January 14, 2009
Poole Carbone Capital Partners, Inc. 50,000(5) 12.00(11) January 14, 2009
Poole Carbone Capital Partners, Inc. 50,000(5) 10.00(11) January 14, 2009
Nils Van Beek(1)(2)(3) 100,000(7) 11.50(11) August 25, 2003
Kenneth B. Cobb II 50,000(6) 2.00(11) December 31, 2004
Kenneth B. Cobb II 50,000(8) 8.00(11) July 29, 2005
Charles Kremp III(1)(2)(3) 250,000(9) 8.00(11) September 30, 2005
Tucker H. Byrd 30,000(5) 8.00(12) October 17, 2009
Elizabeth Walsh(1)(2)(3) 1,000(5) 8.00(12) October 18, 2004
Dole Fresh Flowers, Inc.(1)(2)(3) 1,000,000(10) 7.50(11) December 9, 2009
Interprise Technology Partners(4) 110,000(5) 4.00(13) October 31, 2004
Novelle Consulting, L.L.C.(2)(3) 250,000(5) 12.38(12) April 21, 2003
</TABLE>
- -------------------
(1) The warrant and all rights thereunder may only be transferred by will or
the laws of descent and distribution.
(2) Anti-dilution rights only in the event of stock dividends or stock splits.
(3) No "piggy back" registration rights for any of the shares of our common
stock underlying the warrant. (4) The warrant represents the right to
purchase shares of our Series B preferred stock, which is convertible on a
1 for 1 basis into our common stock, subject to customary anti-dilution
provisions.
(5) 100% of the shares are immediately exercisable.
(6) 100% of the shares are exercisable as of January 1, 2000.
(7) 25% of the shares are exercisable as of January 1, 2000, 25% of the shares
are exercisable as of January 1, 2001, 25% of the shares are exercisable as
of January 1, 2002, and the remaining 25% of the shares are exercisable as
of August 30, 2003.
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<PAGE> 58
(8) 100% of the shares are exercisable as of August 1, 2000.
(9) 20,837 shares are exercisable as of December 31, 1999 and 20,833 shares
are exercisable on the last day of each calendar quarter for 11 successive
quarters until September 30, 2002.
(10) 58,337 shares are exercisable as of January 1, 2000, 58,333 shares are
exercisable as of February 1, 2000 and on the first calendar day of each
month for 10 successive months until December 1, 2000 and 25,000 shares
are exercisable as of January 1, 2001 and on the first calendar day of
each month for 11 successive months until December 1, 2001.
(11) The exercise price is payable in cash or any other form of consideration
agreed to by World Commerce and the warrant holder. The exercise price is
also payable in warrants valued at the current market price of our common
stock underlying such warrant on the date of such exercise less the
current warrant price then in effect, or a combination of cash and such
warrants.
(12) The exercise price is payable in cash or any other form of consideration
agreed to by World Commerce and the warrant holder.
(13) The exercise price is payable in cash or in warrants valued at the average
of the closing prices of our common stock reported for the five business
days immediately before notice of exercise is given, or a combination of
cash and such warrants.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND PROVISIONS OF OUR CERTIFICATE OF
INCORPORATION
Provisions of Delaware Law and our certificate of incorporation
summarized below could make more difficult our acquisition by means of a tender
offer, a proxy contest or otherwise in the removal of incumbent officers and
directors. These provisions are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control to first negotiate with us. We believe that
the benefits of increased protection of our potential ability to negotiate with
the proponent of an unfriendly or unsolicited proposal to acquire or
restructure us outweighs the disadvantages of discouraging such proposals
because, among other things, negotiation of such proposals could result in an
improvement of their terms.
DELAWARE ANTI-TAKEOVER LAW. We are subject to Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the date the person became an interested stockholder, unless the
"business combination" or the transaction in which the person became an
interested stockholder is approved in a prescribed manner. Generally, a
"business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an "interested stockholder" is a person who, together with
affiliates and associates, owns or within three years prior to the
determination of interested stockholder status, did own, 15.0% or more of a
corporation's voting stock. The existence of this provision may have an
anti-takeover effect with respect to transactions not approved in advance by
the board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders.
CERTIFICATE OF INCORPORATION. Our certificate of incorporation
authorizes our board of directors to establish one or more series of preferred
stock and to determine, with respect to any series of preferred stock, the
terms and rights of such series. The authorized shares of preferred stock, as
well as shares of common stock, will be available for issuance without further
action by our stockholders, unless such action is required by applicable laws
or the rules of any stock exchange or automatic quotation system on which our
securities may be listed or traded.
Although our board of directors has no intention at the present time
of doing so, it could issue a series of preferred stock that could, depending
on the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. Our board of directors will make any determination to
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<PAGE> 59
issue such shares based on its judgment as to the best interest of World
Commerce and its stockholders. Our board of directors, in so acting, could
issue preferred stock having terms that could discourage an acquisition attempt
through which an acquiror otherwise may be able to change the composition of
our board of directors, including a tender or exchange offer or other
transaction that some, or a majority, of our stockholders might believe to be
in the best interest or in which stockholders might receive a premium for their
stock over the then current market price of such stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is Continental
Stock Transfer & Trust Company
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a
corporation to include in its charter documents, and in agreements between the
corporation and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Our certificate of incorporation provides that, pursuant to Delaware
law, our directors and officers shall not be liable for monetary damages for
breach of the their fiduciary duty as directors or officers to World Commerce
and its stockholders. This provision in the Certificate of Incorporation does
not eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief
will remain available under Delaware law. In addition, each director and
officer will continue to be subject to liability for breach of their duty of
loyalty to us for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit, and for payment of dividends or approval of stock repurchases
or redemptions that are unlawful under Delaware law. The provision also does
not affect a director's responsibilities under any other law, such as the
federal securities laws or state or federal environmental laws.
We have entered into indemnification agreements with our directors and
executive officers, in addition to the indemnification provided for in our
Certificate of Incorporation, and intend to enter into indemnification
agreements with any new directors and executive officers in the future. The
indemnification agreements provide the directors and executive officers with
further indemnification to the maximum extent permitted by the Delaware General
Corporation Law.
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<PAGE> 60
ITEM 13. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS.
The financial statements filed as part of this registration statement
are listed in the Index to Financial Statements on page F-1 and are attached
hereto immediately thereafter.
(b) EXHIBITS.
The exhibits filed as part of this registration statement are listed
below and in the Exhibit Index and are attached hereto immediately following
the Exhibit Index.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------
<S> <C>
2.1* Agreement and Plan of Merger between World Commerce Online, a
Nevada corporation and World Commerce Online, a Delaware
corporation, dated September 30, 1999.
2.2* Acquisition Agreement dated as of September 10, 1998 between
World Commerce Online, Inc., a Nevada corporation and Sunrise
Express, Inc., a Nevada corporation.
3.1* Certificate of Incorporation of World Commerce Online.
3.2* Certificate of Amendment of Certificate of Incorporation
amending Certificate of Designations of Series A Preferred Stock.
3.3* Bylaws.
3.4* Stock Purchase Agreement for Series A Preferred Stock, dated
March 30, 1999.
3.5* Stock Purchase Agreement for Series B Preferred Stock, dated
November 11, 1999.
3.6* Certificate of Designations of Series B Preferred Stock.
3.7* Registration Rights Agreement for Series A and B Preferred Stock,
dated November 11, 1999.
4.1* Form of Common Stock Certificate.
4.2* Warrant Agreement in favor of Poole Carbone Capital Partners, dated
January 15, 1999.
4.3* Warrant Agreement in favor of Poole Carbone Capital Partners, dated
January 15, 1999.
4.4* Warrant Agreement in favor of Michael W. Poole Trust, dated January
15, 1999.
4.5* Warrant Agreement in favor of Novelle Consulting, L.L.C., dated
April 22, 1999.
4.6* Warrant Agreement in favor of Kenneth B. Cobb II, dated September
20, 1999.
4.7* Warrant Agreement in favor of Kenneth B. Cobb II, dated September
20, 1999.
4.8* Warrant Agreement in favor of Charles Kremp, III, dated as of
October 1, 1999.
4.9* Warrant Agreement in favor of Interprise Technology Partners, L.P.,
dated October 15, 1999.
4.10* Warrant Agreement in favor of Tucker Byrd, dated October 18, 1999.
4.11* Warrant Agreement in favor of Liz Walsh, dated October 18, 1999.
4.12* Warrant Agreement in favor of Nils Van Beek, dated August 26, 1999.
</TABLE>
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<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------
<S> <C>
4.13* Warrant Agreement in favor of Dole Fresh Flowers, dated December 10,
1999.
4.14 Warrant Agreement in favor of AnswerThink, Inc., dated March 29,
1999.
4.15 Warrant Agreement in favor of AnswerThink, Inc., dated March 29,
1999.
10.1* 1999 Stock Option Plan.
10.2* Form of Executive Incentive Stock Option Agreement.
10.3* Form of Executive Non-Qualified Stock Option Agreement.
10.4* Form of Non-Executive Incentive Stock Option Agreement.
10.5* Form of Non-Executive Non-Qualified Stock Option Agreement.
10.6* Form of Indemnification Agreement for officers and directors.
10.7* Corporate Headquarters Lease Agreement, dated February 15, 1999.
10.8* Consulting Agreement with AnswerThink, Inc., dated August 11, 1999.
10.9* Stock Purchase Agreement by and among World Commerce Online, Fresh
Products Network, Omniflora International Ltd., Jobo Holding B.V.
and Nils Van Beek, dated August 26, 1999.
10.10* Consulting Agreement with Jobo Holding B.V., dated August 26, 1999.
10.11* 1st Amendment to Corporate Headquarter Lease Agreement, dated
September 7, 1999.
10.12* Consulting Agreement with Charles Kremp, III, dated as of October
1, 1999.
10.13* Demonstration License Agreement with AnswerThink, Inc., dated
October 4, 1999.
10.14* Web Site Development Agreement with Snickleways Interactive, dated
October 14, 1999.
10.15* Employment Agreement with Robert H. Shaw, dated as of October 18,
1999.
10.16* Employment Agreement with Mark E. Patten, dated as of October 18,
1999.
10.17* Employment Agreement with J. Keith Money, dated as of October 18,
1999.
10.18* Employment Agreement with Henry R. Winogrond, dated as of October
18, 1999.
10.19* Employment Agreement with John R. Daniel II, dated as of October
18, 1999.
10.20* Employment Agreement with Eugenio M. Valdes, dated as of October
18, 1999.
10.21* Employment Agreement with Jacobus N. Kras, dated as of October 18,
1999.
10.22* Floraplex User Agreement with Dole Fresh Flowers, dated December 10,
1999.
10.23* Master Outsourced Services Agreement with eCredit.com, Inc., dated
December 30, 1999.
10.24 Form of Floraplex User Agreement with wholesale florists who are
members of Premiere Floral Distributors and International Floral
Distributors.
10.25 Agreement between World Commerce Online and Flower Auction Holland,
dated October 22, 1999.
10.26 Agreement between Flower Purchase Network-Floraplex and Flower
Auction Aalsmeer, dated December 8, 1999.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------
<S> <C>
21.1* Subsidiaries.
