RESOURCEPHOENIX COM
S-1, 2000-06-12
COMPUTER PROGRAMMING SERVICES
Previous: CYBERMARK INTERNATIONAL CORP, PRE 14A, 2000-06-12
Next: RESOURCEPHOENIX COM, S-1, EX-1.1, 2000-06-12



<PAGE>   1

     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 2000

                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                              RESOURCEPHOENIX.COM
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                  <C>                                  <C>
              DELAWARE                               7300                              52-2190830
  (STATE OR OTHER JURISDICTION OF        (PRIMARY STANDARD INDUSTRIAL               (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)        CLASSIFICATION CODE NUMBER)             IDENTIFICATION NUMBER)
</TABLE>

                              RESOURCEPHOENIX.COM
                             2401 KERNER BOULEVARD
                              SAN RAFAEL, CA 94901
                                 (415) 485-4500
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

                                 GUS CONSTANTIN
                      CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                              RESOURCEPHOENIX.COM
                             2401 KERNER BOULEVARD
                              SAN RAFAEL, CA 94901
                                 (415) 485-4600
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)

                                   COPIES TO:

                               STEVEN V. BERNARD
                        WILSON SONSINI GOODRICH & ROSATI
                               650 PAGE MILL ROAD
                              PALO ALTO, CA 94304
                                 (650) 493-9300

        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [X]

    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ] ______

    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ] ______

    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ] ______

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<S>                                      <C>                  <C>                  <C>                  <C>
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
                                                               PROPOSED MAXIMUM
TITLE OF EACH CLASS OF                      AMOUNT TO BE        OFFERING PRICE     DOLLAR AMOUNT TO BE       AMOUNT OF
SECURITIES TO BE REGISTERED                  REGISTERED            PER SHARE           REGISTERED        REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------
Class A Common Stock, $0.001 par
  value................................   7,000,000 shares         $1.92(1)          $13,440,000(1)          $3,548.16
Class A Common Stock, $0.001 par value
  issuable upon exercise of warrants...   1,800,000 shares         $7.00(2)          $12,600,000(2)          $3,326.40
Total..................................   8,800,000 shares                             $26,040,000           $6,874.56
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Calculated pursuant to Rule 457(c) based on the average of the high and low
    sales price of the Class A Common Stock on June 5, 2000 as reported by the
    Nasdaq Stock Market.
(2) Estimated solely for the purpose of calculating the registration fee and
    computed pursuant to Rule 457(g) based upon the highest price at which the
    warrants may be exercised.

    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

       The information in this prospectus is not complete and may be changed.
       The selling stockholder may not sell these securities until the
       registration statement filed with the Securities and Exchange Commission
       is effective. This prospectus is not an offer to sell these securities
       and it is not soliciting an offer to buy these securities in any state
       where the offer or sale is not permitted.

                   SUBJECT TO COMPLETION, DATED JUNE 12, 2000

PROSPECTUS

                           [RESOURCEPHOENIX.COM LOGO]
                                8,800,000 Shares

                              Class A Common Stock

     This prospectus may be used only in connection with the resale by Torneaux
Ltd. from time to time of up to 8,800,000 shares of Class A common stock of
ReSourcePhoenix.com, consisting of:

     - 7,000,000 shares of Class A common stock which may be issued by us to
       Torneaux pursuant to a common stock purchase agreement. We call these
       shares the "common shares";

     and

     - 1,800,000 shares of Class A common stock issuable by us upon exercise of
       warrants held by Torneaux. We call these shares the "warrant shares."

     The shares of Class A common stock offered may be sold from time to time
for the account of the selling stockholder. We will not receive any of the
proceeds from the sale of the Class A shares by the selling stockholder. We have
agreed to pay the costs of registering the Class A common stock, excluding
commissions, transfer taxes and other expenses related to the resale of the
Class A common stock by Torneaux.

     The price at which the common shares will be issued by us to Torneaux will
be approximately 94% of the daily volume weighted average closing price of our
Class A common stock on the Nasdaq National Market over a 20-day trading period,
and the price at which we issue the common shares to Torneaux may fluctuate. See
"Financing Arrangement with Torneaux Ltd." beginning on page 16.

     We issued warrants to Torneaux to purchase up to 1,800,000 shares of our
Class A common stock. Torneaux may purchase up to 500,000 warrant shares at
$2.50 per share, 500,000 warrant shares at $4.00 per share, 400,000 warrant
shares at $6.00 per share, and 400,000 warrant shares at $7.00 per share.

     The selling stockholder may offer, pursuant to this prospectus, shares of
Class A common stock to purchasers from time to time in transactions on the
Nasdaq National Market, in negotiated transactions, or otherwise or by a
combination of these methods. Torneaux is an "underwriter" within the meaning of
the Securities Act.

     Our Class A common stock is traded on the Nasdaq National Market under the
symbol "RPCX." On June 5, 2000 the last reported sale price for the Class A
common stock on the Nasdaq National Market was $1.86 per share.

     INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>   3

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                      PAGE
                                      ----
<S>                                   <C>
Prospectus Summary..................    1
Risk Factors........................    5
Information Regarding Forward
  Looking Statements................   15
Financing Arrangement with Torneaux
  Ltd. .............................   16
Use of Proceeds.....................   19
Market for Our Class A Common Stock
  and Dividend Policy...............   20
Capitalization......................   21
Selected Financial Data.............   22
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.....................   24
</TABLE>

<TABLE>
<CAPTION>
                                      PAGE
                                      ----
<S>                                   <C>
Business............................   36
Management..........................   48
Relationship with Phoenix Companies
  and Certain Transactions..........   55
Principal Stockholders..............   57
Description of Capital Stock........   58
Selling Stockholder.................   60
Plan of Distribution................   60
Legal Matters.......................   64
Experts.............................   64
Where You Can Find More
  Information.......................   64
Index to Consolidated Financial
  Statements........................  F-1
</TABLE>
<PAGE>   4

                               PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus, including "Risk Factors" and the
financial statements, carefully before making an investment decision.

                              RESOURCEPHOENIX.COM

     ReSourcePhoenix.com provides outsourced financial and management reporting,
accounting management, transaction processing and record keeping services. We
allow our clients to focus on their core businesses by outsourcing the
infrastructure and operations of these critical back-office functions. Our
primary service offerings include:

     - financial and management reporting;

     - accounting and finance management;

     - transaction processing;

     - financial budgeting and analysis;

     - implementation, integration and operation of financial and management
       reporting software, hardware, and network and communications
       infrastructure;

     - sales tracking;

     - sales force contact management; and

     - investor services record keeping.

     Today's companies increasingly need financial and management reporting
systems that can collect, organize and disseminate business information in a
timely, accurate, relevant and easy-to-use format. This need is particularly
acute for early stage and middle market companies that rely upon this
information, but have limited capital and personnel resources to manage these
systems and simultaneously focus on growing their businesses.

     We are pioneering the use of the Internet to integrate leading enterprise
resource planning software applications with the expertise of information
technology, finance, accounting and transaction processing professionals.
Enterprise resource planning software integrates the back-office aspects of the
business, including planning, inventory management, customer service,
manufacturing, sales and marketing. Our solution offers the cost-effective
benefits of outsourcing while providing the flexibility, control, customization,
integration and scalability of an in-house system. We offer our clients access
to the leading enterprise resource planning software applications, which often
are too costly and complex for early stage and middle market companies to obtain
and operate.

     We believe that our success will be driven by the increased demand for
outsourced financial and management reporting solutions. Reasons for this growth
include a desire by companies to focus on their core businesses, the inability
of many early stage and middle market companies to cost-effectively acquire
complete financial management solutions, and difficulties in attracting and
retaining qualified information technology, accounting, finance and transaction
processing professionals. In addition, we believe that this growth will be
fueled by the inability of many companies to effectively adopt and implement
leading enterprise resource planning applications in-house, as well as the
challenges inherent in developing and maintaining software applications,
hardware, and data and communications networks.
                                        1
<PAGE>   5

     By outsourcing these critical back-office functions, companies can reduce
or eliminate the costs of:

     - purchasing leading enterprise resource planning applications and
       associated hardware;

     - integrating and implementing the software and hardware with existing
       systems;

     - recruiting, hiring and training an extensive staff of information
       technology, accounting, finance and transaction processing professionals;

     - ongoing training of these professionals in their respective operational
       areas;

     - expanding overhead to support the growing organization; and

     - ongoing technology and process upgrades.

     We provide comprehensive, high-quality client service through our three
primary service offerings. Our Financial Outsourcing service, formerly known as
ReFOCOS, includes reporting, accounting, transaction processing, budgeting and
analysis solutions. Our S.T.A.R. services are similar to our Financial
Outsourcing service, but are designed to provide investor services to sponsors
of limited partnerships and real estate investment trusts. M.A.R.S. is a sales
force automation software application for specialized financial services clients
that can be licensed to clients or purchased by clients as a hosted application
service.

     In providing our services, we offer our clients access to a broad range of
professionals who are highly qualified and specialized in their areas of
functional expertise. In addition, we develop a business partnership with each
client by assessing the client's needs and implementing a value-added solution
based on our internally developed best practices. At the time of our formation,
we provided information technology, accounting, finance and transaction
processing services to entities affiliated with Phoenix Leasing Incorporated, a
commercial lender and sponsor and syndicator of publicly-traded limited
partnerships. Phoenix Leasing is controlled by Gus Constantin, our chairman,
chief executive officer and controlling stockholder. As of March 31, 2000, we
had 58 clients, including 55 unaffiliated clients and three clients affiliated
with Phoenix Leasing. We have never lost a Financial Outsourcing client because
of service or pricing issues.

                             CORPORATE INFORMATION

     We incorporated in Delaware in July 1999 and our operating subsidiary was
incorporated in California in September 1996. Our headquarters are located at
2401 Kerner Boulevard, San Rafael, California 94901 and our telephone number is
(415) 485-4600. Our Web site address is www.resourcephoenix.com. The information
on our Web site is not a part of this prospectus.

     ReSourcePhoenix.com, ReFOCOS, S.T.A.R. and M.A.R.S. are trademarks of
ReSourcePhoenix.com. This prospectus contains trademarks and trade names of
other companies.
                                        2
<PAGE>   6

                                  THE OFFERING

     We entered into a common stock purchase agreement on June 6, 2000 with
Torneaux Ltd. Pursuant to this agreement:

     - we have the right, subject to certain conditions, to sell up to 7,000,000
       shares of Class A common stock to Torneaux, which Torneaux may resell to
       the public through this prospectus; and

     - we issued warrants to Torneaux to purchase up to 1,800,000 shares of our
       Class A common stock at exercise prices ranging from $2.50 to $7.00 per
       share. Shares issuable upon exercise of Torneaux's warrants may also be
       resold to the public through this prospectus.

     Through this prospectus, the selling stockholder may offer to the public
the Class A common stock acquired under the common stock purchase agreement.

SHARES OFFERED BY THE SELLING
STOCKHOLDER                              8,800,000 shares of Class A common
                                         stock of ReSourcePhoenix.com, par value
                                         $0.001

OFFERING PRICE                           Determined at the time of sale by the
                                         selling stockholder.

COMMON STOCK OUTSTANDING AS
  OF MAY 31, 2000                        4,183,760 shares of Class A common
                                         stock 7,172,000 shares of Class B
                                         common stock

USE OF PROCEEDS                          We will not receive any of the proceeds
                                         of the shares offered by the selling
                                         stockholder.

                                         Any proceeds we receive from the sale
                                         of our Class A common stock pursuant to
                                         the equity line agreement will be used
                                         primarily for general corporate
                                         purposes. See "Use of Proceeds."

DIVIDEND POLICY                          We currently intend to retain any
                                         future earnings to fund the development
                                         and growth of our business. Therefore,
                                         we do not currently anticipate paying
                                         cash dividends. See "Dividend Policy."

NASDAQ NATIONAL MARKET SYMBOL            RPCX
                                        3
<PAGE>   7

                      SUMMARY CONSOLIDATED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

     The following table should be read with the financial statements and notes
to those statements appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                             THREE MONTHS
                                            ENDED MARCH 31,       YEAR ENDED DECEMBER 31,
                                           -----------------   -----------------------------
                                            2000      1999       1999       1998       1997
                                           -------   -------   --------    -------    ------
<S>                                        <C>       <C>       <C>         <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS
  DATA:
Total revenue............................  $ 2,951   $ 1,381   $  9,073    $ 4,686    $5,340
Total operating expenses.................   10,697     5,297     25,727     10,354     6,121
Loss from operations.....................   (7,746)   (3,916)   (16,654)    (5,668)     (781)
                                           -------   -------   --------    -------    ------
Other income.............................      175         9        174         11        41
                                           -------   -------   --------    -------    ------
Net loss before effect of accounting
  change.................................   (7,571)   (3,907)   (16,480)    (5,657)     (740)
Cumulative effect of accounting change...     (129)       --         --         --        --
                                           -------   -------   --------    -------    ------
Net loss.................................   (7,700)   (3,907)   (16,480)    (5,657)     (740)
Basic and diluted net loss per share.....  $ (0.69)  $ (0.54)  $  (2.05)   $ (0.79)   $(0.10)
Shares used in computing basic and
  diluted net loss per share.............   11,201     7,200      8,055      7,200     7,200
</TABLE>

<TABLE>
<CAPTION>
                                                              MARCH 31, 2000
                                                              --------------
<S>                                                           <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................................     $ 9,614
Working capital.............................................       5,856
Total assets................................................      19,112
Total liabilities...........................................       6,840
Total stockholders' equity..................................      12,272
</TABLE>

                                        4
<PAGE>   8

                                  RISK FACTORS

     This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in shares of our Class A common stock. Our business,
operating results and financial condition could be adversely affected by any of
the following risks. The trading price of our Class A common stock could decline
due to any of these risks, and you could lose all or part of your investment.
You should also refer to the other information set forth in this prospectus,
including our financial statements and the related notes.

WE MAY NOT BE ABLE TO CONTINUE OPERATING OUR BUSINESS IF WE DO NOT SATISFY ALL
CONDITIONS TO OUR COMMON STOCK FINANCING WITH TORNEAUX LTD.

     Our business has not generated sufficient cash flow to fund our operations
without requiring external sources of capital, and we expect to continue to have
significant net cash outflow. As of March 31, 2000, we had working capital of
$5.9 million. On June 6, 2000, we entered into the common stock purchase
agreement with Torneaux Ltd. Our ability to raise funds through the agreement is
subject to the satisfaction of certain conditions at the time of each sale of
Class A common stock to Torneaux. We may not be able to satisfy the conditions
to the initial sale and subsequent sales to Torneaux under the agreement. If
this occurs, we would not be able to sell the full 7,000,000 shares to Torneaux
pursuant to the agreement, and we may need to raise additional money from other
sources in order to continue to fund our operations. Such alternative funding
may not be available on favorable terms, if at all. If we do not have sufficient
cash to continue operating our business, our shareholders could lose
substantially all, if not all, of their investment in our company.

WE MAY HAVE DIFFICULTY RAISING MONEY WE NEED FOR OUR OPERATIONS IN THE FUTURE.

     Even if we satisfy the conditions to the initial sale and subsequent sales
under the common stock purchase agreement, we may have to raise additional money
from other sources in the future. Because the price at which we would sell stock
to Torneaux under the agreement will depend on the prevailing market price of
our Class A common stock over the 14 month term of the agreement, we cannot
predict the amount of proceeds we would receive under the agreement. Due to
price fluctuations, we may receive less proceeds than we need to fund our
operations until we achieve cash breakeven. If this occurs, we would need to
raise additional funds. Outside sources may not provide us with money when we
need it. If we cannot obtain money when we need it, we may need to further
reduce our operations. In addition, even if we are able to find outside sources
that will provide us with money when we need it, in order to raise this money we
may be required to issue securities with better rights than the rights of our
Class A common stock or we may be required to take other actions which lessen
the value of our current Class A common stock, including borrowing money on
terms that are not favorable to us.

WE EXPECT TO CONTINUE TO INCUR LOSSES AND EXPERIENCE NEGATIVE CASH FLOW.

     We expect to have significant operating losses and continue to record
significant net cash outflow on a quarterly and annual basis. We reported net
loss from operations of $30.8 million for the period from January 1, 1997, the
date on which we began operations as a separate company, through March 31, 2000,
and reported net cash used in operating and investing activities of $26.4
million for the same period. Further developing our business and expanding our
network may require significant capital in addition to the amount that may be
raised under the common stock purchase agreement with Torneaux. We may not be
able to obtain additional capital on terms favorable to us or at all.

                                        5
<PAGE>   9

     Our ability to achieve and maintain profitability is highly dependent upon
the successful commercialization of our Financial Outsourcing services. We may
not ever be able to successfully commercialize our products or achieve
profitability.

MODIFICATIONS OF THE REPORT OF OUR INDEPENDENT PUBLIC ACCOUNTANTS REGARDING OUR
ABILITY TO CONTINUE AS A GOING CONCERN MAY SIGNIFICANTLY IMPAIR OUR ABILITY TO
SELL OUR PRODUCTS AND SERVICES.

     Our independent auditors, Arthur Andersen LLP, reissued their auditors'
report on our financial statements for the year ended December 31, 1999. They
modified their report to reflect their view that we require additional funding
to continue our operations and their view that we may be unable to continue our
operations absent receiving additional funding. More specifically, the modified
report, among other things, raises substantial doubt about our ability to
continue as a going concern. We believe that growing concern among our existing
and potential customers regarding our continued financial viability has been a
significant factor causing demand for our products to grow more slowly than we
previously anticipated. The modified report from Arthur Andersen may reinforce
our existing and potential customers' concern.

     We cannot assure you that the conditions that raise substantial doubt about
our ability to continue as a going concern will not persist. As a result, we
cannot assure you that Arthur Andersen's report on our future financial
statements will not include a similar modification. This situation could
perpetuate concerns about our ability to fulfill our contractual obligations, as
well as adversely affect our relationships with third parties and impair our
ability to complete future financings. Each of the foregoing could significantly
damage our business.

OUR STOCK PRICE COULD FLUCTUATE DRAMATICALLY BECAUSE OF FLUCTUATIONS IN OUR
QUARTERLY OPERATING RESULTS. THIS COULD RESULT IN SUBSTANTIAL LOSSES TO
INVESTORS.

     Period-to-period comparisons of our operating results may not be a good
indication of our future performance. Moreover, our operating results in some
quarters may not meet the expectations of stock market analysts or investors. In
that event, our stock price would likely fall significantly. For example, on
April 14, 2000, we announced that we expected our revenue to grow more slowly
than previously expected. We also announced on that date that we would adopt a
recently introduced accounting policy, the effect of which would be, among other
things, to reduce our reported revenue for 2000. Following these announcements,
the trading price of our Class A common stock immediately fell dramatically. Any
significant decrease in the trading price of a company's stock can prompt
shareholders and securities class action attorneys to file lawsuits against the
company and those who control the company, regardless of the merits of such
lawsuits. Any such lawsuits, regardless of the outcome, can significantly
distract management, cause the company to incur significant defense costs and
impair the company's reputation, all of which could materially and adversely
affect the company's stock price.

     As a result of the evolving nature of the markets in which we compete, we
may have difficulty accurately forecasting our revenue in any given period. In
addition to the factors discussed elsewhere in this section, a number of factors
may cause our revenue to fall short of our expectations or cause our operating
results to fluctuate, including:

     - the announcement or introduction of new or enhanced products or services
       by our competitors;

     - pricing changes by us or our competitors;

     - the timing and frequency of new client engagements or cancellations; and

     - sales cycle fluctuations.

                                        6
<PAGE>   10

     We must implement our services for new clients in a timely and
cost-effective manner. To the extent that we are unable to staff client
implementations using internal staff, we will need to delay our client
implementations or hire outside software and systems integration consultants,
whose services generally are much more costly. If we delay implementation for
any client, we may not meet the expectations of that client, which could damage
our relationship with that client. A delay in implementation would also postpone
our recognition of revenues from that client, perhaps into a subsequent
financial reporting period, which could cause us not to meet analyst or investor
expectations for that period. If we hire outside software and systems
integration consultants, our operating expenses will increase and our operating
results will be harmed.

     Stock markets often experience significant price and volume fluctuations.
These fluctuations, as well as general economic and political conditions
unrelated to our performance, may adversely affect the price of our Class A
common stock. The market prices of the securities of Internet-related and
technology-related companies have been especially volatile. The closing price of
our Class A common stock, for example, has fluctuated between $1.25 and $25.37
since our initial public offering in October 1999 through May 31, 2000. In
addition, if our performance in a given quarter or our expected future
performance falls below the expectations of securities analysts or investors,
the price of our Class A common stock will likely fall significantly, as it did
in April 2000.

OUR CLASS A COMMON STOCK MAY BE DELISTED FROM THE NASDAQ NATIONAL MARKET IF WE
CANNOT MEET THE CONTINUED LISTING REQUIREMENTS.

     While the Class A common stock has met the current initial listing
requirements for inclusion in the Nasdaq National Market, there can be no
assurance that we will meet the continued listing requirements. To maintain our
listing on the Nasdaq National Market:

     - we must have at least 750,000 shares publicly held with a market value of
       at least $5 million;

     - we will have to maintain at least $4 million in net tangible assets;

     - the minimum bid price of our Class A common stock will have to be $1.00
       per share;

     - our Class A common must be held by at least 400 holders; and

     - our Class A common stock must have at least two active market makers.

     If we are unable to satisfy the maintenance criteria of the Nasdaq National
Market, our Class A common stock may be delisted. If this occurs, our Class A
common stock would be traded only in the over-the-counter market. As a result,
the liquidity of our Class A common stock would be significantly impaired and
the price of our Class A common stock would be significantly adversely affected.
Among other things, our company could receive less media coverage and have fewer
security analysts.

     If our Class A common stock is delisted, then trading in our Class A common
stock would be subject to rules under the Securities Exchange Act of 1934 that
require additional disclosure by broker-dealers in connection with any trades
involving a stock defined as "penny stock." In general, a penny stock is an
equity security that is not listed on a national exchange and has a market price
of less than $5.00 per share, subject to some exceptions. Prior to any
transaction in a penny stock, the rules require the delivery of a disclosure
schedule explaining the penny stock market and associated risks and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors. For these
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The broker-dealer also must disclose the

                                        7
<PAGE>   11

commissions payable to the broker-dealer, current bid and offer quotations for
the penny stock. In addition, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. This information must be provided to the customer orally or in
writing prior to the transaction and in writing before or with the customer's
confirmation. Monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The additional burdens imposed on broker-dealers
by these requirements may discourage them from effecting transactions in our
Class A common stock, which could severely limit the liquidity of our Class A
common stock and the ability of purchasers in this offering to sell our Class A
common stock in the secondary market.

SHAREHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM OUR SALE OF SHARES TO
TORNEAUX LTD. UNDER THE COMMON STOCK PURCHASE AGREEMENT AND WARRANTS. IN
ADDITION, THE RESALE BY TORNEAUX LTD. OF OUR CLASS A COMMON STOCK MAY LOWER ITS
MARKET PRICE.

     The sale of our Class A common stock to Torneaux under the common stock
purchase agreement and warrants will have a dilutive effect on our stockholders.
In addition, Torneaux's resale of our Class A common stock will increase the
number of our publicly traded shares, which could also lower the market price of
our Class A common stock.

OUR SUCCESS DEPENDS ON THE ACCEPTANCE AND INCREASED USE OF INTERNET-BASED
SOFTWARE APPLICATIONS AND BUSINESS PROCESS OUTSOURCING SOLUTIONS. WE CANNOT BE
SURE THAT THESE SOLUTIONS WILL GAIN MARKET ACCEPTANCE.

     Our business model depends on the adoption of Internet-based software
applications and business process outsourcing solutions by commercial users. Our
business would suffer dramatically if these solutions are not accepted or not
perceived to be effective. The market for Internet services, virtual private
networks and widely distributed Internet-enabled packaged application software
has only recently begun to develop. The growth of Internet-based business
process outsourcing solutions could also be limited by:

     - concerns over transaction security and user privacy;

     - inadequate network infrastructure for the entire Internet; and

     - inconsistent performance of the Internet.

     In addition, growth in, demand for and acceptance of Internet-based
software applications and business process outsourcing solutions, including our
Financial Outsourcing service, by early stage and middle market companies is
highly uncertain. It is possible that our outsourced business information
solutions may never achieve broad market acceptance. If the market for our
services does not grow significantly or continues to grow less rapidly than we
currently anticipate, our business, financial condition and operating results
would be seriously harmed.

OUR FINANCIAL OUTSOURCING SERVICE IS TARGETED AT EARLY STAGE AND MIDDLE MARKET
COMPANIES, WHICH MAY BE MORE LIKELY TO BE ACQUIRED OR TO CEASE OPERATIONS THAN
OTHER COMPANIES. AS A RESULT, OUR CLIENT BASE MAY BE MORE VOLATILE THAN THE
CLIENT BASES OF COMPANIES WHOSE CLIENT BASES CONSIST OF MORE ESTABLISHED
COMPANIES.

     Our Financial Outsourcing service is targeted at early stage and middle
market companies, which may be more likely to be acquired or to cease operations
than other companies. As a result, our client base may be more volatile than the
client bases of companies whose client bases consist of more

                                        8
<PAGE>   12

established companies. From our inception through the end of 1999, we lost five
unaffiliated clients, including one because the client was acquired and three
because the clients ceased operations or no longer had financial means to
continue our services. In the quarter ended March 31, 2000, we lost two clients
because they were purchased and one client because it no longer had financial
means to continue our services. If we experience greater than expected client
turnover, either because our clients are acquired, cease operations or for any
other reason, our business, financial condition and operating results could be
seriously harmed.

OUR GROWTH WILL BE LIMITED IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL.

     We must continue to attract and retain qualified information technology,
accounting, finance and transaction processing professionals in order to perform
services for our existing and future clients. The personnel capable of filling
these positions are in great demand and recruiting and training them requires
substantial resources. We may not be able to hire the necessary personnel to
implement our business strategy, or we may need to pay higher compensation for
employees than we currently expect. We cannot assure you that we will succeed in
attracting and retaining the personnel we need to grow.

OUR CURRENT AND HISTORICAL FINANCIAL INFORMATION MAY NOT BE COMPARABLE TO OUR
FUTURE FINANCIAL RESULTS.

