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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM __________ TO ____________
COMMISSION FILE NUMBER 0-21379
ROWECOM INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3370008
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 ABERDEEN AVENUE, CAMBRIDGE, MA
02138 (Address of principal executive office)
(617) 588-2800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No ___
The number of shares outstanding of the registrant's common stock as of October
31, 2000 was 12,398,817.
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ROWECOM INC.
INDEX
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<CAPTION>
ITEM PAGE
NUMBER NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ROWECOM INC.
Consolidated Balance Sheets at September 30, 2000 and December 31, 1999................. 3
Consolidated Statements of Operations for the three and nine months ended
September 30, 2000 and September 30, 1999............................................. 4
Consolidated Statements of Cash Flows for the nine months ended September 30,
2000 and September 30, 1999........................................................... 5
Notes to Consolidated Financial Statements ............................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk ............................. 15
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds............................................... 15
Item 6. Exhibits and Reports on Form 8-K........................................................ 17
Signatures.............................................................................. 18
</TABLE>
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PART I -- FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ROWECOM INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
2000 1999
------------------- ----------------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 41,802 $ 13,264
Accounts receivable (net of allowance for doubtful accounts of
$1,553 and $1,847) 64,011 137,512
Other current assets 13,674 12,306
------------------- ----------------------
Total current assets 119,487 163,082
Property and equipment, net 10,457 10,787
Goodwill, net 5,342 7,411
Intangible and other assets, net 43,071 34,328
------------------- ----------------------
Total assets $ 178,357 $ 215,608
=================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable 27,908 51,595
Accrued expenses 6,115 9,005
Accrued compensation 2,482 2,511
Customer advances 35,672 20,095
Deferred revenue 71,522 11,187
Loans payable 7,016 61,060
------------------- ----------------------
Total current liabilities 150,715 155,453
Stockholders' equity:
Common stock, $.01 par value per share, 34,000,000 shares authorized,
12,398,817 and 10,377,559 shares issued and
outstanding, respectively 124 104
Additional paid-in capital 109,404 89,907
Treasury stock, at cost (53) (53)
Accumulated deficit (78,051) (29,338)
Accumulated other comprehensive loss (3,782) (465)
------------------- ----------------------
Total stockholders' equity 27,642 60,155
------------------- ----------------------
Total liabilities and stockholders' equity $ 178,357 $ 215,608
=================== ======================
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these statements.
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ROWECOM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- --------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Revenues $ 41,241 $ 9,479 $ 131,883 $ 13,159
Cost of revenues 36,946 8,930 119,122 12,325
------------- ------------ ------------- ----------------
Gross profit 4,295 549 12,761 834
Operating expenses:
Sales and marketing 8,314 3,525 26,722 8,072
Research and development 2,634 882 8,503 2,725
General and administrative 3,961 1,643 11,565 3,541
Stock based compensation - 656 - 656
Amortization of goodwill and intangibles 2,020 699 5,488 903
------------- ------------ ------------- ----------------
Total operating expenses 16,929 7,405 52,278 15,897
------------- ------------ ------------- ----------------
Loss from operations (12,634) (6,856) (39,517) (15,063)
Interest and other income (expense), net (1,670) 605 (4,393) 1,673
------------- ------------ ------------- ----------------
Loss before income taxes and
extraordinary item (14,304) (6,251) (43,910) (13,390)
Provision for income taxes 247 7 716 63
------------- ------------ ------------- ----------------
Loss before extraordinary item (14,551) (6,258) (44,626) (13,453)
Extraordinary loss - - (4,087) -
------------- ------------ ------------- ----------------
Net loss (14,551) (6,258) (48,713) (13,453)
============= ============ ============= ================
Accretion of dividends on redeemable preferred stock 370
- - -
------------- ------------ ------------- ----------------
Net loss to common stockholders $ (14,551) $ (6,258) $ (48,713) $ (13,823)
============= ============ ============= ================
Basic and diluted net loss per share
Historical
Net loss applicable to common stockholders
(before extraordinary loss) $ (14,551) $ (6,258) $ (44,626) $ (13,823)
Net loss applicable to common stockholders
(after extraordinary loss) $ (14,551) $ (6,258) $ (48,713) $ (13,823)
Basic and diluted net loss per share to common
stockholders (before extraordinary loss) $ (1.17) $ (.62) $ (3.94) $ (1.74)
Basic and diluted net loss per share to common
stockholders (after extraordinary loss) $ (1.17) $ (.62) $ (4.30) $ (1.74)
Weighted average shares used in computing basic and
diluted net loss per share 12,395 10,116 11,335 7,964
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these statements.
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ROWECOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
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Cash flows from operating activities:
Net loss $ (48,713) $ (13,453)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 7,625 1,329
Amortization of discount on convertible notes 4,717 -
Loss on sale of marketable securities - (76)
Stock based compensation - 656
Loss on disposal of fixed assets 3 -
Changes in operating assets and liabilities:
Accounts receivable 69,316 (1,563)
Other current and long term assets (8,438) 160
Accounts payable (20,282) 489
Income taxes payable (235) -
Accrued expenses and accrued compensation (1,872) 1,498
Customer advances 20,686 -
Deferred revenue 60,616 (36)
---------------- ----------------
Net cash provided by (used in) operating activities 83,423 (10,996)
Cash flows from investing activities:
Purchase of property and equipment (2,329) (1,095)
Purchase of intangible assets - (2)
Cash paid to acquire business, net of cash acquired (3,199) (7,288)
---------------- ----------------
Net cash used in investing activities (5,528) (8,385)
Cash flows from financing activities:
Net proceeds from the issuance of common stock - 51,964
Loan repayments (108,105) (1,444)
Loan proceeds 59,816 -
---------------- ----------------
Net cash (used in) provided by financing activities (48,289) 50,520
Effect of exchange rates on cash (1,068) (40)
Net increase in cash and cash equivalents 28,538 31,099
Cash and cash equivalents, beginning of period 13,264 16,051
---------------- ----------------
Cash and cash equivalents, end of period $ 41,802 $ 47,150
================ ================
SUPPLEMENTARY INFORMATION:
Accretion of preferred stock $ - $ 370
Issuance of common stock in connection with a purchase acquisition $ 10,690 $ 250
Issuance of common stock in connection with the conversion of
outstanding debt $ 4,720 $ -
Warrant discount $ 3,978 $ -
Income taxes paid $ 266 $ 111
Interest paid $ 35 $ 45
</TABLE>
The accompanying notes to the unaudited consolidated financial statements
are an integral part of these statements.