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------
* Previously Filed
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<PAGE> 63
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997,
and for the Period March 30, 1994 (Date of Inception) through December 31, 1999 F-4
Consolidated Statements of Stockholders' Deficit for the Years Ended December 31, 1999, 1998
and 1997, and for the Period March 30, 1994 (Date of Inception) through December 31, 1999 F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997,
and for the Period March 30, 1994 (Date of Inception) through December 31, 1999 F-9
Notes to Consolidated Financial Statements F-11
FRESH PRODUCTS NETWORK B.V. (A DEVELOPMENT STAGE COMPANY)
Report of Independent Accountants F-22
Financial Statements:
Balance Sheets as of August 26, 1999 and December 31, 1998 F-23
Statements of Operations for the period April 17, 1998 (Date of inception) through
December 31, 1998, for the period from January 1, 1999 to August 26, 1999 and
for the period April 17, 1998 (date of inception) through August 26, 1999 F-24
Statements of Stockholder's Deficit for the period April 17, 1998 (Date of inception) through
December 31, 1998, and for the period from January 1, 1999 to August 26, 1999 F-25
Statements of Cash flows for the period April 17, 1998 (Date of inception) through
December 31, 1998, for the period from January 1, 1999 to August 26, 1999 and
for the period April 17, 1998 (date of inception) through August 26, 1999 F-26
Notes to Financial Statements F-27
</TABLE>
F-1
<PAGE> 64
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
World Commerce Online, Inc. and Subsidiaries
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' deficit and cash flows
present fairly, in all material respects, the consolidated financial position of
World Commerce Online, Inc. and Subsidiaries (a development stage company) at
December 31, 1999 and 1998, and the results of their operations and their cash
flows for the years ended December 31, 1999, 1998, 1997 and for the period from
March 30, 1994 (date of inception) through December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tampa, Florida
February 9, 2000, except for Note 16 for
which the date is March 30, 2000
F-2
<PAGE> 65
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
ASSETS 1999 1998
- ------------------------------------------------------------ ------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,553,021 $ 42,335
Prepaid expenses and other current assets 232,754 1,597
Receivable from investors 3,785,000 --
------------ -----------
Total current assets 14,570,775 43,932
Property and equipment, net 6,477,743 57,312
Intangible assets, net 1,596,260 --
Other assets 24,238 --
------------ -----------
Total assets $ 22,669,016 $ 101,244
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
- ------------------------------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,855,185 $ 176,308
Accrued compensation and benefits 372,075 30,852
Capital lease obligation, current 71,611 11,467
------------ -----------
Total current liabilities 2,298,871 218,627
Long-term liabilities:
Capital lease obligation 91,927 26,983
Redeemable convertible preferred stock:
Preferred stock Series A, $0.001 par value; authorized 4,250,000 shares,
issued and outstanding 4,000,000 shares at December 31, 1999, stated at
liquidation value, net of related costs 7,978,211 --
Preferred stock Series B, $0.001, par value; authorized 5,110,000 shares,
issued and outstanding 5,000,000 shares at December 31, 1999, stated at
liquidation value, net of related costs 19,620,772 --
------------ -----------
Total redeemable convertible preferred stock 27,598,983 --
Stockholders' deficit:
Common stock, $0.001 par value; authorized 90,000,000 shares, issued and
outstanding 15,435,357 and 14,815,000 shares at December 31, 1999 and
1998, respectively 15,435 14,815
Additional paid-in capital 43,175,872 4,692,623
Deferred stock-based compensation (4,863,980) --
Deficit accumulated during the development stage (45,602,372) (4,851,804)
Accumulated comprehensive loss (45,720) --
------------ -----------
Total stockholders' deficit (7,320,765) (144,366)
------------ -----------
Total Liabilities and Stockholders' Deficit $ 22,669,016 $ 101,244
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 66
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 30,
1994 (DATE
OF INCEPTION)
THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
1999 1998 1997 1999
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Revenues:
Advertising revenue $ 14,145 $ -- $ -- $ 14,145
Subscription revenue 7,909 -- -- 7,909
Transaction revenue 21,076 -- -- 21,076
Floral product revenue -- -- -- 350,130
Other revenue -- -- 40,195 40,273
Service revenues from related parties -- 292,406 49,990 342,396
------------ ------------ ------------ ------------
Total revenues 43,130 292,406 90,185 775,929
------------ ------------ ------------ ------------
Costs and operating expenses:
Cost of floral product -- -- -- 308,749
Product and technology development 2,836,605 381,192 136,089 3,422,484
Sales and marketing 5,464,989 316,966 81,954 6,048,126
General and administrative 3,848,221 3,223,123 507,342 7,932,957
Depreciation and amortization 421,167 7,401 1,888 432,285
------------ ------------ ------------ ------------
Total costs and operating expenses 12,570,982 3,928,682 727,273 18,144,601
------------ ------------ ------------ ------------
Loss from operations (12,527,852) (3,636,276) (637,088) (17,368,672)
Net interest expense (166,129) (4,026) -- (177,113)
Other non-operating income (expense) (56,587) -- -- (56,587)
------------ ------------ ------------ ------------
Net loss $(12,750,568) $ (3,640,302) $ (637,088) $(17,602,372)
Deemed dividend on redeemable
convertible preferred stock (28,000,000) -- --
------------ ------------ ------------
Net loss available to common
stockholders $(40,750,568) $ (3,640,302) $ (637,088)
------------ ------------ ------------
Basic and diluted net loss per common
share $ (2.67) $ (0.40) $ (0.09)
============ ============ ============
Weighted average number of shares used in
computing basic and diluted net loss per
common share 15,271,152 9,181,923 6,930,865
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 67
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL DEFERRED
PRICE PER ---------------------- PAID-IN TREASURY STOCK-BASED
DATE SHARE SHARES AMOUNT CAPITAL STOCK COMPENSATION
----- ---------- ---------- ------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial sale of common stock 11/94 $ .02 3,150,000 $ 3,150 $ 56,850 $ -- $ --
Comprehensive Loss:
Net loss for the period March 30, 1994
(date of inception) through
December 31, 1994 -- -- -- -- --
---------- ------- ---------- -------- ---------
Total comprehensive loss
Balance, December 31, 1994 3,150,000 $ 3,150 $ 56,850 $ -- $ --
Sales of common stock 7/95-11/95 .08 504,000 504 39,496 -- --
Issuances of common stock in exchange
for professional services 7/95 .08 846,000 846 66,297 -- --
Comprehensive Loss:
Net loss -- -- -- -- --
---------- ------- ---------- -------- ---------
Total comprehensive loss
Balance, December 31, 1995 4,500,000 $ 4,500 $ 162,643 $ -- $ --
Common stock for loan 5/96 .02 1,350,000 1,350 28,195 -- --
Sales of common stock 8/96 .10 675,000 675 69,325 -- --
8/96 .83 90,000 90 74,910 -- --
Issuances of common stock in exchange
for professional services 12/96 .83 90,000 90 74,910 -- --
Comprehensive Loss:
Net loss -- -- -- -- --
---------- ------- ---------- -------- ---------
Total comprehensive loss
Balance, December 31, 1996 6,705,000 $ 6,705 $ 409,983 $ -- $ --
Issuances of common stock in exchange
for professional services 4/97 .56 225,000 225 124,775 -- --
Transfer of shares by principal
shareholders for the benefit of the -- -- 225,000 -- --
Company
Sales of common stock 7/97 .42 90,000 90 37,410 -- --
Repurchase of treasury shares (20 -- -- -- (20,000) --
shares)
Reissuance of treasury stock (20 shares) -- -- 17,500 20,000 --
Comprehensive Loss:
Net loss -- -- -- -- --
---------- ------- ---------- -------- ---------
Total comprehensive loss
Balance, December 31, 1997 7,020,000 $ 7,020 $ 814,668 $ -- $ --
Sales of common stock 9/98-12/98 .50 1,225,000 1,225 611,275 -- --
Transfer of shares by principal share
holders for the benefit of the Company -- -- -- -- 124,750 -- --
Issuances of common stock in exchange 9/98 .50 3,380,000 3,380 1,686,620 -- --
for professional services 10/98-12/98 2.25 305,000 305 685,945 -- --
11/98 1.73 23,650 24 40,891 -- --
12/98 2.50 230,000 230 574,770 -- --
Common stock issued in satisfaction of 10/98 .52 100,000 100 51,900 -- --
shareholder loans 11/98 1.73 31,350 31 54,304 -- --
Common stock issued in connection with
reverse merger with public shell -- -- 2,500,000 2,500 (2,500) -- --
Forgiveness of loan from Affiliate -- -- -- -- 50,000 -- --
Comprehensive Loss:
Net loss -- -- -- -- --
---------- ------- ---------- -------- ---------
Total comprehensive loss
Balance, December 31, 1998 14,815,000 $14,815 $4,692,623 $ -- $ --
</TABLE>
F-5
<PAGE> 68
World Commerce Online, Inc. and Subsidiaries
(A Development State Company)
Consolidated Statements of Stockholders' Deficit (continued)
<TABLE>
<CAPTION>
Common Stock Additional Deferred
Price Per ---------------------- Paid-In Treasury Stock-Based
Date Share Shares Amount Capital Stock Compensation
----------- ---------- ---------- ------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales of common stock 1/99 .50 390,000 390 194,610 -- --
Stock grant to employee 10/99 5.38 25,000 25 134,350 -- --
Issuances of common stock in exchange
for professional services
4/99-10/99 5.50-11.81 105,357 105 1,217,395 -- --
Acquisition of FPN 8/99 11.26 100,000 100 1,126,150 -- --
Issuances of warrants to employees and
directors 1/99-9/99 -- -- 425,770 -- --
Issuances of warrants for professional
services 1/99-12/99 -- -- 933,068 -- --
Deemed dividend on convertible
preferred stock -- -- 28,000,000 -- --
Stock based compensation, net of
amortization of deferred compensation -- -- 6,451,906 -- (4,863,980)
Comprehensive Loss:
Net loss -- -- -- -- --
Foreign currency translation -- -- -- -- --
adjustment
---------- ------- ----------- -------- -----------
Total comprehensive loss
Balance, December 31, 1999 15,435,357 $15,435 $43,175,872 $ -- $(4,863,980)
========== ======= =========== ======== ===========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 69
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED ACCUMULATED
DURING THE OTHER
COMPREHENSIVE DEVELOPMENT COMPREHENSIVE
LOSS STAGE LOSS TOTAL
------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Initial sale of common stock $ -- $ -- $ 60,000
Comprehensive Loss:
Net loss for the period March 30, 1994 (date
of inception) through December 31, 1994 (41,215) (41,215) -- (41,215)
------------- ------------ ------------- -----------
Total comprehensive loss $ (41,215)
=============
Balance, December 31, 1994 $ (41,215) $ -- $ 18,785
Sales of common stock -- -- 40,000
Issuances of common stock in exchange for
professional services -- -- 67,143
Comprehensive Loss:
Net loss (212,865) (212,865) -- (212,865)
------------- ------------ ------------- -----------
Total comprehensive loss $ (212,865)
=============
Balance, December 31, 1995 $ (254,080) $ -- $ (86,937)
Common stock for loan -- -- 29,545
Sales of common stock -- -- 70,000
-- -- 75,000
Issuances of common stock in exchange for
professional services -- -- 75,000
Comprehensive Loss:
Net loss (320,334) (320,334) -- (320,334)
------------- ------------ ------------- -----------
Total comprehensive loss $ (320,334)
=============
Balance, December 31, 1996 $ (574,414) $ -- $ (157,726)
Issuances of common stock in exchange for
professional services -- -- 125,000
Transfer of shares by principal shareholders for
the benefit of the Company -- -- 225,000
Sales of common stock -- -- 37,500
Repurchase of treasury shares (20 shares) -- -- (20,000)
Reissuance of treasury stock (20 shares) -- -- 37,500
Comprehensive Loss:
Net loss (637,088) (637,088) -- (637,088)
------------- ------------ ------------- -----------
Total comprehensive loss $ (637,088)
=============
Balance, December 31, 1997 $ (1,211,502) $ -- $ (389,814)
Sales of common stock -- -- 612,500
Transfer of shares by principal shareholders for
the benefit of the Company -- -- 124,750
Issuances of common stock in exchange for -- -- 1,690,000
professional services -- -- 686,250
-- -- 40,915
-- -- 575,000
Common stock issued in satisfaction of shareholder -- -- 52,000
loans -- -- 54,335
Common stock issued in connection with reverse
merger with public shell -- -- --
Forgiveness of loan from Affiliate -- -- 50,000
Comprehensive Loss:
Net loss (3,640,302) (3,640,302) -- (3,640,302)
------------- ------------ ------------- -----------
Total comprehensive loss $ (3,640,302)
=============
Balance, December 31, 1998 $ (4,851,804) $ -- $ (144,366)
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 70
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED ACCUMULATD
DURING THE OTHER
COMPREHENSIVE DEVELOPMENT COMPREHENSIVE
LOSS STAGE LOSS TOTAL
------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Sales of common stock -- -- 195,000
Stock grant to employee -- -- 134,375
Issuances of common stock in exchange for
professional services -- -- 1,217,500
Acquisition of FPN -- -- 1,126,250
Issuances of warrants to employees and
directors -- -- 425,770
Issuances of warrants for professional
services -- -- 933,068
Deemed dividend on convertible
preferred stock (28,000,000) -- --
Stock based compensation, net of amortization of
deferred compensation -- -- 1,587,926
Comprehensive Loss:
Net loss (12,750,568) (12,750,568) -- (12,750,568)
Foreign currency translation adjustment (45,720) -- (45,720) (45,720)
------------- ------------ ------------- -----------
Total comprehensive loss $ (12,796,288)
=============
Balance, December 31, 1999 $(45,602,372) $ (45,720) $(7,320,765)
============ ============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 71
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 30, 1994
(DATE OF INCEPTION)
THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
1999 1998 1997 1999
------------ ----------- ------------ ------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(12,750,568) $(3,640,302) $ (637,088) $ (17,602,372)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 464,939 7,401 1,888 476,057
Provision for doubtful accounts -- 4,200 29,981 40,322
Stock-based compensation 2,100,426 -- -- 2,100,426
Loss on retirement of property & equipment 18,609 -- -- 30,109
Loss on foreign currency translation 30,071 -- -- 30,071
Professional fees paid through the issuance
of common stock and warrants 576,143 3,159,850 350,000 4,228,136
Interest paid through the issuance of warrants 151,800 -- -- 151,800
Change in operating assets & liabilities:
Accounts receivable -- (4,200) (29,981) (40,322)
Prepaid expenses & other current assets (231,157) (724) (873) (232,754)
Other assets (24,238) -- -- (24,238)
Accounts payable and accrued liabilities 1,587,466 30,477 11,281 1,763,774
Unearned development fees -- (107,172) 75,650 --
Accrued compensation and benefits 341,223 18,833 10,133 372,075
------------ ----------- ------------ ------------------
Net cash used in operating activities (7,735,286) (531,637) (189,009) (8,706,916)
------------ ----------- ------------ ------------------
Cash flows from investing activities:
Purchase of property and equipment and software
development (5,711,800) (15,376) (2,998) (5,748,714)
------------ ----------- ------------ ------------------
Net cash used in investing activities (5,711,800) (15,376) (2,998) (5,748,714)
------------ ----------- ------------ ------------------
Cash flows from financing activities:
Issuance of common stock 195,000 612,500 75,000 1,127,500
Issuance of redeemable convertible
preferred stock, net of related expenses 21,447,983 -- -- 21,447,983
Purchase of treasury stock -- -- (20,000) (20,000)
Proceeds from shareholder loans -- -- 99,900 132,693
Proceeds from other debt 2,366,000 50,000 -- 2,445,545
Payments on shareholder loans -- (69,293) -- (69,293)
Payments on capital leases (51,211) (4,566) -- (55,777)
----------- ------------ ------------------
Net cash provided by financing activities 23,957,772 588,641 154,900 25,008,651
------------ ----------- ------------ ------------------
Net change in cash 10,510,686 41,628 (37,107) 10,553,021
Cash and cash equivalents, beginning of period 42,335 707 37,814 --
------------ ----------- ------------ ------------------
Cash and cash equivalents, end of period $ 10,553,021 $ 42,335 $ 707 $ 10,553,021
============ =========== ============ ==================
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 72
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 30,
1994 (DATE
OF INCEPTION)
YEAR ENDED DECEMBER 31, THROUGH
-------------------------------------- DECEMBER 31,
1999 1998 1997 1999
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest $ 39,059 $ 3,419 $ -- $ 42,478
========== ========== ========== ==============
Non-cash investing and financing:
Equipment acquired through capital leases $ 176,299 $ 43,016 $ -- $ 219,315
========== ========== ========== ==============
Common stock and warrants issued in exchange for
professional services $1,525,143 $3,035,100 $ 125,000 $ 4,823,611
========== ========== ========== ==============
Common stock issued for extinguishment of shareholder
debt $ -- $ 63,400 $ -- $ 63,400
========== ========== ========== ==============
Common stock issued for extinguishment of debt $ -- $ -- $ -- $ 29,545
========== ========== ========== ==============
Preferred stock issued for extinguishment of other debt $2,366,000 $ -- $ -- $ 2,366,000
========== ========== ========== ==============
Warrants issued in connection with other debt $ 151,800 $ -- $ -- $ 151,800
========== ========== ========== ==============
Common stock transferred by principal shareholder for
the benefit of the Company $ -- $ 62,375 $ 225,000 $ 287,375
========== ========== ========== ==============
Common stock issued in reverse merger $ -- $ 2,500 $ -- $ 2,500
========== ========== ========== ==============
Common stock issued as consideration for purchase of
FPN $1,126,150 $ -- $ -- $ 1,126,150
========== ========== ========== ==============
Warrant issued in exchange for covenant not to compete $ 525,270 $ -- $ -- $ 525,270
========== ========== ========== ==============
Preferred stock sold in exchange for note receivable $3,785,000 $ -- $ -- $ 3,785,000
========== ========== ========== ==============
Forgiveness of loan from Affiliate $ -- $ 50,000 $ -- $ 50,000
========== ========== ========== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE> 73
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS:
World Commerce Online, Inc. and its consolidated subsidiaries (the
"Company") is a provider of business-to-business electronic commerce
SOLUTIONS to the perishable products industries. The Company provides
its customers with access to the Company's secure Internet-based trading
systems and to industry-specific Internet communities supplying
comprehensive industry data and information resources as well as
communication tools.
The Company is in the development stage. From 1994 through 1996, the
Company generated revenue through activities outside of the Company's
planned principal operations including the sale of imported fresh cut
flowers and during 1997 and 1998 through Internet site development
services provided to a third party and a company affiliated through
common ownership. Since the third quarter of 1998, the Company has
devoted substantially all of its efforts to develop its technology,
market brand and sales operations. Planned principal operations have
commenced, but have not produced significant revenue in 1999. The
Company plans to generate revenues from its B2B e-commerce business from
three primary sources: transaction fees, subscription fees and
advertising revenue.
The Company has experienced operating losses since its inception.