     Our historical revenues were derived primarily from services that we do not
expect to be the focus of our business in the future. We introduced our S.T.A.R.
services and our original Financial Outsourcing service in 1993. Our Web-enabled
Financial Outsourcing service and our hosted M.A.R.S. service were introduced in
November 1998 and August 1999, respectively. For the years 1998, 1999 and the
first quarter of 2000, we derived approximately 67%, 50% and 40%, respectively,
of total revenue from our S.T.A.R. services. For the years 1998, 1999 and the
first quarter of 2000, we derived approximately 1%, 25% and 18%, respectively,
of total revenue from the sale of software, including license fees and related
services. Because our historical revenues were derived from a different type of
service than the services that we plan to emphasize in the future, our
historical financial results may not be comparable to our future financial
results. In addition, our M.A.R.S. and S.T.A.R. services are marketed to
specialized financial services clients. Our Financial Outsourcing services are
marketed to a broader, less specialized market than either of our M.A.R.S. or
S.T.A.R. services. We may be unsuccessful in our efforts to market to this
target market.

     Our strategy does not contemplate M.A.R.S. as one of our core offerings. As
a result, we expect that software license fees will decline as a percentage of
revenues as we devote greater resources to our other outsourced financial and
management reporting services.

                                        9
<PAGE>   13

OUR OPERATING RESULTS DEPEND ON OUR RELATIONSHIPS WITH A LIMITED NUMBER OF
CLIENTS. AS A RESULT, THE LOSS OF A SINGLE CLIENT MAY SERIOUSLY HARM OUR
OPERATING RESULTS.

     Our results of operations and our business depend on our relationships with
a limited number of large clients. As a result, the loss of a single client may
seriously harm our operating results. Set forth below is the percentage of
revenues during the three months ended March 31, 2000 and the years ended
December 31, 1999 and 1998 for each of our clients that accounted for more than
10% of our revenues and for our ten largest clients combined:

<TABLE>
<CAPTION>
                                                             QUARTER
                                                              ENDED            YEAR ENDED
                                                            MARCH 31,         DECEMBER 31,
                                                            ---------        --------------
                                                              2000           1999      1998
                                                            ---------        ----      ----
<S>                                                         <C>              <C>       <C>
Phoenix Leasing (an affiliate)............................     26%            24%       41%
GE Capital Aviation Services/PIMC.........................      8%             9%       20%
John Hancock Advisors.....................................     --             16%       --
  Total of ten largest clients combined...................     72%            77%       86%
</TABLE>

     We cannot assure you that we will be able to maintain our current level of
revenues derived from any of our clients or markets in the future. The
termination of our business relationships with any of our significant clients or
a material reduction in the use of our services by any of our significant
clients, could seriously harm our business and operating results.

WE RELY ON THIRD PARTIES TO SUPPLY US WITH THE SOFTWARE, HARDWARE AND SERVICES
NECESSARY TO PROVIDE OUR SERVICES. THE LOSS OF ANY OF THIS THIRD PARTY SOFTWARE,
HARDWARE OR SERVICES MAY BE DIFFICULT TO REPLACE AND MAY HARM OUR OPERATING
RESULTS.

     A substantial portion of the software that is integrated into our services
is licensed from third parties, including Oracle Corporation, BroadVision, Inc.
and Vitria Technology, Inc. If we were to lose the right to use the software
that we have licensed from Oracle, BroadVision, Vitria or other third parties,
our operations would be seriously harmed. Our agreements with our software
vendors are non-exclusive. Our vendors may choose to compete with us directly.
Oracle, for example, is now offering a Web-enabled version of its enterprise
resource planning software that it markets directly to middle market businesses.
Our vendors may also enter into strategic relationships with our competitors.
These relationships may take the form of strategic investments, or marketing or
other contractual arrangements. Our competitors may also license and utilize the
same technology in competition with us. We cannot assure you that the vendors of
technology used in our products will continue to support this technology in its
current form. We also cannot assure you that we will be able to adapt our own
offerings to changes in this technology. In addition, we cannot assure you that
the financial or other difficulties of our vendors will not adversely affect the
technologies incorporated into our services, or that if these technologies
become unavailable we will be able to find suitable alternatives.

     In addition, we depend on third parties, such as Cisco Systems, Inc. and
Sun Microsystems, Inc., to supply servers, routers, firewalls, encryption
technology and other key components of our telecommunications and network
infrastructure. If any of our vendors fail to provide needed products or
services in a timely fashion or at an acceptable cost, our business, financial
condition and operating results could be seriously harmed. A disruption in
telecommunications capacity could prevent us from maintaining our standard of
service. Some of the key components of our system and network are available only
from sole or limited sources in the quantities and quality we demand.

                                       10
<PAGE>   14

     We also depend on the services of software and systems integration firms to
help us establish service with new clients. If the services of these firms
became unavailable for any reason, our services to new clients could be delayed.
In addition, we could be forced to pay higher rates for the services of these or
substitute firms. If either of these events were to occur, our business,
financial condition and operating results could be seriously harmed.

OUR BUSINESS AND REPUTATION MAY BE HARMED IF WE MAKE MISTAKES IN PERFORMING OUR
SERVICES.

     Our business is subject to various risks resulting from errors and
omissions in performing services for our clients. We perform accounting,
finance, transaction processing, tax reporting, transfer agency and other
services for our clients. We process data received from our clients that is
critical to our clients' businesses and operations. We may make mistakes in
performing our services, which may result in claims being made against us. If we
do make mistakes, we cannot assure you that our financial reserves or insurance
will be adequate to cover any claims made against us. In addition, our business
reputation will be seriously harmed if we make any mistakes, which could
adversely affect our relationships with our existing clients and our ability to
attract new clients.

OUR SOFTWARE PRODUCTS AND THE SOFTWARE THAT WE HAVE INTEGRATED INTO OUR SERVICES
MAY HAVE UNKNOWN DEFECTS THAT COULD HARM OUR REPUTATION OR DECREASE MARKET
ACCEPTANCE OF OUR SERVICES.

     We derived approximately 18% of our revenues from licensing our M.A.R.S.
software product during the quarter ended March 31, 2000. Our clients rely on
this software to perform critical business functions such as sales and expense
tracking and fulfillment/inventory tracking. Because our clients depend on our
M.A.R.S. software for their critical systems and business functions, any
interruptions caused by unknown defects in our software could damage our
reputation, cause our clients to initiate product liability suits against us,
divert our research and development resources, cause us to lose revenue or delay
market acceptance of any outsourced business service that is based on this
software. Any of these things could harm our business. Our software may contain
errors or defects, particularly when new versions or enhancements are released.
We may not discover software defects that affect our current software or
enhancements until after they are sold. Although we have not experienced any
material software defects to date, any defects could cause our clients to
experience severe system failures.

     The software applications that we license from Oracle, BroadVision, Vitria
and other third parties and integrate into our service offerings may contain
defects when introduced or when new versions or enhancements are released. We
cannot assure you that software defects will not be discovered in the future. If
our services incorporate software that has defects and these defects adversely
affect our service offerings, our business, reputation and operating results may
be harmed.

THE MARKETS WE SERVE ARE HIGHLY COMPETITIVE AND MANY OF OUR COMPETITORS HAVE
MUCH GREATER RESOURCES.

     Our current and potential competitors include applications service
providers, systems integrators, and software and hardware vendors. Our
competitors, who may operate in one or more of these areas, include companies
such as Andersen Consulting, Corio, Inc., DIGEX, Inc., Exodus Communications,
Inc., Navisite, Inc., PricewaterhouseCoopers LLP, and USInternetworking, Inc.
Some of our competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with third parties to increase their ability
to rapidly gain market share by addressing the needs of our prospective clients.
These relationships may take the form of strategic investments or marketing or
other contractual arrangements.

                                       11
<PAGE>   15

     Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
We cannot be sure that we will have the resources or expertise to compete
successfully in the future. Our competitors may be able to:

     - more quickly develop and expand their network infrastructures and service
       offerings;

     - better adapt to new or emerging technologies and changing customer needs;

     - negotiate more favorable licensing agreements with software application
       vendors;

     - more successfully recruit qualified information technology, accounting,
       finance and transaction processing professionals;

     - negotiate more favorable services agreements with software and systems
       integrators;

     - devote greater resources to the marketing and sale of their services; and

     - adopt more aggressive pricing policies.

     Some of our competitors may also be able to provide customers with
additional benefits at lower overall costs. We cannot be sure that we will be
able to match cost reductions by our competitors. In addition, we believe that
there is likely to be consolidation in our markets, which could increase price
and other competition in ways that could seriously harm our business, financial
condition and operating results. Finally, there are few substantial barriers to
entry, and we have no patented technology that would bar competitors from our
market.

WE RELY ON RAPIDLY CHANGING TECHNOLOGY AND MUST ANTICIPATE NEW TECHNOLOGIES.

     The technologies in which we have invested are rapidly evolving. As a
result, we must anticipate and rapidly adapt to changes in technology to keep
pace with the latest technological advances that are likely to affect our
business and competitive position. For example, we recently adapted our
Financial Outsourcing service, which formerly used a client-server
communications architecture, to use an Internet communications architecture. Our
future success will depend on our ability to deploy advanced technologies and
respond to technological advances in a timely and cost effective manner. Even if
we are able to deploy new technologies in a timely manner, we are likely to
incur substantial cost in doing so. If we are unable to develop or successfully
introduce new technology on an as needed basis or if we are unable to do so in a
cost effective manner, our business, financial condition and operating results
would be seriously harmed.

WE RECENTLY BEGAN TO EXPAND VERY RAPIDLY AND MANAGING OUR GROWTH MAY BE
DIFFICULT.

     In mid-1999, we began to aggressively expand our operations. Although we
terminated a number of employees and closed several offices beginning in April
2000, to the extent that our business continues to grow both geographically and
in terms of the number of products and services we offer, we must:

     - expand, train and manage our employee base effectively;

     - enlarge our network and infrastructure to accommodate new clients;

     - expand our infrastructure and systems to accommodate the growth of our
       existing clients; and

     - improve our management, financial and information systems and controls.

                                       12
<PAGE>   16

     We must recruit qualified information technology personnel, for which there
is high demand and short supply. In addition, we must recruit qualified
accounting, finance and transaction processing personnel, which are also in high
demand. During the second half of 1999, we opened eight new offices outside
northern California. In April 2000, we closed five offices, including one office
in California. We have little experience operating a multi-office business.

     There will be additional demands on our operations group and sales,
marketing and administrative resources as we increase our service offerings and
expand our target markets. The strains imposed by these demands are magnified by
the early stage nature of our operations. If we cannot manage our growth
effectively, our business, financial condition or operating results could be
seriously harmed.

WE DEPEND ON A LIMITED NUMBER OF KEY EXECUTIVES WHO WOULD BE DIFFICULT TO
REPLACE.

     Our success depends in significant part on the continued services of our
senior management personnel. Losing one or more of our key executives could
seriously harm our business, financial condition and operating results. We
cannot assure you that we will be able to retain our key executives or that we
would be able to replace any of our key executives if we were to lose their
services for any reason. If we had to replace any of our key executives, we
would not be able to replace the significant amount of knowledge that many of
our key executives have about us.

IF WE DO NOT EFFECTIVELY ADDRESS OUR MARKET, WE MAY NEVER REALIZE A RETURN ON
THE INVESTMENTS WE HAVE MADE TO EXECUTE OUR STRATEGY.

     We have made substantial investments to pursue our strategy. These
investments include:

     - developing relationships with particular software providers, including
       Oracle, BroadVision and Vitria;

     - investing to develop unique product features, including invoice reporting
       and imaging functions; and

     - developing implementation resources around specific applications.

     These investments may not be successful. More cost-effective strategies may
be available to compete in this market. We may have chosen to focus on the wrong
application areas or to work with the wrong partners. Potential customers may
not value the specific product features in which we have invested. We cannot
assure you that our strategy will prove successful.

INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US, EVEN WITHOUT MERIT, COULD
COST A SIGNIFICANT AMOUNT OF MONEY TO DEFEND AND DIVERT MANAGEMENT'S ATTENTION
AWAY FROM OUR BUSINESS.

     As the number of software products in our target market increases and the
functionality of these products further overlaps, software industry participants
may become increasingly subject to infringement claims. Someone may even claim
that our technology infringes their proprietary rights. Any infringement claims,
even if without merit, can be time consuming and expensive to defend. These
suits may divert management's attention and resources and could cause service
implementation delays. They also could require us to enter into costly royalty
or licensing agreements. If successful, a claim of product infringement against
us and our inability to license the infringed or similar technology could
adversely affect our business.

                                       13
<PAGE>   17

WE MAY BE LIABLE IF WE LOSE CLIENT DATA FROM NATURAL DISASTERS, SECURITY
BREACHES OR FOR ANY OTHER REASON.

     We currently conduct all of our data processing and network operations at
our facility in San Rafael, California. In the event of a catastrophic disaster
at our San Rafael data operations center, SunGard Recovery Services Inc. will
provide business resumption of our critical systems at its data center in
Philadelphia.

     We have comprehensive disaster recovery procedures in place, including
uninterruptible power supply systems with seven day capacity, back-up power
generators, nightly backup of our critical data, systems with off-site data
vaults, and 24 and 72 hour service level agreements for recovering systems and
data from the last available backup. However, we cannot assure you that our
disaster recovery procedures are sufficient, or that our client's data would be
recoverable in the event of a disaster.

     Our operations are dependent on SunGard being able to successfully provide
back-up processing capability if we are unable to protect our computer and
network systems against damage from a major catastrophe such as an earthquake or
other natural disaster, fire, power loss, security breach, telecommunications
failure or similar event. We cannot assure you that the precautions that we have
taken to protect ourselves against these types of events will prove to be
adequate. If we suffer damage to our data or operations center, experience a
telecommunications failure or experience a security breach, our operations could
be seriously interrupted. We cannot assure you that any such interruption or
other loss will be covered by our insurance. Any such interruption or loss could
seriously harm our business and operating results.

GUS CONSTANTIN CAN EXERT SUBSTANTIAL CONTROL OVER OUR COMPANY.

     Gus Constantin, our founder, chairman and chief executive officer, owns all
of the shares of our Class B common stock, each share of which entitles him to
five votes on most stockholder actions. If we issue the full 7,000,000 common
shares to Torneaux and if Torneaux exercises all of the warrants that we have
issued to them, Mr. Constantin will still control 73.4% of the combined voting
power of both classes of our common stock. Holders of Class A common stock are
entitled to one vote per share and in the aggregate will have 26.6% of the
combined voting power of both classes of our common stock if we issue the full
7,000,000 common shares to Torneaux and if Torneaux exercises all of the
warrants that we have issued to them. As a result of his stock ownership, Mr.
Constantin can, without the approval of our public stockholders, take corporate
actions that could conflict with the interests of our public stockholders, such
as:

     - amending our charter documents;

     - approving or defeating mergers or takeover attempts;

     - determining the amount and timing of dividends paid to himself and to
       holders of Class A common stock;

     - changing the size and composition of our board of directors and
       committees of our board of directors; and

     - otherwise controlling management and operations and the outcome of most
       matters submitted for a stockholder vote.

                                       14
<PAGE>   18

OUR CHARTER DOCUMENTS COULD DETER A TAKEOVER EFFORT, WHICH COULD INHIBIT YOUR
ABILITY TO RECEIVE AN ACQUISITION PREMIUM FOR YOUR SHARES.

     Provisions of our certificate of incorporation, bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. In addition, we are subject to the
provisions of Section 203 of the Delaware General Corporation Law. This statute
could prohibit or delay the accomplishment of mergers or other takeover or
change in control in attempts with respect to us and, accordingly, may
discourage attempts to acquire us.

WE COULD BE HARMED IF OUR PRODUCTS, SERVICES OR TECHNOLOGIES ARE NOT COMPATIBLE
WITH OTHER PRODUCTS, SERVICES OR TECHNOLOGIES.

     We believe that our ability to compete successfully also depends on the
continued compatibility of our services with products, services and network
architectures offered by various vendors. If we fail to conform to a prevailing
or emerging standard, our business, financial condition and operating results
could be seriously harmed. We cannot be sure that their products will be
compatible with ours or that they will adequately address changing customer
needs. We also cannot be sure what new industry standards will develop. We
cannot assure you that we will be able to conform to these new standards quickly
enough to stay competitive. In addition, we cannot assure you that products,
services or technologies developed by others will not make our products,
services or technologies noncompetitive or obsolete.

                INFORMATION REGARDING FORWARD LOOKING STATEMENTS

     This prospectus contains forward looking statements that involve risks and
uncertainties. These statements relate to our future plans, objectives,
expectations and intentions, and the assumptions underlying or relating to any
of these statements. These statements may be identified by the use of words such
as "expect," "anticipate," "intend" and "plan." Our actual results may differ
materially from those discussed in these statements. Factors that could
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors" and elsewhere in this prospectus.

                                       15
<PAGE>   19

                    FINANCING ARRANGEMENT WITH TORNEAUX LTD.

     On June 6, 2000, we entered into a common stock purchase agreement with
Torneaux Ltd. Pursuant to the agreement, we may issue and sell, from time to
time, up to 7,000,000 shares of our Class A common stock, subject to the
satisfaction of certain conditions.

     Beginning on the date the registration statement, of which this prospectus
forms a part, is declared effective by the SEC, and continuing for 14 months
thereafter, we may in our sole discretion sell, or put, shares of our Class A
common stock to Torneaux. The 14-month period is divided into pricing periods,
each consisting of 20 trading days on the Nasdaq National Market.

     From time to time during the 14-month term, we may make 12 monthly draw
downs, by giving notice and requiring Torneaux to purchase shares of our Class A
common stock, for the draw down amount. Torneaux's purchase price may fluctuate
based upon the daily volume weighted average price over a 20 day trading period.
Prior to each draw down, we will provide Torneaux with a notice that sets forth
the number of shares of Class A common stock we will sell, the commencement date
of the pricing period, and the threshold price, which is the lowest price per
share at which we will issue new shares of Class A common stock. We may issue a
draw down notice for up to $1,500,000 if the threshold price is equal to or
exceeds $1.00, and an additional $500,000 for every $1.00 increase of the
threshold price above $1.00 up to $21.00 for a maximum draw down amount of
$11,500,000. If we set the threshold price between $1.00 and $10.00, then the
purchase price to be paid by Torneaux is 94% of the daily volume weighted
average price over the pricing period. If we set the threshold price between
$10.00 and $21.00, then for each $1.50 increase in the threshold price above
$10.00, the purchase price to be paid by Torneaux is increased by 0.10%. If the
daily volume weighted average price on a given trading day is less than the
threshold price set by us, then the amount that we can draw down will be reduced
by 1/20 for that pricing period. In addition, if trading in our Class A common
stock is suspended for more than three hours in any trading day, then the daily
volume weighted average price for that trading day is deemed to be below the
threshold price and, consequently, reduces the draw down amount by 1/20.

     Our ability to cause Torneaux to purchase shares of our Class A common
stock under the common stock purchase agreement is subject to certain
conditions, including, but not limited to:

- The number of shares we may sell to Torneaux on any draw date, when aggregated
  with all other shares then owned by Torneaux, cannot exceed 9.9% of the total
  common stock we then have outstanding.

- The total number of shares that we may sell to Torneaux under the agreement
  and warrants cannot exceed 19.9% of our common stock, unless we have obtained
  shareholder approval as required by the rules of The Nasdaq Stock Market Inc.
  This required stockholder approval was obtained on          , 2000.

- Our Class A common stock continues to be traded on the Nasdaq National Market.

- The registration statement, of which this prospectus forms a part, must remain
  effective so that Torneaux may publicly resell the shares that it acquires
  from us under the agreement.

- There has not been a material change in ownership of our company in which our
  officers and directors own less than 51% of our outstanding common stock,
  except as a result of the issuance of shares under the agreement and upon
  exercise of the warrants we have issued to Torneaux.

- There has not been an effect on the business, operations, properties, assets
  or financial condition of our company that is material and adverse to our
  company and our subsidiary or affiliates, taken as a whole and/or any
  condition or situation that would prohibit or otherwise interfere, in a
  material respect, with our ability to perform our obligations under the
  agreement.

                                       16
<PAGE>   20

We may not be able to satisfy all conditions required to put shares to Torneaux
at any given time. If this occurs, we would likely need to raise money from
other sources in order to continue to fund our operations. Such alternative
funding may not be available. Also, we cannot put shares to Torneaux at a time
when we have not publicly disclosed material information about our company.

     We have filed a registration statement, of which this prospectus forms a
part, in order to permit Torneaux to resell to the public any Class A common
stock it purchases pursuant to the common stock purchase agreement. Torneaux may
be entitled to indemnification by us for lawsuits based on language in this
prospectus. We will prepare and file such amendments and supplements to the
registration statement as may be necessary in accordance with the Securities Act
and the rules and regulations promulgated under it, in order to keep effective
the registration statement so that we may put shares to Torneaux during the term
of the agreement. In connection with the agreement, we agreed to pay certain
expenses of Torneaux, including legal fees, for the preparation of the agreement
up to a maximum of $50,000, and all reasonable fees incurred in connection with
any amendment, modification or waiver, to or enforcement of the agreement.

     If we suspend the effectiveness of a registration statement for more than
20 days, or more than 45 days in the aggregate during a 12 month period, then we
must pay in cash to Torneaux, as liquidated damages, an amount equal to 2% of
the aggregate purchase price for all shares purchased and then held by Torneaux
for the initial 30 day period, and 3% of the aggregate purchase price for each
subsequent 30 day period, until the suspension is lifted. In addition, if we
fail to deliver the shares of Class A common stock when due to Torneaux and the
failure continues for 10 trading days, then we will pay, in cash or restricted
shares of our Class A common stock, at Torneaux's option, an amount equal to 2%
of the draw down amount for the initial 30 day period and each 30 day period
thereafter until we have delivered the shares and warrants. During the 14-month
period, we may not enter into any agreement with a third party to secure equity
financings without Torneaux's prior consent, except that we may enter into a
loan, credit or lease facility with a bank, financing institution or with Gus
Constantin, our Chairman of the Board and Chief Executive Officer.

     Torneaux may terminate the common stock purchase agreement upon:

     - a material change in ownership of our company in which our officers and
       directors own less than 51% of our outstanding common stock, except as a
       result of the issuance of shares pursuant to the agreement and the
       warrants;

     - an effect on the business, operations, properties, assets or financial
       condition of our company that is material and adverse to our company and
       our subsidiaries or affiliates, taken as a whole and/or any condition or
       situation that would prohibit or otherwise interfere, in a material
       respect, with our ability to enter into and perform our obligations under
       the agreement;

     - our company's issuance of convertible debentures or entering into an
       equity financing without Torneaux's prior consent;

     - any stop order or suspension of the effectiveness of this registration
       statement for an aggregate of five trading days, for any reason other
       than deferrals or suspension during a blackout period as a result of
       corporate developments that would require the registration statement to
       be amended; or

     - our failure to comply with certain provisions in the agreement.

     In connection with the stock purchase agreement, we issued a warrant to
Peter Benz to purchase up to 75,000 shares of our Class A common stock at $2.81
per share. The warrant is exercisable through June 5, 2003.

                                       17
<PAGE>   21

     In connection with the common stock purchase agreement, we issued warrants
on June 6, 2000 to Torneaux to purchase up to 1,800,000 shares of our Class A
common stock at exercise prices ranging from $2.50 to $7.00 per share. Torneaux
may exercise the warrants through June 5, 2003. The first warrant, Warrant A, is
immediately exercisable for 125,000 shares of Class A common stock. Thereafter,
Warrant A is exercisable in increments of 125,000 shares upon the sale of the
125,000 shares previously issued. 500,000 shares of Class A common stock are
issuable to Torneaux at $2.50 per share upon the exercise of Warrant A. Once all
of the shares issued upon exercise of Warrant A have been sold, then Warrant B
may be exercised in increments of 125,000 shares upon the sale of the 125,000
shares previously issued. 500,000 warrant shares are issuable to Torneaux at
$4.00 per share upon the exercise of Warrant B. After the Warrant B shares have
been sold, then Torneaux may exercise Warrant C for up to 400,000 warrant shares
at $6.00 per share. Warrant C may be exercised in increments of 100,000 shares
upon the sale of the 100,000 shares previously issued. Upon the sale of all
shares issued under Warrant C, then Torneaux may exercise Warrant D for up to
400,000 shares of Class A common stock at $7.00 per share. Warrant D may be
exercised in increments of 100,000 shares upon the sale of the 100,000 shares
previously issued. The warrants contain provisions that protect Torneaux against
dilution by adjustment of the exercise price and the number of shares issuable
thereunder upon the occurrence of specified events, such as a merger, stock
split, stock dividend, recapitalization and additional issuances of common
stock. The exercise price for the warrant shares is payable in cash.

     Torneaux is an "underwriter" within the meaning of the Securities Act in
connection with its resale of shares of our Class A common stock under this
prospectus.

                                       18
<PAGE>   22

                                USE OF PROCEEDS

     The proceeds from the sale of our Class A common stock will be received
directly by the selling stockholder. We will receive no proceeds from the sale
of the Class A common stock offered in this prospectus. However, we will receive
the purchase price pursuant to the common stock purchase agreement to the extent
that our Class A common stock is sold under the agreement. We may also receive
proceeds relating to the exercise, if any, of the warrants. See "Financing
Arrangement with Torneaux Ltd."

     We intend to use the proceeds from puts and the exercise of the warrants,
if any, to support general corporate purposes, including working capital and
capital expenditures.

                                       19
<PAGE>   23

            MARKET FOR OUR CLASS A COMMON STOCK AND DIVIDEND POLICY

MARKET INFORMATION

     Our Class A common stock began trading on the Nasdaq National Market on
October 14, 1999 under the symbol "RPCX." The following table lists quarterly
price information based on the high and low closing prices for our Class A
common stock as reported by the Nasdaq National Market for the periods indicated
below. These prices do not include retail markups, markdowns or commissions.

<TABLE>
<CAPTION>
                                                               HIGH      LOW
                                                              ------    ------
<S>                                                           <C>       <C>
2000
  First Quarter.............................................  $25.38    $13.00
  Second Quarter (through May 31, 2000).....................   10.06      1.25
1999
  Fourth Quarter (from October 14, 1999)....................   21.38      5.63
</TABLE>

     As of April 11, 2000, there were approximately 30 holders of record of our
Class A common stock although there are a larger number of beneficial holders.
On May 31, 2000, the last reported sale price on the Nasdaq National Market for
our Class A common stock was $1.50.

DIVIDEND POLICY

     On September 12, 1999, we paid a dividend of $1,000,000 in the form of a
secured note payable to our then sole stockholder. This note was repaid in
October 1999 from the proceeds of our initial public offering. Except for the
dividend described above, we have never declared or paid dividends on our
capital stock and do not anticipate paying any dividends in the foreseeable
future. We currently intend to retain any future earnings for the expansion and
operation of our business.

                                       20
<PAGE>   24

                                 CAPITALIZATION

     The following table sets forth, as of March 31, 2000, our total
capitalization. This table should be read in conjunction with our historical
consolidated financial statements and the related notes included elsewhere in
this prospectus.