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ROWECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. THE COMPANY
The consolidated financial statements include the accounts of RoweCom Inc.
("RoweCom") and its wholly owned subsidiaries. All significant intercompany
accounts and transactions between RoweCom and its subsidiaries, included in the
accompanying financial statements, have been eliminated.
2. INTERIM RESULTS
As permitted by the rules of the Securities and Exchange Commission applicable
to Quarterly Reports on Form 10-Q, these notes are condensed and do not contain
all the disclosures required by generally accepted accounting principles.
Reference should be made to the consolidated financial statements and related
notes included in RoweCom's Annual Report on Form 10-K for the year ended
December 31, 1999, as filed with the Securities and Exchange Commission on March
16, 2000.
In the opinion of the management of RoweCom, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting primarily
of normal recurring accruals) considered necessary for a fair statement of the
results for the interim periods.
The results disclosed in the Consolidated Statement of Operations for the three
and nine months ended September 30, 2000, and the Consolidated Statement of Cash
Flows for the nine months ended September 30, 2000 are not necessarily
indicative of the results to be expected for the full year.
The preparation of the 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 the contingent assets and liabilities at the date of the financial
statements and the reported amounts of expense during the reporting period.
Actual results could differ from those estimates.
The financial statements of RoweCom are presented on a going concern basis that
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. RoweCom posted a net loss of $14.6 million for the
2000 Three Month Period and a net loss of $48.7 million for the 2000 Nine Month
Period. As of September 30, 2000 RoweCom has an accumulated deficit of $78.0
million and a working capital deficit of $31.2 million. The financial statements
do not include any adjustments relating to the recoverability of recorded asset
amounts or to the classification of liabilities that may be necessary if RoweCom
is unable to continue as a going concern.
We have historically experienced seasonal fluctuations in revenues because
approximately three quarters of our revenues have been generated in the fourth
quarter of each year, the time when most institutional subscriptions are
purchased or renewed. As such, we make substantial additional expenditures in
the fourth quarter as we generally pay publishers by mid December of each year,
prior to receipt of a significant portion of client payments. The majority of
our outstanding receivables from clients relating to these advance payments are
paid in the first quarter of the following year. As a result of this seasonal
nature of our cash flows, we rely on bank financing and lines of credit to cover
current operating expenses during this period.
RoweCom believes that its current financial resources, as of the date of this
filing, are not sufficient to meet the entirety of its short and long term
financial needs. However, RoweCom currently has 335 million French Francs and
4.5 million British pounds (approximately $60 million at current exchange rates)
available under existing credit facilities that are more than sufficient for
RoweCom's European and other international business. In addition, RoweCom has a
proposal for $85 million in credit insurance for its United States business and
is in negotiations for a $35 million credit facility. Although there can be no
assurance that either of these will be secured, given the quality of its client
receivables and following the execution of the credit insurance agreement,
RoweCom believes it is likely it will be able to secure the $35 million
additional line of credit that will be sufficient for its U.S. operations. If,
however, RoweCom were to be unable to secure this additional credit facility for
its U.S. operations, it would be unable to make full payments to all of the
publishers on behalf of those U.S. clients who have not paid RoweCom. In that
event, RoweCom would nevertheless continue to send those orders to publishers
and negotiate with publishers a schedule of payments, linked to the times that
RoweCom's clients themselves pay their invoices to RoweCom. In such an event
RoweCom's revenues would be correspondingly delayed or reduced. RoweCom's
experience indicates that these advances to clients of the quality of RoweCom's
clients are generally paid within 90 to 120 days, with virtually no defaults.
RoweCom is continuing to aggressively pursue additional long term financing,
including equity investments, as management believes that financing beyond
short-term credit facilities is required. RoweCom has entered into a definitive
sale-and-leaseback agreement for its Westwood headquarters, which will net
RoweCom more than $4 million in cash to be completed in mid-December. To reduce
cash outflows in the short-term, RoweCom has negotiated with lenders to extend
the due date by one year on its $6.2 million promissory notes to May 26, 2002
from May 26, 2001. The lenders on the outstanding notes have received an
additional 395,158 common stock purchase warrants with an exercise price of
$2.34 in exchange for the maturity date extension.
RoweCom has historically funded its operations through sales of its preferred
stock, our initial public offering and limited borrowings from third-party
financing sources. During 1999, RoweCom entered into additional financing
arrangements including the sale of convertible promissory notes and domestic and
foreign credit facilities. During May 2000, RoweCom issued one-year promissory
notes to certain RoweCom directors and shareholders for proceeds of
approximately $6.2 million. During September 2000, RoweCom issued convertible
debentures to Montrose Investments Ltd. in the aggregate principal amount of
$4.0 million, which bear interest at the stated rate of 7% per year payable at
maturity or upon conversion or redemption of the principal. The maturity date is
six months from the date of issuance.
