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As filed with the Securities and Exchange Commission on June 2, 2000
File No. 0-29495
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 3 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)
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DELAWARE 52-2205697
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
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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:
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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
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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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PAGE
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Item 1. Business..................................................................................................1
Corporate History And Development.....................................................................19
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...............................................................................................38
Item 4. Security Ownership Of Certain Beneficial Owners And Management...........................................39
Item 5. Directors And Executive Officers.........................................................................41
Item 6. Executive Compensation...................................................................................44
Item 7. Certain Relationships And Related Transactions...........................................................49
Item 8. Legal Proceedings........................................................................................51
Item 9. Market Price Of And Dividends On Registrant's Common Equity And Related Stockholder Matters..............52
Item 10. Recent Sales Of Unregistered Securities.................................................................53
Item 11. Description Of Registrant's Securities..................................................................57
Item 12. Indemnification Of Directors And Officers...............................................................61
Item 13. Financial Statements And Exhibits.......................................................................62
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 provide Internet-based technology products and services 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. Floraplex includes the
following trading systems (see also "Products and Services"):
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- Flower Purchase Network(TM) Sale transactions between growers and
wholesalers in Europe
- Tradelink(TM) Sale transactions between growers and
wholesalers in the United States
- Supply Purchase Network Sale transactions of hardgoods, which include
vases, glassware, foam, etc., by
manufacturers to wholesalers
- Floramall(TM) Sale transactions between wholesalers and
retailers
- Florashops.com(TM) Sale transactions by retailers to consumers
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In September 1999, the Flower Purchase Network and Tradelink trading
systems within Floraplex were fully operational. The Floraplex products and
services were the only product offerings from which we have derived revenue for
the three months ended March 31, 2000 and the year ended December 31, 1999.
FreshPlex(TM), our second Global Trading Community, for the global
produce industry, through our wholly-owned subsidiary, World Commerce
Online-FreshPlex, Inc., is in the development stage. The product components of
FreshPlex, providing information content and communication tools, including
email and chat rooms, were operational in May of 2000. The FreshPlex trading
system is in the test phase and we anticipate that it will be fully operational
in September of 2000. Based upon management's project cost estimates for
FreshPlex, we anticipate completion of the trading system to require additional
capital outlays of approximately $2.0 million. Our estimated cost to complete
the fully operational trading system within FreshPlex is based upon
architectural designs developed from our assessment of product features and
functionality. Our estimated cost to complete was produced by our internal
development staff based upon assumptions regarding the time and material costs
of external development activities and required upgrades or acquisitions of
software and/or hardware. Our projected cost to complete the FreshPlex trading
system is our best estimate and is subject to risks of uncertainty. Actual
results may differ from our estimates. It is our intention to furnish updated
disclosures of this estimate and the progress toward completion in our future
filings. We anticipate that FreshPlex will begin to generate revenue in
September 2000, although we do not expect that any such revenue will offset
significantly the net losses we anticipate in the foreseeable future. In
addition, for the forseeable future we do not anticipate such revenues would
significantly diminish the accumulated deficit, which amounted to $54.2 million
as of March 31, 2000.
The formulation of our B2B e-commerce strategy and business model
occurred in the second half of 1998. During the initial stage of our business
development, from inception in March 1994 through December 31, 1996, we engaged
in the first stage of our business model in the floriculture supply chain
whereby we generated revenue and incurred costs in connection with the import
and resale of fresh cut flowers. During the year ended December 31, 1997, and
the first nine months of the year ended December 31, 1998, as our business model
evolved towards an Internet-based offering of products and services to the
floriculture supply chain, we utilized available capacity within our internal
development team to generate revenue from the development of websites primarily
for Global Intertainment Group, Inc., a company under the control of our former
President and founder, William A. Mobley, Jr. We did not generate revenues from
the import and resale activities or website development in the three months
ended March 31, 2000 or in the year ended December 31, 1999.
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.
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Our operating history and financial results prior to September 1998
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 (see "Revenue Model" for a detailed description of these revenue
sources):
- transaction fees fees as a percentage of the
transaction order value
- advertising revenue fees for banner displays and
`click through' advertisements
- subscription fees monthly fees for access
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 through existing internal development
capabilities and web-server infrastructure as well as third
party service providers of technology products and
integration services;
- retain personnel with applicable professional experience in
the perishable products markets globally through recruitment
of referrals by existing personnel or search activities and
the utilization of stock options under our existing option
plan;
- establish contractual relationships with supply chain
participants with significant annual revenue, market share,
or customer base and/or with operating capabilities or
geographic reach through our established sales and marketing
programs and continued initiatives to develop programs
targeting identified customer segments;
- establish our brands including Floraplex and FreshPlex
through traditional print media, trade show participation,
and marketing initiatives with service providers; and
- integrate logistics and financial payment systems technology
to enhance our overall product value through contractual
relationships with software providers specializing in
applicable technology products.
We have incurred significant losses since our inception. We anticipate
that we will continue to incur net losses for the foreseeable future as we
build our revenue base and incur costs, particularly associated with product
and technology development and sales and marketing initiatives.
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-
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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 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%
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
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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 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.
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 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%
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.
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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.
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;
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- 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;
- 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 FLORICULTURE AND PRODUCE SUPPLY CHAIN PARTICIPANTS 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. 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 auctions in Holland with
estimated annual transaction sales of $1.5 billion and $1.4 billion,
respectively, with Dole Fresh Flowers, with annual revenue of more than $200
million, and with Charles Kremp and the Kremp Network, a network of
approximately 30 retail florists in the U.S. each with an average annual
revenue of more than $1 million. We are seeking to expand our penetration into
other 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
organizations or networks 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 regional wholesale florists to promote our
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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 RECOGNIZED 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 supply chain participants in our targeted perishables
product industries by promotion of our brands. We intend to promote our brands
through traditional print media, including advertising in industry periodicals.
We will participate as a speaker or booth presence at most of the significant
international and U.S. based trade shows held annually. We will also conduct
marketing initiatives with service providers with whom we have contractual
relationships whereby we will utilize the sales and marketing personnel of the
service providers to identify potential customers for us. We believe the
combination of strong brand awareness, the functionality of our Global Trade
Communities, and our customer base will create competitive advantage in our
market.
BUILD RELATIONSHIPS WITH SERVICE PROVIDERS TO STRENGTHEN MARKET
POSITION.
It is our goal to selectively pursue relationships supporting our
strategy with Internet technology providers, Internet service providers, web
site developers and systems integrators. Our relationships 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 the execution of agreements with selected service providers may
incorporate the use of our equity instruments including warrants or direct
investments in our stock as well as fee arrangements based on time and
materials or at a fixed price. We believe these relationships will be important
in our efforts to achieve adoption and penetration of our B2B e-commerce
products and services, 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 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. In April 2000, we executed a software license
agreement with a developer of supply chain management software to facilitate
logistics and supply chain management capabilities globally within our Global
Trade Communities. 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: For the three months ended March 31, 2000
and 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: For the three months ended March 31,
2000 and 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.