<TABLE>
<CAPTION>
                                                                      MARCH 31, 2000
                                                                ---------------------------
                                                                (IN THOUSANDS, EXCEPT SHARE
                                                                    AND PER SHARE DATA)
<S>                                                             <C>
Preferred stock, $0.001 par value per share; 5,000,000
  shares authorized, no shares issued or outstanding........             $     --
Class A common stock, $0.001 par value per share; 27,800,000
  shares authorized, 4,038,800 shares issued and
  outstanding...............................................               32,892
Class B common stock, $0.001 par value per share; 7,200,000
  shares authorized, 7,172,000 shares issued and
  outstanding...............................................                9,957
Accumulated deficit.........................................              (30,577)
                                                                         --------
  Total stockholders' equity................................             $ 12,272
                                                                         ========
</TABLE>

     The number of shares of common stock outstanding does not include 1,092,610
shares of Class A common stock issuable upon exercise of stock options
outstanding at March 31, 2000 at a weighted average exercise price of $4.61 per
share.

                                       21
<PAGE>   25

                            SELECTED FINANCIAL DATA

     The following selected financial data should be read with our consolidated
financial statements and the notes to those statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this document. The consolidated statement of operations
data for the fiscal years ended December 31, 1996, 1997, 1998, and 1999 and the
consolidated balance sheet data at December 31, 1997, 1998 and 1999, are derived
from our consolidated financial statements which have been audited by Arthur
Andersen LLP, our independent public accountants, and, except for the
consolidated statement of operations for the fiscal year ended December 31, 1996
and the consolidated balance sheet data at December 31, 1997, are included
elsewhere in this document. The consolidated statement of operations data for
the fiscal year ended December 31, 1995, and for the three months ended March
31, 1999 and 2000 and the consolidated balance sheet data at December 31, 1995
and 1996 and at March 31, 1999 and 2000 are derived from our unaudited
consolidated financial statements. Our unaudited consolidated financial
statements have been prepared on a basis consistent with our audited
consolidated financial statements. Please be advised that historical results are
not necessarily indicative of the results to be expected in the future.

<TABLE>
<CAPTION>
                                        THREE MONTHS
                                            ENDED
                                          MARCH 31,                    YEAR ENDED DECEMBER 31,
                                      -----------------   --------------------------------------------------
                                       2000      1999       1999      1998      1997     1996       1995
                                      -------   -------   --------   -------   ------   ------   -----------
                                         (UNAUDITED)                                             (UNAUDITED)
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                   <C>       <C>       <C>        <C>       <C>      <C>      <C>
CONSOLIDATED STATEMENT OF OPERATIONS
  DATA:
Revenue:
  Contract service revenue..........  $ 1,403   $   809   $  3,915   $ 2,460   $2,255   $1,175     $  896
  Contract service
     revenue-affiliate..............    1,016       478      2,772     2,182    3,085       --         --
  Software revenue..................      532        94      2,386        44       --       --         --
                                      -------   -------   --------   -------   ------   ------     ------
     Total revenue..................    2,951     1,381      9,073     4,686    5,340    1,175        896
                                      -------   -------   --------   -------   ------   ------     ------
Operating expenses:
  Cost of providing services........    3,343     1,028      5,859     4,304    3,052      570        442
  Cost of providing software
     revenue........................      324       177        901       455       --       --         --
  General and administrative........    2,305       511      4,554     1,963    1,823      298        222
  Research and development..........    1,002       656      3,185     2,181      566       --         --
  Client acquisition................    3,122       476      5,278     1,144      547      418        347
  Depreciation and amortization.....      601        91        943       307      133       12          8
  Stock-related compensation
     expense........................       --     2,358      5,007        --       --       --         --
                                      -------   -------   --------   -------   ------   ------     ------
     Total operating expenses.......   10,697     5,297     25,727    10,354    6,121    1,298      1,019
                                      -------   -------   --------   -------   ------   ------     ------
Loss from operations................   (7,746)   (3,916)   (16,654)   (5,668)    (781)    (123)      (123)
Other income........................      175         9        174        11       41       --         --
                                      -------   -------   --------   -------   ------   ------     ------
Net loss before effect of accounting
  change............................   (7,571)   (3,907)   (16,480)   (5,657)    (740)    (123)      (123)
Cumulative effect of accounting
  change............................     (129)       --         --        --       --       --         --
                                      -------   -------   --------   -------   ------   ------     ------
Net loss............................  $(7,700)  $(3,907)  $(16,480)  $(5,657)  $ (740)  $ (123)    $ (123)
                                      =======   =======   ========   =======   ======   ======     ======
Basic and diluted net loss per
  share(1):
  Net loss before effect of
     accounting change..............  $ (0.69)  $ (0.54)  $  (2.05)  $ (0.79)  $(0.10)  $(0.02)    $(0.02)
  Cumulative effect of accounting
     change.........................    (0.01)       --         --        --       --       --         --
                                      -------   -------   --------   -------   ------   ------     ------
  Net loss..........................  $ (0.69)  $ (0.54)  $  (2.05)  $ (0.79)  $(0.10)  $(0.02)    $(0.02)
Shares used in computing basic and
  diluted net loss per share........   11,201     7,200      8,055     7,200    7,200    7,200      7,200
</TABLE>

                                       22
<PAGE>   26

<TABLE>
<CAPTION>
                                                 THREE MONTHS
                                                    ENDED
                                                  MARCH 31,               YEAR ENDED DECEMBER 31,
                                               ----------------   ---------------------------------------
                                                2000      1999     1999      1998     1997    1996   1995
                                               -------   ------   -------   ------   ------   ----   ----
                                                 (UNAUDITED)                                  (UNAUDITED)
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                            <C>       <C>      <C>       <C>      <C>      <C>    <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....................  $ 9,614   $  455   $15,780   $  503   $  106   $ --   $ --
Accounts receivable..........................    1,464      575       981      601      889    303    300
Property and equipment, net..................    7,015      607     6,287      694      686    256    250
Other assets.................................    1,019       99     1,005       24       51     --     --
                                               -------   ------   -------   ------   ------   ----   ----
Total assets.................................  $19,112   $1,736   $24,053   $1,822   $1,732   $559   $550
                                               =======   ======   =======   ======   ======   ====   ====
Accounts payable and accrued liabilities.....    5,204      827     3,110    1,195      874    361    369
Deferred revenue.............................    1,636    1,536       994      627       --     --     --
Total liabilities............................    6,840    2,363     4,104    1,822      874    361    369
                                               -------   ------   -------   ------   ------   ----   ----
Stockholders' equity.........................   12,272     (627)   19,949       --      858    198    181
                                               -------   ------   -------   ------   ------   ----   ----
Total liabilities and stockholders' equity...  $19,112   $1,736   $24,053   $1,822   $1,732   $559   $550
                                               =======   ======   =======   ======   ======   ====   ====
</TABLE>

---------------

(1) Shares used in computing basic and diluted net loss per share are based on
    the weighted average shares outstanding in each period. Basic net loss per
    share excludes any dilutive effects of stock options and our employee stock
    purchase plan. Diluted net loss per share includes the dilutive effects of
    the assumed exercise of stock options using the treasury stock method and
    our employee stock purchase plan. However, the effects of outstanding stock
    options and our employee stock purchase plan have been excluded from the
    calculation of diluted net loss per share as their inclusion would be
    antidilutive.

    If the company had reported net income, the calculation of diluted earnings
    per share would have included the shares used in the computation of net loss
    per share as well as an additional 672,000 common equivalent shares in the
    quarter ended March 31, 2000 and 137,000 common equivalent shares in the
    year ended December 31, 1999 (determined using the treasury stock method)
    related to outstanding stock options and our employee stock purchase plan
    not included above. We adopted our 1999 Stock Option Plan and 1999 Employee
    Stock Purchase Plan in August 1999, and they became effective in October
    1999. Therefore, prior to October 1999, there were no dilutive effects of
    stock options and our employee stock purchase plan.

                                       23
<PAGE>   27

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with our financial
statements and the notes appearing elsewhere in this prospectus. The following
discussion contains forward-looking statements. Our actual results may differ
materially from those projected in the forward-looking statements. Factors that
might cause future results to differ materially from those projected in the
forward-looking statements include those discussed in "Risk Factors" and
elsewhere in this prospectus.

OVERVIEW

     ReSourcePhoenix.com provides outsourced financial and management reporting,
accounting management, transaction processing and record keeping services. We
allow our clients to focus on their core businesses by outsourcing the
infrastructure and operations of these critical back-office functions.

     Our operating subsidiary, ReSource/Phoenix, Inc., commenced operations on
January 1, 1997. Before this time, we operated as part of Phoenix Leasing
Incorporated, a commercial lender and sponsor and syndicator of publicly-traded
limited partnerships. In August 1999, we reorganized into a holding company
structure. As a result, we currently conduct all of our operations through our
wholly-owned subsidiary ReSource/Phoenix, Inc.

     At the time of our formation, we provided information technology,
accounting, finance and transaction processing services to entities affiliated
with Phoenix Leasing which had at that time total combined assets of more than
$200 million. We currently provide services to three clients affiliated with
Phoenix Leasing. Financial information for periods prior to January 1, 1997 have
been derived from the financial statements of Phoenix Leasing using principles
of carve-out accounting.

     We introduced our S.T.A.R. and our original Financial Outsourcing, formerly
ReFOCOS, services in 1993. Using our S.T.A.R. service, we perform a variety of
investor relations functions for sponsors of limited partnerships and real
estate investment trusts. Using our original Financial Outsourcing service, we
perform a wide variety of accounting, finance, transaction processing and other
related services for our clients. Our original Financial Outsourcing and
S.T.A.R. services are based on point-to-point client-server technology.

     In March 1999, we began licensing our M.A.R.S. software, which is a
customer relationship management application aimed at the mutual fund and
variable annuity industries. All of our software clients have entered into
annual software maintenance and support contracts. The first of these contracts
comes up for renewal in the second quarter of 2000.

     We introduced our Web-enabled Financial Outsourcing service and our hosted
M.A.R.S. service in November 1998 and August 1999, respectively. Our Web-enabled
Financial Outsourcing service is similar to our original Financial Outsourcing
service, except that clients can now access the service using the Internet. We
successfully implemented the first hosted M.A.R.S. client during the fourth
quarter of 1999. With the hosted M.A.R.S. service offerings, we install and
maintain the M.A.R.S. software in our data operations center for our clients.

     Contract service revenue. We derive contract service revenue primarily from
fees to provide monthly information technology, accounting, finance and
transaction processing for services related to Financial Outsourcing and
S.T.A.R. Prior to January 1, 2000, implementation fees and subsequent consulting
fees were recognized when the work was completed on a percentage of completion
basis. As of January 1, 2000, fees for these services are deferred and amortized
over the estimated contract service period, which is estimated to be three
years. The method of recognizing implementation and consulting fees was changed
in response to the Security and Exchange Commission's Staff Accounting Bulletin
(SAB) No. 101 "Revenue Recognition." The effect is reported as a change in

                                       24
<PAGE>   28

accounting principle in accordance with Accounting Principles Board Opinion
("APB") No. 20, "Accounting Changes". The cumulative effect of changing to a new
method of accounting effective January 1, 2000 was to increase net loss by
$129,000 or $0.01 basic and fully diluted loss per share for the three months
ended March 31, 2000.

     Contract service revenue -- affiliate. We derive contract service revenue
from affiliates by providing our S.T.A.R. and Financial Outsourcing service to
certain affiliate companies. Prior to August 1, 1999, we charged our affiliates
the fully allocated cost to provide such services. Effective August 1, 1999, we
increased our fees to affiliates to reflect a market rate. We recognize
affiliate revenue in the same manner as our contract service revenue.

     Software revenue. We derive software revenue from software license fees,
consulting services, maintenance, hosting and training for our M.A.R.S.
software. Maintenance and hosting fees have been reclassified from contract
service revenue to software revenue. Software license fee revenue consists
principally of up-front license fees earned from the licensing of the M.A.R.S.
software and related implementation and installation. Revenue from up-front
software license agreements is recognized in accordance with the American
Institute of Certified Public Accountants Statement of Position 97-2. This
revenue is recognized when delivery has occurred, collection is deemed probable,
the fee is fixed or determinable, and vendor-specific objective evidence exists
to allocate the total fee to all delivered and undelivered elements of the
arrangement. Historically, we licensed our M.A.R.S. product primarily on a
perpetual basis. Consulting services and training revenues are recognized as
services are performed and accepted by the customers. Maintenance revenue is
recognized ratably over the term of the agreement. In instances where software
license agreements include a combination of consulting services, training and
maintenance, these separate elements are unbundled from the agreement based on
the element's fair value.

     We also provide M.A.R.S. services on a hosted basis, whereby our customers
do not take possession of the software, instead, the software resides on our
server. We then provide implementation and maintenance services as described in
the paragraph above. Revenue from our hosting services (including up front
implementation fees) is recognized ratably over the term of the agreement. This
treatment is in accordance with the tentative conclusion reached by the Emerging
Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) in
its January 19 - 20, 2000 meeting, on Issue No. 00-3 "Application of AICPA
Statement of Position 97-2, Software Revenue Recognition to Arrangements that
Include the Right to Use Software Stored on Another Entity's Hardware". That
tentative conclusion was that SOP 97-2 only applies to hosting arrangements in
which the customer has the contractual right to take possession of the software
at anytime during the hosting period without significant penalty and it is
feasible for the customer to either run the software on its own hardware or
contract with an unrelated third party to host the software. In the case of our
hosting arrangements, the software may only be used through access to our data
processing facility under our direct supervision and control.

     We expect that in the future software revenue will decline as a percentage
of total revenue as we devote greater resources to our other outsourced business
services.

     Components of costs and expenses. Cost of providing services includes
salaries and benefits for personnel in our Financial Outsourcing and S.T.A.R.
operations groups, fees paid to outside service providers other than
implementation service providers and other miscellaneous operating costs. Cost
of providing software revenue includes salaries and benefits for personnel in
our M.A.R.S. technical support and installation groups and costs related to
consulting, training and updates. Prior to the quarter ended June 30, 1998,
these costs were recorded as research and development. General and
administrative expenses include salaries and benefits for management personnel,
fees paid to outside service providers for corporate-related services and other
overhead expenses. Research and development expenses include salaries and
benefits for personnel engaged in M.A.R.S. development, consulting fees paid to
outside service providers engaged in M.A.R.S. development, miscellaneous

                                       25
<PAGE>   29

costs associated with M.A.R.S. development, and similar types of expenses
engaged in application development efforts related to our Financial Outsourcing
service. Client acquisition expense primarily includes salaries, benefits and
commissions paid to our sales and marketing and implementation personnel, travel
expenses of our sales and marketing and implementation personnel, certain
advertising expenses and fees paid to outside implementation consultants.

     Stock-related compensation expense. As a result of stock options granted in
1999, we recognized stock-related compensation expense of $5.0 million in 1999,
$3.1 million of which was recognized in the first quarter of 1999.

     Revenue and operating expense trends. On April 14, 2000, we announced that
our revenue growth would be less than previously anticipated due to business
conditions and the impact of the adoption of SAB 101. Factors acting to slow
future revenue growth from levels previously anticipated include, among other
things, an expected reduction in fees from affiliate companies due to reduced
operations and the closure of one of the affiliates, delays in the selling
cycle, due in part to concerns over our financial viability going forward,
planned strategic reductions in client acquisition expenditures, and the
adoption of SAB 101 which will defer revenue that would otherwise have been
reported during the current year.

     In response to anticipated slower sales growth we initiated several steps
in late April to reduce our operating cost structure. Those steps include, among
other things, staff reductions, primarily in the areas of general and
administrative and client acquisition expenses, and reduced spending in certain
support and product development areas. These steps, together with a slower pace
of staff additions in the client services areas, began to reduce our cash
operating requirements in the middle of the second quarter. Despite these steps,
we will continue to incur losses and negative cash flow over at least the
balance of the fiscal year.

RECENT DEVELOPMENTS REGARDING DEBT FINANCINGS

     Line of Credit.  On June 7, 2000, we entered into a line of credit for up
to $2,000,000 with Pacific Business Funding, a division of Cupertino National
Bank. Pursuant to the credit agreement, we may borrow up to 80% against all
eligible receivables due within 90 days, and we will pay interest at a rate of
15% per annum on the average daily balance of the amount borrowed. In addition,
we will pay a commitment fee of 1% of the commitment amount and an
administration fee of  1/2% of the face amount of each invoice financed. The
line of credit is secured by our accounts receivable and inventory. In
connection with the credit agreement, we will issue a warrant to Pacific
Business Funding to purchase shares up to 85,715 shares of our Class A common
stock at $1.75 per share, which is the average closing price of our Class A
common stock on the Nasdaq National Market for the five trading days prior to
Pacific Business Funding's credit commitment.

     Equipment Lease Financing.  On June 6, 2000, we entered into an equipment
lease financing commitment with Lease Management Associates, Inc., which is
affiliated with Gus Constantin, our Chief Executive Officer and one of our
directors and shareholders. We expect to enter into a definitive agreement with
Lease Management Associates by the end of June 2000. Pursuant to the proposed
equipment lease line, we will sell furniture, fixtures, office and computer
equipment for up to $3,000,000 to Lease Management Associates, Inc., which we
refer to as LMA. Pursuant to the commitment, LMA agreed to lease the equipment
to our company for three years. During the term of the proposed lease, we will
make a monthly lease payment of up to $90,000 and a final lease payment of up to
$600,000. The interest rate on the equipment lease line is approximately 15% per
annum. We will grant LMA a security interest in the furniture, fixtures and
equipment. In addition, we will issue a warrant to LMA to purchase the number of
shares of our Class A common stock equal to 300,000 divided by the average
closing price of our Class A common stock for the five trading days following
our Board's approval of the transaction, which occurred on June 6, 2000.

                                       26
<PAGE>   30

CONSOLIDATED RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain items
reflected in our consolidated statement of operations expressed as a percentage
of revenue.

<TABLE>
<CAPTION>
                                               THREE MONTHS
                                                  ENDED
                                                MARCH 31,         YEAR ENDED DECEMBER 31,
                                             ----------------    -------------------------
                                              2000      1999      1999      1998     1997
                                             ------    ------    ------    ------    -----
<S>                                          <C>       <C>       <C>       <C>       <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
  Contract service revenue.................    47.5%     58.6%     43.1%     52.5%    42.2%
  Contract service revenue -- affiliate....    34.4      34.6      30.6      46.6     57.8
  Software revenue.........................    18.0       6.8      26.3       0.9       --
                                             ------    ------    ------    ------    -----
     Total revenue.........................   100.0     100.0     100.0     100.0    100.0
Operating expenses:
  Cost of providing services...............   113.3      74.4      64.6      91.9     57.2
  Cost of providing software revenue.......    11.0      12.8       9.9       9.7       --
  General and administrative...............    78.1      37.0      50.2      41.9     34.1
  Research and development.................    34.0      47.5      35.1      46.5     10.6
  Client acquisition.......................   105.8      34.5      58.2      24.4     10.2
  Depreciation and amortization............    20.4       6.6      10.4       6.5      2.5
  Stock-related compensation expense.......     0.0     170.8      55.2        --       --
                                             ------    ------    ------    ------    -----
     Total operating expenses..............   362.5     383.6     283.6     220.9    114.6
                                             ------    ------    ------    ------    -----
Loss from operations.......................  (262.5)   (283.6)   (183.6)   (120.9)   (14.6)
Other income...............................     5.9       0.7       1.9       0.2      0.7
                                             ------    ------    ------    ------    -----
Net loss before change in accounting
  principle................................  (256.6)   (282.9)   (181.7)%  (120.7)%  (13.9)%
                                             ======    ======    ======    ======    =====
Cumulative effect on prior years of change
  in accounting principle..................    (4.4)       --        --        --       --
                                             ------    ------    ------    ------    -----
Net loss...................................  (261.0)%  (282.9)%  (181.7)%  (120.7)%  (13.9)%
                                             ======    ======    ======    ======    =====
</TABLE>

QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED MARCH 31, 1999

     Revenue. Total revenue increased 114.0% or $1.6 million in the first
quarter ended March 31, 2000 when compared with the same period in 1999,
primarily due to growth in both our Financial Outsourcing service for affiliate
and non-affiliate clients and sales of our M.A.R.S. product.

     Contract service revenue. Contract service revenue increased 74.3% or $0.6
million in the first quarter of fiscal 2000 when compared with the same period
of fiscal 1999 primarily due to an increase in Financial Outsourcing revenue of
$0.5 million. The higher revenue from Financial Outsourcing was due to the net
addition of 22 new clients between March 31, 1999 and March 31, 2000. An
increase in S.T.A.R. revenue of $0.04 million was due to the addition of two new
clients and increased activity for existing clients.

     Contract service revenue -- affiliate. Contract service revenue from
affiliates increased 112.6% or $0.5 million in the first quarter of fiscal 2000
compared with the same period in 1999. The increase in contract service revenue
from affiliates was primarily due to a change in August 1999 from a fee based on
allocated cost to a fee schedule that was reflective of market rates for the
services provided.

                                       27
<PAGE>   31

     Software revenue. Software revenue increased 466.0% or $0.4 million in the
first quarter of fiscal 2000 when compared with the same period in 1999. This
increase was primarily due to the introduction of our current M.A.R.S. release
in March 1999. Revenue in the current quarter was primarily related to the sale
of additional licenses to existing clients, rather than the addition of new
clients, and higher maintenance revenue.

     Cost of providing services. Cost of providing services increased 225.2% or
$2.3 million in the first quarter of fiscal 2000 when compared with the same
period in 1999. The increase was primarily due to the increase in the number of
clients serviced, which required us to add full time and contract personnel in
our operations group. Increased labor, labor-related benefit and contract labor
expenses accounted for 71.2% of the increase in our cost of providing services.

     The rate of increase in cost of services exceeded the rate of revenue
growth from services for the quarter. Revenues from implementation services are
now deferred and recognized ratably over three years rather than the actual
average implementation phase of one to three months.

     This was due in part to the adoption of SAB 101 which had the effect of
deferring a significant portion of revenue that would otherwise have been
recorded in the period and to the rapid expansion of staff in the client
services area. Such staff were hired in anticipation of a higher number of
client additions than materialized. Staff reduction, together with a slower rate
of staff additions going forward and are expected to return us to positive gross
margins later in the fiscal year.

     Cost of providing software revenue. Cost of providing software revenue
increased 83% or $0.1 million in the first quarter of fiscal 2000 when compared
with the same period in 1999. The increase was due primarily to the increase in
M.A.R.S. clients from seven as of March 31, 1999 to 10 at the end of the first
quarter of fiscal 2000.

     General and administrative expenses. General and administrative expenses
increased 351.1% or $1.8 million in the first quarter 2000 compared with the
same period in 1999. The increase was primarily due to the hiring of additional
management and administrative personnel to support our operations.

     Research and development expenses. Research and development expenses
increased 52.7% or $0.3 million in the first quarter 2000 when compared with the
same period of fiscal 1999. The increase was due primarily to hiring additional
full-time and contract personnel to develop enhancements and new features to our
M.A.R.S software product and conduct application development work for our
Financial Outsourcing services.

     Client acquisition expenses. Client acquisition expenses increased 555.9%
or $2.6 million in first quarter 2000 compared with the same period of fiscal
1999. The increase was due largely to incremental salary and benefits expense of
$1.2 million associated with hiring additional sales and implementation
personnel for our Financial Outsourcing services and, to a lesser extent,
M.A.R.S. An increase of $0.4 million in consultant expenses incurred supporting
new Financial Outsourcing client implementations. Increased sales support costs,
including the opening of 14 regional sales offices, together with higher
advertising and promotional expenses also contributed to higher costs in first
quarter 2000 compared to the same period in 1999.

     Stock-related compensation expense. As a result of stock options granted in
1999, we recognized stock-related compensation expense of $2.4 million in first
quarter 1999. We had no stock-related compensation expense in the first quarter
of 2000.

     Cumulative effect on prior years for a change in accounting principle. As
of January 1, 2000, the method of recognizing implementation fees for our
Financial Outsourcing and for M.A.R.S. hosted clients was changed from a
percentage of completion basis to recognition ratably over the

                                       28
<PAGE>   32

estimated contract life. We adopted a three year period for such amortization,
in response to the Security and Exchange Commission's Staff Accounting Bulletin
(SAB) No. 101 "Revenue Recognition." In accordance with Accounting Principles
Board Opinion ("APB") No. 20, "Accounting Changes," the effect of changing to a
new method of accounting effective at the beginning of our fiscal year, January
1, 2000 is to report the cumulative effect on prior year income as of January 1,
2000 which resulted in an increase in net loss of $129,000.

     The impact of the change was to reduce Financial Outsourcing revenue by
$415,000 and Software revenue by $335,000 for a total of $750,000 or $0.07 per
share for the quarter ended March 31, 2000.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

     Revenue. Total revenue increased 94% to $9.1 million in 1999 from $4.7
million in 1998, primarily due to growth in both our Financial Outsourcing
service for non-affiliate clients and sales of our M.A.R.S. product.

     Contract service revenue. Contract service revenue increased 62% to $3.9
million in 1999 from $2.5 million in 1998. Financial Outsourcing revenue
increased 138% to $1.9 million in 1999 from $0.8 million in 1998. The revenue
increase was primarily due to the increase in the number of non-affiliated
Financial Outsourcing clients from eleven at December 31, 1998 to 23 at December
31, 1999. S.T.A.R. revenue increased 20% to $2.0 million in 1999 from $1.7
million in 1998. The increase in S.T.A.R. revenue was attributed to the addition
of one new client in the year and increased activity for existing clients. The
total number of S.T.A.R. clients in 1999 was 14 compared to 13 in the prior
year.

     Contract service revenue -- affiliate. Contract service revenue from
affiliates increased 27% to $2.8 million in 1999 from $2.2 million in 1998. The
increase in contract service revenue from affiliates was primarily due to a
change in August 1999 from a fee based on allocated cost to a fee schedule that
was reflective of market rates for the services provided.

     Software revenue. Software revenue increased to $2.4 million in 1999 from
$44,000 in 1998. This increase was primarily due to the introduction of our
current M.A.R.S. release in March 1999. The number of M.A.R.S. clients under
contract increased from 6 at December 31, 1998 to 10 at December 31, 1999.

     Cost of providing services. Cost of providing services increased 36% to
$5.9 million in 1999 from $4.3 million in 1998. The increase was primarily due
to the increase in the number of clients serviced, which required us to add
personnel in our operations group. Increased labor and related benefit expenses
accounted for 86% of the increase in our cost of providing services and
represented 88% of the total cost of providing services in 1999 and in 1998.

     Cost of providing software revenue. Cost of providing software revenue
increased 98% to $0.9 million in 1999 from $0.5 million in 1998. The increase
was primarily due to the increase in M.A.R.S. contracts.