3. NET LOSS PER COMMON SHARE
Basic net loss per share excludes the effect of any dilutive options, warrants
or convertible securities and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were issued,
exercised or converted into common stock. Dilutive common share equivalents
consist of stock options and warrants calculated using the treasury stock
method.
The pro forma net loss per common share is computed based upon the weighted
average number of common shares and common equivalent shares (using the treasury
stock method) outstanding after certain adjustments described below. Common
equivalent shares are not included in the per share calculations where the
effect of their inclusion would be anti-dilutive. In the computation of pro
forma net loss per share, accretion of preferred stock to the mandatory
redemption amount is not included as an increase to net loss. Also, the pro
forma net loss per common share gives effect to the exchange of all outstanding
preferred stock of RoweCom Canada into preferred stock of RoweCom, the mandatory
conversion of all outstanding shares of preferred stock into shares of common
stock and the exercise of all outstanding stock purchase warrants.
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<PAGE>
The following is a calculation of net loss per share:
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Historical
Basic and diluted:
Net loss to common stockholders (before
extraordinary loss) $ (14,551) $ (6,258) $ (44,626) $ (13,823)
Net loss to common stockholders (after
extraordinary loss) $ (14,551) $ (6,258) $ (48,713) $ (13,823)
Weighted average number of common shares 12,395 10,116 11,335 7,964
Net loss per common share--basic and diluted
(before extraordinary loss) $ (1.17) $ (.62) $ (3.94) $ (1.74)
Net loss per common share--basic and diluted
(after extraordinary loss) $ (1.17) $ (.62) $ (4.30) $ (1.74)
Pro forma
Basic and diluted:
Proforma net loss to common stockholders
(before extraordinary loss) $ (14,551) $ (6,258) $ (44,626) $ (13,453)
Proforma net loss to common stockholders
(after extraordinary loss) $ (14,551) $ (6,258) $ (48,713) $ (13,453)
Weighted average number of common shares 12,395 10,116 11,335 7,964
Weighted average assumed number of shares
upon conversion of preferred stock and the net
exercise of all outstanding stock purchase
warrants - - - 1,245
Total weighted average number of shares used in 12,395 10,116 11,335 9,209
Basic and diluted pro forma net loss per common
Share (before extraordinary loss) $ (1.17) $ (.62) $ (3.94) $ (1.46)
Basic and diluted pro forma net loss per common
Share (after extraordinary loss) $ (1.17) $ (.62) $ (4.30) $ (1.46)
</TABLE>
Options to purchase shares of RoweCom's common stock totaling 1,093,253 and
1,030,807 at September 30, 2000 and 1999, respectively, and warrants to purchase
common stock totaling 2,477,458 at September 30, 2000, were outstanding but were
not included in the computation of diluted earnings per share as the inclusion
of these shares would have been antidilutive.
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4. COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net loss $ (14,551) $ (6,258) $ (44,626) $ (13,453)
Other comprehensive loss:
Foreign currency translation adjustment (1,663) (14) (3,317) (33)
------------- ------------- ------------- ------------
Comprehensive loss $ (16,214) $ (6,272) $ (47,943) $ (13,486)
============= ============= ============= ============
</TABLE>
5. DAWSON PURCHASE PRICE FINALIZATION
In accordance with the Dawson purchase agreement, an additional 465,300 shares
of RoweCom's common stock were issued in May 2000, which were valued at
approximately $10.7 million. The value of the shares issued increased the
intangible assets associated with the Dawson purchase.
6. EXTRAORDINARY LOSS
During June 2000, RoweCom redeemed $16.1 million of convertible notes. In
connection with this redemption, RoweCom recorded an extraordinary loss of $4.1
million, primarily attributable to a $1.1 million premium paid on the redemption
and $2.7 million related to the remaining unamortized debt issuance costs at the
time of conversion.
7. ISSUANCE OF CONVERTIBLE DEBENTURE AND WARRANTS
On September 12, 2000, RoweCom issued a six-month convertible debenture in the
original principal amount of $4 million. The debenture may be converted into
shares of common stock at a conversion price of $5.884 per share. Conversion is
at the holder's option, or if the closing bid price of RoweCom's stock exceeds
$8.826 for 20 consecutive trading days, at RoweCom's option. RoweCom also issued
135,958 common stock purchase warrants with an exercise price of $7.268 per
share. These warrants have a five-year term and are exercisable at the holder's
option.
In addition, RoweCom issued 1.5 million Class A common stock purchase warrants
having a term of one year and two business days. During the first year that the
Class A warrants are outstanding, they may be exercised only if called by
RoweCom, at a floating exercise price equal to 92% of the average closing bid
price of a share of RoweCom stock on the two trading days preceding exercise,
subject to a maximum exercise price of $20. These warrants expire if not
exercised when called. On the final two business days that they are outstanding,
the Class A warrants are exercisable at the holder's option at an exercise price
of $20 per share. RoweCom's rights to call the Class A warrants are subject to
certain restrictions, including volume limitations based on the trading volume
in RoweCom's stock.
8. SUBSEQUENT EVENT-ISSUANCE OF PROMISSORY NOTES AND WARRANTS
On May 26, 2000, certain RoweCom shareholders and directors made available
funds to repay the convertible notes' principal through the issuance of
one-year promissory notes with an aggregate principal amount of $6,175,000.
Additionally, 617,500 stock purchase warrants were issued with an exercise
price of $5.00. The warrants vest immediately and expire 10 years from
issuance. The one-year promissory notes are carried net of the warrant
discount of approximately $2.3 million. Amortization of the warrant discount,
which is recorded as interest expense, will total approximately $578,000 per
quarter.