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- SUBSCRIPTION FEES: For the three months ended March 31, 2000
and 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 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
three months ended March 31, 2000 or 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
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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.
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 to transactions
Network(TM) for growers and importers of floriculture products
Trade Link(TM)(1) 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> 16
<TABLE>
<CAPTION>
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 second quarter of 2000 and the first version of the trading
system available beginning in the third quarter of 2000.
MATERIAL AGREEMENTS
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<PAGE> 17
I2 TECHNOLOGIES, INC.
In April 2000, we entered into a software license agreement with i2
Technologies, Inc., a provider of supply chain management and logistics
software. Our agreement with i2 is intended to enhance the value of our
products and services by integrating logistics and supply chain software into
our Global Trade Communities. We will have Internet-based access to i2's
TradeMatrix(TM), a platform of software applications that enables customers to
perform supply chain management and fulfillment activities, including demand
consolidation, supply segregation and order fulfillment within FreshPlex and
Floraplex. Through our agreement with i2, FreshPlex and Floraplex will also
provide access to i2 software that will enable our customers to obtain
logistics and transportation services.
Terms of the agreement include an exclusivity provision which requires
i2, for a period of six months from the date of the agreement, to not develop
and execute a sales and marketing strategy with several of our major
competitors. As consideration for acquiring the software license we issued to
i2 a warrant representing the right to purchase 1.25 million shares of our
common stock at an exercise price of $7.00 a share. The warrant vests
immediately and has a fair value of approximately $8 million based on a Black
Scholes option pricing model.
As part of the agreement we agreed to pay i2 a royalty fee equal to 5%
of our gross revenues with minimum royalty payments of $0.5 million, $0.75
million and $1 million, respectively, in each of the three successive years
after the launch date of the software which is currently estimated to be in
September 2000. In addition, we have entered into a three-year joint marketing
agreement that requires the development of a joint marketing plan between the
companies to facilitate our sales and marketing strategy. As payment for their
marketing efforts, i2 will receive a finder's fee for customer leads it
provides to us. The finder's fee is equal to 50% of the fees we receive from a
customer for access to our products, less specific deductions as outlined in
the agreement.
Flower Auction Aalsmeer
In December 1999, we reached an agreement with Flower Auction Aalsmeer,
or the VBA, a flower and plant auction in Holland with estimated annual sales of
$1.5 billion. The VBA is a cooperative organization owned by Dutch growers
providing supply chain services including product trading through an auction
system, logistics services that involve moving product received from growers at
the auction facility to the buyers transportation equipment or warehouse space
at the auction facility, and a payment system for growers whereby the VBA
collects from buyer's payment for product purchase transactions and remits the
amount to the seller, net of the auction fees. Our agreement provides for the
utilization of Floraplex and specifically our trading system technology for
transactions between growers and the exporter/wholesaler buyers of the VBA. The
five year agreement contained no agreed transaction fee rate structure. However,
at the time of the execution of this agreement, the parties orally agreed to
apply a transaction fee of 4% of the transaction order value. The VBA will
continue to provide their payment system and logistics services regardless of
whether a product is purchased on Floraplex or through the auction process.
Payment for these services will continue to be the responsibility of the buyer
or seller of floriculture product in accordance with the traditional operating
guidelines of the auction. For the three months ended March 31, 2000 and the
year ended December 31, 2000, we had recognized approximately $35,000, or 80% of
total transaction fee revenue, and $10,000, or 50% of total transaction fee
revenue, respectively, in transaction fees, paid by the seller, related to sales
of product. As of March 31, 2000, we have not negotiated a more definitive
agreement with agreed upon transaction rates and terms of service.
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<PAGE> 18
ANSWERTHINK CONSULTING GROUP, INC.
In July 1999, we entered into a strategic services contract with
AnswerThink, Inc., a consulting firm of systems architects and integrators, to
design the integrated technology for our trading systems. Our agreement with
AnswerThink provides us with additional resources for development of our
technology products and the ability to offer resources to our customers to
assist in the integration of our products. The contract requires our approval
of individual statements of work for each assigned service and provides for
costs to be billed on a time and materials basis with no guaranteed fees or
minimum billing levels.
As part of our arrangement with AnswerThink, Inc. and in recognition
of AnswerThink's role in our agreement with i2, 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."
ECREDIT.COM, INC.
In December 1999, we entered into a three year agreement 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 for grower to wholesaler
transactions. Our agreement with eCredit is intended to provide us access to
technology that enables us to connect our technology to the services of
financial institutions or similar organizations that facilitate payment or
funding of transactions and provide other credit services. In addition, we
intend for this agreement to provide access to financial service providers who
have existing relationships with eCredit and those financial service providers
who may have relationships with eCredit in the future. Our 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
agreed upon transaction levels and minimum fees are not applicable until we
identify, select and approve financial service providers presented by eCredit
and the successful implementation of eCredit's software. As of March 31, 2000,
we have not selected or approved a financial service provider.
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 we believe have the
largest annual revenues, significant market share, a large customer base,
significant sales and marketing capability or distribution capacity in the
European and the Americas market segments. As of March 31, 2000, we had 43
full-time employees in our sales and marketing organization. As of March 31,
2000, 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 March 31, 2000, we
had 6 full-time employees in our technical consulting group.
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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 March 31, 2000, 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, 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 March 31, 2000, 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 March 31, 2000, we had 17 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 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:
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- 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.
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-
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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 three months ended March
31, 2000, and the year ended December 31, 1999, the only periods 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.
EMPLOYEES
As of March 31, 2000, we had a total of 98 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.
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- 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
The formulation of our B2B e-commerce strategy and business model
occurred in the second half of 1998, consequently we did not engage in any such
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 operation of the Floraplex products and services 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 $8.1 million and $12.6 million for the three months ended March
31, 2000 and the year ended December 31, 1999, respectively. At March 31, 2000
and December 31, 1999, we had an accumulated deficit of approximately $54.2
million and $45.6 million, respectively. 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
21
<PAGE> 24
Floraplex and successfully implement our trading system, our revenue will not
grow significantly and our business prospects will suffer.
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 the three months ended March 31, 2000 and for the year
ended December 31, 1999, we incurred expense in the amount of $3,024,279 and
$2,828,369, respectively, in connection with the grant and amortization of stock
options and stock grants awarded to our employees and the grant and amortization
of warrants to purchase our common stock. Our earnings have been decreased by
the corresponding amount of compensation expense. As of March 31, 2000, we
anticipate that we will incur additional expense in the amount of $5,390,072 for
the remaining nine months of the fiscal year ended 2000, $3,427,265 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.
WE CURRENTLY RELY ON A LIMITED NUMBER OF CUSTOMERS, AND ANY LOSS OF A
CUSTOMER COULD HAVE A NEGATIVE EFFECT ON OUR REVENUES
During the year ended December 31, 1999, we derived approximately 82%
of our total revenues from 26 customers. Furthermore, two of those customers,
Kiliflora Limited and Waridi Limited, growers selling product at the Flower
Auction Aalsmeer pursuant to the terms of our agreement with the Flower Auction
Aalsmeer, accounted for approximately 38% of our total revenues, combined, with
Kiliflora, individually, accounting for approximately 27% of our total revenues.