Additional operating losses are anticipated for the next several years
as the Company expands its operations, sales and marketing activities
and product technology development.
2. CAPITAL TRANSACTIONS AND BASIS OF PRESENTATION:
The Floral Foundation, Inc. was organized under the laws of the State of
Florida on March 30, 1994 and changed its name to World Commerce Online,
Inc. ("WCO") on July 22, 1996. In September 1998, Sunrise Express, Inc.
("Sunrise"), a Nevada public shell corporation, acquired all of the
outstanding common stock of WCO in exchange for 7,020,000 shares of
Sunrise stock. Since the shareholders of WCO received the majority
voting interests in the combined company, the acquisition has been
treated as a recapitalization of WCO with WCO as the acquiring
enterprise for accounting and financial reporting purposes. The
transaction was recorded as a reverse acquisition using the purchase
method of accounting whereby equity of WCO was adjusted for the fair
value of the acquired tangible net assets of Sunrise. The 2,500,000
shares of the common stock of Sunrise outstanding prior to the merger
have been shown as an issuance in 1998 with no assigned value, given
that there were no net tangible assets received. The historical
financial statements prior to 1998 are those of WCO. Immediately
following the acquisition of WCO, Sunrise changed its name to World
Commerce Online, Inc., a Nevada corporation. Pro forma information is
not presented since this combination is treated as an issuance of shares
rather than a business combination.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of World Commerce Online, Inc. and its
wholly owned subsidiaries under common control. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents - The Company considers all highly liquid
instruments with a maturity of three months or less at time of purchase
to be cash equivalents.
Income Taxes - Income taxes are accounted for under the asset and
liability method. Deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each
year-end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
F-11
<PAGE> 74
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Property and Equipment - Property and equipment, stated at cost, is
comprised of computer and office equipment. Gains and losses on
disposition are recognized in the year of the disposal. Expenditures for
maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight-line method over the
following estimated lives:
<TABLE>
<S> <C>
Computer software 3 years
Furniture, fixtures and computer hardware 5 years
</TABLE>
Revenue Recognition - The Company recognizes revenues at the time that
services are performed. Transaction fee and subscription fee revenue are
recognized as they are earned. Transaction fee revenue is earned as
transactions are conducted through the Company's trading systems.
Subscription fee revenue is earned when the Company's customers access
the information and participate in the trading systems. Current
subscription fees are generally $9.95 per month for access to the
information and communication portal and $99 per month for access and
participation in the trading systems. Advertising revenues are
recognized in the period in which the advertisement is displayed.
Computer Software Costs - The Company has adopted Statement of Position
("SOP") 98-1, which requires computer software costs associated with
internal use software to be charged to operations as incurred until
certain capitalization criteria are met. Costs incurred in the
preliminary project stage of software development have been expensed as
incurred. Costs incurred in the application development stage have been
capitalized. As of December 31, 1999, $4,762,191 has been capitalized
and is included in property and equipment in the accompanying
consolidated balance sheets.
Advertising Costs - Advertising costs are expensed as incurred.
Advertising expenditures reflected in the accompanying consolidated
statements of operations amounted to approximately $255,900, $5,000,
$-0- and $260,900 for the years ended December 31, 1999, 1998, 1997 and
the period from March 30, 1994 (date of inception) through December 31,
1999, respectively.
Net Loss per Share - Basic net loss per share is computed by dividing
net loss available to common stockholders by the weighted average number
of common shares outstanding during the period. Dilutive net loss per
share is computed using the weighted average number of common shares
outstanding during the period, plus the dilutive effect of common stock
equivalents. Common stock equivalent shares consist of convertible
preferred stock, stock options and warrants. For the year ended December
31, 1999, options to purchase 2,813,800 shares of common stock,
preferred stock convertible into 9,000,000 shares of common stock,
warrants to purchase 1,931,000 shares of common stock an option to
purchase 250,000 shares of preferred stock convertible into 250,000
shares of common stock, and warrants to purchase 110,000 shares of
preferred stock convertible into 110,000 shares of common stock were
excluded from the calculation of earnings per share since their
inclusion would be antidilutive.
Intangible Assets - The Company periodically reevaluates the
recoverability of intangible assets as well as the amortization periods
to determine whether an adjustment to carrying value or a revision to
estimated useful lives is appropriate. Recoverability is measured by
comparison of the carrying amount of the assets to future undiscounted
cash flows expected to be generated by the assets. If such assets are
considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets exceeds the
discounted cash flows. The Company has recognized no impairment losses
to date.
Foreign Currency - The financial transactions of subsidiaries located
outside of the United States, are generally measured using the local
currency as the functional currency. Assets, including goodwill, and
liabilities of these subsidiaries are translated at the rates of
exchange at the balance sheet date. The resultant translation
adjustments are in accumulated foreign currency translation adjustment,
a separate component of stockholders' deficit. Income and expense items
are translated at average monthly rates of exchange.
F-12
<PAGE> 75
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Stock-Based Compensation - The Company accounts for employee stock-based
compensation using the intrinsic value method. Stock-based compensation
to non-employees is accounted for using the fair value method. The
Company also provides disclosure of certain pro forma information as if
the Company accounted for its employee stock-based compensation using
the fair value method.
When options are granted to employees, a non-cash charge representing
the difference, if any, between the exercise price and the fair value of
the common stock underlying the vested options on the date of grant is
recorded as stock-based compensation expense and the balance is deferred
and amortized over the remaining vesting period.
Other Comprehensive Income - The Company has adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," which established standards for reporting and displaying
comprehensive income and its components in a financial statement with
the same prominence as the other financial statements. The Company's
only item of other comprehensive income is foreign currency translation
adjustment which has been reported separately within stockholders'
deficit.
Fair Value of Financial Instruments - The carrying amounts of the
Company's financial instruments, which include cash and cash
equivalents, receivable from investors, accounts payable and accrued
liabilities and capital lease obligation approximate their fair values
at December 31, 1999 and 1998 due to the short maturities of these
instruments. The fair value of the convertible preferred stock
approximated the carrying value at December 31, 1999.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Recent Accounting Pronouncements - In December 1999, the Securities and
Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101). The bulletin draws on
existing accounting rules and provides specific guidance on how those
accounting rules should be applied, and specifically addresses gross
versus net basis of reporting revenues for companies which operate
Internet sites as well as the accounting for up-front fees. SAB 101 is
effective for fiscal years beginning after December 15, 1999. The
Company is evaluating SAB 101 and the effect it may have on its
financial statements. At this time, the Company believes that SAB 101
will not have a material impact on its financial position or results of
operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments and hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. The Company, to date, has not engaged in
derivative and hedging activities, and accordingly does not believe that
the adoption of SFAS No. 133 will have a material impact on the
financial reporting and related disclosures of the Company. The Company
will adopt SFAS No. 133 as required by SFAS No. 137, "Deferral of the
Effective Date of the FASB Statement No. 133," in fiscal year 2001.
Concentration of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily
of cash, and cash equivalents. The Company maintains the majority of its
cash balances at one financial institution.
F-13
<PAGE> 76
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
----------- ---------
<S> <C> <C>
Computer software $ 4,762,191 $ 11,114
Furniture, fixtures and computer hardware 1,844,141 14,300
Furniture and equipment under capital lease 218,988 43,016
----------- ---------
6,825,320 68,430
Less accumulated depreciation (347,577) (11,118)
----------- ---------
$ 6,477,743 $ 57,312
=========== =========
</TABLE>
Accumulated amortization on capital leases at December 31, 1999 and 1998
is $44,376 and $4,313, respectively.
5. ACQUISITION TRANSACTION:
On August 26, 1999, the Company acquired Fresh Products Network B.V.
("FPN"). The Company acquired the entire equity interest in the business
for a purchase price of approximately $1,500,000 through the issuance of
100,000 shares of Company common stock, $336,000 in assumed liabilities,
and contingent consideration of 100,000 shares of Company common stock.
Delivery of contingent shares is dependent upon FPN achieving certain
operational milestones by December 31, 2000. Management of the Company
has determined that the contingent consideration will be recorded as an
additional cost of the acquisition when satisfaction of the contingency
is considered probable. The purchase method of accounting was followed
in accounting for this transaction. The goodwill associated with the
acquisition is being amortized on a straight-line basis over 5 years.
Operations of FPN from September 1, 1999 through year-end 1999 are
included in the accompanying consolidated statements of income.
Unaudited pro forma revenues, net loss available to common stockholders
and loss per common share (basic and diluted) are approximately $47,000
$(40,915,000) and $(2.68), respectively, and represent the combined
results of operations of the Company and FPN, as if the acquisition had
occurred at January 1, 1999. The pro forma amounts do not necessarily
reflect the results of operations as they would have been if the
businesses had constituted a single entity during the period and is not
necessarily indicative of results which may be obtained in the future.
6. INTANGIBLE ASSETS:
Intangible assets consist of goodwill and a covenant not to compete,
totaling $1,596,260 as of December 31, 1999. In connection with the
acquisition of FPN, consideration paid exceeded the estimated value of
the assets acquired (including estimated liabilities assumed as part of
the transaction) by approximately $1,191,000. As of December 31, 1999,
no additional goodwill had been recorded relative to the contingent
consideration discussed in Note 5 above. The amount of excess
consideration paid over net asset value amortized was approximately
$76,000 in 1999.
The Company issued a warrant to purchase 100,000 shares of common stock
to a consultant of the Company in exchange for a covenant not to compete
valued at $525,270 based on the fair value of the warrants on the date
of grant based on a Black Scholes option pricing model. The covenant not
to compete is being amortized over the three-year term of the agreement.
Amortization expense related to the covenant not to compete was $43,772
in 1999 and is included in sales and marketing expense.
F-14
<PAGE> 77
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
7. NOTES PAYABLE:
The Company has received loans from shareholders during the development
stage period to finance activities. Shareholder loans carried no
interest rate or repayment terms. All shareholder loans were repaid
during 1998 through the issuance of stock or payment of cash.
The Company received a loan for $50,000 from a company affiliated
through common ownership during 1998 that was used to extinguish a
shareholder loan. This debt was forgiven in 1998 and recorded as
additional paid in capital.
8. LEASES:
The Company has operating lease agreements primarily involving its
office facilities. The Company has various equipment under capital
lease agreements. Commitments for minimum rentals under non-cancelable
leases at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- ----------
<S> <C> <C>
2000 $ 308,392 $ 91,939
2001 316,923 56,537
2002 309,958 29,775
2003 65,867 19,590
2004 -- 4,341
----------- ----------
Total minimum payments $ 1,001,140 202,182
===========
Less amount representing interest (38,644)
----------
Present value of minimum lease payment 163,538
Less current portion (71,611)
----------
Long-term capital lease obligation $ 91,927
==========
</TABLE>
Rent expense was $301,000, $46,000, $12,000 and $373,000 for the years
ended December 31, 1999, 1998, 1997 and the period from March 30, 1994
(date of inception) through December 31, 1999, respectively.
9. STOCK OPTION PLAN:
The World Commerce Online, Inc. 1999 Stock Option Plan (the "Plan") was
adopted by the Company's shareholders in October 1999. The Plan covers
up to 3.0 million shares of common stock and permits the Company to
grant to employees, directors, officers, and consultants of the Company
and its subsidiaries: (i) incentive stock options ("ISOs") and (ii)
nonqualified stock options ("NSOs"). The Plan is administered by the
Compensation Committee of the Board of Directors, which also selects
the individuals who receive grants under the plan. As of December 31,
1999, the grants that had been made under the Plan were NSOs and ISOs.
The exercise price, term, and vesting schedule for options granted
under the Plan are set by the Compensation Committee, subject to
certain limitations. Under the Plan, the exercise price of an ISO may
not be less than the fair market value of the shares of common stock at
the date of grant (110% if the ISO is granted to a greater than 10%
shareholder), and the term of an option may not exceed 10 years (5
years if an ISO is granted to a greater than 10% shareholder). Unless
otherwise specified by the Compensation Committee, options become 25%
vested after 12 months from the date of grant and thereafter vest pro
rata in arrears over 48 months. Options generally terminate 3 months
after the termination of the option holder's employment unless
terminated for cause.
F-15
<PAGE> 78
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
9. STOCK OPTION PLAN (CONTINUED):
For the year ended December 31, 1999, the Company recognized $1,587,926
of stock-based compensation expense related to options and expects to
recognize $4,863,980 over the remaining vesting period of the options.
The following table summarizes the status of the Company's Stock Option
Plan:
<TABLE>
<CAPTION>
Year Ended
December 31, 1999
--------------------------------
Weighted Average
Shares Exercise Price
--------- ----------------
<S> <C> <C>
Outstanding options beginning of year............................. -- --
Granted:.......................................................... 2,813,800 $ 3.76
Exercised:........................................................ -- --
Forfeited:........................................................ -- --
Outstanding at year end:.......................................... 2,813,800 $ 3.76
Exercisable at year end:.......................................... -- --
Weighted average fair value of options granted during the year.... $ 3.98
</TABLE>
The following table summarizes the status of the Plan for options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Total Weighted Average Weighted Average
Range of Exercise Prices Outstanding Remaining Contractual Life (Years) Exercise Price
------------------------ ----------- ---------------------------------- --------------
<S> <C> <C> <C>
$2.00 1,911,676 10 $ 2.00
$5.38 211,248 10 $ 5.38
$7.13 - $8.00 635,876 10 $ 7.93
$9.00 - $11.75 55,000 10 $10.25
---------
Total 2,813,800 $ 3.76
=========
</TABLE>
Included in the preceding table are 1,911,676 stock options with a
weighted average exercise price of $2.00 and a weighted average
remaining contractual life of 10 years. The exercise price of such
stock options was less than the grant date fair value of the underlying
common stock.
Also included in the preceding table are 635,876 stock options with a
weighted average exercise price of $8.00 and a weighted average
remaining contractual life of 10 years. The exercise price of such
options was greater than the grant date fair value of the underlying
common stock.
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Had compensation cost for the Plan been accounted for based on the fair
value at the grant date, consistent with provisions of SFAS No. 123,
the Company's net loss and net loss per share would have been increased
to the pro forma amounts below:
<TABLE>
<CAPTION>
Year Ended
(in thousands except per share amounts) December 31, 1999
------------------------------------------------------------------------------------ ----------------------
<S> <C>
Net loss available to common stockholders -- as reported.......................... $(40,750,568)
Net loss available to common stockholders -- pro forma............................ $(41,721,369)
Net loss per share -- as reported................................................. $ (2.67)
Net loss per share -- pro forma................................................... $ (2.73)
</TABLE>
F-16
<PAGE> 79
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
9. STOCK OPTION PLAN (CONTINUED):
The effects of applying SFAS No. 123 for the presentation of pro forma
disclosures are not necessarily indicative of the effects on reported
net income for future years.
The fair value of options granted in 1999 were estimated using the
Black-Scholes option pricing model as of the date of grant with the
following assumptions: expected lives of 4 years; expected volatility
of 80%; expected dividend yield of 0% and a risk-free interest rate of
6.53%.