     General and administrative expenses. General and administrative expenses
increased 132% to $4.6 million in 1999 from $2.0 million in 1998. The increase
was primarily due to the hiring of additional management and administrative
personnel to support our operations.

     Research and development expenses. Research and development expenses
increased 46% to $3.2 million in 1999 from $2.2 million in 1998. The increase
was primarily due to hiring additional full-time and contract personnel to
develop enhancements and new features to our M.A.R.S. software product and
conduct application development work for our Financial Outsourcing services.

                                       29
<PAGE>   33

     Client acquisition expenses. Client acquisition expenses increased 361% to
$5.3 million in 1999 from $1.1 million in 1998. The increase was due largely to
an incremental salaries and benefits expense of $1.9 million associated with
hiring additional sales and implementation personnel for our Financial
Outsourcing services and, to a lesser extent, M.A.R.S. Consultant expenses
incurred supporting new outsourcing client implementations and the transition of
existing clients to our Web-enabled Financial Outsourcing service, together with
increased advertising and promotional expenses, also contributed to higher costs
in 1999 compared to 1998.

     Stock-related compensation expense. As a result of stock options granted in
1999, we recognized stock-related compensation expense of $5.0 million in 1999.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

     Revenue. Total revenue decreased 12% to $4.7 million in 1998 from $5.3
million in 1997, primarily due to a decrease in contract service revenue from
affiliates from $3.1 million in 1997 to $2.2 million in 1998.

     Contract service revenue. Contract service revenue increased 9% to $2.5
million in 1998 from $2.3 million in 1997. S.T.A.R. revenue increased 6% to $1.7
million in 1998 from $1.6 million in 1997. Financial Outsourcing revenue
increased 14% to $0.8 million in 1998 from $0.7 million in 1997. During this
period, the number of our S.T.A.R. clients increased to 13 in 1998 from 11 in
1997 and the number of non-affiliate Financial Outsourcing clients increased to
seven in 1998 from five in 1997. A number of the new contract service clients
began service late in 1998 so we did not benefit from a full year of revenue
from these clients.

     Contract service revenue -- affiliate. Contract service revenue from
affiliates decreased 29% to $2.2 million in 1998 from $3.1 million in 1997. This
decrease in contract service revenue from affiliates was due to the disposal by
an affiliate of certain of its business units for which we provided contract
services.

     Software revenue. Software revenue increased from zero in 1997 to $44,000
in 1998. This increase consists primarily of non-refundable installation fees
for our M.A.R.S. product.

     Cost of providing services. Cost of providing services increased 41% to
$4.3 million in 1998 from $3.1 million in 1997. The increase was primarily due
to the increase in the number of clients serviced, which required us to add
personnel in our operations group and resulted in additional salaries and
benefits of $1.2 million for these personnel.

     Cost of providing software revenue. Cost of providing software revenue
increased to $0.5 million in 1998 from zero in 1997. The increase was due to the
increase in M.A.R.S. contracts.

     General and administrative expenses. General and administrative expenses
were essentially unchanged at $2.0 million and $1.8 million in 1998 and 1997,
respectively.

     Research and development expenses. Research and development expenses
increased 285% to $2.2 million in 1998 from $0.6 million in 1997. The increase
was primarily due to hiring additional full-time and contract personnel to
develop enhancements and new features to our M.A.R.S. software product.

     Client acquisition expenses. Client acquisition expenses increased 109% to
$1.1 million in 1998 from $0.5 million in 1997. The increase was primarily due
to salaries, benefits and travel expenses of $0.5 million associated with hiring
additional sales and implementation personnel for the M.A.R.S. and Financial
Outsourcing services as well as costs associated with hiring additional
implementation consultants to transition our existing Financial Outsourcing
clients to our Web-enabled service.

                                       30
<PAGE>   34

QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth selected unaudited quarterly consolidated
financial information for each of the eight quarters in the period ended March
31, 2000, as well as such data expressed as a percentage of our revenue for the
periods presented. This information has been derived from unaudited consolidated
statement of operations data that, in the opinion of management, are stated on a
basis consistent with the audited consolidated financial statements and include
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of such information in accordance with generally accepted
accounting principles. Certain prior period amounts have been reclassified to
conform to the current period presentation. Our results of operations for any
quarter are not necessarily indicative of the results to be expected in any
future period.
<TABLE>
<CAPTION>
                                                                              QUARTER ENDED
                                              ------------------------------------------------------------------------------
                                              MARCH 31,   DECEMBER 31,   SEPTEMBER 30,   JUNE 30,   MARCH 31,   DECEMBER 31,
                                                2000          1999           1999          1999       1999          1998
                                              ---------   ------------   -------------   --------   ---------   ------------
                                                                              (IN THOUSANDS)
<S>                                           <C>         <C>            <C>             <C>        <C>         <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
  Contract service revenue..................   $ 1,403      $ 1,221         $   953      $   932     $   809      $   643
  Contract service revenue -- affiliate.....     1,016        1,059             800          435         478          559
  Software revenue..........................       532          322             557        1,413          94            2
                                               -------      -------         -------      -------     -------      -------
    Total revenue...........................     2,951        2,602           2,310        2,780       1,381        1,204
Operating expenses:
  Cost of providing services................     3,343        2,030           1,423        1,378       1,028          916
  Cost of providing software revenue........       324          268             231          225         177          187
  General and administrative................     2,305        2,085           1,470          488         511          807
  Research and development..................     1,002          812           1,022          695         656          956
  Client acquisition........................     3,122        2,805           1,384          613         476          528
  Depreciation and amortization.............       601          464             251          137          91           86
  Stock-related compensation expense........        --        3,051          (3,335)       2,933       2,358           --
                                               -------      -------         -------      -------     -------      -------
    Total operating expenses................    10,697       11,515           2,446        6,469       5,297        3,480
                                               -------      -------         -------      -------     -------      -------
Loss from operations........................    (7,746)      (8,913)           (136)      (3,689)     (3,916)      (2,276)
Other income (expense)......................       175          184             (27)           8           9            3
                                                            -------         -------      -------     -------      -------
Net loss before effect of accounting
  change....................................    (7,571)      (8,729)           (163)      (3,681)     (3,907)      (2,273)
Cumulative effect of accounting change......      (129)          --              --           --          --           --
                                               -------      -------         -------      -------     -------      -------
Net loss....................................   $(7,700)     $(8,729)        $  (163)     $(3,681)    $(3,907)     $(2,273)
                                               =======      =======         =======      =======     =======      =======

<CAPTION>
                                                   QUARTER ENDED
                                              ------------------------
                                              SEPTEMBER 30,   JUNE 30,
                                                  1998          1998
                                              -------------   --------
                                                   (IN THOUSANDS)
<S>                                           <C>             <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
  Contract service revenue..................     $   579      $   574
  Contract service revenue -- affiliate.....         589          481
  Software revenue..........................           2           40
                                                 -------      -------
    Total revenue...........................       1,170        1,095
Operating expenses:
  Cost of providing services................       1,041        1,125
  Cost of providing software revenue........         210           58
  General and administrative................         489          373
  Research and development..................         588          363
  Client acquisition........................         262          176
  Depreciation and amortization.............          80           73
  Stock-related compensation expense........          --           --
                                                 -------      -------
    Total operating expenses................       2,670        2,168
                                                 -------      -------
Loss from operations........................      (1,500)      (1,073)
Other income (expense)......................          49          (21)
                                                 -------      -------
Net loss before effect of accounting
  change....................................      (1,451)      (1,094)
Cumulative effect of accounting change......          --           --
                                                 -------      -------
Net loss....................................     $(1,451)     $(1,094)
                                                 =======      =======
</TABLE>
<TABLE>
<CAPTION>
                                                                AS A PERCENTAGE OF REVENUE
                                              ---------------------------------------------------------------
                                              MARCH 31,   DECEMBER 31,   SEPTEMBER 30,   JUNE 30,   MARCH 31,
                                                2000          1999           1999          1999       1999
                                              ---------   ------------   -------------   --------   ---------
<S>                                           <C>         <C>            <C>             <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
  Contract service revenue..................     47.5%         48.5%          42.8%         33.7%      58.9%
  Contract service revenue -- affiliate.....     34.4          40.7           34.6          15.6       34.6
  Software revenue..........................     18.0          10.8           22.7          50.7        6.5
                                               ------        ------         ------        ------     ------
    Total revenue...........................    100.0         100.0          100.0         100.0      100.0
Operating expenses:
  Cost of providing services................    113.3          78.0           61.6          49.6       74.4
  Cost of providing software revenue........     11.0          10.3           10.0           8.1       12.8
  General and administrative................     78.1          80.1           63.6          17.6       37.0
  Research and development..................     34.0          31.2           44.2          25.0       47.5
  Client acquisition........................    105.8         107.8           59.9          22.1       34.5
  Depreciation and amortization.............     20.4          17.8           10.9           4.9        6.6
  Stock-related compensation expense........       --         117.3         (144.4)        105.5      170.7
                                               ------        ------         ------        ------     ------
    Total operating expenses................    362.5         442.5          105.9         232.7      383.6
                                               ------        ------         ------        ------     ------
Loss from operations........................   (262.5)       (342.5)          (5.9)       (132.7)    (283.6)
                                               ------        ------         ------        ------     ------
Other income (expense)......................      5.9           7.1           (1.2)          0.3        0.7
Net loss before effect of accounting
  change....................................   (256.6)       (335.5)          (7.1)       (132.4)    (282.9)
                                               ------        ------         ------        ------     ------
Cumulative effect of accounting change......     (4.4)           --             --            --         --
                                               ------        ------         ------        ------     ------
Net loss....................................   (261.0)%      (335.5)%         (7.1)%      (132.4)%   (282.9)%
                                               ======        ======         ======        ======     ======

<CAPTION>
                                                    AS A PERCENTAGE OF REVENUE
                                              ---------------------------------------
                                              DECEMBER 31,   SEPTEMBER 30,   JUNE 30,
                                                  1998           1998          1998
                                              ------------   -------------   --------
<S>                                           <C>            <C>             <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
  Contract service revenue..................       53.6%          49.7%        52.5%
  Contract service revenue -- affiliate.....       46.4           50.3         43.9
  Software revenue..........................         --             --          3.6
                                                 ------         ------        -----
    Total revenue...........................      100.0          100.0        100.0
Operating expenses:
  Cost of providing services................       76.1           89.0        102.7
  Cost of providing software revenue........       15.5           17.9          5.3
  General and administrative................       67.0           41.8         34.1
  Research and development..................       79.4           50.3         33.2
  Client acquisition........................       43.9           22.4         16.1
  Depreciation and amortization.............        7.1            6.8          6.7
  Stock-related compensation expense........         --             --           --
                                                 ------         ------        -----
    Total operating expenses................      289.0          228.2        198.0
                                                 ------         ------        -----
Loss from operations........................     (189.0)        (128.2)       (97.9)
                                                 ------         ------        -----
Other income (expense)......................        0.2            4.2         (1.9)
Net loss before effect of accounting
  change....................................     (188.8)        (124.0)       (99.9)
                                                 ------         ------        -----
Cumulative effect of accounting change......         --             --           --
                                                 ------         ------        -----
Net loss....................................     (188.8)%       (124.0)%      (99.9)%
                                                 ======         ======        =====
</TABLE>

                                       31
<PAGE>   35

     Revenue. Our total revenue has fluctuated over the last eight quarters
primarily as a result of increases in contract service revenue from affiliates,
the introduction of our M.A.R.S. software product in March 1999 and increases in
contract service revenue. The increasing revenue, particularly for the three
quarters ended March 31, 2000, was also due to an increase in the number of
clients, which was due to the addition of sales and marketing personnel
beginning in October 1998.

     Contract service revenue. Contract service revenue increased from $0.6
million for the quarter ended June 30, 1998 to $1.4 million for the quarter
ended March 31, 2000 primarily as a result of adding additional Financial
Outsourcing clients.

     Contract service revenue -- affiliate. Contract service revenue from
affiliates historically has fluctuated as a result of the disposition of
affiliated entities and more recently due to a change in the quarter ended
September 30, 1999 from a fee based on allocated cost to fee schedule based on
market rates.

     Software revenue. The increase in software revenue was primarily due to the
introduction of our current M.A.R.S. release in March 1999 and the increase in
dedicated sales personnel. Software revenue in the quarter ended March 31, 2000
includes $0.4 million of revenue deferred in prior periods, which was recognized
at the time of final installation and acceptance of our M.A.R.S. product by some
of our customers. Prior to 1999, the M.A.R.S. product was in beta testing at
client sites. Customer acceptance was contingent upon installation of a final
working copy of the software, which occurred during the quarter ended June 30,
1999. As a result, all software revenue was deferred until customer acceptance
was received as required under SOP 97-2 except an insignificant amount of
non-refundable installation fees. The number of M.A.R.S. clients under contract
increased from six at December 31, 1998 to 10 at March 31, 2000.

     Cost of providing services. Cost of providing services has generally
increased since December 31, 1997. These increases were primarily due to the
addition of additional personnel and related expenses to service new clients and
prepare for anticipated growth. Some of these operational infrastructure costs
will be spread over future clients and as a result we expect that these costs as
a percentage of revenue will decline in the future.

     Cost of providing software revenue. Cost of providing software revenue has
generally increased over the eight quarters ended March 31, 2000. This increase
has been primarily due to the increase in the number of M.A.R.S. contracts.

     General and administrative expenses. General and administrative expenses
have fluctuated on a quarter-to-quarter basis as a result of additional
personnel and related infrastructure to service new clients. The increase in
general and administrative expenses for the quarter ended December 31, 1998 was
primarily the result of an accrual for estimated legal fees. The increase in
general and administrative expenses for the quarters ended September 30, 1999,
December 31, 1999 and March 31, 2000 represents additional personnel and support
costs underlying current and anticipated client growth.

     Research and development expenses. Research and development expenses have
fluctuated due to the hiring of an increased number of outside consultants to
complete the development of our M.A.R.S. software product. The increase in
research and development expenses for the quarter ended September 30, 1999 was
primarily due to hiring additional full-time and contract personnel to develop
enhancements and new features to our M.A.R.S. software product and conduct
application development work for our Financial Outsourcing services. Development
of our M.A.R.S. software product was substantially completed in the quarter
ended December 31, 1999. Accordingly, we reduced the number of consultants used
during this period, which reduced the amount of our research

                                       32
<PAGE>   36

and development expenses. During the quarter ended March 31, 2000, we increased
the use of consultants to conduct development work for our Financial Outsourcing
services.

     Client acquisition expenses. Client acquisition expenses have generally
increased on a quarter-to-quarter basis due to an increase in the number of new
clients, increases in our personnel and investments in infrastructure. We
completed the initial installations of our Web-enabled Financial Outsourcing
service during the quarter ended December 31, 1998 and the increases in client
acquisition expenses in 1999 and 2000 reflect increased staff, the use of
outside consultants working in conjunction with our internal implementation
group, and increased advertising and promotional expenses.

     Stock-related compensation expense. Prior to the quarter ended December 31,
1999, stock-related compensation expenses represented expenses incurred in
connection with our phantom stock plan. Awards under this plan vested over four
years. The expenses for the quarters ended June 30, 1999 and March 31, 1999 were
based on estimated share values of $26.09 and $23.48, respectively. In the
quarter ended September 30, 1999, the estimate of the share value was revised to
$8.00 per share based on the price at which shares were sold in our initial
public offering. As a result, compensation expense was reduced by $3.3 million.
Upon our initial public offering, our phantom stock plan was terminated and
replaced by our 1999 stock option plan. In the quarter ended December 31, 1999,
compensation expense of $2.0 million previously charged under the phantom plan
was reversed and compensation expense of $5.0 million, representing the
difference between the fair value of $8.00 per share and the exercise price of
$2.08, was charged.

     Our quarterly operating results have in the past and will in the future
vary significantly depending on a variety of factors, including the number and
size of new clients starting services, the decision of one or more clients to
delay or cancel implementation or ongoing services, our ability to design,
develop and introduce new services and features for existing services on a
timely basis, transition costs to new technologies, expenses incurred for
geographic expansion, price competition, and general economic factors. A
substantial majority of our operating expenses, particularly personnel and
related costs, depreciation and rent, are relatively fixed in advance of any
particular quarter. Our agreements with our clients generally do not have
significant penalties for cancellation. As a result, any decision by a client to
delay or cancel implementation of our services or the under-utilization of
personnel may cause significant variations in operating results in a particular
quarter and could result in additional losses for such quarter. In addition, our
business may be affected by the risks set forth in "Risk Factors." Our future
revenue and operating results may vary substantially from quarter to quarter as
well as year to year.

YEAR 2000 COMPLIANCE

     As of May 31, 2000, we had not incurred any material cost directly
associated with our year 2000 compliance efforts, except for compensation
expense associated with our salaried employees who have devoted some of their
time to our year 2000 assessment and remediation efforts. We do not expect the
total cost of year 2000 issues to be material to our business, financial
condition and operating results.

     As of May 31, 2000, we had not encountered any material year 2000 problems
with the hardware and software systems used in our operations. In addition, none
of our critical venders have reported any material year 2000 problems nor have
we experienced any decline in service levels from such venders.

     We expect to continue to monitor internal and external issues related to
year 2000. While no material problems have been discovered, we cannot assure you
that material problems will not materialize in the future.

                                       33
<PAGE>   37

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have financed our operations primarily through equity
contributions and loans from the Gus and Mary Jane Constantin 1978 Living Trust,
our sole stockholder prior to our initial public offering, and from the net
proceeds of our initial public offering, which closed in October 1999.

     At March 31, 2000, we had approximately $9.6 million of cash and cash
equivalents. Net cash used in operating activities in the first three months of
2000 and 1999 was $4.9 million and $1.0 million, respectively. The cash used in
operating activities in 2000 and 1999 was primarily the result of net losses.

     Net cash used in investing activities was $1.3 million in first quarter
2000 and $5,000 in the first quarter of 1999. The net cash used in investing
activities resulted primarily from capital expenditures for data processing
equipment, leasehold improvements and furniture and fixtures. We expect to make
additional capital expenditures for computer hardware and software, furniture,
equipment and fixtures to support the continued growth of our operations.

     Net cash provided by financing activities was $23,000 in first quarter 2000
and $0.9 million, in the first three months 1999. Net cash provided by financing
activities in 2000 resulted from the exercise of certain employee options. Net
cash provided by financing activities in the first three months of 1999 was due
to capital contributions from our then sole stockholder.

     We will need to raise additional capital during the second quarter.
Subsequent to the end of the first quarter, we began to implement a number of
steps aimed at reducing our operating costs. Those steps included, among other
things, staff reductions amounting to approximately 15% of our work force and
cessation of certain development efforts that will reduce expenditures for
outside consulting expertise. Despite these efforts, we will continue to operate
at a significant cash negative level. To obtain additional financing, we entered
into a common stock purchase agreement with Torneaux. Our ability to raise funds
pursuant to the agreement with Torneaux is subject to certain conditions at the
time of each sale of our Class A common stock. We may not be able to satisfy the
conditions for each sale of our Class A common stock. On June 6, 2000, we
entered into an equipment lease financing commitment for up to $3,000,000 with
Lease Management Associates, Inc., which is affiliated with Gus Constantin, our
Chief Executive Officer and one of our directors and shareholders. On June 7,
2000, we entered into a line of credit for up to $2,000,000 with Pacific
Business Funding, a division of Cupertino National Bank. We cannot assure you
that these financing arrangements will be adequate for our needs.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements" which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. Subsequently,
the SEC released SAB 101A, which delayed the implementation date of SAB 101 for
registrants with fiscal years that begin between December 16, 1999 and March 15,
2000 to the second quarter of their fiscal year. We elected to implement SAB No.
101 in the first quarter of 2000, the effect of which is described as follows:

     Effective January 1, 2000, we deferred recognition of implementation fees
for our Financial Outsourcing, S.T.A.R. and M.A.R.S. hosting services and will
amortize such fees ratably over a three-year period as client services are
performed. Prior to January 1, 2000, implementation fees were recognized when
the work was completed on a percentage of completion basis. The cumulative
effect of the change in the method of recognizing implementation revenue on
prior years' income was a

                                       34
<PAGE>   38

one-time charge of $129,000 or $0.01 per share. Of this amount, $85,000 is
attributable to the first quarter of 1999. The effect of this change in
accounting principle on first quarter 2000's revenue was to reduce total revenue
from $3.7 million to $3.0 million. Costs related to client implementation
activities are expensed as incurred.

     Set forth below is a comparison of operating results for the three months
ended March 31, 2000:

<TABLE>
<CAPTION>
                                                                ASSUMING SAB 101 HAD
                                                                  NOT BEEN ADOPTED
                                              MARCH 31, 2000       MARCH 31, 2000
                                              --------------    --------------------
<S>                                           <C>               <C>
Revenue.....................................     $ 2,951              $ 3,701
Operating Expenses..........................      10,697               10,697
Net Loss from Operations....................      (7,746)              (6,996)
</TABLE>

     In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued. We
are required to adopt this statement in fiscal 2001. Because we do not currently
use any derivative instruments, we do not anticipate that the adoption of the
new statement will have a significant effect on our business or operating
results.

     In December 1998, the American Institute of Certified Public Accountants
issued SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions." SOP 98-9 amends SOP 97-2 and SOP 98-4
extending the deferral of the application of certain provisions of SOP 97-2 as
amended by SOP 98-4 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999. We have adopted SOP 98-9 and it did
not have a material effect on our operating results or financial position.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We do not hold derivative financial instruments, derivative commodity
investments or other financial investments or engage in foreign currency hedging
or other transactions that expose us to material market risk.

                                       35
<PAGE>   39

                                    BUSINESS

OVERVIEW

     ReSourcePhoenix.com provides outsourced financial and management reporting,
accounting management, transaction processing and record keeping services. We
allow our clients to focus on their core businesses by outsourcing the
infrastructure and operations of these critical back-office functions.

     We are pioneering the use of the Internet to integrate leading enterprise
resource planning software applications with the expertise of information
technology, finance, accounting and transaction processing professionals. Our
solution offers the cost-effective benefits of outsourcing while providing the
flexibility, control, customization, integration and scalability of an in-house
system. We offer our clients access to leading enterprise resource planning
software applications, which often are too costly and complex for early stage
and middle market companies to obtain and operate.

INDUSTRY BACKGROUND

     Businesses increasingly need financial and management reporting systems
that can collect, organize and disseminate information quickly and accurately
for strategic, financial and competitive reasons. This trend has increased the
competitive pressures on these companies to automate business processes and
invest in more complex technology as a way to improve their information
technology systems.

Shortfalls of traditional business information systems

     Current solutions are complex and costly. We believe that many of the
leading enterprise resource planning software packages remain too complex and
costly to be effective business process automation solutions for early stage and
middle market companies. While many enterprise resource planning providers offer
products that are targeted for these companies, the initial purchase,
implementation, integration and operation of these packages generally require
specialized knowledge and take up to twelve months, and frequently longer.
Additionally, the infrastructure required to support these packages, once
implemented, is frequently cost prohibitive for many early stage and middle
market businesses. Faced with these challenges, many of these companies choose
to forgo the capabilities of leading enterprise resource planning software
packages in favor of less functional products.

     Personnel gap. The high cost of automating business processes has been
exacerbated by the level of technical skill necessary to manage this technology
and the shortage of qualified information technology, accounting, finance, and
transaction processing professionals. There are indications that this shortage
will continue and become more severe. Management consulting firm A.T. Kearney
recently estimated that the shortage of high technology workers in Silicon
Valley resulted in one in three jobs requiring special recruitment efforts or
going unfilled, which leads to a loss of over $3 billion per year in lost
production and additional recruiting costs. A 1998 study by the Information
Technology Association of America found a shortage of 346,000 programmers,
systems analysts and computer scientists.

     The emergence of ASPs and their limitations. Traditionally, companies
wanting to implement Internet-enabled applications had to develop their own
software applications or customize existing software packages. Recently, a
number of companies known as application service providers, or ASPs, began
providing integrated software applications for business enterprises. ASPs manage
the hardware and software at their data centers and provide access to clients
over the Internet. ASPs do not,

                                       36
<PAGE>   40

however, provide the accounting, financial analysis, data compilation or
transaction processing professionals and infrastructure that is required to
effectively operate these software applications. Moreover, ASPs can exacerbate
an existing problem by putting more complicated technology in the hands of users
without providing the additional training or support that is required to operate
this technology effectively.

Need for an outsourced solution

     International Data Corporation estimated that outsourcing spending in the
United States will grow from approximately $51 billion in 1998 to more than $81
billion in 2003. Reasons for the growth in outsourcing include:

     - the desire by companies to focus on their core businesses;

     - the difficulties of attracting and retaining qualified personnel in
       information technology, accounting, finance, transaction processing and
       other business specialties;

     - the time and expense required to keep these personnel current in their
       skills;

     - the inability of many companies to effectively adopt and implement
       advanced business processes;

     - the challenges inherent in developing and maintaining software
       applications, and data and communications networks; and

     - the ongoing cost to keep up with leading technologies.

     Designing, developing and implementing information technology solutions for
individual businesses has become increasingly complex. Companies can improve
their core business processes, reduce costs and enhance their competitive
position by outsourcing these processes to an affordable, single-source provider
that integrates the functionality of leading enterprise resource planning
software applications with the expertise of information technology, accounting,
finance and transaction processing professionals.

OUR SOLUTION

     We provide our clients with a single-source, cost-effective outsourced
financial and management reporting solution, which allows our clients to:

     - Maintain focus on growing their businesses. Our solution allows our
       clients to focus on executing their business strategy. By outsourcing
       these critical back-office functions to us, our clients minimize the
       distractions of managing the personnel and technology necessary to
       perform these tasks and instead focus on their core businesses.

     - Receive better business information. We allow our clients to utilize and
       benefit from leading enterprise resource planning software applications,
       which are often too costly and complex for early stage and middle market
       companies to obtain and operate. These applications can provide more
       detailed information on costs, expenses, trends, budgeting, sales and
       other areas more quickly than less functional solutions.

                                       37
<PAGE>   41

     - Reduce costs. Early stage and middle market companies often are
       financially constrained and seek to reduce the use of capital for
       non-core functions. By outsourcing these functions, these companies can
       reduce or eliminate the costs of:

       -- purchasing enterprise resource planning and other functional software
          and computer hardware;

       -- integrating and implementing the software and hardware with existing
          systems;

       -- recruiting, hiring and training an extensive staff of information
          technology, accounting, finance, transaction processing and other
          business professionals;

       -- ongoing training of these personnel in their respective operational
          areas;

       -- expanding overhead to support the growing organization; and

       -- ongoing technology and process upgrades.

     - Gain access to the most advanced enterprise resource planning
       applications available. We are committed to providing our clients with
       the most advanced enterprise resource planning applications available. We
       currently employ a dedicated information technology group whose function
       is to continually evaluate new applications and technologies, as well as
       integrate new releases of existing software applications into our service
       offerings. As a result, our clients have access to leading applications,
       such as Oracle financial reporting and database applications, while
       avoiding the complexity of keeping current with multiple product and
       service roll-outs.