-8-
<PAGE>
In October 2000, RoweCom negotiated with lenders to extend the due date by one
year on its $6.2 million promissory notes to May 26, 2002 from May 26, 2001. The
lenders on the outstanding notes have received an additional 395,158 common
stock purchase warrants with an exercise price of $2.34 in exchange for the
maturity date extension.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY NOTE
This quarterly report on Form 10-Q may contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. This
Act provides a "safe harbor" for forward-looking statements to encourage
companies to provide prospective information about themselves so long as they
identify these statements as forward looking and provide meaningful cautionary
statements identifying important factors that could cause actual results to
differ from the projected results. All statements other than statements of
historical fact made in this Form 10-Q are forward looking. In particular, the
statements herein regarding industry prospects and future results of operations
or financial position are forward-looking statements. Forward-looking statements
reflect management's current expectations and are inherently uncertain. Actual
results may differ materially from the results discussed in or implied by the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, the risks and uncertainties described or discussed in
the section "Risk Factors" in the Registration Statement on Form S-3 (file no.
333-47434) of RoweCom filed on October 5, 2000.These risks include, among
others, the following:
- The failure to maintain our leadership position through enhancement of
our services and catalog of magazines, newspapers, journals and
e-journals, books and other knowledge resources.
- The failure to significantly and rapidly increase our client base.
- The development by competitors of services similar or superior to the
services we offer.
- The failure to increase penetration of our existing client base.
- The failure of businesses to widely adopt intranets and the Internet
as means for purchasing subscriptions and books.
- The inability to identify, attract, retain and motivate qualified
personnel.
OVERVIEW OF ROWECOM'S OPERATIONS AND FINANCIAL PERFORMANCE
RoweCom provides businesses and their employees with an e-commerce solution for
purchasing and managing the acquisition of magazines, newspapers, journals,
e-journals, books and other knowledge resources through a corporate intranet or
the Internet. We offer our clients access to the largest catalog of magazines,
newspapers, journals, e-journals, books and other knowledge resources on the
Internet. RoweCom allows employees to purchase knowledge resources easily and
conveniently from their desktop computers and provides businesses with a highly
effective means of managing and controlling purchases of knowledge resources and
reducing costs. Our target clients are in knowledge-intense industries, such as
corporate and financial services; biomedical; academic; and the federal
government.
RoweCom's services initially focused on academic libraries and centralized
purchasing groups. Beginning in 1998, we have increasingly focused our sales and
marketing efforts on corporate clients and on desktop purchases by individuals
rather than centralized purchasing groups. We believe that an increase in the
number of desktop purchasers at a client would increase the amount of revenue
generated by such client.
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To date, a substantial majority of our revenues have been generated in the
fourth quarter of each year, primarily because most subscriptions are purchased
or renewed in that quarter, with subscriptions generally beginning on January
1st of each year. For the corporate e-commerce portion of the business, as
purchases by individual employees increase as a percentage of total revenues,
the seasonality described above has begun to decrease because desktop purchases
are generally made as required, and thus are more evenly distributed throughout
the year. Dawson Subscription Business, which was acquired by RoweCom in October
1999 by the purchase of certain assets of UK-based Dawson Information Services
and all of the issued and outstanding capital stock of Dawson, Inc., has
experienced similar seasonality.
In June 1999, RoweCom acquired all of the issued and outstanding capital stock
of Corporate Subscription Services, Inc. for $5,726,000 in cash, subject to
certain post-closing adjustments, and 16,260 shares of RoweCom's common stock,
which were valued at approximately $250,000.
In August 1999, RoweCom acquired all of the issued and outstanding capital stock
of International Subscription Agencies Pty. Ltd. for $1,486,596 in cash.
In October 1999, RoweCom acquired all of the issued and outstanding capital
stock of Dawson, Inc., a Delaware corporation, and certain assets of United
Kingdom-based Dawson Information Services for $34.0 million cash and issued
approximately 97,000 shares of RoweCom's common stock, which were valued at
approximately $1.7 million. In accordance with the purchase agreement, an
additional 465,300 shares of RoweCom's common stock were issued in May 2000,
which were valued at approximately $10.7 million. The value of the shares issued
increased the intangible assets associated with the Dawson purchase.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2000 (THE "2000 THREE MONTH
PERIOD") WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1999 (THE "1999 THREE MONTH
PERIOD")
REVENUES. Revenues for the 2000 Three Month Period were $41.2 million, as
compared to $9.5 million for the 1999 Three Month Period, an increase of
$31.8 million. The strengthening of the US dollar had a negative impact on
revenues for the Three Month period of $2.8 million. Transaction volumes for
the 2000 Three Month Period also increased significantly from the 1999 Three
Month Period from 41,000 to 251,000 transactions. These increases resulted
primarily from growth in our client base, particularly related to the
acquisition of Dawson.
COST OF REVENUES. Cost of revenues in the 2000 Three Month Period was $36.9
million as compared to $8.9 million during the 1999 Three Month Period, an
increase of $28.0 million. As a percentage of revenues, cost of revenues
decreased to 90% during the 2000 Three Month Period as compared to 94% in the
1999 Three Month Period. This improvement was primarily due to the fact that
the acquired Dawson Subscription Business has more favorable margins than the
RoweCom business and the actions taken to rationalize pricing.
SALES AND MARKETING. Sales and marketing expenses increased to $8.3 million
during the 2000 Three Month Period from $3.5 million in the 1999 Three Month
Period, an increase of $4.8 million or 136%. This growth is primarily due to an
increase of personnel as a result of the Dawson acquisition. Personnel expenses
increased to approximately $5.1 million in the 2000 Three Month Period from $2.2
million in the 1999 Three Month Period.