We expect that for the first half of fiscal year 2000 these 26 customers will
account for approximately 50% of our total revenues. A loss of
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<PAGE> 25
any one of these customers could have a negative effect on our total revenues.
Our customers may discontinue use of Floraplex at any time without significant
financial penalty.
WE MAY NOT BE ABLE TO MAINTAIN OR INCREASE OUR CUSTOMER BASE IF OUR
CUSTOMERS DO NOT PERCEIVE THAT WE PROVIDE A NEUTRAL AND IMPARTIAL TRADING
COMMUNITY.
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 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 78% of our revenues generated in the three months ended
March 31, 2000, and approximately 50% of our revenues for the year ended
December 31, 1999, were derived from our international operations. 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;
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<PAGE> 26
- 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 98 at March 31, 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.
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
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<PAGE> 27
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.
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 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 March 31, 2000. We include such preferred stock in
our
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<PAGE> 28
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 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
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<PAGE> 29
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
- 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,
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<PAGE> 30
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.
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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<PAGE> 31
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 March 31, 2000, and for the three
months then ended, are derived from unaudited condensed consolidated financial
statements and are 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 consolidated 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 consolidated financial statements audited by
PricewaterhouseCoopers, LLP, but are not included in this registration
statement. Operating results for the three months ended March 31, 2000 and the
year ended December 31, 1999 are not necessarily indicative of the results that
may be expected for any other period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ -------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
----------- ----------- ------------ ----------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue(1)................................. $ 51,131 $ -- $ 43,130 $ 292,406 $ 90,185 $ 110,834 $ 237,788
Operating expenses:
Cost of floral products................. -- -- -- -- -- 124,924 182,076
Product and technology development...... 2,628,558 91,394 2,836,605 381,192 136,089 36,546 31,369
Sales and marketing..................... 3,499,010 189,431 5,464,989 316,966 81,954 86,943 71,543
General and administrative.............. 1,450,432 379,277 3,848,221 3,223,123 507,342 179,542 160,895
Depreciation and amortization........... 615,335 4,681 421,167 7,401 1,888 1,829 -
Total costs and operating 8,193,335 664,783 12,570,982 3,928,682 727,273 429,784 445,883
expenses..........................
Loss from operations....................... $(8,142,204) $ (664,783) $(12,527,852) $(3,636,276) $ (637,088) $ (318,950) $ (208,095)
Net interest income (expense).............. 118,015 (21,466) (166,129) (4,026) -- (1,384) (4,769)
Net loss................................... $(8,086,106) $ (686,249) $(12,750,568) $(3,640,302) $ (637,088) $ (320,334) $ (212,864)
Deemed dividend on redeemable convertible
preferred stock(2)..................... (500,000) -- (28,000,000) -- -- -- --
Net loss available to common stockholders $(8,586,106) $ (686,249) $(40,750,568) $(3,640,302) $ (637,088) $ (320,334) $ (212,864)
Basic and diluted net loss per common $(0.56) $ (0.05) $ (2.67) $ (0.40) $ (0.09) $ (0.04) $ (0.09)
share......................................
Weighted average number of shares
outstanding............................ 15,437,115 15,114,778 15,271,152 9,181,923 6,930,865 5,589,740 3,671,112
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ -------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
----------- ---------- ------------ ----------- ---------- --------- ---------
BALANCE SHEET DATA: (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents............. $ 9,931,277 $ 84,467 $10,553,021 $ 42,335 $ 707 $ 37,814 $ (146)
Working capital....................... 7,907,117 (121,321) 12,271,904 (174,695) (396,135) (130,145) (56,382)
Total assets.......................... 19,400,865 224,232 22,669,016 101,244 7,901 43,026 16,260
Long-term liabilities................. 478,036 26,708 91,927 26,983 -- 32,793 30,555
Redeemable convertible preferred stock 28,098,983 500,000 27,598,983 -- -- -- --
Total stockholders' deficit........... $(12,122,227) $(538,185) $(7,320,765) $(144,366) $ (389,814) $ (157,726) $ (86,937)
</TABLE>
(1) All revenue generated in the three months ended March 31, 2000 and the year
ended December 31, 1999 is attributable to Floraplex.
(2) 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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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", the consolidated financial statements as of and
for the years ended December 31, 1999, 1998 and 1997 and the notes to those
statements and the unaudited condensed consolidated financial statements as of
and for the three months ended March 31, 2000 and 1999 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
March 31, 2000 and December 31, 1999, we had an accumulated deficit of $54.2
million and $45.6 million, respectively. 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. During the initial stage of our business
development, from inception in March 1994 through December 31, 1996, we engaged
in the first stage of our business model in the floriculture supply chain
whereby we generated revenue and incurred costs in connection with the import
and resale of fresh cut flowers. During the year ended December 31, 1997, and
the first nine months of the year ended December 31, 1998, as our business model
evolved towards an Internet-based offering of products and services to the
floriculture supply chain, we utilized available capacity within our internal
development team to generate revenue from the development of websites primarily
for Global Intertainment Group, Inc., a company under the control of our former
President and founder, William A. Mobley, Jr. We did not generate revenues from
the import and resale activities or website development in the three months
ended March 31, 2000 or the year ended December 31, 1999.
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
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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. For the three months ended March
31, 2000 and for the year ended December 31, 1999, we derived revenue from all
three sources. See "Results of Operations Comparison of Three Months Ended March
31, 2000 to Three Months Ended March 31, 1999 and 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 March
31, 2000, we had not recognized revenue related to implementation fees. Also in
the future we may derive fees for the development of private trade communities
in lieu of or in addition to transaction and subscription fees.
All revenue generated during the three months ended March 31, 2000 and
the year ended December 31, 1999 was derived from Floraplex. For the three
months ended March 31, 2000, we generated approximately 78% of our revenues from
Floraplex customers based in Europe. The revenue we generated in the year ended
December 31, 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 March 31, 2000, we are not able to determine perceivable trends in
the allocation of revenues from transaction fees, advertisement revenue, and
subscription fees. With respect to Floraplex, we consider it likely that
transaction fee revenue from customers based outside the United States will be
greater than such revenue derived in the U.S. because approximately 80% of the
transaction volume in the industry occurs outside the United States. We did not
generate any revenue from FreshPlex for the three months ended March 31, 2000 or
during the year ended December 31, 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. For the three months ended
March 31, 2000 and during the year ended December 31, 1999, we capitalized $0.9
million and $4.8 million, respectively, 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.
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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 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.
On March 14, 2000, we sold 200,000 shares of our Series A convertible
preferred stock, at a purchase price of $2 per share, to Interprise Technology
Partners for $400,000 pursuant to Interprise's exercise of an option, which we
granted on March 30, 1999, to purchase such shares at such price.
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 March 31, 2000 and December
31, 1999 was $54.2 million and $45.6 million, respectively, 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 in the B2B e-commerce market for
the perishable products industries.