     - Gain access to the expertise of a broad range of professionals. We offer
       our clients access to a broad range of professionals who are
       highly-qualified and specialized in areas of information technology,
       accounting, finance and transaction processing. Our business
       professionals assess each client's needs, reengineer and design each
       client's business processes and implement a value-added solution. The
       skills offered by these professionals generally are in short supply and
       difficult for many companies to acquire. We believe that we are well
       positioned to attract and retain these professionals because we offer
       expanded opportunities for development and career advancement and
       exposure to leading-edge technologies not customarily found at many early
       stage and middle market companies.

OUR STRATEGY

     Our objective is to become the leading single-source provider of financial
and management reporting services for early stage and middle market companies,
and selected financial services companies. Key elements of our strategy include:

     - Target early stage and middle market companies. We plan to focus our
       marketing efforts on early stage and middle market companies. These
       companies often have difficulty collecting, organizing and disseminating
       financial and business information and often are more receptive to
       outsourcing as a means of solving these problems. We plan to establish
       early relationships with these companies and grow with them as their
       needs in these areas expand and become more complex.

     - Build recurring revenue by continuing to emphasize client service. We
       plan to continue to build recurring revenue by supporting our clients'
       needs as they grow. We believe that our client service focus will enable
       us to expand our existing client relationships and to add new clients.

                                       38
<PAGE>   42

     - Extend technology leadership. We believe that our ability to offer the
       latest, most technologically advanced services possible is critical to
       expanding our current client relationships and client base. To this end,
       we employ a sizable staff of business and information technology
       professionals whose function is to expand and update our service
       offerings so that our clients can benefit from the latest technology
       available. We also aggressively recruit key professionals in
       implementation and information technology management including research
       and development, development and quality assurance.

     - Strengthen our brand. We believe that a strong brand is critical to
       attracting and expanding our client base. Until now we have relied on our
       own sales and marketing professionals, and referrals from our current
       clients and strategic partners as our primary means of attracting new
       clients. We launched a comprehensive advertising campaign, which includes
       Internet, radio and print advertisements, in September 1999.

     - Offer integrated e-commerce solutions. We plan to offer integrated
       software applications to our clients that seek e-commerce solutions. Our
       goal is to offer our clients a complete solution including online
       transaction processing, integration of databases, and management of
       network architecture and back-office operations. We entered into
       relationships with BroadVision in November 1999 and with Vitria in
       December 1999 to integrate their solutions into our service offerings.

     - Broaden service offerings. We plan to broaden our service offerings,
       including payroll and human resource management services, through
       strategic alliances. These alliances could include co-marketing or
       co-branding relationships. We believe that by offering these additional
       services, we will be able to provide a more comprehensive solution to
       alleviate the problems encountered by our clients performing these
       functions internally.

     - Develop additional relationships with trusted business partners of early
       stage and middle market companies. We plan to leverage and expand our
       relationships with the professional advisors, key suppliers and other
       trusted business partners of early stage and middle market companies who
       have the ability to refer business to us. For example, we currently have
       relationships with certain banking institutions for venture-backed, early
       stage companies, and with Sun Microsystems and Cisco Systems, two leading
       producers of network infrastructure, in which these companies have agreed
       to refer prospective clients to us. We plan to develop additional
       relationships with leading law firms, venture capital firms and other
       professional services firms that service early stage and middle market
       companies.

                                       39
<PAGE>   43

OUR OFFERINGS

     Each of our service offerings is summarized below:

<TABLE>
<S>              <C>                      <C>
------------------------------------------------------------------------------------------------
    PRODUCT           TARGET MARKET                          SERVICES OFFERED
------------------------------------------------------------------------------------------------
 FINANCIAL       - Early stage and        - Reporting, including: management reporting; investor
 OUTSOURCING       middle market            and bank reporting; statutory reporting; regulatory
 (formerly         companies                reporting; and income, VAT, property, sales and use
 ReFOCOS)                                   tax reporting
                                          - Accounting, including: month-end, quarter-end and
                                            year-end closings; and account reconciliations
                                          - Transaction processing including: accounts payable;
                                            disbursements; travel and entertainment expense
                                            reporting and processing; billing; cash receipts;
                                            and collections activities
                                          - Budgeting and analysis
                                          - Operation of financial and management reporting
                                            software, databases, hardware, network and other
                                            communications infrastructure
------------------------------------------------------------------------------------------------
 S.T.A.R.        - Sponsors of limited    - Transfer agency and investor servicing through call
 (Syndication      partnerships             center support
 Tracking And
 Reporting)      - Sponsors of real       - Distribution processing
                   estate investment
                   trusts                 - Tax (K-1 and 1099) reporting
                                          - Sales and marketing support
                                          - Blue sky and compliance reporting
                                          - Multi-level support of broker selling agreements
                                          - Investor proxy support
                                          - Investor and broker contact management and follow-up
------------------------------------------------------------------------------------------------
 M.A.R.S.        - Mutual funds           - Sales tracking
 (Marketing
 And             - Issuers of variable    - Contact management
 Representative    annuities
 Sales)                                   - Fulfillment/inventory tracking
------------------------------------------------------------------------------------------------
</TABLE>

     Our Financial Outsourcing service, formerly referred to as ReFOCOS, is a
solution that includes reporting, accounting, transaction processing, budgeting
and analysis solutions. We target our Financial Outsourcing service to early
stage and middle market companies. We perform the accounting, transaction
processing and management reporting functions for our clients. We also manage
the applications, related databases, hardware, communications network and
infrastructure.

     Our S.T.A.R. services are similar to our Financial Outsourcing services,
but are designed to provide investor services to sponsors of limited
partnerships and real estate investment trusts. We begin by implementing the
client on the S.T.A.R. application. This typically requires minimal
customization but substantial data conversion. Once implemented, we manage the
applications, related databases, hardware, communications network and
infrastructure. Our clients access the system using dedicated point-to-point
connections. In addition to technology implementation and

                                       40
<PAGE>   44

management, we perform a full range of investor services including transfer
agency, call center, distribution processing, tax and other reporting.

     M.A.R.S. is a sales force automation software application aimed at the
mutual fund and variable annuity industries. We currently license our M.A.R.S.
software to clients who operate the software using their own staff and
equipment. We also market M.A.R.S. as a hosted application in which our clients
can outsource to us several functions, including database management, call
center services, telemarketing services and sales transaction processing. Our
strategy is to offer M.A.R.S. as a hosted application in our data centers while
continuing to offer M.A.R.S. as a licensed software product to our clients that
prefer a software-only solution.

CLIENT SERVICE

     We believe that providing high levels of client service creates a
competitive advantage in the market for outsourced financial and management
reporting services. By assessing each client's needs, we create value-added
solutions through business process reengineering. Our client team includes a
sales representative, a client operations manager and numerous functional and
technical support specialists to provide service to our clients.

     We monitor the quality of our service through client feedback mechanisms.
Our goal is to solicit formal feedback from our clients four times each year,
twice in writing and twice in person, to measure their level of satisfaction
with our service. We use this information to help develop and identify new
service offerings and enhance existing offerings provided to our clients to
improve the levels of service. We also use client feedback as a basis to
recognize the achievements of our employees.

     Sales. Since we believe that client service begins with the sales process,
we assign a sales representative to work closely with our information
technology, accounting, finance, transaction processing and other business
professionals to assess a potential client's needs. Using this assessment, the
sales representative identifies opportunities to add value through business
process reengineering and designs solutions that integrate the client's business
needs effectively. Our sales cycle typically ranges from two to six months.

     Implementation and integration. Upon engagement by a client, a client
operations manager works with a team of technical support specialists to
transition the client from its former system to our system. The team creates new
processes and reports, converts client data and integrates the client's existing
hardware and software to our systems. This process generally takes from one to
four months depending on the scope of the service that we provide.

     Operations. After implementation, our business process operations group
becomes the primary interface for day-to-day contact with the client,
coordinating the efforts of both functional and technical support specialists as
necessary. By regularly soliciting feedback, the salesperson helps our
operations group stay informed and ensure that all of the client's needs are
addressed.

     Specialized client support. Each client is supported by a team of
information technology, accounting, finance and transaction processing
professionals. Each specialist is available to support the client directly,
onsite or over the phone, or indirectly through the business process operations
group.

                                       41
<PAGE>   45

OUR PEOPLE

     Attracting, training and retaining high quality information technology,
accounting, finance and transaction processing professionals is essential to our
growth. We believe that we are well-positioned to attract and retain these
professionals primarily for the following reasons:

     - Financial and management reporting, accounting management, transaction
       processing and record keeping services are our core businesses rather
       than support functions. As a result, we can offer expanded opportunities
       for development and career advancement, and exposure to the business
       processes of multiple organizations and leading-edge technology.

     - Our integration and implementation specialists are not required to spend
       extended periods on out-of-town client assignments, which would typically
       be required of these professionals if they worked for a consulting firm.
       As a result, we can offer more attractive opportunities than many other
       competing employers.

     We hire motivated individuals with strong substantive skills and leadership
traits and provide them with ongoing technology and leadership skills training.
We emphasize retaining our information technology, accounting, finance and
transaction processing professionals through challenging work assignments and
incentive programs, including rewarding outstanding performance and client
service. These factors contribute to improved success in recruiting and
sustaining high retention rates.

OUR NETWORK

     Our information technology strategy focuses on delivering reliable, high
performance, integrated financial and management reporting solutions to anyone,
anytime, anywhere. To this end, our application, server and networking
architecture is designed to provide:

     - scalability;

     - customizable and reliable security;

     - flexible communication and networking worldwide;

     - high availability (uptime); and

     - flexible application hosting and integration capability.

Scalability

     We have installed hardware and software that are designed to operate in
parallel, to enable efficient expansion of our network infrastructure as needed.

Customizable and reliable security

     We deploy a multi-layered security defense against unauthorized data
access. Our defenses consist of electronic and procedural controls to regulate
physical access to sensitive locations within our data operations center,
network access control using CiscoSecure authentication components, server
operating system level controls with Cisco firewall and router-based lock-down
of network protocols, IP addresses and ports, database access controls for
applications, and for development and operations personnel, and application
access controls at the application, user, data and business function levels. Our
data center earned the industry leading ICSA.Net Tru Secure(TM) certification in
December 1999. In June 2000, we received the SunTone certification of our
Financial Outsourcing technological infrastructure.

                                       42
<PAGE>   46

Flexible communication and networking worldwide

     We support four client communication models, consisting of Internet Web
sites using secure socket layer technology, secure Internet-based virtual
private networks, or VPN, based on 128 bit encryption, secure dial-up networks,
and wide area networks, or WANs, using dedicated leased lines. Our VPN
architecture is a key differentiator between us and the typical ASP. With our
VPN networking option, we can run network based applications across multiple
customer locations around the world as if the servers, printers and system
interfaces were local at each and every site. This secure network solution works
well for distributed offices, telecommuters and travelers because it can be
deployed anywhere a customer can gain access to the Internet.

High availability (uptime)

     Our data operations center is designed to promote high availability. We use
industry leading hardware and service providers with proven compatibility, which
allows us to maintain availability during system maintenance. These providers
include Cisco ISP class networking hardware, software and security; Red Creek
and Cisco hardware accelerated virtual private networks; Sprint, Electric Light
Wave and UUNet Internet service providers; Sun Enterprise UNIX servers and
arrays; Dell multi-processor Intel based NT servers; Microsoft operating
systems, security, SMS and applications; Oracle databases; Vitria middleware and
Oracle and BroadVision applications.

Flexible application hosting and integration capability

     Our integrated systems model is designed to provide seamless integration of
industry leading Internet-based applications. In addition, we also have the
ability to deliver traditional client-server and "terminal-based" applications.
We have the ability to host a wide range of business applications on industry
leading operating system platforms that include Sun Solaris and Microsoft NT.

     We support contemporary Web-enabled software applications that are designed
to give the modern "terminal," or Web browser, on a user's desktop secure access
to remote application servers at the hosting site. Moreover, the VPN-based
integration of our local area networks, or LANs, with our customers' LANs also
allows us to run software applications that were originally only designed to run
on private LANs or WANs. This class of software includes client-server-based
applications such as M.A.R.S. or Oracle Financial Applications, and terminal
based applications such as S.T.A.R.

     This cost-effective and secure VPN with our clients and us enables us to
initiate printing from desktops or our servers to local printers at our, and our
clients' remote sites. It also enables us to seamlessly integrate our hosted
applications, those of third-party partners, and our customers' applications
that they have chosen not to outsource, as if they were all on the same LAN in
the same data center.

SALES AND MARKETING

     We market our services through a direct sales organization based in the
United States. Our sales force has, on average, 15 years of business experience.
Because the sale of our services requires a strong understanding of business
functions as well as the use of technology to facilitate business process and
decision support, we recruit our sales force from sources of those skills.

     Our marketing strategy includes building awareness of our brand and
developing strategic partner relationships. We will continue to target emerging
growth and middle-market companies. In addition, we plan to continue to direct a
large portion of our marketing dollars towards the venture capital community,
attorneys, CPAs and financial institutions that work with our target companies.

                                       43
<PAGE>   47

Financial Outsourcing

     Our primary focus is to target early stage and middle market companies,
which we believe are more likely to be receptive to our service offerings.
Typically, there is less initial risk of adoption for early stage companies
because these companies generally do not have a significant investment in
hardware, software and human resource infrastructure. Additionally, we believe
that our solution is attractive to early stage companies because it requires
minimal up-front cost, is an economical ongoing solution, and is designed to
scale in a manner that is transparent to the client and which allows the client
to manage its growth more effectively. Moreover, early stage and middle market
companies can exhibit above average business growth, which can result in
increased service revenue as we expand our relationships with them.

M.A.R.S. and S.T.A.R.

     We currently market our M.A.R.S. software and services to the mutual fund
and variable annuity industries, money management firms and banks that sponsor
mutual funds. We may seek to expand the industries to which we market our
M.A.R.S. software and service to include insurance and no-load mutual fund
companies. Our strategy is to offer hosting M.A.R.S. in our data centers while
continuing to offer M.A.R.S. as a licensed software product to our clients that
prefer a software-only solution.

     We market our S.T.A.R. service to sponsors of limited partnerships and real
estate investment trusts. We will continue to devote resources to the marketing
of our S.T.A.R. services and intend to pursue additional sales opportunities as
they arise.

CLIENTS

     As of March 31, 2000, we had 58 clients with signed service contracts,
including 55 unaffiliated clients and three clients that are affiliated with
Phoenix Leasing. Of the unaffiliated clients, 30 were Financial Outsourcing
clients, 10 were M.A.R.S. clients and 15 were S.T.A.R. clients. Set forth below
is a representative list of our unaffiliated clients.

<TABLE>
<S>                            <C>                            <C>
--------------------------------------------------------------------------------------------
FINANCIAL OUTSOURCING CLIENTS         S.T.A.R. CLIENTS               M.A.R.S. CLIENTS
--------------------------------------------------------------------------------------------
    Air Transport Leasing           Coordinated Services            Aeltus Investments
--------------------------------------------------------------------------------------------
     Martin & Glantz LLC               First Winthrop            Deutsche Fund Management
--------------------------------------------------------------------------------------------
GE Capital Aviation Services/  GE Capital Aviation Services/    Heritage Asset Management
    Aircraft Finance Trust                  PIMC
--------------------------------------------------------------------------------------------
     GE Capital Aviation        Starwood Hotels and Resorts       John Hancock Advisors
        Services/PIMC
--------------------------------------------------------------------------------------------
    Thomas Weisel Partners               W.P. Carey                   The Alger Fund
--------------------------------------------------------------------------------------------
</TABLE>

     Our five largest clients accounted for 59% of our total revenue in 1999,
75% in 1998 and 88% in 1997. See "Risk Factors -- Our operating results depend
on our relationships with a limited number of clients. As a result, the loss of
a single client may seriously harm our operating results."

     We believe that our high quality service is the reason why we have never
lost a Financial Outsourcing client because of service or pricing issues. Our
client contracts can generally be terminated without significant penalties for
cancellation.

                                       44
<PAGE>   48

BUSINESS PARTNERS

     In developing our service offerings, we have formed relationships with some
of the leading product and service providers whose offerings support essential
business processes. These partners include Oracle, Cisco, Sun, BroadVision,
Vitria and FutureNext Consulting.

     We believe that we can help establish our partners in markets that are
difficult to reach. Early stage and middle market companies are unlikely to
purchase a leading ERP solution directly from the ERP application vendor because
of the significant resource commitments that implementing such an application
requires. However, these companies may purchase a financial and management
reporting solution from us because we offer an outsourced, turn-key solution
that substantially reduces the resource commitments necessary to implement an
ERP application. As a result, our business partners benefit from increased
market share, and their ability to expand the relationships that we have
initiated into difficult to reach markets.

     Each of our agreements with our software application partners allows us to
deploy packaged application software as a service. While our clients are not
required to establish a separate licensing arrangement for the applications, our
client contracts require the client to acknowledge that they are a sublicensee
and are subject to certain restrictions regarding use of the applications. We
plan to enter into additional agreements with other software vendors from time
to time.

     Each of our key business relationships is described below:

     Oracle Corporation. We have a contract with Oracle that permits us to
license its applications and use the software for the benefit of our clients.
The contract requires that we pay a one-time software license fee and annual
maintenance fees, and pay additional amounts incrementally as we add users. The
contract continues for a perpetual term.

     Cisco Systems, Inc. We purchase equipment and services from Cisco for use
in our data operations center as well as at client locations. We have conferred
with Cisco technical personnel on the design of our VPN communication solution.
As a result of meeting Cisco's stringent criteria for quality of service and
support, we have been designated as a Cisco Powered Network Partner. As a result
of our Cisco Powered Network Partner designation, we are eligible for
co-marketing programs, technology sharing benefits and joint selling benefits.

     Sun Microsystems, Inc. We purchase equipment and services from Sun for use
in our data center. Sun has assigned us "named account" status, a status that is
reserved for accounts that Sun has determined merit dedicated special technical
and business support. Being designated a "named account" gives us the following
benefits:

     - executive level discussions of Sun's technical and business plans;

     - free technical design, capacity planning, evaluation equipment and
       systems implementation; and

     - special payment terms for Sun's largest servers, allowing us to install
       fully loaded servers with excess performance and scalability, with tiered
       payments deferred until hardware resources are actually used.

     BroadVision, Inc. We have a relationship with BroadVision under which we
license the entire suite of BroadVision One-To-One e-business applications for
one-to-one customer relationship management. We intend to integrate BroadVision
with our clients' existing back office operations and outside supply chain or
third-party service providers. We believe that this integration will extend our
Financial Outsourcing service to include integrated e-commerce solutions.

     Vitria Technology, Inc. We have a relationship with Vitria, an e-business
platform provider, pursuant to which we license Vitria's BusinessWare software.
We are currently integrating this

                                       45
<PAGE>   49

software into our Financial Outsourcing service. When this integration is
complete, this integrated service offering will allow our clients to exchange
information over the Internet among applications, customers, third-party vendors
and accounting functions. We believe that this relationship will provide greater
flexibility in the expansion of products and services we provide now and in the
future.

     FutureNext Consulting provides to us various Oracle technology consulting
services. We have entered into a relationship whereby we have agreed to use
FutureNext Consulting for implementation and integration services on any
prospective clients they refer to us with whom we ultimately sign a contract.

COMPETITION

     The market for outsourced financial and management reporting solutions is
extremely competitive. We anticipate that competition will continue to intensify
as the use of the Internet grows. In the market for outsourced financial process
and management reporting solutions, we anticipate that we will compete on the
basis of service, performance, experience, price, software functionality,
ability to attract professional staff and overall network design. With respect
to service, we believe that we have a competitive advantage because we combine
both information technology outsourcing and finance, accounting and transaction
processing outsourcing. With respect to experience, we believe that we have a
competitive advantage because we have provided outsourced financial and
management reporting solutions since 1972. With respect to price, we believe
that we have a competitive advantage because we have negotiated relatively
favorable terms with Oracle, BroadVision and other vendors that supply
components to our system. With respect to our ability to attract professional
staff, we believe that we have a competitive advantage because of the career
paths that we are able to offer to our professional staff. While our potential
competitors come from many industry segments, we believe no single company
provides the cost-effective, single-source financial and management reporting
solution that we provide. Although we believe that we have several competitive
advantages with respect to our potential competitors, we cannot assure you that
we will be able to compete successfully in our selected markets. See "Risk
Factors -- The markets we serve are highly competitive and many of our
competitors have much greater resources" and "Risk Factors -- Our growth will be
limited if we are unable to attract and retain qualified personnel."

     Prospective competitors include the following:

     Application service providers. Our potential competitors include
application service providers such as USInternetworking, NaviSite, Oracle and
Corio. Oracle, a business partner of ours, recently introduced a hosted service
offering based on its Web-enabled enterprise resource planning software that it
markets directly to middle market companies. Some of these companies have
significantly greater market presence, brand recognition, and financial,
technical and personnel resources than we do.

     Accounting firms. Our potential competitors include international, national
and regional accounting firms who provide systems integration and outsourced
finance and accounting services for their clients. Many of these firms have
greater name recognition or more extensive experience than we do.
PricewaterhouseCoopers LLP, KPMG LLP, and Ernst & Young LLP, among others,
provide professional consulting services in the use and integration of software
applications in single project client engagements and provide outsourced finance
and accounting services.

     Software and systems integrators. Our potential competitors, who include
national, regional, and local commercial systems integrators who bundle their
services with software and hardware providers and perform a facilities
management outsourcing role for the customer, generally have greater name
recognition or more extensive experience than we do. EDS, Perot Systems,
Andersen Consulting and PricewaterhouseCoopers LLP, among others, provide
professional consulting services in the use and

                                       46
<PAGE>   50

integration of software applications in single-project client engagements. Large
systems integrators may establish strategic relationships with software vendors
to offer services similar to our Financial Outsourcing offerings. We expect that
regional systems integrators are likely to compete with us. Additionally,
regional systems integrators may align themselves with ISPs to offer complex Web
site management combined with professional implementation services.

     Hardware and software companies. Our potential competitors include hardware
and software companies providing packaged application solutions as well as
network infrastructure. In order to build market share, both hardware and
software providers may establish strategic relationships in order to enhance
their service offerings. Oracle, a business partner of ours, recently introduced
a hosted service offering based on its Web-enabled enterprise resource planning
software that it markets directly to middle market companies. IBM Solutions
currently provides applications outsourcing around its Lotus Notes products and
delivers the service via the IBM network infrastructure. J.D. Edwards & Company,
a developer of enterprise resource planning software, has announced that it will
offer its software in an outsourced model. SAP AG has formed an outsourcing
organization to develop key partnerships with leading consulting firms with the
intent of offering SAP software. We believe that additional hardware and
software providers, potentially including our strategic partners, may enter the
outsourcing market in the future.

     Other potential competitors. It is possible that new competitors or
alliances may emerge and gain market share. Such competitors could materially
affect our ability to obtain new contracts. Further, competitive pressure could
require us to reduce the price of our products and services thus affecting our
business, financial condition and operating results.

EMPLOYEES

     As of March 31, 2000, we had 287 full-time employees, including 29 in sales
and marketing, seven in management, 242 in operations and 16 in research and
development. None of our employees are covered by collective bargaining
agreements. On April 26, 2000, we reduced our overall staff by approximately 40
people, including seven in the sales and marketing area. We believe that our
relations with our employees are good.

FACILITIES

     Our principal executive offices are located in San Rafael, California, in a
40,000 square-foot facility that is leased from an affiliate. The lease term
expires in July 2001 with five successive options to renew for one year terms.
See "Relationship with Phoenix Companies and Certain
Transactions -- Intercompany Agreements."

     We entered into a lease in 1999 for a 67,482 square foot facility located
in Alameda, California to accommodate expected growth in staff. The lease term
expires in December 2006. In addition, we lease sales offices in Atlanta,
Georgia; Broomfield, Colorado; Irvine, California; Kirkland, Washington;
Newburyport, Massachusetts; Sacramento, California; Schaumburg, Illinois;
Scottsdale, Arizona; West Orange, New Jersey; and Westlake Village, California.
These leases are typically for executive suite type space with a term of less
than one year with options to renew for set periods. The aggregate lease expense
for all facilities in 1999 was approximately $651,000.

LEGAL PROCEEDINGS

     We are not currently involved in any material legal proceedings. We are,
however, party to various legal proceedings and claims from time to time arising
in the ordinary course of business. We do not expect that the results in any of
these legal proceedings will seriously harm our business or results of
operations.

                                       47
<PAGE>   51

                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

     Our executive officers and directors and their ages as of May 31, 2000 are
as follows:

<TABLE>
<CAPTION>
                  NAME                    AGE                    POSITION
                  ----                    ---                    --------
<S>                                       <C>    <C>
Gus Constantin..........................  62     Chairman of the Board and Chief
                                                 Executive Officer
W. Corey West...........................  38     President, Chief Operating Officer and
                                                 Director
David Brunton...........................  50     Senior Vice President, Operations
Michael D'Almeda-Remedios...............  37     Senior Vice President and Chief
                                                 Technology Officer
Gregory Thornton........................  47     Vice President and Chief Financial
                                                 Officer
James Barrington(1)(2)..................  59     Director
Glen McLaughlin(1)(2)...................  65     Director
Roger Smith(1)(2).......................  59     Director
</TABLE>

-------------------------
(1) Member of compensation committee of the board of directors.

(2) Member of audit committee of the board of directors.

     Gus Constantin has served as our Chairman of the Board and Chief Executive
Officer since founding the company in 1996. In 1972, Mr. Constantin founded
Phoenix Leasing Incorporated, a company specializing in lease financing for
businesses. Mr. Constantin currently serves as Chairman of the Board and Chief
Executive Officer of Phoenix Leasing, as well as Phoenix Cable Incorporated,
Phoenix Precision Graphics, Inc. and Phoenix American Incorporated. Each of
these entities is located in San Rafael, California. Mr. Constantin devotes
approximately 40% of his professional time to us, 40% to Phoenix Leasing, 5% to
Phoenix Cable, and 15% to Phoenix Precision Graphics. From 1969 to 1972, he
served as Director, Computer and Technical Equipment of DCL Incorporated
(formerly Diebold Computer Leasing Incorporated), a corporation formerly listed
on the American Stock Exchange, and as Vice President and General Manager of DCL
Capital Corporation, a wholly-owned subsidiary of DCL Incorporated. Mr.
Constantin was actively engaged in marketing manufacturer leasing programs to
computer and medical equipment manufacturers and in directing DCL Incorporated's
IBM System/370 marketing activities. Prior to 1969, Mr. Constantin was employed
by IBM Corporation as a data processing systems engineer for four years. Mr.
Constantin received his B.S. in engineering from University of Michigan and his
M.S. in management science from Columbia University.