RESEARCH AND DEVELOPMENT. Research and development expenses increased to $2.6
million in the 2000 Three Month Period from $882,000 in the 1999 Three Month
Period, an increase of $1.8 million or 199%, primarily as a result of costs
incurred in an effort to integrate new content into our catalog, to enhance
the user interface and functionality of the kStore, and to develop the
transaction processing systems.
-10-
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased to
$4.0 million in the 2000 Three Month Period compared to $1.6 million in the 1999
Three Month Period, an increase of $2.3 million or 141%. This increase can be
primarily attributed to growth in average headcount in the administrative,
finance and human resources departments related to the Dawson acquisition.
STOCK BASED COMPENSATION. Stock based compensation was $656,000 in the 1999
Three Month Period. Under an agreement among certain of RoweCom's
shareholders, Working Ventures' Canadian Fund, Inc. ("Working Ventures") must
transfer 310,371 shares of common stock to certain other shareholders and
option holders of RoweCom when Working Ventures' initial investment increases
by 45% or more (on an annually compounded basis) and they are not legally
restricted from selling such shares. As a result of the expiration of the IPO
lock up period on September 5, 1999, RoweCom was required to record a
compensation charge equal to the aggregate fair market value of the common
stock transferred to the RoweCom option and warrant holders who were eligible
to receive such shares as described above.
AMORTIZATION OF GOODWILL AND INTANGIBLES. Amortization of goodwill and
intangibles was $2.0 million in the 2000 Three Month Period compared to $699,000
in the 1999 Three Month Period. As a result of the acquisitions of Corporate
Subscription Services, Inc., International Subscription Agencies Pty. Ltd. and
Dawson's Subscription Business, approximately $56.0 million in goodwill and
intangibles were recorded and are being amortized over a range of 3 to 11 years
from the date of such acquisitions.
INTEREST AND OTHER INCOME, NET. Interest expense was $1.7 million in the 2000
Three Month Period, as compared to interest income of $605,000 in the 1999 Three
Month Period. The 2000 Three Month Period expense is primarily a result of the
amortization of the discount on the warrants and interest paid on the notes held
by Promethean, RAM Capital, and the promissory notes issued in May 2000.
PROVISION FOR INCOME TAXES. The provision for income taxes was $247,000 for the
2000 Three Month Period as compared to $7,000 for the 1999 Three Month Period.
The provision has been recorded to account for profitable entities in foreign
jurisdictions.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (THE "2000 NINE MONTH
PERIOD") WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (THE "1999 NINE MONTH
PERIOD")
REVENUES. Revenues for the 2000 Nine Month Period were $131.9 million, as
compared to $13.2 million for the 1999 Nine Month Period, an increase of
$118.7 million. The strengthening of the US dollar had a negative impact on
revenues for the Nine Month period of $4.4 million. Transaction volumes for
the 2000 Nine Month Period also increased significantly from the 1999 Nine
Month Period from 71,000 to 832,000 transactions. These increases resulted
primarily from growth in our client base, particularly related to the
acquisition of Dawson.
COST OF REVENUES. Cost of revenues in the 2000 Nine Month Period was $119.1
million as compared to $12.3 million during the 1999 Nine Month Period, an
increase of $106.8 million. As a percentage of revenues, cost of revenues
decreased to 90% during the 2000 Nine Month Period as compared to 94% in the
1999 Nine Month Period. This improvement was primarily due to the fact that the
acquired Dawson Subscription Business has more favorable margins than the
RoweCom business and the actions taken to rationalize pricing.
SALES AND MARKETING. Sales and marketing expenses increased to $26.7 million
during the 2000 Nine Month Period from $8.1 million in the 1999 Nine Month
Period, an increase of $18.7 million or 231%. This growth is primarily due to an
increase of personnel as a result of the Dawson acquisition. Personnel expenses
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increased to approximately $16.3 million in the 2000 Nine Month Period from $4.9
million in the 1999 Nine Month Period.
RESEARCH AND DEVELOPMENT. Research and development expenses increased to $8.5
million in the 2000 Nine Month Period from $2.7 million in the 1999 Nine Month
Period, an increase of $5.8 million or 212%, primarily as a result of costs
incurred in an effort to integrate new content into our catalog, to enhance the
user interface and functionality of the kStore, and to develop the transaction
processing systems.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased to
$11.6 million in the 2000 Nine Month Period compared to $3.5 million in the 1999
Nine Month Period, an increase of $8.0 million or 227%. This increase can be
primarily attributed to growth in average headcount in the administrative,
finance and human resources departments related to the Dawson acquisition.
STOCK BASED COMPENSATION. Stock based compensation was $656,000 in the 1999
Nine Month Period. Under an agreement among certain of RoweCom's
shareholders, Working Ventures' Canadian Fund, Inc. ("Working Ventures") must
transfer 310,371 shares of common stock to certain other shareholders and
option holders of RoweCom when Working Ventures' initial investment increases
by 45% or more (on an annually compounded basis) and they are not legally
restricted from selling such shares. As a result of the expiration of the IPO
lock up period on September 5, 1999, RoweCom was required to record a
compensation charge equal to the aggregate fair market value of the common
stock transferred to the RoweCom option and warrant holders who were eligible
to receive such shares as described above.
AMORTIZATION OF GOODWILL AND INTANGIBLES. Amortization of goodwill and
intangibles was $5.5 million in the 2000 Nine Month Period compared to $903,000
in the Three Month Period. As a result of the acquisitions of Corporate
Subscription Services, Inc., International Subscription Agencies Pty. Ltd. and
Dawson's Subscription Business, approximately $56.0 million in goodwill and
intangibles were recorded and are being amortized over a range of 3 to 11 years
from the date of such acquisitions.