10. EQUITY TRANSACTIONS:
The authorized capital stock of the Company consists of (i) 90,000,000
shares of voting common stock ("Common Stock") authorized for issuance
with a par value of $0.001 and (ii) 10,000,000 shares of preferred
stock with a par value of $0.001, of which 4,250,000 are designated as
Series A redeemable convertible preferred stock ("Series A") and
5,110,000 shares are designated as Series B redeemable convertible
preferred stock ("Series B").
Common Stock
The common shares authorized, issued and outstanding have been
retroactively restated for the reverse acquisition discussed in Note 2.
At December 31, 1999, 11,000,000 shares of the outstanding common
shares are restricted.
Warrants
In January 1999, the Company issued to a director of the Company a
warrant representing the right to purchase 100,000 shares of common
stock at an exercise price of $2 per share. The estimated fair value of
the warrant based upon the intrinsic value method equaled $212,000 and
is recorded as general and administrative expense. In addition, the
Company issued to a company controlled by the director two warrants
each representing the right to purchase 50,000 shares of our common
stock at exercise prices of $12 and $10 per share, respectively. The
warrants vested immediately upon issuance and expire on January 14,
2009. The estimated fair values of the warrants based on a Black
Scholes option pricing model are $18,700 and $12,900, respectively.
These amounts were recorded as general and administrative expense
during the year ended December 31, 1999.
In April 1999, the Company issued to a consultant of the Company a
warrant representing the right to purchase 250,000 shares of common
stock at an exercise price of $12.38 per share. The warrant vested
immediately. The estimated fair value of this warrant based on a Black
Scholes option pricing model is $276,560 and was recorded as sales and
marketing expense during the year ended December 31, 1999.
In August 1999, the Company issued to a former owner of FPN, an
employee of the Company as of the acquisition date, a warrant
representing the right to purchase 100,000 shares of common stock at an
exercise price of $11.50 per share. The warrant vests 25% a year over a
four year period beginning January 1, 2000. The estimated fair value of
the warrant based on a Black Scholes option pricing model is $724,000
which will be amortized as Sales and Marketing expense over the vesting
period. The Company recognized $60,333 in Sales and Marketing expense
related to this warrant during the year ended December 31, 1999.
In September 1999, the Company issued to an employee, for past
employment services, warrants to purchase a total of 100,000 shares of
common stock, each warrant representing the right to acquire 50,000
shares at exercise prices of $2 and $8 per share. The warrants vest on
January 1, 2000 and August 1, 2000, respectively, and expire on
December 31, 2004 and July 29, 2005, respectively. The estimated fair
value of the warrant based upon the intrinsic value method equaled
$290,625 and is recorded in general and administrative expense.
F-17
<PAGE> 80
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
10. EQUITY TRANSACTIONS (CONTINUED):
In October 1999, the Company entered into an agreement with a
consultant of the Company to exclusively promote the Company's products
to its affiliated network, a cooperative of large retail florists
throughout the United States. In connection with the promotional
exclusivity of this agreement, the Company issued a warrant
representing the right to purchase 250,000 shares of common stock at an
exercise price of $8 per share. The warrant vests quarterly over a
three year period beginning on October 1, 1999. The estimated fair
value of the warrant totaled $525,270 and was recorded as a covenant
not to compete and is included in Intangible Assets (Note 6) in the
accompanying consolidated balance sheet at December 31, 1999.
Also in October 1999, the Company issued to its outside legal counsel
two warrants each representing the right to purchase 30,000 shares and
1,000 shares of common stock at $8 per share. The warrants vested
immediately and expire on October 17, 2009 and October 18, 2004,
respectively. The estimated fair value of the warrants based on a Black
Scholes option pricing model is $34,175 which was recorded as
professional fees within general and administrative expenses during the
year ended December 31, 1999.
In December 1999, the Company issued to Dole Fresh Flowers, a division
of Dole Food Company, a warrant representing the right to purchase
1,000,000 shares of common stock at $7.50 per share. The warrant vests
over a two-year period beginning January 1, 2000 with 58,333 shares
vesting monthly during the first year (700,000 total shares) and 25,000
vesting monthly during the second year (300,000 total shares). The
estimated fair value of the warrant based on a Black Scholes option
pricing model is $5,170,000 which will be amortized as sales and
marketing expense over the vesting period. No expense was recorded
during 1999 related to this warrant.
No warrants have been exercised as of December 31, 1999.
11. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
In March 1999, the Company sold 4,000,000 shares of Series A
convertible preferred stock at $2.00 per share to investors for total
proceeds of $7,978,211 (net of offering costs of $21,789) and an option
to purchase an additional 250,000 shares exercisable at any time over
the next 5 years.
The holders of Series A are allowed to elect one member to the board of
directors as a group and participate in the voting on all matters which
are decided by a shareholder vote. The holders of Series A are not as a
matter of right entitled to be paid or receive dividends or
distributions. Series A is convertible at any time at the holder's
option, at the then applicable conversion rate (1-1 at the date of
issuance) adjusted for certain events including the issuance of common
stock for consideration of less than the conversion price then in
effect. Series A is redeemable for cash at the holder's option
beginning April 1, 2001. Upon liquidation, holders of Series A
preferred stock are entitled to receive, out of funds then generally
available, $2.00 per share, plus any declared and unpaid dividends,
thereon. In addition to and after payment in full of all other amounts
payable to the holders of Series A, the holders of Series A will be
entitled to share in remaining available funds on an as if converted
basis with the holders of common stock. Because on the date of issuance
of such shares, the estimated fair market value of the Company's common
stock exceeded the conversion price, the Company has treated as a
preferred stock dividend an amount of $8,000,000 related to these
transactions.
In December 1999, the Company sold 5,000,000 shares of Series B
convertible preferred stock at $4.00 per share to investors for total
proceeds of $17,254,772 (net of loan conversion of $2,366,000 and
offering costs of $379,228) which included a receivable in the amount
of $3,785,000 that was collected subsequent to December 31, 1999. In
addition, the Company issued a warrant to purchase 110,000 shares of
Series B convertible preferred stock at an exercise price of $4 per
share which expires on October 31, 2004. The Company recognized
$151,800 in interest expense related to the assigned value of this
warrant during the year ended December 31, 1999.
F-18
<PAGE> 81
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
11. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED):
The holders of Series B are allowed to elect one member to the board of
directors as a group and participate in the voting on all matters which
are decided by a shareholder vote. The holders of Series B are not as a
matter of right entitled to be paid or receive dividends or
distributions. Series B is convertible at any time at the holder's
option, at the then applicable conversion rate (1-1 at the date of
issuance), adjusted for certain events including the issuance of common
stock for consideration of less than the conversion price then in
effect. Series B is redeemable for cash beginning April 1, 2001. Upon
liquidation, holders of Series A and Series B preferred stock are
entitled to receive, out of funds then generally available, $4.00 per
share, plus any declared and unpaid dividends, thereon. In addition to
and after payment in full of all other amounts payable to the holders
of Series B, the holders of Series B will be entitled to share in
remaining available funds on an as if converted basis with the holders
of common stock. Because on the date of issuance of such shares, the
estimated fair market value of the Company's common stock exceeded the
conversion price, the Company has treated as a preferred stock dividend
an amount of $20,000,000 related to these transactions.
12. INCOME TAXES:
The components of the Company's net deferred tax asset and the tax
effects of the temporary differences giving rise to the Company's
deferred tax asset are as follows as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Noncurrent deferred tax assets:
Net operating loss $ 3,263,250 $ 113,607
----------- ----------
Deferred compensation 911,306 615,573
Fixed assets (28,313) (1,661)
Accrued expenses 970,188 209,843
----------- ----------
Noncurrent deferred tax asset 5,116,431 937,362
Valuation allowance (5,116,431) (937,362)
----------- ----------
Net deferred tax $ -- $ --
</TABLE>
Any tax benefits for the years ended December 31, 1999 and 1998 and the
period March 30, 1994 (date of inception) through December 31, 1999
computed based on statutory federal and state rates are completely
offset by valuation allowances established since realization of the
deferred tax benefits are not considered more likely than not.
As of December 31, 1999, the Company had a net operating loss of
approximately $8,587,500 available to reduce future federal income
taxes. This net operating loss carryforward will begin to expire in
2009 and is subject to limitation in any given year in the event of
certain changes in ownership.
The following table accounts for the difference between the actual tax
provision and amounts obtained by applying the statutory U.S. federal
income tax rate of 35% to the income before income taxes:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Statutory provision $(4,423,133) $(1,256,606)
State taxes net of federal benefit (379,126) (107,709)
Nondeductible expenses 623,190 853,582
----------- -----------
(4,179,069) (510,733)
Change in valuation allowance 4,179,069 510,733
----------- -----------
$ -- $ --
</TABLE>
F-19
<PAGE> 82
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
13. RELATED-PARTY TRANSACTIONS:
In 1996, the Company entered into a five year exclusive agreement with
Hortimarc B.V., a consulting business owned by the Company's Executive
Vice President for Europe as of October 1999, for the development of
marketing and sales initiatives in the European market. The contract
provided for compensation to Hortimarc based upon time and materials
billed. This agreement was terminated upon the execution of an
employment agreement with the executive. However, the Company continues
to utilize limited services of Hortimarc for which the Company incurs
costs for time and materials. In 1999, the Company remitted $98,300 to
Hortimarc under the aforementioned agreement and for activities
conducted after the termination of such agreement.
The Company has had various transactions with the Company's founder, a
primary shareholder and a member of the board of directors. Amounts
were paid to the Company's founder for consulting fees in the amount of
$41,844 and $21,500 during 1998 and 1997, respectively. Additionally,
the Company's founder received common shares in exchange for services
valued at $56,250 (25,000 shares) in 1998 and $89,821 (290,500 shares)
since the date of inception. In 1997, the Company's founder transferred
405,000 shares of common stock valued at $225,000 to individuals in
payment of services provided to the Company. In 1998, the Company's
founder transferred 124,750 shares of common stock valued at $62,375 to
individuals in payment of services provided to the Company.
The Company also had various transactions with a primary shareholder
and member of the board of directors. Since the date of inception,
220,500 common shares have been issued to this shareholder in exchange
for services valued at $17,500.
As indicated in Note 1, the Company provided various Internet site
development services to a company affiliated through common ownership.
Amounts paid by the affiliate to the Company during 1998 and 1997 were
$292,406 and $49,990, respectively. The amounts paid were based on
development time incurred at pre-established rates and related
expenses.
In January 1999, the Company entered into a two year agreement with a
company controlled by a director to receive financial and investment
banking services. In connection with this agreement the Company issued
two warrants each representing the right to purchase 50,000 shares of
our common stock at exercise prices of $12 and $10 per share,
respectively. The estimated fair values of the warrants at the date of
issuance based on a Black Scholes option pricing model were $18,700 and
$12,900, respectively. These amounts were recorded as general and
administrative expense during the year ended December 31, 1999. In
addition, the Company issued to the director personally, a warrant
representing the right to purchase 100,000 shares of common stock at an
exercise price of $2. The estimated fair value of this warrant at the
date of issuance based on the intrinsic value method was $212,000.
In October 1999, the Company issued 25,000 shares of common stock to
the Company's Chief Financial Officer in connection with the start of
his employment with the Company.
F-20
<PAGE> 83
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
14. COMMITMENTS AND CONTINGENCIES:
In August 1999, in connection with the acquisition of FPN, the Company
entered into a four year consulting agreement with a business owned by
the former owner of FPN providing for the performance of advisory
services to us on matters pertaining to sales and product marketing for
Europe, Africa and the Middle East. The agreement provides annual
compensation of $210,000, and annual incentive compensation of
approximately $220,000 payable quarterly based upon achievement of
agreed-upon levels of transaction volume.
In December 1999, the Company entered into an agreement with a company
to integrate their Internet-based financial services product into
Floraplex for the Americas market segment providing Internet-based
sourcing of financial payment and credit services. The three year
agreement is contingent upon the identification and selection of
financial partners acceptable to the Company to facilitate the payment
system for the grower to wholesaler transactions. Upon selection of
financial partners acceptable to the Company and satisfaction of the
implementation requirements, the Company is committed to specified
transaction levels in each of the three years beginning with fiscal
year 2000 at agreed-upon pricing levels. The minimum commitment
relative to fees per payment transactions processed in an annual period
is approximately $150,000 in 2000, $240,000 in 2001, and $650,000 in
2002.
The Company makes trade commitments in the course of its normal
operations and is subject to litigation incident to the conduct of its
ongoing business. In the opinion of management, there are no unusual
commitments or contingencies at December 31, 1999, that would
materially affect the financial position or operating results of the
Company.
15. BUSINESS SEGMENT INFORMATION:
As of and for the years presented, the Company has primarily operated
in one business segment, providing business-to-business electronic
commerce solutions to the fresh cut flower industry.
During the year ended December 31, 1999, the Company derived revenues
equally in the United States and Holland. At December 31, 1999, the
Company held approximately $661,000 of its total assets in Holland. The
Company derived substantially all of its revenues from 17 customers and
two of those customers exceeded 10% of total revenues.
16. SUBSEQUENT EVENT:
In March 2000, the Company issued to a consultant of the Company two
warrants representing the right to purchase 250,000 shares of common
stock at an exercise price of $18 per share. The warrants vest over a
six month period with 155,000 shares vesting immediately and 40,000
shares vesting in June and 55,000 shares vesting in September 2000. The
estimated fair value of these warrants based on a Black Scholes option
pricing model is $2,572,354 which will be amortized over the vesting
period.
In March 2000, the option to purchase 250,000 shares of Series A
convertible preferred stock was exercised for total proceeds of
$500,000.
F-21
<PAGE> 84
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Fresh Products Network, B. V.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholder's deficit and cash flows present fairly, in all material
respects, the financial position of Fresh Products Network, B. V. (a development
stage company) at August 26, 1999 and December 31, 1998, and the results of its
operations and cash flows for the period from April 17, 1998 (date of inception)
through December 31, 1998 and the period from January 1, 1999 through August 26,
1999, and the period from April 17, 1998 (date of inception) through August 26,
1999, in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 7, on August 26, 1999, the Company was acquired by World
Commerce Online, Inc.
PricewaterhouseCoopers N.V.
Amsterdam, Netherlands
March 31, 2000
F-22
<PAGE> 85
FRESH PRODUCTS NETWORK B. V.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 26, DECEMBER 31,
ASSETS 1999 1998
- --------------------------------------------------------------------------- ---------- ------------
NLG NLG
<S> <C> <C>
Current Assets:
VAT Receivable 117,306 --
-------- --------
Total current assets 117,306 --
-------- --------
Computer Hardware, net of accumulated depreciation of 12,495 and
1,209, respectively 38,291 49,577
Software development costs, net of accumulated depreciation of 42,219
and 1,652, respectively 204,166 117,268
-------- --------
Total assets 359,763 166,845
-------- --------
LIABILITIES AND STOCKHOLDER'S DEFICIT
- ---------------------------------------------------------------------------
Current liabilities:
Accounts payable to Van Beek Bloemen B. V. 739,606 178,357
-------- --------
Total current liabilities 739,606 178,357
-------- --------
Commitments and Contingencies (Note [5]).