RESULTS OF OPERATIONS
The following is derived from our unaudited condensed consolidated
financial statements as of and for the three months ended March 31, 2000 and
1999.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 TO THREE MONTHS ENDED MARCH 31,
1999
REVENUES. Revenue for the three months ended March 31, 2000 was
$51,000. There was no revenue generated in the three months ended March 31,
1999. For the three months ended March 31, 2000, revenue was generated primarily
from three sources: approximately $42,000, or 82.4% of total revenue, in
transaction fees, approximately $2,000, or 3.9% of total revenue, in advertising
fees, and approximately $7,000, or 13.7% of total revenue, in subscription fees.
PRODUCT AND TECHNOLOGY DEVELOPMENT. Product and technology development
expenses consist primarily of salaries and related personnel costs for our
internal development team including stock-based
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compensation costs, 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 three months ended March 31, 2000 were
$2.6 million compared to $0.1 million for the three months ended March 31,
1999, an increase of approximately $2.5 million. The primary reasons for this
increase were increases in non-cash charges of approximately $0.1 million
related to stock based compensation, an increase in third party consultant
expense of approximately $2.0 million of which approximately $1.5 related to a
non-cash charge related to the issuance of warrants and an increase in employee
headcount from 5 as of March 31, 1999 to 35 as of March 31, 2000 which resulted
in an increase of approximately $0.3 million.
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 three
months ended March 31, 2000 were $3.5 million compared to $0.2 million for the
three months ended March 31, 1999, an increase of approximately $3.3 million.
The primary reasons for this increase were the amortization of approximately
$1.0 million related to warrants issued to third party consultants and a
customer, an increase in our global marketing efforts of approximately $ 0.5
million and an increase of approximately $0.4 million related to our
participation in and travel to trade shows worldwide. Additionally, our sales
and marketing department increased from 5 employees as of March 31, 1999 to 43
employees as of March 31, 2000 which resulted in an increase of approximately
$1.3 million which includes a non-cash charge of approximately $0.5 million for
stock-based compensation.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
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 three months ended March 31, 2000
were $1.5 million compared to $0.4 million for the three months ended March 31,
1999, an increase of approximately $1.1 million. The primary reasons for this
increase were the hiring of personnel in all support departments and the
increase in professional costs. Our headcount increased from 2 as of March 31,
1999 to 20 as of March 31, 2000. This resulted in an increase of approximately
$0.4 million in salaries and wages, which includes a non-cash charge of
approximately $0.08 million in stock-based compensation, and $0.3 million in
related personnel costs and other operating costs as mentioned above.
Professional costs increased approximately $0.2 million for legal and accounting
costs associated with filing our registration statement on Form 10, as amended,
filed on April 3, 2000.
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 three months ended
March 31, 2000 were $0.6 million compared to $0.005 million for the three months
ended March 31, 1999, an increase of approximately $0.6 million due to the
amortization of goodwill recognized in connection with our acquisition of Fresh
Products Network B.V. in August 1999 and depreciation for additions in property
and equipment and capitalized software development costs.
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 March 31, 2000, 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
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25% cliff vesting or 28% vesting on the first anniversary of the grant date and
the balance vesting 2% monthly thereafter. We have recognized approximately $0.7
million in stock-based compensation, $0.5 million related to options and $0.2
million related to an employee stock grant, for the three months ended March 31,
2000. As of March 31, 2000 we expect to incur stock-based compensation expense
of at least $1.7 million for the remainder of 2000, $1.6 million in 2001 and
2002.
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 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
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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.
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
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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. During the three
months ended March 31, 2000, we raised $0.5 million through the sale of our
redeemable convertible preferred stock.
Net cash used in operating activities was approximately $3.7 million
for the three months ended March 31, 2000 and $0.6 million for the three months
ended March 31, 1999. This use of cash was primarily due to our net losses in
each of those periods. For the three months ended March 31, 2000, the net loss
was offset by an increase in accounts payable and accrued liabilities, a
non-cash stock-based compensation charge of $0.7 million, a non-cash charge of
$2.3 million through the issuance of warrants for professional services, and an
increase in depreciation and amortization expense of $0.7 million.
Net cash used in operating activities was approximately $7.7 million
for the year ended December 31, 1999 and $0.5 million for the year ended
December 31, 1998. 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 $1.0 million
for the three months ended March 31, 2000 and $0.05 million for the three months
ended March 31, 1999. The increase for the three months ended March 31, 2000,
was primarily due to the acquisition of technology equipment and the
capitalization of software development costs.
Net cash used in investing activities was approximately $5.7 million
for the year ended December 31, 1999 and $0.02 million for the year ended
December 31, 1998, 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 $4.1
million for the three months ended March 31, 2000 and $0.7 million for the three
months ended March 31, 1999. The increase for the three months ended March 31,
2000, was due to the receipt of proceeds from investor receivables from the sale
of our Series B redeemable convertible preferred stock.
Net cash provided by financing activities was approximately $24 million
for the year ended December 31, 1999 and $0.6 million for the year ended
December 31, 1998. In addition to the sales of our Series A and Series B
redeemable convertible preferred stock, which provided proceeds of
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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 March 31, 2000, we had approximately $9.9 million in cash and
cash equivalents. In addition, we had a $0.1 million receivable from an investor
as a result of the exercise of an option to purchase shares of our Series A
redeemable convertible preferred stock.
We expect to continue to incur losses and to utilize cash in our
operations for the foreseeable future. We believe that our current cash and cash
equivalents and expected cash from operations will be sufficient to meet our
anticipated requirements for our operations including the initial implementation
of FreshPlex for at least the next 9 months. We expect that we will need to
raise additional funds, including through equity offerings, in the future in
order to improve and upgrade the underlying technology affiliated with our
Floraplex and FreshPlex products and services 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.
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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 and approximately
78% of our revenues generated in the three months ended March 31, 2000, were
denominated in Dutch guilders. We estimate that a 10% change in the Dutch
guilder as compared to the U.S. dollar would have changed the reported operating
loss by approximately $87,000 and $75,000 for the three months ended March 31,
2000 and the year ended December 31, 1999, respectively. This quantitative
measure has inherent limitations because it does not take into account the
changes in customer purchasing patterns or any adjustment to our financing or
operating strategies in response to such a change in rates.
A significant percentage of our revenues will likely continue to 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 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
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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 May 31, 2000, 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 15,465,357 shares of common stock outstanding as of May 31, 2000.
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 May 31, 2000 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............................ 1,334,720(1) 8.5%
Mark E. Patten............................ 25,000 *
J. Keith Money............................ 401,500(2) 2.6%
Henry R. Winogrond........................ 100,000(3) *
John R. Daniel II......................... 101,070(4) *
Jacobus N. Kras........................... 100,000(5) *
Michael W. Poole.......................... 225,000(6) 1.4%
David R. Parker........................... 5,595,000(7) 26.6%
Interprise Technology Partners, L.P....... 5,560,000(8) 26.4%
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%
i2 Technologies, Inc...................... 1,250,000(12) 7.5%
All directors and executive officers as a
group (9 persons)...................... 7,963,270 36.3%
</TABLE>
-------------------------
* Less than one percent.