INTEREST AND OTHER INCOME, NET. Interest expense was $4.4 million in the 2000
Nine Month Period, as compared to interest income of $1.7 million in the 1999
Nine Month Period. The 2000 Nine Month Period expense is primarily a result of
the amortization of the discount on the warrants and interest paid on the notes
held by Promethean, RAM Capital, and the promissory notes issued in May 2000.
PROVISION FOR INCOME TAXES. The provision for income taxes was $716,000 for the
2000 Nine Month Period as compared to $63,000 for the 1999 Nine Month Period.
The provision has been recorded to account for profitable entities in foreign
jurisdictions.
EXTRAORDINARY ITEM. During June 2000, RoweCom redeemed $16.1 million of
convertible notes. In connection with this redemption, RoweCom recorded an
extraordinary loss of $4.1 million, primarily attributable to a $1.1 million
premium paid on the redemption, and $2.7 million related to the remaining
unamortized debt issuance costs at the time of conversion.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $83.4 million for the 2000 Nine
Month Period as compared to $11.0 million of cash used in for the 1999 Nine
Month Period. Cash provided for the 2000 Nine Month Period resulted primarily
from a decrease in accounts receivable of $69.3 million, an increase in
deferred revenue of $60.6 million, and an increase in customer advances of
$20.7 million. This was partially offset by a net loss of $48.7 million and a
$20.3 million decrease in accounts payable. Cash used in operating activities
for the 1999 Nine Month Period was primarily from a net loss of $13.5 million
and an increase in accounts receivable of $1.6 million, partially offset by a
$1.5 million increase in accrued expenses and accrued liabilities, and $1.3
million in depreciation and amortization expense.
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Net cash used in investing activities for the 2000 Nine Month Period was $5.5
million, $2.3 million of which was used to purchase property and equipment and
$3.2 million was used for acquisitions, as compared to $8.4 million for the 1999
Nine Month Period. Cash used for the acquisitions of CSS and ISA, net of cash
acquired, was $7.3 million in the 1999 Nine Month Period.
Net cash used in financing activities was $48.3 million for the 2000 Nine
Month Period, as compared to cash provided by financing activities of $50.5
million for the 1999 Nine Month Period. Repayments on loans were $108.1
million, offset by loan proceeds of $59.8 million. During the 1999 Nine Month
Period, net proceeds from the IPO, net of underwriting discounts and offering
costs, were $51.6 million, of which $1.4 million was used to pay down
existing credit facilities. At September 30, 2000, RoweCom had cash and cash
equivalents of $41.8 million, a working capital deficit of $31.2 million,
debt of $7.0 million and stockholders' equity of $27.6 million.
The financial statements of RoweCom are presented on a going concern basis that
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. RoweCom posted a net loss of $14.6 million for the
2000 Three Month Period and a net loss of $48.7 million for the 2000 Nine Month
Period. As of September 30, 2000 RoweCom has an accumulated deficit of $78.0
million and a working capital deficit of $31.2 million. The financial statements
do not include any adjustments relating to the recoverability of recorded asset
amounts or to the classification of liabilities that may be necessary if RoweCom
is unable to continue as a going concern.
As discussed in the Overview, we have historically experienced seasonal
fluctuations in revenues because approximately three quarters of our revenues
have been generated in the fourth quarter of each year, the time when most
institutional subscriptions are purchased or renewed. As such, we make
substantial additional expenditures in the fourth quarter as we generally pay
publishers by mid December of each year, prior to receipt of a significant
portion of client payments. The majority of our outstanding receivables from
clients relating to these advance payments are paid in the first quarter of the
following year. As a result of this seasonal nature of our cash flows, we rely
on bank financing and lines of credit to cover current operating expenses during
this period.
RoweCom believes that its current financial resources, as of the date of this
filing, are not sufficient to meet the entirety of its short and long term
financial needs. However, RoweCom currently has 335 million French Francs and
4.5 million British pounds (approximately $60 million at current exchange rates)
available under existing credit facilities that are more than sufficient for
RoweCom's European and other international business. In addition, RoweCom has a
proposal for $85 million in credit insurance for its United States business and
is in negotiations for a $35 million credit facility. Although there can be no
assurance that either of these will be secured, given the quality of its client
receivables and following the execution of the credit insurance agreement,
RoweCom believes it is likely it will be able to secure the $35 million
additional line of credit that will be sufficient for its U.S. operations. If,
however, RoweCom were to be unable to secure this additional credit facility for
its U.S. operations, it would be unable to make full payments to all of the
publishers on behalf of those U.S. clients who have not paid RoweCom. In that
event, RoweCom would nevertheless continue to send those orders to publishers
and negotiate with publishers a schedule of payments, linked to the times that
RoweCom's clients themselves pay their invoices to RoweCom. In such an event
RoweCom's revenues would be correspondingly delayed or reduced. RoweCom's
experience indicates that these advances to clients of the quality of RoweCom's
clients are generally paid within 90 to 120 days, with virtually no defaults.
RoweCom is continuing to aggressively pursue additional long term financing,
including equity investments, as management believes that financing beyond
short-term credit facilities is required. RoweCom has entered into a definitive
sale-and-leaseback agreement for its Westwood headquarters, which will net
RoweCom more than $4 million in cash to be completed in mid-December. To reduce
cash outflows in the short-term, RoweCom has negotiated with lenders to extend
the due date by one year on its $6.2 million promissory notes to May 26, 2002
from May 26, 2001. The lenders on the outstanding notes have received an
additional 395,158 common stock purchase warrants with an exercise price of
$2.34 in exchange for the maturity date extension.