     W. Corey West has served as our President and Chief Operating Officer since
May 18, 2000 and our Senior Vice President, Sales and Marketing from December
1999 to May 2000. In addition, he has served as one of our directors since May
22, 2000. From October 1998 to December 1999, Mr. West served as Group Vice
President, Sales and Marketing. From July 1986 to October 1998, Mr. West was
with Arthur Andersen LLP, most recently as a partner. Mr. West received his B.S.
in accounting and finance from the University of Washington and is a Certified
Public Accountant.

     David Brunton has served as Senior Vice President, Operations since
December 1999. Prior to assuming his current position, Mr. Brunton served as
Vice President and Chief Financial Officer from January 1997 to December 1999.
From February 1987 to December 1996, Mr. Brunton served as Corporate Controller
of Phoenix Leasing Incorporated and Phoenix American Incorporated.

                                       48
<PAGE>   52

Mr. Brunton received his B.A. in social welfare from the University of
California at Chico and is a Certified Public Accountant.

     Michael D'Almada-Remedios has served as Senior Vice President and Chief
Technology Officer since December 1999. From September 1998 to December 1999,
Dr. D'Almada-Remedios served as Vice President and Chief Technology Officer.
From February 1992 to September 1998, Dr. D'Almada-Remedios was with Wells Fargo
Bank, most recently as a vice president responsible for selecting technologies,
developing applications and running operations to support numerous areas of
consumer and business banking. Dr. D'Almada-Remedios received his B.Sc. in
physics and computer science from Kings College, University of London and his
Ph.D. in fluid dynamics and computer control from Nottingham (Trent) University,
England.

     Gregory Thornton has served as our Vice President and Chief Financial
Officer since December 1999. Prior to assuming his current position, Mr.
Thornton served since 1990 in various capacities with Harding Lawson Associates
Group, Inc., an international engineering and consulting firm, including most
recently as Vice President and Chief Financial Officer. Mr. Thornton received
his B.A. in political science and business administration from Seattle Pacific
University and an M.B.A. from the University of Southern California.

     James Barrington has been a director since September 1999. Mr. Barrington
is currently a private business consultant. From 1965 to 1999, Mr. Barrington
was with Arthur Andersen LLP, serving primarily as an audit and business
advisory partner. Mr. Barrington received his B.S. in accounting from San Jose
State University and his M.B.A. from the University of California at Berkeley.

     Glen McLaughlin has been a director since August 1999. Since December 1986,
Mr. McLaughlin has served as President, Chief Executive Officer and a director
of Venture Leasing Associates, a general equipment leasing company. From 1982 to
1990, Mr. McLaughlin was a director of Phoenix American Incorporated. From 1995
to 1998, Mr. McLaughlin was a director of Phoenix Receivables I, Inc. Mr.
McLaughlin currently serves on the Board of Directors of Phoenix Receivables II,
Inc. and Phoenix Receivables III, Inc. Mr. McLaughlin is also a director of
Greater Bay Bancorp, a bank holding company and several privately-held
companies. Mr. McLaughlin received his B.B.A. in accounting and business
administration from the University of Oklahoma and his M.B.A. in finance and
business administration from Harvard University.

     Roger Smith has been a director since August 1999. Since January 1999, Mr.
Smith has been the owner of Smith Venture Group, a venture capital firm, a
position he also held from February 1994 to March 1998. From March 1998 to
January 1999, Mr. Smith was President of Venture Banking at Greater Bay Bancorp,
a bank holding company. Since July 1994, Mr. Smith has served on the board of
directors of Venture Lending and Leasing Inc., an investment company. Mr. Smith
received his B.S. in business administration from the University of Colorado and
his M.B.A. from the University of Santa Clara.

MANAGEMENT CHANGES

     In April 2000, Bryant Tong resigned his positions as President, Chief
Operating Officer and a director of our company. Corey West became our
President, Chief Operating Officer and a director in May 2000.

                                       49
<PAGE>   53

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The compensation committee was established in August 1999. Prior to that
time, the entire board of directors participated in compensation decisions. In
particular, Mr. Tong, a former executive, and Mr. Constantin, each an executive
officer of ReSourcePhoenix.com, participated in the deliberations concerning
executive officer compensation.

     Mr. Constantin is the Chairman, Chief Executive Officer and controlling
shareholder of Phoenix American and each of its subsidiaries. We provide
services to Phoenix Leasing Incorporated, Phoenix Cable Incorporated and Phoenix
Precision Graphics, Inc., and we lease real estate from Phoenix American
Incorporated. Mr. Constantin, our Chairman, Chief Executive Officer and
controlling shareholder, is also the Chairman, Chief Executive Officer and
controlling shareholder of Phoenix Leasing, Phoenix Cable, Phoenix Precision
Graphics and Phoenix American. We believe that the terms of these agreements are
no less favorable to us than we could have received from an unaffiliated third
party. See "Relationship with Phoenix Companies and Certain Transactions --
Intercompany Agreements."

     Mr. McLaughlin, one of our directors and a member of our compensation
committee, is also a director of Phoenix Receivables II, Inc. and Phoenix
Receivables III, Inc. Mr. Constantin is the controlling shareholder of Phoenix
Receivables II and Phoenix Receivables III.

DIRECTOR COMPENSATION

     Directors are elected each year for one-year terms and do not currently
receive any cash compensation for their service as directors, but are reimbursed
for reasonable expenses incurred in attending meetings. Each director will be
granted on a quarterly basis an option to purchase 1,250 shares of our Class A
common stock at an exercise price equal to the fair market value of our Class A
common stock on the date of grant. These options are fully vested at the time of
the grant.

                                       50
<PAGE>   54

EXECUTIVE COMPENSATION

     The following table summarizes all compensation earned by or paid to our
Chief Executive Officer and to each of our most highly compensated executive
officers other than the Chief Executive Officer whose total annual salary and
bonus exceeded $100,000 for services rendered in all capacities to us during the
fiscal year ended December 31, 1999. These officers are referred to as the
"named executive officers" here and elsewhere in this prospectus.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                               ANNUAL COMPENSATION              LONG TERM COMPENSATION
                                        ---------------------------------    ----------------------------
                                                                             SECURITIES
     NAME AND PRINCIPAL       FISCAL                         OTHER ANNUAL    UNDERLYING      ALL OTHER
          POSITION             YEAR      SALARY     BONUS    COMPENSATION     OPTIONS     COMPENSATION(1)
     ------------------       ------    --------   -------   ------------    ----------   ---------------
<S>                           <C>       <C>        <C>       <C>             <C>          <C>
Gus Constantin..............   1999     $148,029   $    --     $    --          1,890         $    --
  Chairman and Chief           1998           --        --          --             --              --
  Executive Officer
Bryant Tong(6)..............   1999      200,000    49,591      10,747(2)     427,204          14,222
  President and Chief          1998      180,000        --      10,747(2)          --          13,497
  Operating Officer
W. Corey West(7)............   1999      136,666        --      44,000(3)      70,956              --
  Senior Vice President,       1998(4)    25,538        --      11,250(3)          --              --
  Sales & Marketing
Michael D'Almada Remedios...   1999      143,625    10,200          --         40,900              --
  Senior Vice President and    1998(5)    40,114     2,500          --             --              --
  Chief Technology Officer
David Brunton...............   1999      129,583    10,100          --         54,900           8,016
  Senior Vice President,       1998      100,000    10,000          --             --          10,830
  Operations
</TABLE>

-------------------------
(1) The amounts shown are allocations of employer contributions to our profit
    sharing plan.

(2) The amounts shown for Mr. Tong include an automobile allowance of $7,800,
    company paid health insurance premiums of $2,664 and long term disability
    premiums of $283.

(3) The amounts shown include payments to Mr. West of commissions of $38,000 and
    $10,000 and car allowances of $6,000 and $1,250, for 1998 and 1997,
    respectively.

(4) Mr. West joined us effective October 15, 1998.

(5) Dr. Remedios joined us effective September 1, 1998.

(6) On April 19, 2000, Mr. Tong resigned his position as President, Chief
    Operating Officer and member of our board of directors.

(7) On May 18, 2000, Mr. West became our President and Chief Operating Officer.
    Mr. West was appointed as a director on May 22, 2000.

                                       51
<PAGE>   55

                            OPTIONS GRANTED IN 1999

     The following table sets forth information concerning stock options granted
in 1999 to the executive officers included in the summary compensation table.

<TABLE>
<CAPTION>
                                                 INDIVIDUAL GRANTS                       POTENTIAL REALIZED VALUE
                             ---------------------------------------------------------       AT ASSUMED ANNUAL
                                                 PERCENT OF                                RATES OF STOCK PRICE
                                NUMBER OF       TOTAL OPTIONS                                APPRECIATION FOR
                               SECURITIES        GRANTED TO     EXERCISE                        OPTION TERM
                               UNDERLYING       EMPLOYEES IN    PRICE PER   EXPIRATION   -------------------------
           NAME              OPTIONS GRANTED     FISCAL YEAR      SHARE        DATE          5%           10%
           ----              ---------------    -------------   ---------   ----------   ----------   ------------
<S>                          <C>                <C>             <C>         <C>          <C>          <C>
Gus Constantin.............          540(1)            *         $ 8.00      10/12/04     $  1,194     $    2,637
                                     100(2)            *          15.69      12/06/04          433            958
                                   1,250(1)            *          17.25      12/30/04        5,957         13,164
Bryant Tong(4).............      402,314(3)         40.0%          2.08      08/03/09      526,267      1,333,665
                                     540(1)            *           8.00      10/12/09        2,717          6,885
                                  23,000(2)          2.3           8.00      10/12/09      115,717        293,249
                                     100(2)            *          15.69      12/06/09          987          2,501
                                   1,250(1)            *          17.25      12/30/09       13,561         34,365
W. Corey West..............       53,856(3)          5.4           2.08      08/03/09       70,449        178,532
                                  12,000(2)          1.2           8.00      10/12/09       60,374        152,999
                                     100(2)            *          15.69      12/06/09          987          2,501
Michael
  D'Almada-Remedios........       28,800(3)          2.9           2.08      08/03/09       37,673         95,472
                                  12,000(2)          1.2           8.00      10/12/09       60,374        152,999
                                     100(2)            *          15.69      12/06/09          987          2,501
David Brunton..............       42,480(3)          4.2           2.08      08/03/09       55,568        140,821
                                  12,000(2)          1.2           8.00      10/12/09       60,374        152,999
                                     100(2)            *          15.69      12/06/09          987          2,501
</TABLE>

-------------------------
 *  Less than one percent.

(1) Automatic grant to directors. Fully vested on grant.

(2) Vest over four years, with first 25% vesting on first anniversary of grant
    and remainder vesting monthly thereafter.

(3) Vested in full upon the effectiveness of our initial public offering on
    October 13, 1999.

(4) On April 17, 2000, Mr. Tong resigned his positions with our company.

     The options in this table were granted under our 1999 Stock Option Plan.
These options have ten-year terms, except that the options granted to Mr.
Constantin have five year terms.

     The figures representing percentages of total options granted to employees
in the last fiscal year are based on an aggregate of 1,005,410 options granted
by us during our fiscal year ended December 31, 1999 to our employees and
consultants, including the executive officers named in the summary compensation
table.

     Under SEC rules, the amounts in the last two columns represent the
hypothetical gain or option spread that would exist for the options in this
table based on assumed stock price appreciation from the date of grant until the
end of such options' applicable terms at assumed annual rates of 5% and 10%. The
5% and 10% assumed annual rates of appreciation are specified by SEC rules and
do not represent our estimate or projection of future stock price growth.

                                       52
<PAGE>   56

                          1999 YEAR-END OPTION VALUES

     The following table sets forth information, as to the executive officers
included in the summary compensation table, concerning the number of shares
subject to both exercisable and unexercisable stock options as of December 31,
1999. Also reported are values for in-the-money options that represent the
positive spread between the respective exercise prices of these options and
$19.75, the closing price of our Class A common stock on December 31, 1999.

<TABLE>
<CAPTION>
                                   NUMBER OF SECURITIES            VALUE OF UNEXERCISED
                              UNDERLYING UNEXERCISED OPTIONS      IN-THE-MONEY OPTIONS AT
                                   AT DECEMBER 31, 1999              DECEMBER 31, 1999
                              -------------------------------   ---------------------------
            NAME               EXERCISABLE     UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE
            ----              -------------   ---------------   -----------   -------------
<S>                           <C>             <C>               <C>           <C>
Gus Constantin..............        1,790             100       $    9,470      $    406
Bryant Tong.................      404,104          23,100        7,118,358       270,656
W. Corey West...............       53,856          12,100          951,635       141,406
Michael D'Almada-Remedios...       28,800          12,100          508,896       141,406
David Brunton...............       42,480          12,100          750,622       141,406
</TABLE>

STOCK PLANS

     PRIOR PLAN

     On January 1, 1999, we adopted an incentive plan for our key employees.
This plan allowed us to grant share appreciation and dividend income rights to
our employees. We terminated this plan on August 4, 1999 subject to the
effectiveness of the initial public offering, and replaced all awards
outstanding under the plan with options granted pursuant to our 1999 Stock
Option Plan.

     1999 STOCK OPTION PLAN

     We have established a stock option plan pursuant to which a total of
3,260,000 shares of Class A common stock have been reserved for issuance to
provide additional incentive to our employees, officers, directors and
consultants. Under the stock option plan, we may grant stock options and stock
purchase rights to our employees, officers, directors and consultants. Our board
of directors, or a committee to whom the board has delegated authority, which we
refer to as the "plan administrator," selects the individuals to whom options
and stock purchase rights are granted, interprets and adopts rules for the
operation of the stock option plan and specifies the vesting, exercise price and
other terms of options and stock purchase rights. As of March 31, 2000, options
to purchase an aggregate of 1,092,610 shares of Class A common stock had been
granted, at a weighted average exercise price of $4.61 per share.

     The maximum term of an incentive stock option granted under the plan is
generally limited to ten years. If an optionee terminates his or her service
with us, the optionee generally may exercise only those options vested as of the
date of termination of service. Unless otherwise specified in the option
agreement, the optionee must effect such exercise within three months of
termination of service for any reason other than death or disability, and within
one year after termination due to death or disability. The exercise price of
incentive stock options granted under the stock option plan must be at least
equal to the fair market value of our Class A common stock on the date of grant.
Payment of the exercise price may be made by such methods as determined by the
plan administrator and may include cash, check, a promissory note or shares of
our Class A common stock valued at the fair market value on the date of
exercise.

                                       53
<PAGE>   57

     Terms of any stock purchase rights granted under the stock option plan are
determined by the plan administrator at the time such rights are issued. Upon
the termination of a purchaser's service with us, we have an option to
repurchase his or her shares at the original price paid by the purchaser.

     In the event we are acquired or merge with another entity or transfer all
or substantially all of our assets to an entity not controlled by us, then each
outstanding option and stock purchase right automatically vests and become fully
exercisable unless the successor entity assumes such option or stock purchase
right or replaces it with a comparable option or right.

     1999 EMPLOYEE STOCK PURCHASE PLAN

     Concurrently with our initial public offering, we established an Employee
Stock Purchase Plan under which a total of 360,000 shares of Class A common
stock were reserved. In April 2000, we sold 144,960 shares of our Class A common
stock to employee participants, leaving 215,040 shares of our Class A common
stock available for sale under our Employee Stock Purchase Plan. The purchase
plan, which qualifies as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended, is administered by
our board of directors or by a committee appointed by the board. Employees are
eligible to participate if they are employed by us or one of our subsidiaries
designated by the board for at least 20 hours per week and for more than five
months in any calendar year. The purchase plan permits eligible employees to
purchase Class A common stock through payroll deductions, which may not exceed
15% of an employee's total compensation, subject to certain limitations. The
purchase plan is implemented in a series of consecutive, overlapping offering
periods, each approximately six months in duration. Offering periods begin on
the first trading day on or after April 30 and October 31 of every other year
and terminate on the last trading day in the period six months later. However,
the first offering period is the period of approximately 24 months commencing on
October 13, 1999, the date upon which the registration statement for our initial
public offering was declared effective by the SEC and terminating on the last
trading day in the period ending October 31, 2001. Each participant is granted
an option to purchase stock on the first day of the six-month purchase period
and such option is automatically exercised on the last date of each purchase
period. The purchase price of each share of Class A common stock under the
purchase plan will be equal to 85% of the lesser of the fair market value per
share of Class A common stock on the start date of that offering period or on
the date of purchase. Employees may modify or end their participation in the
offering at any time during the offering period. Participation ends
automatically on termination of employment with us. The purchase plan will
terminate in 2009 unless sooner terminated by our board.

401(k) PLAN

     We have a 401(k) Retirement Savings and Investment Plan covering our
full-time employees located in the United States. The plan is intended to
qualify under Section 401(k) of the Internal Revenue Code of 1986, as amended,
so that contributions to the plan by employees or by us, and the investment
earnings thereon, are not taxable to employees until withdrawn from the plan,
and so that contributions by us, if any, will be deductible by us when made.
Under the plan, eligible employees may elect to make payroll deductions up to
15% of their compensation, up to the statutorily prescribed annual limit, which
was $10,000 in 1999, and to have the amount of such deduction contributed to the
plan. The plan permits, but does not require, additional matching contributions
by us on behalf of all participants. To date, we have not made any matching
contributions to the plan.

                                       54
<PAGE>   58

          RELATIONSHIP WITH PHOENIX COMPANIES AND CERTAIN TRANSACTIONS

RELATIONSHIP WITH GUS CONSTANTIN

     If we issue the full 7,000,000 equity line shares to Torneaux and if
Torneaux exercises all of the warrants that we have issued to them, Gus
Constantin will own 35.6% of the common stock outstanding. As the sole holder of
our Class B common stock, he will control 73.4% of our total voting power, if we
issue the full 7,000,000 equity line shares to Torneaux and if Torneaux
exercises all of the warrants that we have issued to them. As long as Mr.
Constantin controls a majority of the voting power, he will be able, acting
alone, to:

     - elect at least a majority of our board of directors;

     - amend our certificate of incorporation or effect a merger, sale of assets
       or other major corporate transaction;

     - defeat any non-negotiated takeover attempt;

     - determine the amount and timing of dividends paid to himself and to
       holders of Class A common stock; and

     - otherwise control our management and operations and the outcome of most
       matters submitted for a stockholder vote.

     Mr. Constantin is also the controlling shareholder of several other
companies, known generally as the Phoenix companies.

     On September 12, 1999, we paid a dividend of $1,000,000 to our then sole
stockholder, the Gus and Mary Jane Constantin 1978 Living Trust. This dividend
was paid in the form of a promissory note, which accrued interest at 9% per
year. This note was repaid from the net proceeds of our initial public offering.

     Prior to our initial public offering, our then sole stockholder, the Gus
and Mary Jane Constantin 1978 Living Trust, loaned money to our operating
subsidiary, ReSource/Phoenix, Inc., to fund its operations. The maximum
outstanding balance of these loans was $5.2 million. These loans accrued
interest at 9% per year. These loans were repaid from the net proceeds of our
initial public offering.

RELATIONSHIP WITH PHOENIX COMPANIES

     In the normal course of business, we have from time-to-time entered into
various business transactions and agreements with several of the Phoenix
companies. We may enter into additional transactions with the Phoenix companies
in the future. The following is a summary of each of the material agreements
that we have entered into with the Phoenix companies. Such summaries include all
material information contained in the agreements, but are qualified by those
agreements, which are filed as exhibits to the registration statement of which
this prospectus is a part.

     ADMINISTRATIVE SERVICES AGREEMENTS

     We have entered into Administrative Services Agreements with each of
Phoenix Leasing Incorporated, Phoenix Cable Incorporated and Phoenix Precision
Graphics, Inc. under which we provide accounting, tax, legal, administrative,
financial, data processing and other consulting services to these companies for
a monthly fee. These agreements are substantially identical. Through December
31, 1999, we have been paid $5.2 million by Phoenix Leasing Incorporated, $0.6
million by

                                       55
<PAGE>   59

Phoenix Cable Incorporated and $0.3 million by Phoenix Precision Graphics, Inc.
under prior agreements. Under the new agreements, Phoenix Leasing will pay us
$246,000 per month, Phoenix Cable will pay us $12,000 per month and Phoenix
Precision Graphics will pay us $35,000 per month. Phoenix Precision Graphics has
commenced a wind-up of its operations and is expected to terminate its contract
with the company prior to August 31, 2000. We believe that the terms of these
agreements are no less favorable to us than we could have received from an
unaffiliated third party. Gus Constantin, our Chairman, Chief Executive Officer
and controlling shareholder, is also the Chairman, Chief Executive Officer and
controlling shareholder of each of Phoenix Leasing, Phoenix Cable and Phoenix
Precision Graphics.

     Prior to August 1, 1999, we provided accounting services to Phoenix
American Incorporated and Phoenix American provided tax, legal, administrative,
financial, data processing and other consulting services to us. For the year
ended December 31, 1999 and the year ended December 31, 1998, we paid Phoenix
American $657,000 and $494,000, respectively, for these services. Effective
August 1, 1999, Phoenix American transferred these operations to us. Gus
Constantin, our Chairman, Chief Executive Officer and controlling stockholder,
is also the Chairman, Chief Executive Officer and controlling shareholder of
Phoenix American.

     REAL ESTATE LEASE

     We lease approximately 40,000 square feet of the building that contains our
principal executive offices and our data operations center from Phoenix American
Incorporated. The lease is for a term of two years, with five successive options
to renew for one-year terms. Under the lease, we pay $53,650 per month in rent
and have a right of first refusal to lease additional space in the building if
and when it becomes available. We believe that the terms of our lease agreement
are no less favorable to us than we could have received from an unaffiliated
third party. Mr. Constantin is the Chairman, Chief Executive Officer and
controlling shareholder of Phoenix American.

     DEBT FINANCING

     Equipment Lease Financing.  On June 6, 2000, we entered into an equipment
lease financing commitment with Lease Management Associates, Inc., which is
affiliated with Gus Constantin, our Chief Executive Officer and one of our
directors and shareholders. We expect to enter into a definitive agreement with
Lease Management Associates by the end of June 2000. Pursuant to the proposed
equipment lease line, we will sell furniture, fixtures, office and computer
equipment for up to $3,000,000 to Lease Management Associates, Inc., which we
refer to as LMA. Pursuant to the commitment, LMA agreed to lease the equipment
to our company for three years. During the term of the proposed lease, we will
make a monthly lease payment of up to $90,000 and a final lease payment of up to
$600,000. The interest rate on the equipment lease line is approximately 15% per
annum. We will grant LMA a security interest in the furniture, fixtures and
equipment. In addition, we will issue a warrant to LMA to purchase the number of
shares of our Class A common stock equal to 300,000 divided by the average
closing price of our Class A common stock for the five trading days following
our Board's approval of the transaction, which occurred on June 6, 2000.

     The equipment lease financing transaction with LMA has been, and all future
transactions between us and our officers, directors and principal stockholders
and their affiliates will be, approved by a majority of the board, including a
majority of the independent and disinterested directors of the board.

                                       56
<PAGE>   60

                             PRINCIPAL STOCKHOLDERS

     The following table sets forth certain information regarding beneficial
ownership of our common stock as of May 1, 2000 by:

     - each person or entity known to us to own beneficially more than 5% of
       either class of our common stock;

     - each of our directors;

     - each of our named executive officers; and

     - all executive officers and directors as a group.

<TABLE>
<CAPTION>
                                                                              CLASS B
                                            CLASS A COMMON STOCK               COMMON
                                    -------------------------------------      STOCK          PERCENT OF TOTAL
                                                    PERCENT OF OWNERSHIP    ------------        VOTING POWER
                                       SHARES      ----------------------      SHARES      ----------------------
                                    BENEFICIALLY    BEFORE       AFTER      BENEFICIALLY    BEFORE       AFTER
               NAME                    OWNED       OFFERING   OFFERING(1)      OWNED       OFFERING   OFFERING(1)
               ----                 ------------   --------   -----------   ------------   --------   -----------
<S>                                 <C>            <C>        <C>           <C>            <C>        <C>
Gus Constantin(1)(2)..............      3,040           *           *        7,172,000       89.6%       73.4%
Bryant Tong(3)....................    405,354         8.8%        3.0               --          *           *
David Brunton(3)..................     42,480         1.0%          *               --          *           *
W. Corey West(3)..................     53,856         1.3%          *               --          *           *
Michael D'Almeda-Remedios(3)......     28,800           *           *               --          *           *
James Barrington(3)...............      3,040           *           *               --          *           *
Glen McLaughlin(3)................      3,040           *           *               --          *           *
Roger Smith(3)....................      3,040           *           *               --          *           *
All directors and executive
  officers as a group (9
  persons)........................    573,150(3)     11.1%        3.0%       7,172,000       89.6%       73.4%
</TABLE>

-------------------------
  * Less than one percent.

    Beneficial ownership is determined in accordance with SEC rules. In
    computing the number of shares beneficially owned by a person and the
    percentage ownership of that person, shares of Class A common stock subject
    to options held by that person that are currently exercisable or exercisable
    within 60 days of May 1, 2000 are deemed outstanding. Such shares, however,
    are not deemed outstanding for the purpose of computing the percentage
    ownership of any other person. Except as indicated in the footnotes to this
    table and pursuant to applicable community property laws, each stockholder
    named in the table has sole voting and investment power with respect to the
    shares set forth opposite such stockholder's name.

(1) The foregoing percentages are based on 11,355,760 shares of Class A and
    Class B common stock outstanding immediately prior to the offering and
    20,155,760 shares outstanding immediately after the offering. We have
    assumed for this purpose that 7,000,000 shares of Class A common stock were
    sold under the common stock purchase agreement and that Torneaux exercised
    the warrants for 1,800,000 shares of Class A common stock.

(2) The shares of Class A common stock owned consist of options that are
    exercisable within 60 days of May 1, 2000. All of these securities are held
    by the Gus and Mary Constantin 1978 Living Trust, of which Mr. Constantin
    and his wife are trustees. The living trust can be amended or revoked at any
    time at the option of Mr. Constantin and his wife, Mr. Constantin and his
    wife, as trustees of the living trust, are authorized to exercise all rights
    with respect to the Class B common stock held by the trust, including the
    right to vote and dispose of such shares. The address of each of Mr.
    Constantin and his wife is c/o ReSourcePhoenix.com, 2401 Kerner Boulevard,
    San Rafael, CA 94901-55529.

(3) Consists of shares of Class A Common Stock subject to options that are
    exercisable within 60 days of May 1, 2000.