(1) Includes 174,720 shares of common stock subject to options either
currently exercisable or exercisable by Mr. Shaw within 60 days of May 31,
2000. 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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(2) Includes 120,000 shares of common stock subject to options either
currently exercisable or exercisable by Mr. Money within 60 days of May
31, 2000.
(3) All 100,000 shares of common stock are subject to options either currently
exercisable or exercisable by Mr. Winogrond within 60 days of May 31,
2000.
(4) Includes 100,000 shares of common stock subject to options either
currently exercisable or exercisable by Mr. Daniel within 60 days of May
31, 2000. 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 100,000 shares of common stock are subject to options either currently
exercisable or exercisable by Mr. Kras within 60 days of May 31, 2000.
(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 4,200,000 shares of Series A preferred
stock which are immediately convertible into 4,200,000 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; 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.
(12) All 1,250,000 shares of common stock are subject to a warrant that is
immediately exercisable. The address of i2 Technologies, Inc. is 11701
Luna Road, Dallas Texas 75234.
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<PAGE> 44
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Our directors, executive officers and significant employees, and their
ages as of May 31, 2000, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Robert H. Shaw 57 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 Mr. Money was
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<PAGE> 45
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 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 and the representative of
Interprise Technology Partners, L.P. on the Board of Directors, pursuant to the
terms of a Stock Purchase Agreement between Interprise Technology Partners and
us, 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 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.
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<PAGE> 46
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.
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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<PAGE> 47
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 $100,000 prior to fiscal year 1999.
SUMMARY COMPENSATION IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION AWARDS
------------- ----------------------------------------
RESTRICTED STOCK SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(3) ($) AWARD(S)($) OPTIONS (#) COMPENSATION ($)
------------------------------------- ------------- ---------------- --------------------- ----------------
<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> 48
(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 option holder's
continued employment through the vesting period. Unless the market price
of our common stock appreciates over the option term, no additional
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
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<PAGE> 49
actual value, if any, a named executive officer may realize will depend upon
the excess of the stock price over 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 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,
47
<PAGE> 50
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."
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 2,666,300 shares were outstanding as of May 31, 2000.
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
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<PAGE> 51
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.
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> 52
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTERPRISE TECHNOLOGY PARTNERS
On February 12, 1999, our board of directors agreed to sell to
Interprise Technology Partners 4,000,000 shares of our Series A convertible
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, the
holders of a majority of the shares of our Series A convertible preferred stock
have the right to elect one member to our board of directors until such time as
no shares of our Series A preferred convertible stock are outstanding. ITP is
the holder of all but 50,000 shares of our Series A convertible preferred
stock. 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 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 day before 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 March 14 and April 11, 2000, we sold 200,000 and 50,000 shares,
respectively, of our Series A convertible preferred stock, at a purchase price
of $2 per share, to ITP for $500,000 pursuant to ITP's exercise of an option,
which we granted on March 30, 1999, to purchase such shares at such price.
After we sold the 50,000 shares on April 11, 2000, ITP immediately sold those
50,000 shares of Series A convertible preferred stock to Robert Guerin, a third
party who is not an affiliate of either ITP or us, for $100,000. As of May 31,
2000. ITP and David Parker were the beneficial holders of 26.4% and 26.6% of
our common stock, respectively.
DIRECTORS AND OFFICERS
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
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<PAGE> 53
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.
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
price of our common stock on the OTC Bulletin Board was $5.25 on the date of
issuance.
i2 TECHNOLOGIES
On April 29, 2000, we granted to i2 Technologies, Inc. a warrant
representing the right to purchase 1,250,000 shares of our common stock as
consideration for software i2 Technologies licensed to us pursuant to a
software license agreement dated April 29, 2000. The warrant had a fair market
value (based on the closing sale price on the day before the date of grant of
our common stock on the OTC Bulletin Board) on the date of the grant of
$8,000,000. The warrant is immediately exercisable at an exercise price of
$7.00 per share. See "Description of Registrant's Securities - Warrants." After
the grant of the warrant, i2 Technologies was the beneficial holder of 7.5% of
our common stock.
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 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 day before 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.
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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.
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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>
Second Quarter(1)................................................. 21 15/16 5 3/4
First Quarter..................................................... 28 13 11/16
Fiscal Year Ended December 31, 1999 High Low
-------- --------
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
Fiscal Year Ended December 31, 1998 High Low
-------- --------
Fourth Quarter.................................................... 3 3/4 2
Third Quarter (commencing September 9, 1998)(2)................... 2 1/2 2 1/2
</TABLE>
-------------------
(1) As of May 31, 2000.
(2) Trading was commenced under the symbol SUEX.
As of May 31, 2000, there were 15,465,357 shares of common stock
outstanding, held by approximately 124 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.
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<PAGE> 56
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 day before
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 day before 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 day before 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 day
before the date of issuance of our common stock on
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<PAGE> 57
the OTC Bulletin Board), to Noble House of Boston, Inc. as consideration for
services rendered in performing public relations work.
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 day
before 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 day before 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 day before 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 day before
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 day before 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 day before 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 an average of the closing sale price for the two days before, the
date of and the two days after 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 day before 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 day before the date
of grant of our common stock on the OTC Bulletin Board) on the date of the
grant of $290,625.
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On October 1, 1999, we issued 20,000 shares or our common stock, at a
fair market value of $110,000 (based on the closing sale price on the day
before 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 day before 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 day before 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 day
before 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.
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 day before 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 day before 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.
On March 14, 2000, we issued 10,000 shares of our common stock, at a
fair market value of $235,000 (based on the closing sale price on the day
before the date of issuance of our common stock on the OTC Bulletin Board), to
Gregory N. Chambers, an executive in our sales and marketing organization, in
connection with the commencement of his employment with the Company.
On March 14, 2000, we sold 200,000 shares of our Series A convertible
preferred stock, at a purchase price of $2 per share, to Interprise Technology
Partners for $400,000 pursuant to Interprise's exercise of an option, which we
granted on March 30, 1999, to purchase such shares at such price.
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<PAGE> 59
On March 29, 2000, we granted to AnswerThink Consulting Group, Inc.
two warrants representing the right to purchase 250,000 shares of our common
stock as consideration for introducing us to i2 Technologies, Inc. and in full
payment of $200,000 worth of consulting services rendered to us as of March 29,
2000. The warrant had a fair market value (based on the closing sale price on
the day before the date of grant of our common stock on the OTC Bulletin Board)
on the date of the grant of $2,572,000.
On April 11, 2000, we sold 50,000 shares of our Series A convertible
preferred stock, at a purchase price of $2 per share, to Interprise Technology
Partners for $100,000 pursuant to Interprise's exercise of an option, which we
granted on March 30, 1999, to purchase such shares at such price.
On April 29, 2000, we granted to i2 Technologies, Inc. a warrant
representing the right to purchase 1,250,000 shares of our common stock as
consideration for software i2 Technologies licensed to us pursuant to a
software license agreement dated April 29, 2000. The warrant had a fair market
value (based on the closing sale price on the day before the date of grant of
our common stock on the OTC Bulletin Board) on the date of the grant of
$8,000,000.