RoweCom has historically funded its operations through sales of its preferred
stock, our initial public offering and limited borrowings from third-party
financing sources. During
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1999, RoweCom entered into additional financing arrangements including the
sale of convertible promissory notes and domestic and foreign credit
facilities. During May 2000, RoweCom issued one-year promissory notes to
certain RoweCom directors and shareholders for proceeds of approximately $6.2
million. During September 2000, RoweCom issued convertible debentures to
Montrose Investments Ltd. in the aggregate principal amount of $4.0 million,
which bear interest at the stated rate of 7% per year payable at maturity or
upon conversion or redemption of the principal. The maturity date is six
months from the date of issuance.
SALE OF CONVERTIBLE NOTES AND COMMON STOCK PURCHASE WARRANTS. On October 13,
1999, RoweCom entered into a Securities Purchase Agreement with two investors
under which RoweCom issued and sold notes convertible into RoweCom common stock
in the aggregate principal amount of $20.0 million and warrants to purchase up
to 224,000 shares of RoweCom's common stock at an exercise price of
approximately $27.50 per share. The sale of the convertible notes and the
warrants generated net proceeds of approximately $19.2 million for RoweCom.
RoweCom also granted the investors certain rights to require the registration
under applicable securities laws of the shares of RoweCom common stock issuable
upon conversion of the notes and exercise of the warrants. RoweCom filed a
short-form registration on Form S-3 on March 16, 2000, which was effective on
April 20, 2000.
Between May 23 and May 26, 2000, the two holders of convertible notes converted
approximately $5.7 million of principal and interest into an aggregate of
approximately 1,499,893 million shares. On May 30, RoweCom negotiated an
agreement with the two holders to redeem their outstanding balances. On June 12,
2000, RoweCom completed the redemption of the convertible notes. A portion of
the $16.1 million used to redeem the notes, including conversion premium and
accrued interest, came from the issuance of promissory notes.
On May 26, 2000, certain RoweCom shareholders and directors made available funds
to repay the convertible notes' principal through the issuance of one-year
promissory notes with an aggregate principal amount of $6,175,000. Additionally,
617,500 stock purchase warrants were issued with an exercise price of $5.00. The
warrants vest immediately and expire 10 years from issuance. The one-year
promissory notes are carried net of the warrant discount of approximately $2.3
million. Amortization of the warrant discount, which is recorded as interest
expense, will total approximately $578,000 per quarter.
On September 12, 2000, RoweCom issued a six-month convertible debenture in
the original principal amount of $4 million. The debenture may be converted
into shares of common stock at a conversion price of $5.884 per share.
Conversion is at the holder's option, or if the closing bid price of
RoweCom's stock exceeds $8.826 for 20 consecutive trading days, at RoweCom's
option. RoweCom also issued 135,958 common stock purchase warrants with an
exercise price of $7.268 per share. These warrants have a five-year term and
are exercisable at the holder's option.
In addition, RoweCom issued 1.5 million Class A common stock purchase
warrants having a term of one year and two business days. During the first
year that the Class A warrants are outstanding, they may be exercised only if
called by RoweCom, at a floating exercise price equal to 92% of the average
closing bid price of a share of RoweCom stock on the two trading days
preceding exercise, subject to a maximum exercise price of $20. These
warrants expire if not exercised when called. On the final two business days
that they are outstanding, the Class A warrants are exercisable at the
holder's option at an exercise price of $20 per share. RoweCom's rights to
call the Class A warrants are subject to certain restrictions, including
volume limitations based on the trading volume in RoweCom's stock.
In October 2000, RoweCom negotiated with lenders to extend the due date by
one year on its $6.2 million promissory notes to May 26, 2002 from May 26,
2001. The lenders on the outstanding notes have received an additional
395,158 common stock purchase warrants with an exercise price of $2.34 in
exchange for the maturity date extension.
EURO CURRENCY ISSUES
Effective January 1, 1999, eleven of the fifteen member countries of the
European Union established fixed conversion rates between their existing
currencies and one common currency (the "euro"). The euro trades on currency
exchanges and is used in business transactions. Beginning in January 2002, bills
and coins denominated in the euro will be issued and existing currencies will be
withdrawn from circulation. RoweCom foreign subsidiaries do not expect to
transact a material portion of their business in the euro until fiscal 2001.
Also, RoweCom's foreign subsidiaries are not yet required to prepare reports to
local regulatory agencies using the euro. Management expects that IT systems
used by RoweCom's foreign subsidiaries will be repaired or replaced in a timely
manner to facilitate business transactions and reporting to local government
agencies. Cost to repair and/or replace IT systems are not expected to be
material.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EXCHANGE RATE RISK MANAGEMENT
RoweCom enters into forward currency contracts primarily in European,
Australian and Canadian currencies to hedge its foreign currency exposures.
Forward currency contracts have maturities of less than one year. These
contracts are used to reduce RoweCom's risk associated with exchange rate
movements, as gains and losses on these contracts are intended to offset
exchange losses and gains on underlying exposures. RoweCom does not engage in
currency speculation. At September 30, 2000 the face amount of outstanding
forward currency contracts to buy and sell U.S dollars and British pound
sterling for non-U.S. currencies was $4.6 million. A 10% decrease in exchange
rates for these currencies would increase the fair value by approximately
$464,000. However, since these contracts hedge non-U.S. currency
transactions, any change in fair value of the contracts would be offset by
changes in the underlying value of the transactions being hedged. The
hypothetical movement was estimated by calculating the fair value of the
forward currency contracts at September 30, 2000 and comparing that with
those calculated using hypothetical forward currency exchange rates.