                                       57
<PAGE>   61

                          DESCRIPTION OF CAPITAL STOCK

     Pursuant to our certificate of incorporation, we have authority to issue an
aggregate of 40,000,000 shares of capital stock, consisting of 27,800,000 shares
of Class A common stock, par value $0.001 per share, 7,200,000 shares of Class B
common stock, par value $0.001 per share, and 5,000,000 shares of preferred
stock, par value $0.001 per share.

COMMON STOCK

     Shares of Class A common stock and Class B common stock are identical in
all respects, except for voting rights and certain conversion rights, as
described below.

     Voting rights. Each outstanding share of Class A common stock is entitled
to one vote on all matters submitted to a vote of our stockholders, including
the election of directors, and each share of Class B common stock is entitled to
five votes on each such matter. Except as required by applicable law, holders of
the Class A common stock and Class B common stock vote together as a single
class on all matters. There is no cumulative voting in the election of
directors.

     For so long as there are any shares of Class B common stock outstanding,
any action that may be taken at a meeting of the stockholders may be taken by
written consent in lieu of a meeting if we receive consents signed by
stockholders having the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares entitled to vote on the
matter were present and voted. This could permit the holders of Class B common
stock to take action regarding certain matters without providing other
stockholders the opportunity to voice dissenting views or raise other matters.
The right to take such action by written consent of stockholders will expire
when there are no longer any shares of Class B common stock outstanding.

     Dividends, distributions and stock splits. Holders of Class A common stock
and Class B common stock are entitled to receive dividends at the same rate if,
as and when such dividends are declared by our board of directors out of assets
legally available therefor after payment of dividends required to be paid on
shares of preferred stock, if any.

     In the case of dividends or distributions payable in Class A common stock
or Class B common stock, only shares of Class A common stock will be distributed
with respect to the Class A common stock and only shares of Class B common stock
will be distributed with respect to the Class B common stock. In the case of
dividends or other distributions consisting of other voting shares, we will
declare and pay such dividends in two separate classes, identical in all
respects except that the voting rights of each such security paid to the holders
of the Class A common stock shall be one-fifth of the voting rights of each such
security paid to the holders of Class B common stock. In the case of dividends
or other distributions consisting of non-voting securities convertible into, or
exchangeable for, our voting securities, we will provide that such convertible
or exchangeable securities and the underlying securities be identical in all
respects, except that the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of the Class A common
stock shall be one-fifth of the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of Class B common
stock, and such underlying securities paid to the holders of Class B common
stock shall convert into the security paid to the holders of the Class A common
stock upon the same terms and conditions applicable to the conversion of Class B
common stock into Class A common stock.

     Neither the Class A common stock nor the Class B common stock may be
subdivided or combined in any manner unless the other class is subdivided or
combined in the same proportion.

     Conversion. The shares of Class A common stock are not convertible.

                                       58
<PAGE>   62

     Each share of Class B common stock is convertible into one share of Class A
common stock at any time at the option of the holder. Each share of Class B
common stock will automatically convert into one share of Class A common stock
upon the sale or transfer of such share of Class B common stock other than to an
entity that he controls. The holder of Class B common stock shall have, upon
conversion of his shares of Class B common stock into shares of Class A common
stock, one vote per share of Class A common stock held.

     Liquidation. In the event of any dissolution, liquidation, or winding up of
our affairs, whether voluntary or involuntary, after payment of our debts and
other liabilities and making provision for the holders of preferred stock, if
any, our remaining assets will be distributed ratably among the holders of the
Class A common stock and the Class B common stock, treated as a single class.

     Mergers and other business combinations. Upon a merger, combination, or
other similar transaction in which shares of common stock are exchanged for or
changed into other stock or securities, cash and/or any other property, holders
of the Class A common stock and Class B common stock will be entitled to receive
an equal amount per share of stock, securities, cash, and/or any other property,
as the case may be, into which or for which each share of any other class of
common stock is exchanged or changed; provided that in any transaction in which
shares of capital stock are distributed, such shares so exchanged for or changed
into may differ as to voting rights and conversion rights to the extent and only
to the extent that the voting rights and conversion rights of Class A common
stock and Class B common stock differ at that time.

PREFERRED STOCK

     We are authorized to issue up to 5,000,000 shares of undesignated preferred
stock, none of which are outstanding. Our board has the authority to issue
preferred stock in one or more series and to establish the rights and
restrictions granted to or imposed on any unissued shares of preferred stock and
to fix the number of shares constituting any series without any further vote or
action by the stockholders. Our board has the authority, without approval of the
stockholders, to issue preferred stock that has voting and conversion rights
superior to the common stock, which could have the effect of delaying or
preventing a change in control. We currently have no plans to issue any shares
of preferred stock.

                                       59
<PAGE>   63

                              SELLING STOCKHOLDER

     The shares being offered by Torneaux consist of shares of Class A common
stock that it may purchase from us pursuant to the common stock purchase
agreement, including upon exercise of warrants issued pursuant to the agreement.
For additional information about the stock purchase agreement, see "Financing
Arrangement with Torneaux Ltd." The address of Torneaux is c/o Mees Pierson Fund
Services (Bahamas) Ltd., Montague Sterling Centre, East Bay Street, P.O. Box
SS-6238 Nassau, Bahamas.

     The following table sets forth information about the beneficial ownership
of our Class A common stock by Torneaux as of June 12, 2000.

<TABLE>
<CAPTION>
                                                                          NUMBER OF SHARES OF
                               SHARES OF COMMON                              CLASS A COMMON
                              STOCK BENEFICIALLY                           STOCK BENEFICIALLY
                              OWNED PRIOR TO THE                          OWNED FOLLOWING THE
                                   OFFERING        NUMBER OF SHARES OF          OFFERING
                              ------------------   CLASS A COMMON STOCK   --------------------
NAME OF SELLING SHAREHOLDER   NUMBER    PERCENT       BEING OFFERED        NUMBER     PERCENT
---------------------------   -------   --------   --------------------   --------   ---------
<S>                           <C>       <C>        <C>                    <C>        <C>
Torneaux                         0         0         Up to 8,800,000(1)       0(2)       0
</TABLE>

-------------------------
(1) Includes 1,800,000 shares of Class A common stock issuable pursuant to
    Warrant A, Warrant B, Warrant C, and Warrant D. 500,000 shares of Class A
    common stock are issuable to Torneaux at $2.50 per share upon the exercise
    of Warrant A. Warrant A is immediately exercisable for 125,000 shares of
    Class A common stock. Thereafter, Warrant A is exercisable in increments of
    125,000 shares upon the sale of the 125,000 shares previously issued. Once
    all of the shares issued upon exercise of Warrant A have been sold, then
    Warrant B may be exercised in increments of 125,000 shares upon the sale of
    the 125,000 shares previously issued. 500,000 shares of Class A common stock
    are issuable to Torneaux at $4.00 per share upon the exercise of Warrant B.
    After the Warrant B shares have been sold, then Torneaux may exercise
    Warrant C for up to 400,000 warrant shares at $6.00 per share. Warrant C may
    be exercised in increments of 100,000 shares upon the sale of the 100,000
    shares previously issued. Upon the sale of all shares issued under Warrant
    C, then Torneaux may exercise Warrant D for up to 400,000 warrant shares at
    $7.00 per share, Warrant D may be exercised in increments of 100,000 shares
    upon the sale of the 100,000 shares previously issued.
(2) Assumes the resale of 7,000,000 shares of Class A common stock which we have
    the right to cause Torneaux to purchase pursuant to the common stock
    purchase agreement and the resale of 1,800,000 shares of Class A Common
    Stock that Torneaux has the right to acquire upon exercise of warrants
    issued to Torneaux pursuant to the agreement. The shares offered hereby are
    to be acquired by Torneaux pursuant to the agreement or upon the exercise of
    warrants.

                              PLAN OF DISTRIBUTION

     To the extent required under the Securities Act, a supplemental prospectus
will be filed, disclosing (a) the name of any broker-dealers; (b) the number of
shares of Class A common stock involved; (c) the price at which the Class A
common stock is to be sold; (d) the commissions paid or discounts or concessions
allowed to such broker-dealers, where applicable; (e) that such broker-dealers
did not conduct any investigation to verify the information set out or
incorporated by reference in this prospectus, as supplemented; and (f) other
facts material to the transaction.

     We and the selling stockholder will be subject to applicable provisions of
the Exchange Act and the rules and regulations under it, including, without
limitation, Rule 10b-5 and, insofar as the selling stockholder is a distribution
participant and we, under certain circumstances, may be a distribution
participant, Regulation M. All of the foregoing may affect the marketability of
the common stock.

                                       60
<PAGE>   64

TORNEAUX LTD.

     We have been advised by Torneaux that it may sell the Class A common stock
from time to time in transactions on the Nasdaq National Market (or any exchange
where the Class A common stock is then listed), in negotiated transactions, or
otherwise, or by a combination of these methods, at fixed prices which may be
changed, at market prices at the time of sale, at prices related to market
prices or at negotiated prices. Torneaux may effect these transactions by
selling the Class A common stock to or through broker-dealers, who may receive
compensation in the form of discounts, concessions or commissions from Torneaux
or the purchasers of the Class A common stock for whom the broker-dealer may act
as an agent or to whom it may sell the Class A common stock as a principal, or
both. The compensation to a particular broker-dealer may be in excess of
customary commissions.

     Torneaux is an "underwriter" within the meaning of the Securities Act in
connection with the sale of the Class A common stock offered hereby. Assuming
that we are in compliance with the conditions of the common stock purchase
agreement, Torneaux must accept puts of shares from us, subject to maximum
aggregate dollar amounts, during the term of the agreement. Broker-dealers who
act in connection with the sale of the Class A common stock may also be deemed
to be underwriters. Profits on any resale of the Class A common stock as a
principal by such broker-dealers and any commissions received by such
broker-dealers may be deemed to be underwriting discounts and commissions under
the Securities Act. Any broker-dealer participating in such transactions as
agent may receive commissions from Torneaux (and, if they act as agent for the
purchaser of our Class A common stock, from such purchaser). Broker-dealers may
agree with Torneaux to sell a specified number of shares of our Class A common
stock at a stipulated price per share, and, to the extent such a broker-dealer
is unable to do so acting as agent for Torneaux, to purchase as principal any
unsold common stock at the price required to fulfill the broker-dealer
commitment to Torneaux. Broker-dealers who acquire common stock as principal may
thereafter resell the Class A common stock from time to time in transactions
(which may involve crosses and block transactions and which may involve sales to
and through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise,
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
common stock commissions computed as described above.

     The Class A common stock offered hereby is being registered pursuant to our
contractual obligations, and we have agreed to pay the costs of registering the
shares hereunder. We have also agreed to reimburse Torneaux's costs and expenses
incurred in connection with the common stock purchase agreement, including fees,
expenses and disbursements of counsel for Torneaux for the preparation of the
agreement up to a maximum of $50,000, and all reasonable fees incurred in
connection with any amendment, modification or waiver, to or enforcement of the
agreement.

     The price at which the common shares will be issued by us to Torneaux will
be approximately 94% of the daily volume weighted average closing price over a
20-day trading period on the Nasdaq National Market, and the price at which we
issue the Class A common stock to Torneaux may fluctuate. See "Financing
Arrangement with Torneaux Ltd."

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

     Our certificate of incorporation and bylaws and the Delaware General
Corporation Law contain provisions that could discourage potential takeover
attempts and make it more difficult for our stockholders to change management or
receive a premium for their shares.

                                       61
<PAGE>   65

     We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, the statute prohibits a
publicly-held Delaware corporation from engaging in a business combination with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner including approval by at
least 66.7% of the outstanding stock not owned by the interested stockholder. A
"business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the stockholder. For purposes of Section
203, an "interested stockholder" is defined to include any person that is:

     - the owner of 15% or more of the outstanding voting stock of the
       corporation;

     - an affiliate or associate of the corporation and was the owner of 15% or
       more of the voting stock outstanding of the corporation, at any time
       within three years immediately prior to the relevant date; and

     - an affiliate or associate of the persons described in the foregoing
       bullet points.

     Stockholders may, by adopting an amendment to the corporation's certificate
of incorporation or bylaws, elect for the corporation not to be governed by
Section 203, effective 12 months after adoption. Neither our certificate of
incorporation nor our bylaws exempt us from the restrictions imposed under
Section 203. Section 203 may encourage companies interested in acquiring us to
negotiate in advance with our board because stockholder approval of the
transaction, as discussed above, would be unnecessary.

     Annual meetings of stockholders will be held to elect our board and
transact such other business as may be properly brought before the meeting.
Special meetings of stockholders may be called by the Chairman or the Chief
Executive Officer or by a majority of the board. Our certificate of
incorporation and bylaws provide that any action required or permitted to be
taken by our stockholders may be effected at a duly called annual or special
meeting of the stockholders or may be taken by a consent in writing by
stockholders.

     Our certificate of incorporation may be amended with the approval of a
majority of the board and the holders of a majority of our outstanding voting
securities.

     The number of directors will be fixed by resolution of the board. The size
of the board is currently fixed at five members. The directors will be elected
for annual terms at the annual meeting of the stockholders, except for filling
vacancies. Directors may be removed with the approval of the holders of a
majority of our voting power present and entitled to vote at a meeting of
stockholders. Vacancies and newly-created directorships resulting from any
increase in the number of directors may be filled by a majority of the directors
then in office, a sole remaining director, or the holders of a majority of the
voting power present and entitled to vote at a meeting of stockholders.

     The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote generally shall
constitute a quorum for stockholder action at any meeting.

LIMITATION OF LIABILITY; INDEMNIFICATION

     Our certificate of incorporation contains provisions permitted under the
Delaware General Corporation Law relating to the liability of directors. These
provisions eliminate a director's personal

                                       62
<PAGE>   66

liability for monetary damages resulting from a breach of fiduciary duty, except
for specified wrongful acts, including:

     - for any breach of the director's duty of loyalty to us or our
       stockholders;

     - for acts or omissions not in good faith or which involve intentional
       misconduct or a knowing violation of law;

     - under Section 174 of the Delaware General Corporation Law relating to
       unlawful stock repurchases or dividends; or

     - for any transaction from which the director derives an improper personal
       benefit.

     These provisions do not limit or eliminate our rights or those of any
stockholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's fiduciary duty. These provisions will not
alter a director's liability under federal securities laws.

     Our bylaws also contain provisions indemnifying our directors and officers
to the fullest extent permitted by the Delaware General Corporation Law. We have
entered into separate indemnification agreements with our directors and officers
that, in some cases, may be broader than the specific indemnification provisions
contained in our certificate of incorporation, bylaws or the Delaware General
Corporation Law. The indemnification agreements may require us, among other
things, to indemnify the officers and directors against liabilities, other than
liabilities arising from willful misconduct, that may arise by reason of their
status or service as directors or officers. These agreements also may require us
to advance the expenses incurred by the officers and directors as a result of
any proceeding against them as to which they could be identified. We believe
that these indemnification arrangements are necessary to attract and retain
qualified individuals to serve as directors and officers.

TRANSFER AGENT AND REGISTRAR

     The Transfer Agent and Registrar for the Class A common stock is
ChaseMellon Shareholder Services LLC.

                                       63
<PAGE>   67

                                 LEGAL MATTERS

     Certain legal matters with respect to the validity of the Class A common
stock offered hereby are being passed upon for ReSourcePhoenix.com by Wilson
Sonsini Goodrich & Rosati, Palo Alto, California.

                                    EXPERTS

     The financial statements included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares to be sold in the offering. This
prospectus does not contain all the information contained in the registration
statement. For further information with respect to ReSourcePhoenix.com and the
shares to be sold in the offering, reference is made to the registration
statement and the exhibits and schedules filed with the registration statement.
We have described all material information for each contract, agreement or other
document filed with the registration statement in the prospectus. However,
statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. As a
result, you should refer to the copy of the contract, agreement or other
document filed as an exhibit to the registration statement for a complete
description of the matter involved.

     You may read and copy all or any portion of the registration statement or
any reports, statements or other information that we file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Our SEC filings, including the
registration statement, are also available to you without charge from the SEC
Web site, which is located at http://www.sec.gov.

                                       64
<PAGE>   68

                              RESOURCEPHOENIX.COM

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Unaudited Condensed Consolidated Balance Sheets -- March 31,
  2000......................................................   F-2
Unaudited Condensed Consolidated Statements of
  Income -- Three Months Ended March 31, 2000 and March 31,
  1999......................................................   F-3
Unaudited Condensed Statements of Cash Flows -- Three Months
  Ended March 31, 2000 and March 31, 1999...................   F-4
Notes to Unaudited Condensed Consolidated Financial
  Statements -- March 31, 2000..............................   F-5
Report of Independent Public Accountants....................   F-9
Consolidated Statement of Operations for the years ended
  December 31, 1999, 1998 and 1997..........................  F-10
Consolidated Balance Sheets as of December 31, 1999 and
  1998......................................................  F-11
Consolidated Statement of Changes in Stockholders' Equity
  for the years ended December 31, 1999, 1998 and 1997......  F-12
Consolidated Statement of Cash Flows for the years ended
  December 31, 1999, 1998 and 1997..........................  F-13
Notes to Consolidated Financial Statements..................  F-14
</TABLE>

                                       F-1
<PAGE>   69

                              RESOURCEPHOENIX.COM

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               MARCH 31,     DECEMBER 31,
                                                                 2000            1999
                                                              -----------    ------------
                                                              (UNAUDITED)
<S>                                                           <C>            <C>
ASSETS
Current Assets:
  Cash and cash equivalents.................................   $  9,614        $ 15,780
  Accounts receivable, net of allowance of $55 at March 31,
     2000 and $54 at December 31, 1999......................      1,422             948
  Receivable from affiliates................................         42              33
  Prepaid expenses and other current assets.................        687             729
                                                               --------        --------
     Total current assets...................................     11,765          17,490
Property and equipment, at cost, net of accumulated
  depreciation..............................................      7,015           6,287
Other assets................................................        332             276
                                                               --------        --------
     Total assets...........................................   $ 19,112        $ 24,053
                                                               ========        ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..........................................   $  3,196        $  1,455
  Accrued liabilities.......................................      2,008           1,655
  Deferred revenue -- current...............................        705             306
                                                               --------        --------
     Total current liabilities..............................      5,909           3,416
Deferred revenue............................................        931             688
                                                               --------        --------
     Total liabilities......................................      6,840           4,104
Commitment and Contingencies
Stockholder's Equity:
  Class A Common Stock, $.001 par value; 4,028,000 shares
     issued and outstanding at December 31, 1999 and
     4,038,800 shares issued and outstanding at March 31,
     2000...................................................     32,892          32,869
  Class B Common Stock, $.001 par value; 7,172,000 shares
     issued and outstanding at December 31, 1999 and March
     31, 2000...............................................      9,957           9,957
  Accumulated deficit.......................................    (30,577)        (22,877)
                                                               --------        --------
     Total stockholder's equity.............................     12,272          19,949
                                                               --------        --------
     Total liabilities and stockholder's equity.............   $ 19,112        $ 24,053
                                                               ========        ========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-2
<PAGE>   70

                              RESOURCEPHOENIX.COM

                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                              ------------------
                                                               2000       1999
                                                              -------    -------
<S>                                                           <C>        <C>
Revenue:
  Contract service revenue..................................  $ 1,403    $   809
  Contract service revenue -- affiliate.....................    1,016        478
  Software revenue..........................................      532         94
                                                              -------    -------
     Total revenue..........................................    2,951      1,381
Operating expenses:
  Cost of providing services................................    3,343      1,028
  Cost of providing software revenue........................      324        177
  General and administrative................................    2,305        511
  Research and development..................................    1,002        656
  Client acquisition........................................    3,122        476
  Stock-related compensation................................       --      2,358
  Depreciation and amortization.............................      601         91
                                                              -------    -------
     Total operating expenses...............................   10,697      5,297
                                                              -------    -------
Loss from operations........................................   (7,746)    (3,916)
Other income (expense)......................................      175          9
                                                              -------    -------
Net loss before effect of accounting change.................   (7,571)    (3,907)
  Cumulative effect of accounting change....................     (129)        --
                                                              -------    -------
Net loss....................................................  $(7,700)   $(3,907)
                                                              =======    =======
Basic and diluted net loss per share:
  Net loss before effect of accounting change...............  $ (0.68)   $  (.54)
  Cumulative effect of accounting change....................    (0.01)        --
                                                              -------    -------
Net loss....................................................  $ (0.69)   $ (0.54)
                                                              =======    =======
Shares used in computing basic and diluted net loss per
  share.....................................................   11,201      7,200
Pro forma amounts assuming accounting change had been in
  effect during the three months ended March 31, 1999:
  Net loss..................................................  $(7,522)   $(3,992)
  Basic and diluted net loss per share......................  $ (0.67)   $ (0.55)
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-3
<PAGE>   71

                              RESOURCEPHOENIX.COM

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                              ------------------
                                                               2000       1999
                                                              -------    -------
<S>                                                           <C>        <C>
OPERATING ACTIVITIES
  Net loss..................................................  $(7,700)   $(3,907)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Depreciation and amortization..........................      601         91
     Stock-related compensation.............................       --      2,358
     Change in operating assets and liabilities:
       Accounts receivable..................................     (474)       666
       Receivable from affiliates...........................       (9)        84
       Prepaid expenses and other assets....................      (14)       (75)
       Accounts payable and accrued liabilities.............    2,094       (367)
       Deferred revenue.....................................      642        186
                                                              -------    -------
          Net cash used in operating activities.............   (4,860)      (964)
INVESTING ACTIVITIES
  Purchase of property and equipment........................   (1,329)        (5)
                                                              -------    -------
          Net cash used in investing activities.............   (1,329)        (5)
FINANCING ACTIVITIES
  Proceeds from capital contribution........................       --        921
  Proceeds from exercise of options.........................       23         --
                                                              -------    -------
          Net cash provided by financing activities.........       23        921
Net decrease in cash and cash equivalents...................   (6,166)       (48)
Cash and cash equivalents, beginning of period..............   15,780        503
                                                              -------    -------
Cash and cash equivalents, end of period....................  $ 9,614    $   455
                                                              =======    =======
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-4
<PAGE>   72

                              RESOURCEPHOENIX.COM

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

     The accompanying condensed consolidated financial statements have been
prepared without audit by ReSourcePhoenix.com (the "Company") in accordance with
generally accepted accounting principles for interim financial statements and
pursuant to the rules of the Securities and Exchange Commission for Form 10-Q.
Certain information and footnotes required by generally accepted accounting
principles for complete financial statements have been omitted. It is the
opinion of management that all adjustments are of a normal and recurring nature.
For further information, refer to the audited financial statements and footnotes
included in the Company's Annual Report on Form 10-K dated December 31, 1999.
Reclassification of certain prior year balances have been made to conform to the
March 31, 2000 presentation.

NOTE 2. CHANGE IN ACCOUNTING PRINCIPLE

     In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements" which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. Subsequently,
the SEC released SAB 101A, which delayed the implementation date of SAB 101 for
registrants with fiscal years that begin between December 16, 1999 and March 15,
2000 to the second quarter of their fiscal year. The Company elected to
implement SAB No. 101 the first quarter of 2000, the effect of which is
described as follows:

     Effective January 1, 2000, the Company deferred recognition of
implementation fees for its Financial Outsourcing, S.T.A.R. and M.A.R.S. hosting
services and will amortize such fees ratably over a three-year period as client
services are performed. Prior to January 1, 2000, implementation fees were
recognized when the work was completed on a percentage of completion basis. The
cumulative effect of the change in the method of recognizing implementation
revenue on prior years' income was a one-time charge of $129,000 or $0.01 per
share. Of this amount, $85,000 is attributable to the first quarter of 1999. The
effect of this change in accounting principle on first quarter 2000's revenue
was to reduce total revenue from $3.7 million to $3.0 million. Costs related to
client implementation activities are expensed as incurred.

     Set forth below is a comparison of operating results for the three months
ended March 31, 2000:

<TABLE>
<CAPTION>
                                                                 ASSUMING SAB 101 HAD
                                                                   NOT BEEN ADOPTED
                                                MARCH 31, 2000      MARCH 31, 2000
                                                --------------   --------------------
<S>                                             <C>              <C>
Revenue.......................................     $ 2,951             $ 3,701
Operating Expenses............................      10,697              10,697
Net Loss from Operations......................      (7,746)             (6,996)
</TABLE>

NOTE 3. BASIC AND DILUTED NET LOSS PER SHARE

     Shares used in computing basic and diluted net loss per share are based on
the weighted average shares outstanding in each period. Basic net loss per share
excludes any dilutive effects of stock options. Diluted net loss per share
includes the dilutive effect of the assumed exercise of stock options using the
treasury stock method. However, the effect of outstanding stock options has been
excluded from the calculation of diluted net loss per share as their inclusion
would be antidilutive.

                                       F-5
<PAGE>   73
                              RESOURCEPHOENIX.COM

   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     If the Company had reported net income, the calculation of diluted earnings
per share would have included the shares used in the computation of net loss per
share as well as an additional 672,000 common equivalent shares (determined
using the treasury stock method) related to outstanding stock options not
included above for the first quarter of fiscal 2000.

NOTE 4. LEGAL PROCEEDINGS

     We are not currently involved in any material legal proceedings. We are,
however, party to various legal proceedings and claims from time to time arising
in the ordinary course of business. We do not expect that the results in any of
these legal proceedings will seriously harm our business or results of
operations.

NOTE 5. GOING CONCERN

     The Company will need to raise additional capital during the second
quarter. In late April the Company began to implement a number of steps aimed at
reducing its operating costs, which, prior to that point, had been predicated on
higher anticipated revenue levels. Those steps included, among other things,
staff reductions amounting to approximately 15% of its work force and cessation
of certain development efforts that will reduce expenditures for outside
consulting expertise. We expect to record a charge of approximately $900,000 in
the second quarter of 2000 related to these reductions. Despite these efforts,
the Company will continue to operate at a significant cash negative level.
Absent additional financing, the Company may not have sufficient resources to
continue as a going concern beyond its second quarter. We may sell additional
debt or equity securities or enter into new credit facilities to meet our cash
needs. To that end, the Company has entered into an agreement with Torneaux Ltd.
to provide us with equity financing. (See Note 6 -- Subsequent Events.) Our
ability to raise funds through the equity facility with Torneaux is subject to
certain conditions at the time of each sale of our Class A common stock. We may
not be able to satisfy the conditions for each sale of our Class A common stock.
We cannot assure you that we will be able to complete this or any other
financing, that such financing will be adequate for the Company's needs, or that
a financing will be completed prior to the Company running out of funds.

     The factors discussed above create substantial doubt about the Company's
ability to continue as a going concern and an uncertainty as to the
recoverability and classification of recorded asset amounts and the amounts and
classification of liabilities. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern. In
connection with filing a registration statement, our independent auditors,
Arthur Andersen LLP, reissued their auditors' report on our financial statements
for the year ended December 31, 1999. They modified their report to reflect
their view that we require additional funding to continue our operations and
their view that we may be unable to continue our operations absent receiving
additional funding. More specifically, the modified opinion, among other things,
recognizes substantial doubt about our ability to continue as a going concern.