Stockholder's deficit:
Common stock, Euro 1 par value; authorized 100,000 shares, subscribed
but not issued 20,000 at August 26, 1999 44,074 --
Common stock subscriptions receivable (44,074) --
Deficit accumulated during the development stage (379,843) (11,512)
-------- --------
Total stockholder's deficit (379,843) (11,512)
-------- --------
Total Liabilities and Stockholder's Deficit 359,763 166,845
-------- --------
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE> 86
FRESH PRODUCTS NETWORK B. V.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
APRIL 17, FOR THE PERIOD APRIL 17,
1998 (DATE JANUARY 1, 1998 (DATE
OF INCEPTION) 1999 OF INCEPTION)
THROUGH THROUGH THROUGH
DECEMBER 31, AUGUST 26, AUGUST 26,
1998 1999 1999
-------------- -------------- --------------
NLG NLG NLG
<S> <C> <C> <C>
Revenues:
Transaction revenue -- 7,151 7,151
-------------- -------------- --------------
Total revenues -- 7,151 7,151
-------------- -------------- --------------
Costs and operating expenses:
Sales and marketing 5,563 278,448 284,011
General and administrative 3,088 45,181 48,269
Depreciation and amortization 2,861 51,853 54,714
-------------- -------------- --------------
Total costs and operating expenses 11,512 375,482 386,994
-------------- -------------- --------------
Net loss (11,512) (368,331) (379,843)
-------------- -------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE> 87
Fresh Products Network B. V.
(A Development Stage Company)
Statements of Stockholder's Deficit
<TABLE>
<CAPTION>
-----------------
Common Stock Common Stock Deficit
Price per ----------------- Subscriptions Accumulated During
Date share Shares Amount Receivable Development Stage Total
-------- --------- ------ ------ ------------- ------------------ ---------
(NLG) (NLG) (NLG) (NLG) (NLG)
<S> <C> <C> <C> <C> <C> <C> <C>
INCEPTION 04/17/98
NET LOSS FOR THE PERIOD
APRIL 17, 1998 (DATE OF
INCEPTION) THROUGH -- -- -- -- (11,512) (11,512)
DECEMBER 31, 1998
TOTAL COMPREHENSIVE INCOME -- -- -- -- -- -- (11,512)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 -- -- -- -- -- (11,512) (11,512)
INCORPORATION 08/17/99 2.20371 20,000 44,074 (44,074) -- --
NET LOSS FOR THE PERIOD
JANUARY 1, 1999 THROUGH
AUGUST 26, 1999 -- -- -- -- (368,331) (368,331)
TOTAL COMPREHENSIVE INCOME -- -- -- -- -- -- (368,331)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, AUGUST 26, 1999 20,000 44,074 (44,074) (379,843) (379,843)
================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE> 88
Fresh Products Network B. V.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 17,
FOR THE PERIOD FOR THE PERIOD 1998 (DATE
APRIL 17, 1998 (DATE OF JANUARY 1, 1999 OF INCEPTION)
INCEPTION) THROUGH THROUGH THROUGH
DECEMBER 31, AUGUST 26, AUGUST 26,
1998 1999 1999
----------------------- -------------- --------------
NLG NLG NLG
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss (11,512) (368,331) (379,843)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
Change in operating assets & liabilities: 2,861 51,853 54,714
VAT receivable -- (117,306) (117,306)
---------- ---------- ---------
Net cash used in operating activities (8,651) (433,784) (442,435)
---------- ---------- ---------
Cash flows from investing activities:
Purchase of property and equipment (50,786) -- (50,786)
Software Development (118,920) (127,465) (246,385)
---------- ---------- ---------
Net cash used in investing activities (169,706) (127,465) (297,171)
---------- ---------- ---------
Cash flows from financing activities:
Change in accounts payable to Van Beek Bloemen B.V. 178,357 561,249 739,606
---------- ---------- ---------
Net cash from financing activities 178,357 561,249 739,606
---------- ---------- ---------
Net change in cash 0 0 0
Cash and cash equivalents, beginning of period 0 0 0
----------- --------- ----------
Cash and cash equivalents, end of period 0 0 0
=========== ========= ==========
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 89
FRESH PRODUCTS NETWORK B.V.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION, PRINCIPAL BUSINESS ACTIVITIES AND BASIS OF PRESENTATION
Organization and Principal Business Activities
Fresh Products Network, B. V., ("FPN" or the "Company") is a provider
of a business-to-business electronic commerce, or B2B e-commerce,
trading system designed to sell floriculture products from growers to
resellers via the Internet.
The Company is in the development stage. Planned principal operations
have commenced, but have not produced significant revenue in 1999.
Since inception, the Company has devoted substantially all of its
efforts to develop its technology, market its brand and commence sales
operations. The Company plans to generate revenues from its B2B
e-commerce business from three primary sources: transaction fees,
subscription fees and advertising revenue.
As described in Note 7, on August 26, 1999, the Company was acquired by
World Commerce Online, Inc.
Basis of Presentation
Fresh Products Network B. V. was incorporated under the laws of The
Netherlands on August 17, 1999. Prior to incorporation, the company did
not exist as a separate legal entity, and operated as a fully
integrated business of Van Beek Bloemen B. V. After incorporation, Van
Beek Bloemen contributed this business and related assets and
liabilities to the legal entity, for a price of approximately NLG
630,000, which reflects the funds contributed directly to the business
by Van Beek Bloemen since inception.
The Company has devoted substantial efforts to developing, marketing
and selling new products and services. As a result, the Company has
incurred losses and negative cash flows from operations since
inception. Management is seeking to increase revenues through the
marketing and sales of its products and services while controlling
expenditures to meet its working capital needs. However, additional
cash and working capital will be required and the Company will be
required to continue to increase revenues and control costs, or obtain
additional financing. On August 26, 1999, the Company was acquired by
World Commerce Online, Inc. (Note 7). The Company received a commitment
from World Commerce Online to provide the required financing, if
necessary.
These financial statements are designed to reflect the carve-out
results of operations and financial position of the business within Van
Beek Bloemen B. V. for the period from April 17, 1998 (inception) to
August 17, 1999 (date of incorporation) and of the Company from August
17, 1999 (date of incorporation) until August 26, 1999. The financial
statements reflect the assets, liabilities, equity, revenues and
expenses that were directly related to the Company. Certain corporate
allocations have been included in the expenses (see Note 2). These
financial statements are not necessarily indicative of the results that
would have occurred if the Company had been a separate stand-alone
entity during the entire period presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Corporate allocations - For the purposes of these financial statements,
certain corporate allocations have been included in the company's
financial statements as discussed below. Management believes that the
methods of allocation are reasonable and that the allocated costs
represent the expenses that would have been incurred by the Company on
a stand-alone basis.
Van Beek Bloemen B. V. provided services to the Company in management,
accounting and financial reporting, human resources, information
systems, legal, taxes and other corporate services. The allocation of
these expenses which is generally based on certain operating costs
incurred by the company as a percentage of such costs incurred by Van
Beek Bloemen B. V. is reflected in the financial statements as sales
and marketing expenses and general and administrative expenses.
F-27
<PAGE> 90
FRESH PRODUCTS NETWORK B.V.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Property and Equipment - Property and equipment, stated at cost, is
comprised of computer software and hardware. Gains and losses on
disposition are recognized in the year of the disposal.
Depreciation is computed using the straight-line method over the
following estimated lives:
Computer software 3 years
Computer hardware 3 years
Software Development Costs - The Company has adopted Statement of
Position ("SOP") 98-1, which requires computer software costs
associated with internal use software to be charged to operations as
incurred until certain capitalization criteria are met. Costs incurred
in the preliminary project state of software development have been
expensed as incurred. Costs incurred in the application development
stage have been capitalized. As of August 26, 1999 and December 31,
1998, NLG 246,385 and NLG 118,920, respectively has been capitalized.
Revenue Recognition - The Company recognizes revenues at the time that
services are performed. Transaction fee revenues are recognized at the
time of sale.
Advertising Costs - Advertising costs are expensed as incurred.
Advertising expenditures reflected in the accompanying statement of
operations amounted to approximately NLG 3,732, NLG 62,803 and NLG
66,535, respectively, for the period from April 17, 1998 (date of
inception) through December 31, 1998, January 1, 1999 through August 26,
1999 and April 17, 1998 (date of inception) through August 26, 1999.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. EQUITY:
On August 17, 1999, date of incorporation, the founding shareholders of
the Company authorized for issuance 100,000 shares of common stock with
a Euro 1 par value. At that date, the founding shareholders subscribed
to 40,000 shares at par. Subsequent to August 26, 1999 these shares were
issued and paid.
4. RELATED-PARTY TRANSACTIONS:
Except for the transactions with Van Beek Bloemen as mentioned under
notes 1 and 2, there have been no other transactions with related
parties.
5. COMMITMENTS AND CONTINGENCIES:
The Company makes trade commitments in the course of its normal
operations and is subject to litigation incident to the conduct of its
ongoing business. In the opinion of management, there are no unusual
commitments or contingencies at August 26, 1999, that would materially
affect the financial position or operating results of the Company.
6. INCOME TAXES:
Through August 17, 1999, the Company was not a separate tax paying
entity. For purposes of these financial statements deferred tax
benefits arise solely as a result of the Company's net operating
losses.
As a result of tax losses incurred by the Company, no current tax
provision has been recorded in the accompanying financial statements
for all periods presented.
The Company's deferred tax asset reflects the tax effect of differences
between financial statement carrying amounts and tax bases of assets on
a separate company basis as follows at August 26, 1999 and December 31,
1998:
F-28
<PAGE> 91
Fresh Products Network B. V.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED):
<TABLE>
<CAPTION>
August 26, 1999 December 31, 1998
NLG NLG
<S> <C> <C>
Deferred tax asset:
Net operating loss carryforwards 132,945 4,029
Deferred tax asset valuation allowance (132,945) (4,029)
-------- ------
Deferred tax assets, net 0 0
======== ======
</TABLE>
On a separate company basis, the Company has net operating loss
carryforwards for income tax purposes subject to certain carryforward
limitation of approximately NLG 379,843 at August 26, 1999. Management
has recorded a valuation allowance for the full amount of the Company's
net deferred tax assets as a result of the uncertainty surrounding the
realization of such deferred tax assets on a separate company basis. As
a result of such valuation allowance, no deferred tax provision has
been recorded in the accounts at August 26, 1999.
Limitations on the utilization of the Company's net operating tax loss
carryforwards could result in the event of certain changes in the
Company's ownership.
7. SUBSEQUENT EVENT
On August 26, 1999, World Commerce, Online Inc. ("WCO") acquired the
entire equity interest of the Company for a purchase price of
approximately $1,500,000 through the issuance of 100,000 shares of WCO
common stock, the assumption of FPN's liabilities on the date of
acquisition, and contingent consideration of 100,000 shares of WCO
common stock. Delivery of contingent shares is dependent upon FPN
achieving certain operational milestones by December 31, 2000.
In connection with this acquisition, WCO also entered into a consulting
agreement with JoBo Holding B.V., a shareholder of Van Beek Bloemen
B.V. Under the terms of this agreement, JoBo Holding B.V. is retained
as a consultant for a period of four years after the date of the
acquisition, at a total compensation of approximately $210,000 and
bonuses of approximately $220,000, contingent on FPN meeting certain
milestones during the life of the agreement. In addition, WCO granted
Nils van Beek, sole owner of JoBo Holding B.V., a warrant to purchase
100,000 shares of WCO common stock, vesting 25% on January 1, 2000 and
on January 1 of each of the three following years, at an exercise price
of $11.50. The warrant is contingent on continued existence of the
consulting agreement between JoBo Holding and WCO, and contains certain
anti-dilutive provisions.
8. BUSINESS SEGMENT INFORMATION
As of and for the period presented, the Company has primarily operated
in one business segment, providing business-to-business electronic
commerce solutions to the fresh cut flower industry.
F-29
<PAGE> 92
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Orlando, State of Florida, on the 3rd day of April, 2000.
WORLD COMMERCE ONLINE, INC.
By: /s/ Robert H. Shaw
-------------------------------------------
Robert H. Shaw
Chairman of the Board and
Chief Executive Officer and President
By: /s/ Mark E. Patten
-------------------------------------------
Mark E. Patten
Executive Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
<PAGE> 93
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------------- ------------------------------------------------------------------------------------------
<S> <C>
2.1* Agreement and Plan of Merger between World Commerce Online, a Nevada corporation
and World Commerce Online, a Delaware corporation, dated September 30, 1999.
2.2* Acquisition Agreement dated as of September 10, 1998 between World Commerce
Online, Inc., a Nevada corporation and Sunrise Express, Inc., a Nevada corporation.
3.1* Certificate of Incorporation of World Commerce Online.
3.2* Certificate of Amendment of Certificate of Incorporation amending Certificate of
Designations of Series A Preferred Stock.
3.3* Bylaws.
3.4* Stock Purchase Agreement for Series A Preferred Stock, dated March 30, 1999.
3.5* Stock Purchase Agreement for Series B Preferred Stock, dated November 11, 1999.
3.6* Certificate of Designations of Series B Preferred Stock.
3.7* Registration Rights Agreement for Series A and B Preferred Stock, dated November 11, 1999.
4.1* Form of Common Stock Certificate.
4.2* Warrant Agreement in favor of Poole Carbone Capital Partners, dated January 15, 1999.
4.3* Warrant Agreement in favor of Poole Carbone Capital Partners, dated January 15, 1999.
4.4* Warrant Agreement in favor of Michael W. Poole Trust, dated January 15, 1999.
4.5* Warrant Agreement in favor of Novelle Consulting, L.L.C., dated April 22, 1999.
4.6* Warrant Agreement in favor of Kenneth B. Cobb II, dated September 20, 1999.
4.7* Warrant Agreement in favor of Kenneth B. Cobb II, dated September 20, 1999.
4.8* Warrant Agreement in favor of Charles Kremp, III, dated as of October 1, 1999.
4.9* Warrant Agreement in favor of Interprise Technology Partners, L.P., dated October 15, 1999.
4.10* Warrant Agreement in favor of Tucker Byrd, dated October 18, 1999.
4.11* Warrant Agreement in favor of Liz Walsh, dated October 18, 1999.
4.12* Warrant Agreement in favor of Nils Van Beek, dated August 26, 1999.
4.13* Warrant Agreement in favor of Dole Fresh Flowers, dated December 10, 1999.
4.14 Warrant Agreement in favor of AnswerThink, Inc., dated March 29, 1999.
4.15 Warrant Agreement in favor of AnswerThink, Inc., dated March 29, 1999.
10.1* 1999 Stock Option Plan.
10.2* Form of Executive Incentive Stock Option Agreement.
10.3* Form of Executive Non-Qualified Stock Option Agreement.
10.4* Form of Non-Executive Incentive Stock Option Agreement.
10.5* Form of Non-Executive Non-Qualified Stock Option Agreement.
10.6* Form of Indemnification Agreement for officers and directors.
10.7* Corporate Headquarters Lease Agreement, dated February 15, 1999.
10.8* Consulting Agreement with AnswerThink, Inc., dated August 11, 1999.