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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 May 31, 2000, there were 15,465,537 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 May 31, 2000,
there were 9,250,000 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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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" its shares of
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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
May 31, 2000, 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 May 31, 2000.
<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
AnswerThink Consulting Group, Inc.(2)(3)(14) 155,000(5) 18.00(17) March 29, 2004
AnswerThink Consulting Group, Inc.(2)(3)(14) 95,000(16) 18.00(17) March 29, 2004
i2 Technologies, Inc.(15) 1,250,000(5) 7.00(17) April 29, 2005
</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.
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(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.
(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.
(14) The warrant and all rights thereunder may only be transferred, in whole or
in part, to another entity that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
the holder of such warrant.
(15) The warrant and all rights thereunder are transferable, in whole or in
part, at any time to any other person or entity. Anti-dilution rights are
provided for in the event of stock dividends, stock splits, capital
reorganizations or reclassifications and the issuance of additional stock
or options with a per share price or option price, respectively, of less
than $7.00, except for issuance of common stock in connection with warrants
or convertible securities issued and outstanding as of April 29, 2000 or
issuances of stock options under the Stock Option Plan. The warrant holder
may request registration of the common stock underlying the warrant one
time from the date of grant until May 31, 2000, and is entitled to
unlimited "piggy-back" registration rights until all the shares of common
stock underlying the warrant are registered.
(16) Provided that a consulting agreement between World Commerce and
AnswerThink Consulting Group entered into as of August 11, 1999 is in full
force and effect and has not been terminated prior to any applicable
vesting date, 40,000 shares are exercisable as of June 30, 2000 and the
remaining 55,000 shares are exercisable as of September 30, 2000.
(17) The exercise price is payable in cash only.
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
61
<PAGE> 64
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
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
62
<PAGE> 65
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.
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.
</TABLE>
63
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ --------------------------------------------------------------------------------------------
<S> <C>
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 Consulting Group, Inc., dated March 29, 1999.
4.15* Warrant Agreement in favor of AnswerThink Consulting Group, Inc., dated March 29, 1999.
4.16* Warrant Purchase Agreement with i2 Technologies, Inc., dated April 29, 2000.
4.17* Warrant Agreement in favor of i2 Technologies, Inc., dated April 29, 2000.
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.
</TABLE>
64
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ --------------------------------------------------------------------------------------------
<S> <C>
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 Premier 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.
10.27* Software License Agreement with i2 Technologies, Inc., dated April 29, 2000.
21.1* Subsidiaries.
27.1* Financial Data Schedule (for SEC use only).
</TABLE>
------------------
* Previously Filed
65
<PAGE> 68
INDEX TO FINANCIAL STATEMENTS
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
Page
----
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
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
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet, as of March 31, 2000 (unaudited) F-23
Condensed Consolidated Statements of Operations for the three months ended March 31, 2000
and 1999, and for the period March 30, 1994 (date of inception) through March 31, 2000
(unaudited) F-24
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2000
and 1999, and for the period March 30, 1994 (date of inception) through March 31, 2000
(unaudited) F-25
Notes to Condensed Consolidated Financial Statements (unaudited) F-27
FRESH PRODUCTS NETWORK B.V. (A DEVELOPMENT STAGE COMPANY)
Report of Independent Accountants F-30
Financial Statements:
Balance Sheets as of August 26, 1999 and December 31, 1998 F-31
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-32
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-33
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-34
Notes to Financial Statements F-35
</TABLE>
F-1
<PAGE> 69
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 April 29, 2000
F-2
<PAGE> 70
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> 71
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> 72
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<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
Company -- -- 225,000 -- --
Sales of common stock 7/97 .42 90,000 90 37,410 -- --
Repurchase of treasury shares (20
shares) -- -- -- (20,000) --
Reissuance of treasury stock (20 shares)
Comprehensive Loss: -- -- 17,500 20,000 --
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> 73
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>
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 consolidated financial statements.
F-6
<PAGE> 74
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> 75
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>
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> 76
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> 77
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> 78
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> 79
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
Computer software 3 years
Furniture, fixtures and computer hardware 5 years
Revenue Recognition - The Company recognizes revenues at the time that
services are performed. Transaction fee revenue represents a fee equal
to a percentage of the transaction order value and is earned as
transactions are conducted through the Company's trading systems.
Subscription fee revenue is recognized ratably over the Subscription
Period in connection with the customer's access. 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> 80
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 currently records revenues on a net basis with no revenues
generated by activities that result in gross versus net issues. To
date, the Company does not charge any up front fees to customers. As a
result, 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> 81
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> 82
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> 83
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> 84
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> 85
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> 86
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> 87
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> 88
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
approximately 50% of its revenues from its international operations. At
December 31, 1999, the Company held approximately $661,000 of its total
assets in Holland. The Company derived approximately 82% of its
revenues from 26 customers and two of those customers exceeded 10% of
total revenues.
16. SUBSEQUENT EVENTS:
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.
In April 2000, we entered into a software license agreement with i2
Technologies, Inc., a provider of supply chain management and logistics
software. We will use i2's TradeMatrix(TM) platform for the integration
of supply chain management and fulfillment software applications
including demand consolidation, supply segregation and order
fulfillment within FreshPlex and Floraplex. FreshPlex and Floraplex
will also provide logistics and transportation services to the global
perishables products industry utilizing i2's transportation software
application. We will also provide the platform for the trading and
transaction application.
F-21
<PAGE> 89
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS (CONTINUED):
Terms of the Agreement include an exclusivity provision which requires
i2, for a period of six months from the date of the Agreement, to not
develop and execute a sales and marketing strategy with several of our
major competitors. As consideration for acquiring the software license
we issued to i2 a warrant representing the right to purchase 1.25
million shares of our common stock at an exercise price of $7.00 a
share. The warrant vests immediately and has a fair value of
approximately $8 million based on a Black Scholes option pricing model.
The value of the warrant was capitalized as the cost of acquiring the
licensed software and will be amortized over three years, the initial
term of the license.
As part of the Agreement we agreed to pay i2 a royalty fee equal to 5%
of our gross revenues with minimum royalty payments of $0.5 million,
$0.75 million and $1 million, respectively, in each of the three
successive years after the launch date of the software which is
currently estimated to be complete in September 2000. In addition, we
have entered into a three-year joint marketing agreement that requires
the development of a joint marketing plan between the companies to
facilitate our sales and marketing strategy. As payment for their
marketing efforts, i2 will receive a finder's fee for customer leads it
provides to us. The finder's fee is equal to 50% of the fees we receive
from a customer for use, sale or license of our solutions, less
specific deductions as outlined in the agreement.