INTEREST RATE RISK MANAGEMENT
Due to its short-term duration, the fair value of RoweCom's borrowings at
September 30, 2000 approximated carrying value. Interest rate risk was estimated
as the potential increase in fair value resulting from a hypothetical 10%
increase in interest rates. The resulting hypothetical fair value was not
materially different from the quarter-end carrying value.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, collectively referred to as
derivatives, and for hedging activities. We 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. We do not expect the adoption of SFAS 133 to have material
impact on our financial position or results of operations.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes the SEC's view in applying generally accepted
accounting principles to selected revenue recognition issues. The application of
the guidance in SAB 101 will be required in RoweCom's fourth quarter of fiscal
year 2000. The effects of applying this guidance, if any, will be reported as a
cumulative effect adjustment resulting from a change in accounting principle.
RoweCom does not expect the adoption of SAB 101 to have a material effect on
their financial statements.
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 16, 2000 in connection with RoweCom's issuance of convertible notes and
warrants, a Registration Statement on Form S-3 was filed with the SEC. See "SALE
OF CONVERTIBLE NOTES AND COMMON STOCK PURCHASE WARRANTS" on page 14 within this
document. The registration statement was declared effective on April 20, 2000.
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On May 20, 2000, under the terms of the purchase agreement, RoweCom issued
465,300 shares of common stock to Dawson, Inc., at a price per share of
approximately $22.98, as part of the purchase price for the acquisition.
Between May 23 and May 26, 2000, RoweCom issued 1,499,893 shares of common stock
as a result of the conversion of the convertible notes. See "SALE OF CONVERTIBLE
NOTES AND COMMON STOCK PURCHASE WARRANTS" on page 14 within this document.
On June 30, 2000 in connection with RoweCom's issuance of promissory notes and
warrants, a Registration Statement on Form S-3 was filed with the SEC. See "SALE
OF CONVERTIBLE NOTES AND COMMON STOCK PURCHASE WARRANTS" on page 14 within this
document. The registration statement was declared effective on July 13, 2000.
On September 12, 2000, RoweCom issued a six-month convertible debenture in
the original principal amount of $4 million. The debenture may be converted
into shares of common stock at a conversion price of $5.884 per share.
Conversion is at the holder's option, or if the closing bid price of
RoweCom's stock exceeds $8.826 for 20 consecutive trading days, at RoweCom's
option. RoweCom also issued 135,958 common stock purchase warrants with an
exercise price of $7.268 per share. These warrants have a five-year term and
are exercisable at the holder's option.
In addition, RoweCom issued 1.5 million Class A common stock purchase warrants
having a term of one year and two business days. During the first year that the
Class A warrants are outstanding, they may be exercised only if called by
RoweCom, at a floating exercise price equal to 92% of the average closing bid
price of a share of RoweCom stock on the two trading days preceding exercise,
subject to a maximum exercise price of $20. These warrants expire if not
exercised when called. On the final two business days that they are outstanding,
the Class A warrants are exercisable at the holder's option at an exercise price
of $20 per share. RoweCom's rights to call the Class A warrants are subject to
certain restrictions, including volume limitations based on the trading volume
in RoweCom's stock.
On October 5, 2000 in connection with RoweCom's issuance of the aforementioned
promissory notes and warrants, a Registration Statement on Form S-3 was filed
with the SEC. The registration statement was declared effective on October 16,
2000.
In October 2000, RoweCom negotiated with lenders to extend the due date by
one year on its $6.2 million promissory notes to May 26, 2002 from May 26,
2001. The lenders on the outstanding notes have received an additional
395,158 common stock purchase warrants with an exercise price of $2.34 in
exchange for the maturity date extension.
No options were granted to purchase common stock under RoweCom's Amended and
Restated 1998 Stock Incentive Plan during the 2000 Three Month Period. The
grants of options, when made, are made in reliance on the exemptions from
registration under the Securities Act of 1933, as amended (the "Securities Act")
provided by Rule 701 there under. 12,384 stock options were exercised during the
2000 Three Month Period.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
1.1 - Certificate of Incorporation of RoweCom *
1.2 - By-laws of RoweCom *
10.1 - Strategic Alliance and Marketing Agreement between RoweCom and
AsiaSmart Pte Ltd. dated July 24, 2000
11 - Computation of Loss per Share***
27 - Financial Data Schedule
(b) Reports on Form 8-K
On September 12, 2000, RoweCom filed a Current Report on Form 8-K in
connection with a six-month convertible debenture in the original
principal amount of $4 million and 1.5 million Class A common stock
purchase warrants.
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(*) Incorporated by reference to the same numbered exhibit to the
Company's registration statement on Form S-1. (Reg. No. 333-68761)
(***) Statement regarding computation of per share earnings is not required
because the computation can be readily determined from the material
contained in the financial statements included herein.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ROWECOM INC.
November 20, 2000 By: /s/ Paul Burmeister
----------------------------------------
Paul Burmeister
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer,
Authorized Officer)
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EXHIBIT INDEX
Exhibit Number Description
1.1 Certificate of Incorporation of RoweCom*
1.2 By-laws of RoweCom*
10.1 Strategic Alliance and Marketing Agreement between
RoweCom and AsiaSmart Pte Ltd. dated July 24, 2000
11 Computation of Loss per Share***
27 Financial Data Schedule
(*) Incorporated by reference to the same numbered exhibit to the
Company's registration statement on Form S-1. (Reg. No. 333-68761)
(***) Statement regarding computation of per share earnings is not required
because the computation can be readily determined from the material
contained in the financial statements included herein.