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ---------------- -------------------------------------------------------------------------------------------
<S> <C>
10.9* Stock Purchase Agreement by and among World Commerce Online, Fresh Products
Network, Omniflora International Ltd., Jobo Holding B.V. and Nils Van Beek,
dated August 26, 1999.
10.10* Consulting Agreement with Jobo Holding B.V., dated August 26, 1999.
10.11* 1st Amendment to Corporate Headquarter Lease Agreement, dated September 7, 1999.
10.12* Consulting Agreement with Charles Kremp, III, dated as of October 1, 1999.
10.13* Demonstration License Agreement with AnswerThink, Inc., dated October 4, 1999.
10.14* Web Site Development Agreement with Snickleways Interactive, dated October 14, 1999.
10.15* Employment Agreement with Robert H. Shaw, dated as of October 18, 1999.
10.16* Employment Agreement with Mark E. Patten, dated as of October 18, 1999.
10.17* Employment Agreement with J. Keith Money, dated as of October 18, 1999.
10.18* Employment Agreement with Henry R. Winogrond, dated as of October 18, 1999.
10.19* Employment Agreement with John R. Daniel II, dated as of October 18, 1999.
10.20* Employment Agreement with Eugenio M. Valdes, dated as of October 18, 1999.
10.21* Employment Agreement with Jacobus N. Kras, dated as of October 18, 1999.
10.22* Floraplex User Agreement with Dole Fresh Flowers, dated December 10, 1999.
10.23* Master Outsourced Services Agreement with eCredit.com, Inc., dated December 30, 1999.
10.24 Form of Floraplex User Agreement with wholesale florists who are members of
Premiere Floral Distributors and International Floral Distributors.
10.25 Agreement between World Commerce Online and Flower Auction Holland, dated
October 22, 1999.
10.26 Agreement between Flower Purchase Network-Floraplex and Flower Auction Aalsmeer,
dated December 8, 1999.
21.1* Subsidiaries.
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
* Previously Filed
<PAGE> 1
EXHIBIT 4.14
THIS WARRANT AND THE COMMON STOCK OF WORLD COMMERCE ONLINE, INC., (THE
"COMPANY") ISSUABLE UPON CONVERSION HEREOF (UNTIL SUCH TIME AS SUCH COMMON STOCK
IS REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER SECURITIES STATUTE, AND NO SALE, TRANSFER,
OR OTHER DISPOSITION OF ANY INTEREST HEREIN MAY BE MADE UNLESS, IN THE WRITTEN
OPINION OF COUNSEL TO THE COMPANY, SUCH TRANSFER WOULD NOT VIOLATE OR REQUIRE
REGISTRATION UNDER ANY SUCH STATUTE.
WARRANT
To Purchase Common Stock of
WORLD COMMERCE ONLINE, INC.
This is to certify that, for value received from ANSWERTHINK CONSULTING
GROUP, INC. ("ANSWERTHINK"), a Florida corporation (together with its permitted
assigns, "Holder"), including ANSWERTHINK's assistance in establishing a
business relationship with i2 Technologies, Inc., together with ANSWERTHINK's
acknowledgment of full payment for services rendered as of March 29, 1999,
ANSWERTHINK is hereby granted, as of March 29, 2000 (the "Grant Date"), a
warrant to purchase from World Commerce Online, Inc., a Delaware corporation
(the "Company"), up to 155,000 duly authorized, validly issued, fully-paid and
nonassessable shares (the "Shares") of common stock, par value $.001 per share,
of the Company ("Common Stock"), at the Current Warrant Price (as hereinafter
defined) in lawful money of the United States of America, subject to the terms
and conditions set forth herein. The purchase price hereunder at any time of a
single share of Common Stock is referred to herein as the "Current Warrant
Price." Initially, and until adjustment in the manner hereinafter provided, the
Current Warrant Price with respect to such 155,000 shares shall be $18.00 PER
SHARE. The Warrant shall vest and become exercisable immediately. To the extent
that the Warrant has vested and become exercisable, the Warrant may thereafter
be exercised by the Holder, in whole or in part, at any time or from time to
time prior to four (4) years after the Grant Date.
Except as otherwise specifically provided herein, there shall be no
proportionate or partial vesting in any period prior to each Vesting Date, and
all vesting shall occur only on the appropriate Vesting Date. Upon termination
of the Consulting Agreement, any unvested portion of the Warrant shall terminate
and be null and void. The number of shares of Common Stock purchasable hereunder
and the Current Warrant Price are subject to adjustment from time to time in the
manner provided in Article 3 below. Certain terms in this Warrant are defined in
Article 4 below.
ARTICLE 1
EXERCISE OF WARRANTS
SECTION 1.1. METHOD OF EXERCISE. Subject to the provisions of Article 3
below, to exercise this Warrant in whole or in part, the Holder shall deliver to
the Company at the Warrant Office designated pursuant to Section 2.1: (i) a
written notice, in substantially the form of the Subscription Notice appearing
at the end of this Warrant, of such Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be purchased;
(ii) a certified or official bank check payable to the order of the Company in
an amount equal to the aggregate Current Warrant Price of the number of shares
of Common Stock being purchased; and (iii) this Warrant. The Company shall as
promptly as practicable, and in any event within 10 days after receipt by the
Company of such
<PAGE> 2
notice, execute and deliver or cause to be executed and delivered, in accordance
with said notice, a certificate or certificates representing the aggregate
number of shares of Common Stock specified in said notice. The stock certificate
or certificates so delivered shall be in the denomination as may be specified in
said notice and shall be issued in the name of such holder or such other name as
shall be designated in said notice. Such certificate or certificates shall be
deemed to have been issued and such holder or any other person so designated to
be named therein shall be deemed for all purposes to have become a holder of
record of such shares as of the date the consideration specified for such shares
is received by the Company as aforesaid. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of said
certificate or certificates, deliver to such holder a new Warrant evidencing the
rights of such holder to purchase the remaining shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the request of such holder, appropriate notation may
be made on this Warrant and the same returned to such holder. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of such stock certificates and any new
Warrant, except that, in case such stock certificates or new Warrant shall be
registered in a name or names other than the name of the holder of this Warrant,
funds sufficient to pay all stock transfer taxes which shall be payable upon the
issuance of such stock certificate or certificates or any new Warrant shall be
paid by the holder hereof at the time of delivering the notice of exercise
mentioned above or promptly upon receipt of a written request of the Company for
payment of the same.
SECTION 1.2. WARRANT SHARES TO BE FULLY PAID AND NONASSESSABLE. All
shares of Common Stock issued upon the exercise of this Warrant shall be validly
issued, fully paid and nonassessable and, if the Common Stock is then listed on
a securities exchange, shall be duly listed thereon, subject to registration
under the Exchange Act.
SECTION 1.3. NO FRACTIONAL SHARES TO BE ISSUED, The Company shall not
be required upon any exercise of this Warrant to issue a certificate
representing any fraction of a share of Common Stock, but, in lieu thereof,
shall pay Holder cash in an amount equal to a corresponding fraction (calculated
to the nearest 1/100 of a share) of the Current Market Price of one share of
Common Stock as of the date of receipt by the Company of notice of exercise of
this Warrant.
SECTION 1.4. LEGEND ON WARRANT SHARES. Each certificate for shares
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Act, shall bear a legend in
substantially the following form (and any additional legend required by any
securities exchange upon which such Warrant Shares may, at the time of such
exercise, be listed) on the face thereof:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the laws of any
state and may not be sold or otherwise transferred except pursuant to an
effective registration statement or the written opinion of counsel to World
Commerce Online, Inc., that such registration is not required.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of: (i) a public distribution pursuant to a registration statement; or (ii) an
exempt sale pursuant to Rule 144 or Rule 144A under the Act of the securities
represented thereby) shall also bear such legend.
2
<PAGE> 3
ARTICLE 2
WARRANT OFFICE; OWNERSHIP, TRANSFER
OF WARRANT
SECTION 2.1. WARRANT OFFICE. The Company shall maintain an office for
certain purposes specified herein (the "Warrant Office"), which office shall
initially be the Company's office at 9677 Tradeport Drive, Orlando, Florida
32827, and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock in the continental United States as to which
written notice has previously been given to all of the Warrantholders.
SECTION 2.2. OWNERSHIP OF WARRANT. The Company may deem and treat the
person in whose name this Warrant is initially registered as the holder and
owner hereof (notwithstanding any notations of ownership or writing hereon made
by anyone other than the Company) for all purposes and shall not be affected by
any notice to the contrary, until presentation of evidence satisfactory to the
Company that this Warrant has been transferred as provided in Section 2.3.
SECTION 2.3. TRANSFER OF WARRANT. This Warrant and all rights hereunder
may not be alienated, assigned, pledged or otherwise transferred, in whole or in
part, other than by Holder to an Affiliate of Holder, and any attempt to make
any transfer other than by Holder to an Affiliate shall be null and void. The
term "Affiliate" shall mean, with respect to Holder, any other entity that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Holder.
ARTICLE 3
ANTI-DILUTION PROVISIONS
SECTION 3.1. ADJUSTMENT OF CURRENT WARRANT PRICE AND NUMBER OF SHARES
PURCHASABLE. The Current Warrant Price and the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall be subject to adjustment
from time to time as hereinafter provided in this Article 3. Upon each
adjustment of the Current Warrant Price, the holder of this Warrant shall
thereafter be entitled to purchase at the Current Warrant Price resulting from
such adjustment, the number of shares (calculated to the nearest whole share) of
Common Stock calculated by multiplying the Current Warrant Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Current Warrant Price resulting from such adjustment.
SECTION 3.2. EFFECT OF "SPLIT-UPS" AND STOCK DIVIDENDS. In case at any
time or from time to time the Company shall subdivide or combine as a whole, by
reclassification, by the issuance of a stock dividend on the Common Stock
payable in Common Stock, or otherwise, the number of shares of Common Stock then
outstanding into a greater or lesser number of shares of Common Stock, with or
without par value, the Current Warrant Price shall be reduced or increased (as
applicable) proportionately. The issuance of such a stock dividend shall be
treated as a subdivision of the whole number of shares of Common Stock
outstanding immediately prior to such dividend into a number of shares equal to
such whole number of shares so outstanding plus the number of shares issued as a
stock dividend. Upon any such adjustment, the number of shares shall be rounded
upward to the nearest whole share.
3
<PAGE> 4
ARTICLE 4
CERTAIN DEFINITIONS
For all purposes of this Warrant, unless the context otherwise
requires, the following terms shall have the following respective meanings:
"Act": the Securities Act of 1933, as amended from time to time, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Commission": the Securities and Exchange Commission, or any other
federal agency then administering the Act.
"Current Market Price": the "Closing Price" (as defined below) of the
Common Stock on the last business day immediately preceding any date of
reference. For the purpose of determining Current Market Price, the "Closing
Price" of the Common Stock on any business day shall be: (i) if the Common Stock
is listed or admitted for trading on any United States national securities
exchange, the last reported sale price of Common Stock on such exchange; (ii) if
the Common Stock is listed or admitted for trading on any tier of The Nasdaq
Stock Market, the last reported sale price of Common Stock on such tier; or
(iii) if the Common Stock is traded in the over-the-counter market, the average
of the closing bid and asked prices for the Common Stock as quoted on the OTC
Bulletin Board.
"Current Warrant Price" (per share of Common Stock at any date): the
price at which one share of Common Stock may be purchased hereunder at any time.
The Current Warrant Price is subject to adjustment from time to time pursuant to
Article 3 above.
"Exchange Act": the Securities Exchange Act of 1934, as amended from
time to time, or any successor federal statute, and the rules and regulations of
the Commission thereunder.
"Outstanding": when used with reference to Common Stock at any date,
all issued shares of Common Stock (including, but without duplication, shares
deemed issued pursuant to Article 3 above) at such date, except shares then held
in the treasury of the Company.
"Person": an individual, corporation, partnership, joint venture, trust
estate, unincorporated organization or government or an agency or political
subdivision thereof.
"Total Warrants": the sum of the aggregate number of shares of: (i)
Common Stock purchasable by the holder(s) upon exercise of the Warrant then
outstanding; and (ii) Warrant Shares which had been issued pursuant to the
exercise the Warrant.
"Warrant Office": see Section 2.1 above.
"Warrant Shares": the shares of Common Stock purchasable or purchased
by the Warrantholder upon the exercise of the Warrant.
"Warrantholder": the registered holder of the Warrant or any related
Warrant Shares.
"Warrant": the warrant issued by the Company hereunder evidencing the
right to purchase an aggregate of 155,000 shares of Common Stock and all
warrants issued in substitution or subdivision hereof.
4
<PAGE> 5
ARTICLE 5
CERTAIN COVENANTS OF THE COMPANY
The Company represents, warrants, covenants and agrees that:
(a) It will reserve and set apart and have at all times, free from
preemptive rights, a number of shares of authorized but unissued Common Stock or
other securities or property deliverable upon the exercise of this Warrant
sufficient to enable it at any time to fulfill all its obligations thereunder;
(b) Before taking any action which would cause an adjustment reducing
the Current Warrant Price below the then par value of the shares of Common Stock
issuable upon exercise of this Warrant, it will take any corporate action which
may be necessary in order that the Company may validly and legally issue fully
paid and nonassessable shares of such Common Stock at such adjusted Current
Warrant Price;
(c) If any shares of Common Stock required to be reserved for the
purposes of the exercise of this Warrant require registration with or approval
of any governmental authority under any federal law (other than the Act) or
under any state law before such shares may be issued upon exercise of this
Warrant, the Company will, at its expense, as expeditiously as possible, cause
such shares to be duly registered or approved, as the case may be;
(d) This Warrant shall be binding upon any corporation succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets.
ARTICLE 6
CERTAIN COVENANTS OF THE HOLDER
The Holder represents, warrants, covenants and agrees that:
(a) This transaction is exempt from the Act and, accordingly neither
the Warrant nor the Warrant Shares have been registered under the Act; they are
acquiring the Warrant and Warrant Shares for investment purposes only and not
with a view to or for resale in connection with any distribution of the Warrant
or Warrant Shares, nor with any present intention of distribution (within the
meaning of the Act) of the Warrant or Warrant Shares; because the Warrant and
Warrant Shares will not have been registered under the Act, the Company will not
permit the transfer of such shares without registration under the Act, or upon
the issuance to the Company of a favorable opinion of its counsel to the effect
that such transfer, whether pursuant to Rule 144 of the Act or otherwise, shall
not be in violation of the Act, and any applicable state security laws; and the
share certificates representing the Warrant Shares will be issued with a
restrictive legend providing notice of such restriction;
(b) Holder has had an opportunity to ask questions of, and receive
answers from, appropriate officers and representatives of the Company concerning
the terms and conditions of the issuance of this Warrant and the Warrant Shares
and to obtain any additional information concerning the Company which they have
requested; and
(c) The Company has made available for inspection by them various
documents connected with the Company's business and has not refused in any way
to permit them to inspect any document requested by them to be inspected.