F-22
<PAGE> 90
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 2000
------ ----
(unaudited)
<S> <C>
Current assets:
Cash and cash equivalents $ 9,931,277
Prepaid expenses and other current assets 821,913
Receivable from investors 100,000
-----------
Total current assets 10,853,190
Property and equipment, net 7,007,561
Intangible assets, net 1,515,876
Other assets 24,238
-----------
Total assets $19,400,865
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 2,630,715
Accrued compensation and benefits 146,191
Capital lease obligation, current 169,167
-----------
Total current liabilities 2,946,073
Long-term liabilities:
Capital lease obligation 478,036
Redeemable convertible preferred stock:
Preferred stock Series A, $0.001 par value; authorized 4,250,000 shares, issued and
outstanding 4,250,000 at March 31, 2000, stated at liquidation value, net of related
costs 8,478,211
Preferred stock Series B, $0.001, par value; authorized 5,110,000 shares, issued and
outstanding 5,000,000 at March 31, 2000, stated at liquidation value, net of related
costs
19,620,772
-----------
Total redeemable convertible preferred stock 28,098,983
Stockholders' deficit:
Common stock, $0.001 par value; authorized 90,000,000 shares, issued and
outstanding 15,445,357 shares at March 31, 2000 15,445
Additional paid-in capital 46,898,109
Deferred stock-based compensation (4,861,948)
Accumulated deficit (54,188,478)
Accumulated comprehensive income (loss) 14,645
-----------
Total stockholders' deficit (12,122,227)
-----------
Total liabilities and stockholders' deficit $19,400,865
===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-23
<PAGE> 91
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
For the Period
March 30, 1994
(Date of
Three Months Inception
Ended through
March 31, March 31,
2000 1999 2000
------------ ------------ --------------
<S> <C> <C> <C>
Revenues:
Advertising revenue $ 2,099 $ -- $ 16,244
Subscription revenue 7,025 -- 14,934
Transaction revenue 42,007 -- 63,083
Floral product revenue -- -- 350,130
Other revenue -- -- 40,273
Service revenues from related parties -- -- 342,396
------------ ------------ ------------
Total revenues 51,131 -- 827,060
------------ ------------ ------------
Costs and operating expenses:
Cost of floral product -- -- 308,749
Product and technology development 2,628,558 91,394 6,051,042
Sales and marketing 3,499,010 189,431 9,547,136
General and administrative 1,450,432 379,277 9,383,389
Depreciation and amortization 615,335 4,681 1,047,620
------------ ------------ ------------
Total costs and operating expenses 8,193,335 664,783 26,337,936
------------ ------------ ------------
Loss from operations (8,142,204) (664,783) (25,510,876)
Net interest income (expense) 118,015 (21,466) (59,098)
Other non-operating expense (61,917) -- (118,504)
------------ ------------ ------------
Net loss $ (8,086,106) $ (686,249) $(25,688,478)
Deemed dividend on redeemable convertible preferred stock (500,000) --
------------ ------------
Net loss available to common stockholders $ (8,586,106) $ (686,249)
============ ============
Basic and diluted net loss per common share $ (0.56) $ (0.05)
============ ============
Weighted average number of shares used in computing basic
and diluted net loss per common share 15,437,115 15,114,778
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-24
<PAGE> 92
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 30,1994
THREE MONTHS (DATE OF
------------ INCEPTION)
ENDED MARCH 31, THROUGH
MARCH 31,
2000 1999 2000
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (8,086,106) $ (686,249) $(25,688,478)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 660,585 4,681 1,136,642
Provision for doubtful accounts -- -- 40,322
Stock-based compensation 680,649 -- 2,781,075
Loss on retirement of property & equipment 3,322 -- 33,431
Loss on foreign currency translation 58,544 -- 88,615
Professional fees paid through the issuance
of common stock and warrants 2,343,630 97,430 6,571,766
Interest paid through the issuance of warrants -- -- 151,800
Change in operating assets & liabilities:
Accounts receivable -- -- (40,322)
Prepaid expenses & other current assets (127,628) (38,115) (360,382)
Other assets -- -- (24,238)
Accounts payable and accrued liabilities 975,530 32,091 2,739,304
Accrued compensation and benefits (225,884) (9,229) 146,191
------------ ------------ ------------
Net cash used in operating activities (3,717,358) (599,391) (12,424,274)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment and software
development (1,052,976) (47,422) (6,801,690)
------------ ------------ ------------
Net cash used in investing activities (1,052,976) (47,422) (6,801,690)
------------ ------------ ------------
Cash flows from financing activities:
Issuance of common stock -- 195,000 1,127,500
Issuance of redeemable convertible
preferred stock, net of related expenses 4,185,000 500,000 25,632,983
Purchase of treasury stock -- -- (20,000)
Proceeds from shareholder loans -- -- 132,693
Proceeds from other debt -- -- 2,445,545
Payments on shareholder loans -- -- (69,293)
Payments on capital leases (36,410) (6,055) (92,187)
------------ ------------ ------------
Net cash provided by financing activities 4,148,590 688,945 29,157,241
------------ ------------ ------------
Net change in cash (621,744) 42,132 9,931,277
Cash and cash equivalents, beginning of period 10,553,021 42,335 --
------------ ------------ ------------
Cash and cash equivalents, end of period $ 9,931,277 $ 84,467 $ 9,931,277
============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-25
<PAGE> 93
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 30,1994
(DATE OF INCEPTION)
THREE MONTHS THROUGH
ENDED MARCH 31, MARCH 31,
2000 1999 2000
--------------- ------------ ------------
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Non-cash investing and financing:
Equipment acquired through capital leases $ 520,075 $ -- $ 739,390
============ ============ ============
Common stock and warrants issued in exchange for
professional services $ 2,343,630 $ 125,000 $ 7,167,241
============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-26
<PAGE> 94
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL:
World Commerce Online, Inc. and its consolidated subsidiaries (the
"Company") is a provider of business-to-business electronic commerce
("B2B e-commerce") technology products and services to the global
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. Planned principal operations
have commenced but have not produced significant revenue. 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 foreseeable future
as the Company builds its revenue base while expanding its operations,
sales and marketing activities and product technology development.
At March 31, 2000, the condensed consolidated financial statements of
the Company include the accounts of the Company and its consolidated
subsidiaries. The condensed consolidated financial statements of the
Company as of and for the three months ended March 31, 2000 have not
been audited. In the opinion of management, the unaudited condensed
consolidated financial statements include all adjustments and accruals
(consisting of normal recurring adjustments) necessary to present
fairly the Company's consolidated financial position at March 31, 2000
and the consolidated results of its operations and cash flows for the
three months ended March 31, 2000 and 1999. Results of interim periods
are not necessarily indicative of the results to be expected during the
remainder of the current year or for any future period. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted or condensed. All significant intercompany
accounts and transactions have been eliminated in consolidation. The
accounting policies used in preparing these condensed consolidated
financial statements are the same as those described in the Company's
registration statement on Form 10, as amended, filed on April 3, 2000.
2. 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. As of January 1, 2000, the Company
adopted SAB 101. The Company does not believe that SAB 101 will 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.
F-27
<PAGE> 95
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. 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 three months ended March 31, 2000,
options to purchase 2,800,800 shares of common stock, preferred stock
convertible into 9,250,000 shares of common stock, warrants to purchase
2,181,000 shares of common stock, and a warrant 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.