5
<PAGE> 6
ARTICLE 7
NOTICE
Any notice or other document required to be given or delivered to the
Warrantholder shall be delivered at, or sent by certified or registered mail to
Holder at the last address shown on the books of the Company maintained at the
Warrant Office for the registration of the Warrants or at any more recent
address of which Warrantholder shall have notified the Company in writing. Any
notice or other document required or permitted to be given or delivered to
holders of record of outstanding Warrant Shares shall be delivered at, or sent
by certified or registered mail to, each such holder at such holder's address as
the same appears on the stock records of the Company. Any notice or other
document required or permitted to be given or delivered to the Company, other
than such notice or documents required to be delivered to the Warrant Office,
shall be delivered at, or sent by certified or registered mail to, the office of
the Company at 9677 Tradeport Drive, Orlando, Florida 32827, or such other
address within the United States of America as shall have been furnished by the
Company to the Warrantholders and the holders of record of Warrant Shares. Any
notice or other document sent by certified or registered mail, return receipt
requested, shall be deemed to have been delivered and received when sent if the
receipt is appropriately completed and returned. Notices or documents delivered
in any other manner than as set forth above shall be deemed to have been
delivered only when and if received.
ARTICLE 8
LIMITATIONS OF LIABILITY;
NOT STOCKHOLDERS
No provision of this Warrant shall be construed as conferring upon the
holder hereof the right to vote, consent, receive dividends or receive notice
other than as herein expressly provided in respect of meetings of stockholders
for the election of directors of the Company or any other matter whatsoever as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the purchase price of any Warrant
Shares or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
ARTICLE 9
LOSS, DESTRUCTION, ETC. OF WARRANTS
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of the Warrant, the Company will
make and deliver a new Warrant, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any Warrant issued under the provisions of this
Article 9 in lieu of any Warrant alleged to be lost, destroyed or stolen, or in
lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company.
6
<PAGE> 7
ARTICLE 10
LAW GOVERNING
This Warrant shall be governed by, and construed and enforced in
accordance with, the law of the State of Florida, without reference to its
choice of law principles.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name effective as of the 29th day of March, 2000.
WORLD COMMERCE ONLINE, INC.
By: /s/ Robert Shaw
--------------------------------
Robert Shaw
President and Chief Executive Officer
7
<PAGE> 8
SUBSCRIPTION NOTICE
World Commerce Online, Inc.
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented by said Warrant for, and to purchase
thereunder, _______ shares of the Common Stock covered by said Warrant and (a)
herewith makes payment in full therefor of $___________ by certified or official
bank check payable to the order of the Company; and (b) requests (1) that
certificates for such shares (and any securities or other property issuable upon
such exercise) be issued in the name of and delivered to
___________________________________________________________, whose address is
________________________________ and (2) if such shares shall not include all of
the shares issuable as provided in said Warrant, that a new Warrant of like
tenor and date for the balance of the shares issuable thereunder be delivered to
the undersigned.
----------------------------------
Signature Guaranteed:
Dated:
----------------------------
8
<PAGE> 1
EXHIBIT 4.15
THIS WARRANT AND THE COMMON STOCK OF WORLD COMMERCE ONLINE, INC., (THE
"COMPANY") ISSUABLE UPON CONVERSION HEREOF (UNTIL SUCH TIME AS SUCH COMMON STOCK
IS REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER SECURITIES STATUTE, AND NO SALE, TRANSFER,
OR OTHER DISPOSITION OF ANY INTEREST HEREIN MAY BE MADE UNLESS, IN THE WRITTEN
OPINION OF COUNSEL TO THE COMPANY, SUCH TRANSFER WOULD NOT VIOLATE OR REQUIRE
REGISTRATION UNDER ANY SUCH STATUTE.
WARRANT
To Purchase Common Stock of
WORLD COMMERCE ONLINE, INC.
This is to certify that, for value received, ANSWERTHINK CONSULTING
GROUP, INC. ("ANSWERTHINK"), a Florida corporation (together with its permitted
assigns, "Holder"), is hereby granted, as of March 29, 2000 (the "Grant Date"),
a warrant to purchase from World Commerce Online, Inc., a Delaware corporation
(the "Company"), up to 95,000 duly authorized, validly issued, fully-paid and
nonassessable shares (the "Shares") of common stock, par value $.001 per share,
of the Company ("Common Stock"), at the Current Warrant Price (as hereinafter
defined) in lawful money of the United States of America, subject to the terms
and conditions set forth herein. The purchase price hereunder at any time of a
single share of Common Stock is referred to herein as the "Current Warrant
Price." Initially, and until adjustment in the manner hereinafter provided, the
Current Warrant Price with respect to such 95,000 shares shall be $18.00 PER
SHARE. The Warrant shall vest and become exercisable in installments. To the
extent that the Warrant has vested and become exercisable with respect to a
number of Shares as provided below, the Warrant may thereafter be exercised by
the Holder, in whole or in part, at any time or from time to time prior to four
(4) years after the Grant Date.
The following table indicates each date (the "Vesting Date") upon which
the Holder shall be entitled to exercise the Warrant with respect to the number
of Shares granted as indicated beside the date, provided that the Consulting
Agreement between the Company and ANSWERTHINK entered into as of August 11, 1999
(the "Consulting Agreement") is in full force and effect and has not been
terminated prior to any applicable Vesting Date.
<TABLE>
<CAPTION>
Number of Shares Vesting Date
---------------- ------------
<S> <C>
40,000 Shares June 30, 2000
55,000 Shares September 30, 2000
</TABLE>
Except as otherwise specifically provided herein, there shall be no
proportionate or partial vesting in any period prior to each Vesting Date, and
all vesting shall occur only on the appropriate Vesting Date. Upon termination
of the Consulting Agreement, any unvested portion of the Warrant shall terminate
and be null and void. The number of shares of Common Stock purchasable hereunder
and the Current Warrant Price are subject to adjustment from time to time in the
manner provided in Article 3 below. Certain terms in this Warrant are defined in
Article 4 below.
<PAGE> 2
ARTICLE 1
EXERCISE OF WARRANTS
SECTION 1.1. METHOD OF EXERCISE. Subject to the provisions of Article 3
below, to exercise this Warrant in whole or in part, the Holder shall deliver to
the Company at the Warrant Office designated pursuant to Section 2.1: (i) a
written notice, in substantially the form of the Subscription Notice appearing
at the end of this Warrant, of such Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be purchased;
(ii) a certified or official bank check payable to the order of the Company in
an amount equal to the aggregate Current Warrant Price of the number of shares
of Common Stock being purchased; and (iii) this Warrant. The Company shall as
promptly as practicable, and in any event within 10 days after receipt by the
Company of such notice, execute and deliver or cause to be executed and
delivered, in accordance with said notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in said
notice. The stock certificate or certificates so delivered shall be in the
denomination as may be specified in said notice and shall be issued in the name
of such holder or such other name as shall be designated in said notice. Such
certificate or certificates shall be deemed to have been issued and such holder
or any other person so designated to be named therein shall be deemed for all
purposes to have become a holder of record of such shares as of the date the
consideration specified for such shares is received by the Company as aforesaid.
If this Warrant shall have been exercised only in part, the Company shall, at
the time of delivery of said certificate or certificates, deliver to such holder
a new Warrant evidencing the rights of such holder to purchase the remaining
shares of Common Stock called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of such
holder, appropriate notation may be made on this Warrant and the same returned
to such holder. The Company shall pay all expenses, taxes and other charges
payable in connection with the preparation, issuance and delivery of such stock
certificates and any new Warrant, except that, in case such stock certificates
or new Warrant shall be registered in a name or names other than the name of the
holder of this Warrant, funds sufficient to pay all stock transfer taxes which
shall be payable upon the issuance of such stock certificate or certificates or
any new Warrant shall be paid by the holder hereof at the time of delivering the
notice of exercise mentioned above or promptly upon receipt of a written request
of the Company for payment of the same.
SECTION 1.2. WARRANT SHARES TO BE FULLY PAID AND NONASSESSABLE. All
shares of Common Stock issued upon the exercise of this Warrant shall be validly
issued, fully paid and nonassessable and, if the Common Stock is then listed on
a securities exchange, shall be duly listed thereon, subject to registration
under the Exchange Act.
SECTION 1.3. NO FRACTIONAL SHARES TO BE ISSUED, The Company shall not
be required upon any exercise of this Warrant to issue a certificate
representing any fraction of a share of Common Stock, but, in lieu thereof,
shall pay Holder cash in an amount equal to a corresponding fraction (calculated
to the nearest 1/100 of a share) of the Current Market Price of one share of
Common Stock as of the date of receipt by the Company of notice of exercise of
this Warrant.
SECTION 1.4. LEGEND ON WARRANT SHARES. Each certificate for shares
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Act, shall bear a legend in
substantially the following form (and any additional legend required by any
securities exchange upon which such Warrant Shares may, at the time of such
exercise, be listed) on the face thereof:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the laws of any
state and may not be sold or otherwise transferred except
2
<PAGE> 3
pursuant to an effective registration statement or the written opinion of
counsel to World Commerce Online, Inc., that such registration is not required.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of: (i) a public distribution pursuant to a registration statement; or (ii) an
exempt sale pursuant to Rule 144 or Rule 144A under the Act of the securities
represented thereby) shall also bear such legend.
ARTICLE 2
WARRANT OFFICE; OWNERSHIP, TRANSFER
OF WARRANT
SECTION 2.1. WARRANT OFFICE. The Company shall maintain an office for
certain purposes specified herein (the "Warrant Office"), which office shall
initially be the Company's office at 9677 Tradeport Drive, Orlando, Florida
32827, and may subsequently be such other office of the Company or of any
transfer agent of the Common Stock in the continental United States as to which
written notice has previously been given to all of the Warrantholders.
SECTION 2.2. OWNERSHIP OF WARRANT. The Company may deem and treat the
person in whose name this Warrant is initially registered as the holder and
owner hereof (notwithstanding any notations of ownership or writing hereon made
by anyone other than the Company) for all purposes and shall not be affected by
any notice to the contrary, until presentation of evidence satisfactory to the
Company that this Warrant has been transferred as provided in Section 2.3.
SECTION 2.3. TRANSFER OF WARRANT. This Warrant and all rights hereunder
may not be alienated, assigned, pledged or otherwise transferred, in whole or in
part, other than by Holder to an Affiliate of Holder, and any attempt to make
any transfer other than by Holder to an Affiliate shall be null and void. The
term "Affiliate" shall mean, with respect to Holder, any other entity that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Holder.
ARTICLE 3
ANTI-DILUTION PROVISIONS
SECTION 3.1. ADJUSTMENT OF CURRENT WARRANT PRICE AND NUMBER OF SHARES
PURCHASABLE. The Current Warrant Price and the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall be subject to adjustment
from time to time as hereinafter provided in this Article 3. Upon each
adjustment of the Current Warrant Price, the holder of this Warrant shall
thereafter be entitled to purchase at the Current Warrant Price resulting from
such adjustment, the number of shares (calculated to the nearest whole share) of
Common Stock calculated by multiplying the Current Warrant Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Current Warrant Price resulting from such adjustment.
SECTION 3.2. EFFECT OF "SPLIT-UPS" AND STOCK DIVIDENDS. In case at any
time or from time to time the Company shall subdivide or combine as a whole, by
reclassification, by the issuance of a stock dividend on the Common Stock
payable in Common Stock, or otherwise, the number of shares of Common Stock then
outstanding into a greater or lesser number of shares of Common Stock, with or
without par value, the Current Warrant Price shall be reduced or increased (as
applicable) proportionately. The issuance of such a stock dividend shall be
treated as a subdivision of the whole
3
<PAGE> 4
number of shares of Common Stock outstanding immediately prior to such dividend
into a number of shares equal to such whole number of shares so outstanding plus
the number of shares issued as a stock dividend. Upon any such adjustment, the
number of shares shall be rounded upward to the nearest whole share.
ARTICLE 4
CERTAIN DEFINITIONS
For all purposes of this Warrant, unless the context otherwise
requires, the following terms shall have the following respective meanings:
"Act": the Securities Act of 1933, as amended from time to time, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Commission": the Securities and Exchange Commission, or any other
federal agency then administering the Act.
"Current Market Price": the "Closing Price" (as defined below) of the
Common Stock on the last business day immediately preceding any date of
reference. For the purpose of determining Current Market Price, the "Closing
Price" of the Common Stock on any business day shall be: (i) if the Common Stock
is listed or admitted for trading on any United States national securities
exchange, the last reported sale price of Common Stock on such exchange; (ii) if
the Common Stock is listed or admitted for trading on any tier of The Nasdaq
Stock Market, the last reported sale price of Common Stock on such tier; or
(iii) if the Common Stock is traded in the over-the-counter market, the average
of the closing bid and asked prices for the Common Stock as quoted on the OTC
Bulletin Board.
"Current Warrant Price" (per share of Common Stock at any date): the
price at which one share of Common Stock may be purchased hereunder at any time.
The Current Warrant Price is subject to adjustment from time to time pursuant to
Article 3 above.
"Exchange Act": the Securities Exchange Act of 1934, as amended from
time to time, or any successor federal statute, and the rules and regulations of
the Commission thereunder.
"Outstanding": when used with reference to Common Stock at any date,
all issued shares of Common Stock (including, but without duplication, shares
deemed issued pursuant to Article 3 above) at such date, except shares then held
in the treasury of the Company.
"Person": an individual, corporation, partnership, joint venture, trust
estate, unincorporated organization or government or an agency or political
subdivision thereof.
"Total Warrants": the sum of the aggregate number of shares of: (i)
Common Stock purchasable by the holder(s) upon exercise of the Warrant then
outstanding; and (ii) Warrant Shares which had been issued pursuant to the
exercise the Warrant.
"Warrant Office": see Section 2.1 above.
"Warrant Shares": the shares of Common Stock purchasable or purchased
by the Warrantholder upon the exercise of the Warrant.
4
<PAGE> 5
"Warrantholder": the registered holder of the Warrant or any related
Warrant Shares.
"Warrant": the warrant issued by the Company hereunder evidencing the
right to purchase an aggregate of 95,000 shares of Common Stock and all warrants
issued in substitution or subdivision hereof.
ARTICLE 5
CERTAIN COVENANTS OF THE COMPANY
The Company represents, warrants, covenants and agrees that:
(a) It will reserve and set apart and have at all times, free from
preemptive rights, a number of shares of authorized but unissued Common Stock or
other securities or property deliverable upon the exercise of this Warrant
sufficient to enable it at any time to fulfill all its obligations thereunder;
(b) Before taking any action which would cause an adjustment reducing
the Current Warrant Price below the then par value of the shares of Common Stock
issuable upon exercise of this Warrant, it will take any corporate action which
may be necessary in order that the Company may validly and legally issue fully
paid and nonassessable shares of such Common Stock at such adjusted Current
Warrant Price;
(c) If any shares of Common Stock required to be reserved for the
purposes of the exercise of this Warrant require registration with or approval
of any governmental authority under any federal law (other than the Act) or
under any state law before such shares may be issued upon exercise of this
Warrant, the Company will, at its expense, as expeditiously as possible, cause
such shares to be duly registered or approved, as the case may be;
(d) This Warrant shall be binding upon any corporation succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets.
ARTICLE 6
CERTAIN COVENANTS OF THE HOLDER
The Holder represents, warrants, covenants and agrees that:
(a) This transaction is exempt from the Act and, accordingly neither
the Warrant nor the Warrant Shares have been registered under the Act; they are
acquiring the Warrant and Warrant Shares for investment purposes only and not
with a view to or for resale in connection with any distribution of the Warrant
or Warrant Shares, nor with any present intention of distribution (within the
meaning of the Act) of the Warrant or Warrant Shares; because the Warrant and
Warrant Shares will not have been registered under the Act, the Company will not
permit the transfer of such shares without registration under the Act, or upon
the issuance to the Company of a favorable opinion of its counsel to the effect
that such transfer, whether pursuant to Rule 144 of the Act or otherwise, shall
not be in violation of the Act, and any applicable state security laws; and the
share certificates representing the Warrant Shares will be issued with a
restrictive legend providing notice of such restriction;
(b) Holder has had an opportunity to ask questions of, and receive
answers from, appropriate officers and representatives of the Company concerning
the terms and conditions of the
5
<PAGE> 6
issuance of this Warrant and the Warrant Shares and to obtain any additional
information concerning the Company which they have requested; and
(c) The Company has made available for inspection by them various
documents connected with the Company's business and has not refused in any way
to permit them to inspect any document requested by them to be inspected.
ARTICLE 7
NOTICE
Any notice or other document required to be given or delivered to the
Warrantholder shall be delivered at, or sent by certified or registered mail to
Holder at the last address shown on the books of the Company maintained at the
Warrant Office for the registration of the Warrants or at any more recent
address of which Warrantholder shall have notified the Company in writing. Any
notice or other document required or permitted to be given or delivered to
holders of record of outstanding Warrant Shares shall be delivered at, or sent
by certified or registered mail to, each such holder at such holder's address as
the same appears on the stock records of the Company. Any notice or other
document required or permitted to be given or delivered to the Company, other
than such notice or documents required to be delivered to the Warrant Office,
shall be delivered at, or sent by certified or registered mail to, the office of
the Company at 9677 Tradeport Drive, Orlando, Florida 32827, or such other
address within the United States of America as shall have been furnished by the
Company to the Warrantholders and the holders of record of Warrant Shares. Any
notice or other document sent by certified or registered mail, return receipt
requested, shall be deemed to have been delivered and received when sent if the
receipt is appropriately completed and returned. Notices or documents delivered
in any other manner than as set forth above shall be deemed to have been
delivered only when and if received.
ARTICLE 8
LIMITATIONS OF LIABILITY;
NOT STOCKHOLDERS
No provision of this Warrant shall be construed as conferring upon the
holder hereof the right to vote, consent, receive dividends or receive notice
other than as herein expressly provided in respect of meetings of stockholders
for the election of directors of the Company or any other matter whatsoever as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the purchase price of any Warrant
Shares or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
ARTICLE 9
LOSS, DESTRUCTION, ETC. OF WARRANTS
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of the Warrant, the Company will
make and deliver a new Warrant, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any Warrant issued under the provisions of this
Article 9 in lieu of any Warrant alleged to be lost, destroyed or stolen, or in
lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company.
6
<PAGE> 7
ARTICLE 10
LAW GOVERNING
This Warrant shall be governed by, and construed and enforced in
accordance with, the law of the State of Florida, without reference to its
choice of law principles.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name effective as of the 29th day of March, 2000.
WORLD COMMERCE ONLINE, INC.
By: /s/ Robert Shaw
-------------------------------------
Robert Shaw
President and Chief Executive Officer
7
<PAGE> 8
SUBSCRIPTION NOTICE
World Commerce Online, Inc.
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented by said Warrant for, and to purchase
thereunder, _______ shares of the Common Stock covered by said Warrant and (a)
herewith makes payment in full therefor of $___________ by certified or official
bank check payable to the order of the Company; and (b) requests (1) that
certificates for such shares (and any securities or other property issuable upon
such exercise) be issued in the name of and delivered to
__________________________________, whose address is
________________________________ and (2) if such shares shall not include all of
the shares issuable as provided in said Warrant, that a new Warrant of like
tenor and date for the balance of the shares issuable thereunder be delivered to
the undersigned.
-------------------------
Signature Guaranteed:
Dated:
---------------------
8
<PAGE> 1
EXHIBIT 10.24
[WCO(TM) LOGO]
(Date)
Name:
----------------------
- ----------------------------
- ----------------------------
RE: FLORAPLEX(TM) WHOLESALER USE AGREEMENT
Dear :
-----------
Thank you for giving World Commerce Online-Floraplex, Inc. ("WCO") the
opportunity to make the following proposal to ________________________ ("User")
for use of the Floraplex(TM) system, WCO's global commercial network for the
floral industry. By agreeing to the following terms and conditions, you will
join a growing number of users making Floraplex(TM) their online e-commerce
solution to electronically sell and purchase floral products through
Tradelink(TM) and Floramall(TM), communicate with industry members, and obtain
floral news and information.
The basic terms for your use of Floraplex(TM) are as follows:
1. FLORAPLEX(TM) USE AND ENDORSEMENT: User shall exclusively use and
endorse Floraplex(TM) as its official online service, and reasonably allow its
name and logo to be used for promotional purposes with User's prior notice and
approval.
2. SUBSCRIPTION FEES: User shall be entitled to a ______% discount on
Floraplex's standard subscription fees of $99/mo. (and $5.95/mo. for each unique
employee account).
3. ACCESS TO FLORAMALL(TM): WCO will afford User access to
Floramall(TM) through establishing a customized, secure, commercial inventory
and transactional web store in User's name.
4. TRANSACTION FEES: User shall pay monthly transaction fees in the
amounts set forth in the attached schedule for sales through WCO's
Floramall(TM). Users who are members of certain wholesaler groups recognized by
Floraplex(TM) as one entity may be entitled to pay reduced transaction fees
based on the aggregate monthly total amount of sales transactions by other group
members, which will allow the individual group members to benefit from the
selling power of the entire group. These transaction fees do not include third
party bank charges (i.e., Visa, MC).
5. ADVERTISING/DIRECT MARKETING EXPENSES: WCO will provide User with a
____% discount on any Floraplex(TM) advertising and direct marketing expenses.
<PAGE> 2
6. ACCESS TO TRADELINK(TM): WCO will afford User access to
Tradelink(TM), which showcases worldwide grower and manufacturer resources. WCO
may make arrangements to provide Users special access to growers and
manufacturers to acquire floral products under discounted pricing arrangements.
7. CONFIDENTIALITY: WCO and User acknowledge and agree that both will
have access to certain information which is generally not available to the
public which has particular value to either party, and disclosure of which could
be harmful to either party's interests (the "Confidential Information"). Such
Confidential information may include, but is not limited to information and
knowledge regarding products, processes, techniques, trade secrets, strategies
and programs, financial data, vendor and customer relationships, methods of
operation and other information and material in any form proprietary to either
party. WCO and User covenant and agree (i) that both during and 5 years after
the Term of this Agreement neither will disclose any Confidential Information to
any person or business entity without the prior express written authorization of
the other, and (ii) not to use or allow third parties to use Confidential
Information for any purpose other than for the performance of obligations
hereunder.
8. TERM OF AGREEMENT: The term of this Agreement shall be for three (3)
years from the date of acceptance. Either party may terminate this Agreement at
any time upon thirty (30) days written notice.
9. INCORPORATION OF FLORAPLEX(TM) ONLINE TERMS: User agrees and accepts
the general Floraplex(TM) online Terms and Conditions to the extent not altered,
modified, or changed by the terms of this Agreement.
Accepted by:
By:
-------------------------------------
NAME: User
Dated:
-----------------------------------
By:
-------------------------------------
World Commerce Online-Floraplex, Inc.
Dated:
-----------------------------------
<PAGE> 1
EXHIBIT 10.25
STANDARD DOCUMENT
BETWEEN BVH AND WCO
Cooperation `Bloemenveiling Holland' B.A., Middelbroekweg 29, P.O. Box
220, 2670 AE NAALDWIJK, as represented by R. de Ruiter, Department Manager of
Advice & Development, hereinafter referred to as "BVH" and WCO Inc, 9677
Tradeport Drive, Orlando, FL 32827 USA, with an office at NL, 1054 GT
Vondelstraat 138, Amsterdam, represented by Mr. J.N. Kras, Executive Vice
President of European, African and Middle East Operations, hereinafter referred
to as "WCO".
Considering that WCO develops and exploits a global e-commerce trading
system through the Internet in the horticultural industry;, that BVH is one of
the most important market places in the world for the trade of floricultural
products; that BVH wishes to come to an ordering system which is specified in an
BVH document called "Specification Ordering System Presale Clock Naaldwijk
Version 8"; that BVH is interested in Internet applications and trade systems;
and WCO wishes to build a good cooperation together with BVH:
BVH and WCO agree as follows:
1. WCO builds for BVH an ordering system according to the
specifications "Specification Ordering System Presale Clock Naaldwijk Version 8"
dated August 16 1999.
2. WCO will do everything to deliver the ordering system according to
the detailed and to each party agreed project planning. When and so far WCO
fails to meet by repetition one or more of the in the planning described
milestones, which prevents a timely and ongoing completion of the project, BVH
is entitled to end this agreement one sided in writing.
3. The ordering system shall, after delivery by WCO and acceptation by
BVH, be tested in a 3 months pilot project. Two months after the start of the
project, there will be an evaluation and further appointments will be made about
the continuation of the cooperation.
4. In addition to the specifications mentioned in article 1, WCO
guarantees 98% availability of the functionality of the ordering system between
8.00 a.m. and 5.00 p.m. WCO will guarantee an up to date back up situation for
the ordering system. WCO will take care of a back up of the data. After seven
days the back up will be deleted. WCO will take care that the system does not
allow that two users at the very same time are able to order the same.
5. WCO manages the hard- and software.
6. As part of this agreement WCO will offer supporting services. To
that fact there a service level agreement is made which is part of this
agreement and should be considered as one.
7. WCO will fix all bugs in the provided ordering system at her own
costs.
8. WCO grants BVH an exclusive user's right of the specific application
software during the pilot period. After this period this right is no longer
valid. A continuation of this right will be part of the evaluation and
continuation negations as mentioned in article 3 of this agreement.
9. The source code, documentation, reports and the intellectual
property of the ordering system as drafted by WCO, remain property of WCO. If
the continuity of the services (functionality and/or support) during the pilot
period is in danger by acts of WCO and if BVH wishes so, than WCO will be
prepared to cooperate to make a draft of an agreement for continuation of the
support in any form (maybe by involving a third party).
10. BVH will put certain demands to the users of the system concerning
intended use and application of the ordering system. If necessary BVH will
exclude participants when they abuse the system deliberately, which may cause
damage to hard- and or software, to systems both of WCO and BVH.
<PAGE> 2
11. During the pilot period BVH does not owe a fee for the current
transactions through the ordering system: a 0 tariff.
12. When the ordering system works technically okay and the agreements
for support is conform the service level agreement but BVH decides for
commercial reasons not to continue the pilot in an ongoing ordering system, than
BVH owes WCO a fee of Hfl 50,000.--.
When the ordering system is commercially and technically successful,
but BVH and WCO cannot come to an agreement about a mutual continuation of the
project, than BVH owes WCO at the end of the pilot period a fee of
Hfl150,000.--.
When the ordering system does not work properly and/or the agreements
for support according to the service level agreement are not met, and that is
the reason that BVH decides not to continue in an ongoing ordering system in
cooperation with WCO, than BVH does not owe anything.
13. For BVH and WCO it is also the intention to get more experience
through this project and to look or and in which way further closer strategic
cooperation in e-commerce for the floricultural industry can be developed
between BVH and WCO.
14. In addition to the mentioned SLA WCO guarantees that she has a
reaction time of 10 minutes, starting actually fixing the problem, in case of a
failure during normal trading times for the buyers (between 1.00 p.m. to 2.00
p.m.).
Cooperation "Bloemenveiling Holland" B.A., WCO, Inc.
By: /s/ R. de Ruiter By: /s/ J.N. Kras
---------------------- --------------------------
Dated: October 22, 1999 Dated: October 22, 1999
<PAGE> 1
EXHIBIT 10.26
STANDARD DOCUMENT
BETWEEN VBA AND FPN
Aalsmeer Flower Auction, Legmeerdijk 313, 1431 GB, Aalsmeer,
represented by Mr. D. `t Hooft, General Manager, hereinafter referred to as
"VBA" and Flower Purchase Network-Floraplex, the Netherlands, a subsidiary of
World Commerce Online, Inc., Vondelstraat 138, 1054 GT Amsterdam, represented by
its director Mr. Nils van Beek, hereinafter referred to as "FPN".
Considering that:
a. The VBA facilitates the classification of quality of the
supplied ornamental flowers and plants and the payment to the
suppliers.
b. FPN offers suppliers worldwide the opportunity to market
theirs ornamental flowers and plants though its Internet
e-commerce network.
c. FPN has invested in the information technology and
marketing of its trading system through the Internet.
d. FPN will be responsible for the cost of logistics.
e. VBA and FPN will utilize each other's services, therefore
increasing the turnover of both parties.
In this respect, both parties have agreed as follows:
1. FPN respects the agreements (the standard conditions) that are made
between VBA and their suppliers, unless specified otherwise.
2. Suppliers/buyers which use the VBA, by way of the services of FPN,
must let their payment transactions take place through the VBA.
3. According to the VBA guidelines, after deduction of the commission
rate charged by the VBA, these funds will be directly paid to the suppliers.
4. This agreement is effective immediately until December 31, 2005 and
will be extended at that time by periods of one year. Cancellation by either of
the parties after the automatic extension, can only take place three months
prior to the end of the calendar year.
5. The conditions regarding the administrative process of each sale
(chapter 3 of the VBA auction guidelines) will be discussed at a later date by
the parties.
6. VBA and FPN agree on complete confidentiality regarding the system
and its marketing.
The above parties have hereunto affixed their signatures as of the 8th
day of December, 1999.
Flower Purchase Network-Floraplex, Aalsmeer Flower Auction
the Netherlands,
a subsidiary of World Commerce Online, Inc.
By: /s/ Nils van Beek By: /s/ D. `t Hooft
---------------------- ----------------------
Dated: December 8, 1999 Dated: December 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS AND
CONSOLIDATED STATEMENT OF CASH FLOWS INCLUDED IN THE COMPANY'S FORM 10 FOR THE
PERIOD ENDING DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 10,553,021
<SECURITIES> 0
<RECEIVABLES> 3,785,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,570,775
<PP&E> 6,477,743
<DEPRECIATION> (347,577)
<TOTAL-ASSETS> 22,669,016
<CURRENT-LIABILITIES> 2,298,871
<BONDS> 0
27,598,983
0
<COMMON> 15,435
<OTHER-SE> (7,320,765)
<TOTAL-LIABILITY-AND-EQUITY> 22,669,016
<SALES> 40,130
<TOTAL-REVENUES> 40,130
<CGS> 0
<TOTAL-COSTS> 12,570,982
<OTHER-EXPENSES> 56,587
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166,129
<INCOME-PRETAX> (12,750,568)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,750,568)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,750,568)
<EPS-BASIC> (2.67)
<EPS-DILUTED> (2.67)
</TABLE>