4. COMPREHENSIVE INCOME:
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income." Total comprehensive loss of
$8,071,461 for the three months ended March 31, 2000 includes net loss
of $8,086,106 and other comprehensive income of $14,645. The Company's
only item of other comprehensive income is foreign currency translation
adjustment that has been reported separately within stockholders'
deficit on the condensed consolidated balance sheets. Total
comprehensive loss for the three months ended March 31, 1999 equaled
the net loss of $686,249. There were no items of other comprehensive
income or loss for the three months ended March 31, 1999.
5. 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 March 31,
2000, the grants that had been made under the Plan were NSOs and ISOs.
For the three months ended March 31, 2000, the Company recognized
$445,649 of stock-based compensation expense related to options and
expects to recognize $4,861,948 over the remaining vesting period of
the options.
6. EQUITY TRANSACTIONS:
In March 2000, the Company issued to a consultant of the Company two
warrants representing the right to purchase 155,000 and 95,000, shares,
respectively, of common stock at an exercise price of $18 per share.
The warrant representing 155,000 shares vest immediately with 40,000
shares of the second warrant vesting on June 30, 2000 and 55,000 shares
vesting on September 30, 2000 provided that the existing consulting
agreement remains in effect on those dates. The estimated fair value of
these warrants based on a Black Scholes option pricing model is
approximately $1,595,000 and $977,000, respectively, of which
approximately $1,487,000 was recorded as product and technology
development expense during the three months ended March 31, 2000.
7. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
In March 2000, an investor of the Company exercised its option to
purchase 250,000 shares of Series A convertible preferred stock at
$2.00 per share. 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 $500,000 related to this transaction.
F-28
<PAGE> 96
WORLD COMMERCE ONLINE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. SUBSEQUENT EVENT:
In April 2000, we entered into a software license agreement
("Agreement") with i2 Technologies, Inc., ("i2") a leading provider of
intelligent eBusiness solutions. We will use i2's TradeMatrix(TM)
platform to optimize demand consolidation, supply segregation and order
fulfillment with FreshPlex(TM) and Floraplex.(TM) FreshPlex(TM) and
Floraplex(TM) will be powered by i2's Tradematrix(TM) e-marketplace
platform to offer a variety of services to the food and floral
industries. FreshPlex (TM) and Floraplex(TM) will also provide
logistics and transportation services to the global perishables
products industry utilizing i2's transportation solutions. We will also
provide the platform for the trading and transaction application.
Terms of the Agreement include an exclusivity provision which requires
i2, for a period of six months from the date of the Agreement, to not
develop and execute a "go to market" strategy with several of our major
competitors. As consideration for acquiring the software license we
issued to i2 a warrant representing the right to purchase 1.25 million
shares of our common stock at an exercise price of $7.00 a share. The
warrant vests immediately and has a fair value of approximately $8
million based on a Black Scholes option pricing model.
As part of the Agreement we agreed to pay i2 a royalty fee equal to 5%
of our gross revenues with minimum royalty payments of $0.5 million,
$0.75 million and $1 million, respectively, in each of the three
successive years after the launch date of the software which is
currently estimated to be complete in September 2000. In addition, we
have entered into a three-year joint marketing agreement that requires
the development of a joint marketing plan between the companies to
facilitate our "go to market" strategy. As payment for their marketing
efforts, i2 will receive a finder's fee for customer leads it provides
to us. The finder's fee is equal to 50% of the fees we receive from a
customer for use, sale or license of our solutions, less specific
deductions as outlined in the Agreement.
9. COMMITMENTS AND CONTINGENCIES:
In December 1999, the Company entered into an agreement with a company
to integrate their Internet-based financial services product into
Floraplex(TM) for the Americas market segment for the grower to
wholesaler transactions 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. As of March 31, 2000,
the Company had not identified and selected a financial partner. 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 is, from time to time, party to certain litigation which
relates to matters arising in the ordinary course of business.
Management believes that such litigation is not expected to have a
material impact on the financial position or results of operations of
the Company.
10. BUSINESS SEGMENT INFORMATION:
As of and for the periods 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 three months ended March 31, 2000, the Company derived
approximately $11,000 in revenues in the United States and
approximately $40,000 in revenues in Holland. The Company derived
approximately 65% of its revenues from three customers and two of those
customers exceeded 10% of total revenues.
F-29
<PAGE> 97
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Fresh Products Network, B. V.
In our opinion, the accompanying balance sheet and the related statement 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, 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, The Netherlands
March 31, 2000
F-30
<PAGE> 98
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-31
<PAGE> 99
FRESH PRODUCTS NETWORK B. V.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
APRIL 17, APRIL 17,
1998 (DATE FOR THE PERIOD 1998 (DATE
OF INCEPTION) JANUARY 1, OF INCEPTION)
THROUGH 1999 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-32
<PAGE> 100
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
DECEMBER 31, 1998 -- -- -- (11,512) (11,512)
TOTAL COMPREHENSIVE INCOME -- -- -- -- (11,512)
-------- -------- ------ ------ ------- -------- --------
BALANCE DECEMBER 31, 1998 -- -- -- -- (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-33
<PAGE> 101
FRESH PRODUCTS B. V.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
APRIL 17, JANUARY 1, APRIL 17,
1998 (DATE 1999 (DATE 1998 (DATE
OF INCEPTION) OF INCEPTION) OF 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 2,861 51,853 54,714
Change in operating assets & liabilities:
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 used in financing activities 178,357 561,249 739,606
-------- -------- --------
Net change in cash -- -- --
Cash and cash equivalents, beginning of period -- -- --
-------- -------- --------
Cash and cash equivalents, end of period -- -- --
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-34
<PAGE> 102
FRESH PRODUCTS 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-35
<PAGE> 103
FRESH PRODUCTS 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, have 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.
F-36
<PAGE> 104
FRESH PRODUCTS B. V.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED):
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:
<TABLE>
<CAPTION>
AUGUST 26, DECEMBER 31,
1999 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-37
<PAGE> 105
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 2nd day of June, 2000.
WORLD COMMERCE ONLINE, INC.
By: /s/ Robert H. Shaw
------------------------
Robert H. Shaw
Chairman of the Board and
Chief Executive Officer
By: /s/ Mark E. Patten
------------------------
Mark E. Patten
Executive Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
<PAGE> 106
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 Consulting Group, Inc., dated March 29, 1999.
4.15* Warrant Agreement in favor of AnswerThink Consulting Group, Inc., dated March 29, 1999.
4.16* Warrant Purchase Agreement with i2 Technologies, Inc., dated April 29, 2000.
4.17* Warrant Agreement in favor of i2 Technologies, Inc., dated April 29, 2000.
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.
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
-------- ----------------------------------------------------------------------------------------
<S> <C>
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, 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 Premier 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.
10.27* Software License Agreement with i2 Technologies, Inc., dated April 29, 2000.
21.1* Subsidiaries.
27.1* Financial Data Schedule (for SEC use only).
</TABLE>
---------------
* Previously Filed