                                       F-6
<PAGE>   74
                              RESOURCEPHOENIX.COM

   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6. SUBSEQUENT EVENTS

     FINANCING ARRANGEMENT WITH TORNEAUX LTD.

     On June 6, 2000, we entered into a common stock purchase agreement with
Torneaux Ltd. Pursuant to the agreement, we may issue and sell, from time to
time, up to 7,000,000 shares of our Class A common stock, subject to the
satisfaction of certain conditions.

     Beginning on the date a registration statement is declared effective by the
SEC, and continuing for 14 months thereafter, we may in our sole discretion
sell, or put, shares of our Class A common stock to Torneaux. The 14-month
period is divided into pricing periods, each consisting of 20 trading days on
the Nasdaq National Market.

     From time to time during the 14-month term, we may make 12 monthly draw
downs, by giving notice and requiring Torneaux to purchase shares of our Class A
common stock, for the draw down amount. Torneaux's purchase price may fluctuate
based upon the daily volume weighted average price over a 20 day trading period.
Prior to each draw down, we will provide Torneaux with a notice that sets forth
the number of shares of Class A common stock we will sell, the commencement date
of the pricing period, and the threshold price, which is the lowest price per
share at which we will issue new shares of Class A common stock. We may issue a
draw down notice for up to $1,500,000 if the threshold price is equal to or
exceeds $1.00, and an additional $500,000 for every $1.00 increase of the
threshold price above $1.00 up to $21.00 for a maximum draw down amount of
$11,500,000. If we set the threshold price between $1.00 and $10.00, then the
purchase price to be paid by Torneaux is 94% of the daily volume weighted
average price over the pricing period. If we set the threshold price between
$10.00 and $21.00, then for each $1.50 increase in the threshold price above
$10.00, the purchase price to be paid by Torneaux is increased by 0.10%. If the
daily volume weighted average price on a given trading day is less than the
threshold price set by us, then the amount that we can draw down will be reduced
by 1/20 for that pricing period. In addition, if trading in our Class A common
stock is suspended for more than three hours in any trading day, then the daily
volume weighted average price for that trading day is deemed to be below the
threshold price and, consequently, reduces the draw down amount by 1/20.

     On June 6, 2000, we also issued warrants to Torneaux to purchase up to
1,800,000 shares of our Class A common stock at exercise prices ranging from
$2.50 to $7.00 per share. Torneaux may exercise the warrants through June 5,
2003. The first warrant, Warrant A, is immediately exercisable for 125,000
shares of Class A common stock. Thereafter, Warrant A is exercisable in
increments of 125,000 shares upon the sale of the 125,000 shares previously
issued. 500,000 shares of Class A common stock are issuable to Torneaux at $2.50
per share upon the exercise of Warrant A. Once all of the shares issued upon
exercise of Warrant A have been sold, then Warrant B may be exercised in
increments of 125,000 shares upon the sale of the 125,000 shares previously
issued. 500,000 warrant shares are issuable to Torneaux at $4.00 per share upon
the exercise of Warrant B. After the Warrant B shares have been sold, then
Torneaux may exercise Warrant C for up to 400,000 warrant shares at $6.00 per
share. Warrant C may be exercised in increments of 100,000 shares upon the sale
of the 100,000 shares previously issued. Upon the sale of all shares issued
under Warrant C, then Torneaux may exercise Warrant D for up to 400,000 shares
of Class A common stock at $7.00 per share. Warrant D may be exercised in
increments of 100,000 shares upon the sale of the 100,000 shares previously
issued. The warrants contain provisions that protect Torneaux against dilution
by adjustment of the exercise price and the number of shares issuable thereunder
upon the occurrence of

                                       F-7
<PAGE>   75
                              RESOURCEPHOENIX.COM

   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

specified events, such as a merger, stock split, stock dividend,
recapitalization and additional issuances of common stock. The exercise price
for the warrant shares is payable in cash.

     DEBT FINANCING

     Line of Credit.  On June 7, 2000, we entered into a line of credit for up
to $2,000,000 with Pacific Business Funding, a division of Cupertino National
Bank. Pursuant to the credit agreement, we may borrow up to 80% against all
eligible receivables due within 90 days, and we will pay interest at a rate of
15% per annum on the average daily balance of the amount borrowed. In addition,
we will pay a commitment fee of 1% of the commitment amount and an
administration fee of  1/2% of the face amount of each invoice financed. The
line of credit is secured by our accounts receivable and inventory. In
connection with the credit agreement, we will issue a warrant to Pacific
Business Funding to purchase shares up to 85,715 shares of our Class A common
stock at $1.75 per share, which is the average closing price of our Class A
common stock on the Nasdaq National Market for the five trading days prior to
Pacific Business Funding's credit commitment.

     Equipment Lease Financing.  On June 6, 2000, we entered into an equipment
lease financing commitment with Lease Management Associates, Inc., which is
affiliated with Gus Constantin, our Chief Executive Officer and one of our
directors and shareholders. We expect to enter into a definitive agreement with
Lease Management Associates by the end of June 2000. Pursuant to the proposed
equipment lease line, we will sell furniture, fixtures, office and computer
equipment for up to $3,000,000 to Lease Management Associates, Inc., which we
refer to as LMA. Pursuant to the commitment, LMA agreed to lease the equipment
to our company for three years. During the term of the proposed lease, we will
make a monthly lease payment of up to $90,000 and a final lease payment of up to
$600,000. The interest rate on the equipment lease line is approximately 15% per
annum. We will grant LMA a security interest in the furniture, fixtures and
equipment. In addition, we will issue a warrant to LMA to purchase the number of
shares of our Class A common stock equal to 300,000 divided by the average
closing price of our Class A common stock for the five trading days following
our Board's approval of the transaction, which occurred on June 6, 2000.

                                       F-8
<PAGE>   76

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and the Board of Directors of
ReSourcePhoenix.com:

     We have audited the accompanying consolidated balance sheets of
ReSourcePhoenix.com (a Delaware corporation) and subsidiary as of December 31,
1999 and 1998 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. 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 in accordance with auditing standards generally
accepted in the United States. Those standards 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 financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ReSourcePhoenix.com and
subsidiary at December 31, 1999 and 1998, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.

     As discussed further in Note 14, subsequent to January 31, 2000, the date
of our original report, ReSourcePhoenix.com incurred losses of $7,700,000 during
the three months ended March 31, 2000 and expects to incur additional losses
during the remainder of the year ending December 31, 2000. These factors, among
others, as described in Note 14, create substantial doubt about
ReSourcePhoenix.com's ability to continue as a going concern and an uncertainty
as to the recoverability and classification of recorded asset amounts and the
amounts and classification of liabilities. The accompanying financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result should ReSourcePhoenix.com be unable to continue as a going
concern.

                                                     ARTHUR ANDERSEN LLP

San Francisco, California
January 31, 2000, (except with respect to the matter discussed in
Note 14, as to which the date is June 7, 2000)

                                       F-9
<PAGE>   77

                              RESOURCEPHOENIX.COM

                      CONSOLIDATED STATEMENT OF OPERATIONS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED
                                                    --------------------------------------
                                                     12/31/99      12/31/98      12/31/97
                                                    ----------    ----------    ----------
<S>                                                 <C>           <C>           <C>
Revenue:
  Contract service revenue........................  $    3,915    $    2,460    $    2,255
  Contract service revenue -- affiliate...........       2,772         2,182         3,085
  Software revenue................................       2,386            44            --
                                                    ----------    ----------    ----------
     Total revenue................................       9,073         4,686         5,340
Operating expenses:
  Cost of providing services......................       5,859         4,304         3,052
  Cost of providing software revenue..............         901           455            --
  General and administrative......................       4,554         1,963         1,823
  Research and development........................       3,185         2,181           566
  Client acquisition costs........................       5,278         1,144           547
  Depreciation and amortization...................         943           307           133
  Stock-related compensation......................       5,007            --            --
                                                    ----------    ----------    ----------
     Total operating expenses.....................      25,727        10,354         6,121
Loss from operations..............................     (16,654)       (5,668)         (781)
Other income......................................         174            11            41
                                                    ----------    ----------    ----------
Net loss..........................................  $  (16,480)   $   (5,657)   $     (740)
                                                    ==========    ==========    ==========
Basic and diluted net loss per share..............  $    (2.05)   $    (0.79)   $    (0.10)
Shares used in computing basic and diluted net
  loss per share..................................   8,055,000     7,200,000     7,200,000
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-10
<PAGE>   78

                              RESOURCEPHOENIX.COM

                          CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED
                                                              --------------------
                                                              12/31/99    12/31/98
                                                              --------    --------
<S>                                                           <C>         <C>
ASSETS
Current Assets:
  Cash and cash equivalents.................................  $ 15,780    $   503
  Accounts receivable, net of allowance of $54 in 1999 and
     $8 in 1998.............................................       948        419
  Receivable from affiliates................................        33        182
  Prepaid expenses and other current assets.................       729         20
                                                              --------    -------
     Total current assets...................................    17,490      1,124
  Property and equipment....................................     7,669      1,133
  Accumulated depreciation..................................    (1,382)      (439)
                                                              --------    -------
     Net property and equipment.............................     6,287        694
  Other assets..............................................       276          4
                                                              --------    -------
     Total assets...........................................  $ 24,053    $ 1,822
                                                              ========    =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..........................................  $  1,455    $   269
  Accrued liabilities.......................................     1,655        926
  Deferred revenue..........................................       994        627
                                                              --------    -------
     Total current liabilities..............................     4,104      1,822
Commitments and contingencies...............................        --         --
Stockholders' Equity
  Preferred Stock, $.001 par value; 5,000,000 shares
     authorized, none issued or outstanding.................        --         --
  Class A common stock, $.001 par value; 27,800,000
     authorized,
     4,028,000 and no shares issued and outstanding at
     December 31, 1999 and 1998, respectively...............    32,869         --
  Class B common stock, $.001 par value; 7,200,000 shares
     authorized, 7,172,000 and 7,200,000 shares issued and
     outstanding at December 31, 1999 and 1998,
     respectively...........................................     9,957      6,397
  Accumulated deficit.......................................   (22,877)    (6,397)
                                                              --------    -------
     Total stockholders' equity.............................    19,949         --
                                                              --------    -------
     Total liabilities and stockholders' equity.............  $ 24,053    $ 1,822
                                                              ========    =======
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-11
<PAGE>   79

                              RESOURCEPHOENIX.COM

                      CONSOLIDATED STATEMENT OF CHANGES IN
                              STOCKHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                        CLASS A              CLASS B                     TOTAL
                                     COMMON STOCK          COMMON STOCK                  STOCK-
                                  -------------------   ------------------    ACCUM     HOLDERS'
                                   SHARES     AMOUNT     SHARES     AMOUNT   DEFICIT     EQUITY
                                  ---------   -------   ---------   ------   --------   --------
<S>                               <C>         <C>       <C>         <C>      <C>        <C>
BALANCE AT JANUARY 1, 1997......         --   $    --          --   $   --   $     --   $     --
Net loss........................         --        --          --       --       (740)      (740)
Capital contribution from
  stockholder...................         --        --       1,000    1,598         --      1,598
                                  ---------   -------   ---------   ------   --------   --------
BALANCE AT DECEMBER 31, 1997....         --        --       1,000    1,598       (740)       858
Net loss........................         --        --          --       --     (5,657)    (5,657)
Capital contribution from
  stockholder...................         --        --          --    4,799         --      4,799
                                  ---------   -------   ---------   ------   --------   --------
BALANCE AT DECEMBER 31, 1998....         --        --      (1,000)   6,397     (6,397)        --
Net loss........................         --        --          --       --    (16,480)   (16,480)
Capital contribution from
  stockholder...................         --        --          --    3,603         --      3,603
Cancellation of stock...........         --        --      (1,000)      --         --         --
Issuance of Class B common
  stock.........................         --             7,200,000       --         --         --
Dividend........................         --    (1,000)         --       --         --     (1,000)
Compensation paid by issuing
  stock options.................         --     5,007          --       --         --      5,007
Transfer of Class B common stock
  and issuance of Class A common
  stock.........................     28,000        43     (28,000)     (43)        --         --
Issuance of Class A common
  stock.........................  4,000,000    32,000          --       --         --     32,000
  Underwriter/broker
     commissions................         --    (2,240)         --       --         --     (2,240)
  Offering expenses.............         --      (941)         --       --         --       (941)
                                  ---------   -------   ---------   ------   --------   --------
BALANCE AT DECEMBER 31, 1999....  4,028,000   $32,869   7,172,000   $9,957   $(22,877)  $ 19,949
                                  =========   =======   =========   ======   ========   ========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-12
<PAGE>   80

                              RESOURCEPHOENIX.COM

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     YEAR ENDED
                                                          --------------------------------
                                                          12/31/99    12/31/98    12/31/97
                                                          --------    --------    --------
<S>                                                       <C>         <C>         <C>
OPERATING ACTIVITIES
  Net loss..............................................  $(16,480)   $(5,657)     $(740)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Depreciation and amortization......................       943        307        133
     Stock-related compensation expense.................     5,007         --         --
     Change in operating assets and liabilities:
       Accounts receivable, net.........................      (529)       125       (544)
       Receivable from (due to) affiliates..............       149        163       (345)
       Prepaid expenses and other current assets........      (981)        27        (51)
       Accounts payable.................................     1,186        127        240
       Accrued liabilities..............................       729        194        634
       Deferred revenue.................................       367        627         --
                                                          --------    -------      -----
          Net cash used in operating activities.........    (9,609)    (4,087)      (673)
INVESTING ACTIVITIES
  Purchase of equipment, furniture and fixtures.........    (5,062)      (315)      (496)
                                                          --------    -------      -----
          Net cash used in investing activities.........    (5,062)      (315)      (496)
FINANCING ACTIVITIES
  Proceeds from notes payable to stockholder............     5,577         --         --
  Repayment of notes to stockholder.....................    (5,577)        --         --
  Proceeds from capital contributions from
     stockholder........................................     2,129      4,799      1,275
  Payment of dividend...................................    (1,000)        --         --
  Proceeds from initial public offering, net............    29,760         --         --
  Expenses of offering..................................      (941)        --         --
                                                          --------    -------      -----
          Net cash provided by financing activities.....    29,948      4,799      1,275
                                                          --------    -------      -----
Net increase in cash and cash equivalents...............    15,277        397        106
Cash and cash equivalents, beginning of period..........       503        106         --
                                                          --------    -------      -----
Cash and cash equivalents, end of period................  $ 15,780    $   503      $ 106
                                                          ========    =======      =====
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
  Contribution of property and equipment from
     affiliate..........................................  $  1,474
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the period for interest..............  $     57
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      F-13
<PAGE>   81

                              RESOURCEPHOENIX.COM

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

     The consolidated financial statements of ReSourcePhoenix.com and Subsidiary
("the Company") include the accounts of ReSourcePhoenix.com ("the Holding
Company"), a Delaware corporation, and ReSource/Phoenix, Inc. ("the Subsidiary")
a California company incorporated on September 26, 1996. The Holding Company was
formed on July 27, 1999 and on August 4, 1999 the shareholder of the Subsidiary
contributed the shares of the Subsidiary in exchange for shares of Class B
common stock of the Holding Company. The consolidated financial statements
reflect this reorganization. Revenues, expenses, assets and liabilities of the
Subsidiary are included in the respective line items in the consolidated
financial statements for all periods presented after the elimination of
intercompany accounts and transactions. The Holding Company has no operations.

     The Company provides financial, information technology and investor related
services on an outsource basis to unaffiliated third parties. The Company also
provides these services to affiliated companies. In addition, the Company has
developed contact management and sales tracking support software for use by the
mutual fund industry. The Company commenced operating as a division of Phoenix
Leasing Incorporated ("PLI") in 1994. On January 1, 1997, the operations were
sold to the controlling shareholder of Phoenix American Incorporated, the parent
company of PLI and transferred to the Company. On January 1, and April 1, 1997
certain personnel of PLI were also transferred to the Company and certain assets
of PLI were sold to the Company. All asset transfers were made at historical
cost.

     The Company continues to be subject to certain risks common to companies in
similar states of development, including continued market acceptance of its
Internet-based software applications and service offerings, potential turnover
among its early stage and middle-market client base, difficulties in attracting
qualified professional personnel, the loss of a significant customer, and
disruptions with respect to third-party vendors and suppliers.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES

     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.

     REVENUE RECOGNITION

     The Company's revenues are derived from two sources, contract services and
software.

     Contract service revenue. Contract service revenue includes monthly
contractual payments for ongoing accounting, finance, data center operations,
software maintenance and hosting, and other functions in addition to up front
implementation fees. Contract service revenue is recognized as the services are
provided. Contract services are also provided to affiliates and reported as
affiliate revenue. Maintenance revenue is recognized ratably over the term of
the agreement.

                                      F-14
<PAGE>   82
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Software revenue. Software revenue consists principally of up front license
fees earned from the licensing of the Company's software, related consulting and
implementation services, and training. American Institute of Certified Public
Accountants' Statement of Position 97-2, "Software Revenue Recognition" (SOP
97-2) provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions. In accordance with SOP 97-2,
revenue from up front software license agreements is recognized when delivery
has occurred, collection is deemed probable, the fee is fixed or determinable
and vendor-specific objective evidence exists to allocate the total fee to all
delivered and undelivered elements of the arrangement. Revenue is deferred in
cases where the license arrangement calls for future delivery of products or
services for which the Company does not have vendor-specific objective evidence
to allocate a portion of the total fee to the undelivered element. In such
cases, revenue is recognized when the undelivered elements are delivered or
vendor-specific objective evidence of the undelivered elements becomes
available. If license arrangements include the rights to unspecified future
products, revenue is recognized over the contractual or estimated economic term
of the arrangement. Consulting service and training revenues are recognized as
services are performed and accepted by the customer. In instances where software
license agreements include a combination of consulting services, training, and
maintenance, these separate elements are unbundled from the arrangement based on
the element's relative fair value. The Company provides implementation services,
such as implementation planning, loading of software, training of customer
personnel, data conversion, building simple interfaces, running test data, and
assisting in the development and documentation of procedures. Customer personnel
are dedicated to participate in the services being performed. As such, this
service element qualifies for separate accounting in accordance with SOP 97-2.

     DEFERRED REVENUE

     Deferred revenue represents amounts received from customers under certain
license, maintenance, service agreements and up front implementation fees for
which the revenue earnings process has not been completed.

     OPERATING EXPENSES

     Cost of providing services includes salaries and benefits for personnel in
our S.T.A.R. and Financial Outsourcing operations, data center, and certain
other IT functions, fees paid to outside service providers other than
implementation service providers and other miscellaneous operating costs.

     Cost of providing software revenue includes salaries and benefits for
personnel in M.A.R.S. technical support and installation groups and costs
related to consulting, training and maintenance, and updates. Prior to the
quarter ended June 30, 1998, these costs were expensed as research and
development.

     General and administrative expenses includes salaries and benefits for
management personnel, fees paid to outside service providers for
corporate-related services and other corporate overhead.

     Research and development expenses include salaries and benefits for
personnel engaged in M.A.R.S. development, consulting fees paid to outside
service providers engaged in M.A.R.S. development and other miscellaneous costs
associated with M.A.R.S. development. In addition, research and development
includes similar costs related to applications development that relate to
Financial Outsourcing services. Research and development costs are expensed as
incurred and consist

                                      F-15
<PAGE>   83
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

primarily of software development costs. Financial accounting standards require
the capitalization of certain software development costs after technological
feasibility of the software is established. In the development of the Company's
new products and existing products, the technological feasibility of the
software is not established until substantially all product development is
complete, including the development of a working model. Internal software
development costs that were eligible for capitalization were insignificant and
were charged to research and development expense in the accompanying
consolidated statement of operations.

     Client acquisition expense includes salaries, benefits and commissions paid
to our sales and marketing and implementation personnel, travel expenses of our
sales and marketing and implementation personnel, advertising expenses and fees
paid to outside implementation consultants.

     CASH AND CASH EQUIVALENTS

     Cash and cash equivalents consist of highly liquid financial instruments,
primarily money market funds, purchased with an original maturity of three
months or less.

     PROPERTY AND EQUIPMENT

     Property and equipment is recorded at cost and depreciated on a
straight-line basis over estimated useful lives ranging from 3 to 10 years.

     CONCENTRATION OF CREDIT RISK

     The Company does not require collateral or other security to support credit
sales, but does perform ongoing credit evaluations of its customers' financial
condition. The Company provides allowances for bad debts based on historical
experience and specific identification, which, to date, have been insignificant.

     For the years ended December 31, 1999, 1998 and 1997, the following
customers accounted for 10% or more of the Company's net revenues:

<TABLE>
<CAPTION>
                                                         1999    1998    1997
                                                         ----    ----    ----
<S>                                                      <C>     <C>     <C>
Phoenix Leasing Incorporated (Affiliate)...............   24%     41%     48%
John Hancock Advisors..................................   16%     --      --
GE Capital Aviation/PIMC...............................    9%     20%     23%
</TABLE>

     SEGMENT REPORTING

     Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131") establishes
standards for the reporting of financial and descriptive information about
reportable operating segments. Because the Company's financial information is
internally evaluated as a single operating segment and decisions regarding
resource allocation are made considering the Company's operations as a whole, no
separate segment information is presented. All of the Company's operations are
in the United States.

                                      F-16
<PAGE>   84
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     INCOME TAXES

     Prior to the completion of the Company's initial public offering, the
Company elected to be treated as a subchapter S corporation as defined by the
Internal Revenue Code of 1986, as amended (the "Code"). As such, the Company was
not subject to federal taxes on its income and items of income, gain, loss,
deductions and credit are reportable by individual stockholders of the Company.
Accordingly, no liability or provision for such taxes was recorded on the
Company's consolidated financial statements. Upon the completion of the
Company's initial public offering, the Company terminated its election to be
taxed as a subchapter S corporation. The Company now accounts for income taxes
in accordance with the Statement of Accounting Standards No. 109, "Accounting
for Income Taxes," under which the liability method is used to account for
deferred income taxes. Under this method, deferred tax assets and liabilities
are determined based on differences between the financial reporting and tax
basis of the assets and liabilities and are measured using enacted tax rates and
laws. The Company has experienced operating losses since inception. Since the
utilization of these deferred tax assets is dependent on future profits, which
are not assured, a valuation allowance equal to the net deferred tax assets has
been provided in the consolidated financial statements.

     RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued and,
as amended, is required to be adopted by the Company in fiscal 2001. Because the
Company does not currently use any derivative instruments, management does not
anticipate that the adoption of the new statement will have a significant effect
on consolidated results of operations or the consolidated financial position of
the Company.

     In December 1998, the American Institute of Certified Public Accountants
issued SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions." SOP 98-9 amends SOP 97-2 and SOP 98-4
extending the deferral of the application of certain provisions of SOP 97-2 as
amended by SOP 98-4 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999. Management does not expect the
adoption to have a material effect on its results of consolidated operations or
consolidated financial position.

     RECLASSIFICATIONS

     Certain prior year balances have been reclassified to conform to the
current year presentation.

     BASIC AND DILUTED NET LOSS PER SHARE

     Shares used in computing basic and diluted net loss per share are based on
the weighted average shares outstanding in each period. Basic net loss per share
excludes any dilutive effects of stock options. Diluted net loss per share
includes the dilutive effect of the assumed exercise of stock options using the
treasury stock method. However, the effect of outstanding stock options has been
excluded from the calculation of diluted net loss per share as their inclusion
would be antidilutive.

                                      F-17
<PAGE>   85
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3. PROPERTY AND EQUIPMENT

     Major classes of property and equipment are as follows (in thousands):

<TABLE>
<CAPTION>
                                                       DECEMBER 31,    DECEMBER 31,
                                                           1999            1998
                                                       ------------    ------------
<S>                                                    <C>             <C>
Furniture, fixtures and leasehold improvements.......    $   838          $  270
Computer hardware and equipment......................      4,668             542
Software.............................................      2,163             321
                                                         -------          ------
                                                           7,669           1,133
Less accumulated depreciation and amortization.......     (1,382)           (439)
                                                         -------          ------
Net property and equipment...........................    $ 6,287          $  694
                                                         =======          ======
</TABLE>

     Equipment and furniture are carried at cost. The Company provides for
depreciation using the straight-line method for financial reporting purposes
over estimated useful lives ranging from three to ten years.

     The Company received a transfer of property and equipment in the amount of
$389,000 less accumulated depreciation of $66,000 from PLI on January 1, 1997 at
historical cost. Also, effective June 1, 1999, property and equipment in the
amount of $1,592,000, less accumulated depreciation of $118,000 was transferred
at historical cost from an affiliate to the Company. The Company is continuing
to depreciate these assets based on their original useful lives.

NOTE 4. INCOME TAXES

     Prior to the completion of the Company's initial public offering, the
Company elected to be treated as a subchapter S corporation as defined by the
Code. As such, the Company was not subject to federal taxes on its income and
items of income, gain, loss, deductions and credit are reportable by individual
stockholders of the Company. Accordingly, no liability or provision for such
taxes were recorded on the Company's consolidated financial statements prior to
October 13, 1999.

     As of December 31, 1999, the Company had a federal net operating loss
carryforward of approximately $5.6 million, which will expire in the years 2003
through 2020 for state and federal reporting purposes.

                                      F-18
<PAGE>   86
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):

<TABLE>
<CAPTION>
                                                         DECEMBER 31, 1999
                                                         -----------------
<S>                                                      <C>
Deferred tax assets:
  Net operating loss carryforward......................       $2,258
  Accounts receivable..................................           35
  Stock-related compensation expense...................        2,003
                                                              ------
Gross deferred tax assets..............................        4,296
Less valuation allowance...............................        3,953
                                                              ------
Deferred tax assets....................................          343
                                                              ------
Deferred tax liabilities:
  Equipment, furniture and fixtures....................         (343)
                                                              ------
Gross deferred tax liabilities.........................         (343)
                                                              ------
Net deferred taxes.....................................       $    0
                                                              ======
</TABLE>

     A valuation allowance has been established, and accordingly, no benefit has
been recognized for the Company's net operating loss and net deferred tax
assets. The Company believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realizability of
the deferred tax assets such that a full valuation allowance has been recorded.
These factors include the Company's history of net losses since its inception
and expected near-term future losses. The Company will continue to assess the
realizability of the deferred tax assets based on actual and forecasted
operating results.

NOTE 5. LEASE OBLIGATIONS

     The Company leases its office space under non-cancelable operating leases,
which expire at various dates through 2006. The facility leases generally
require the Company to pay operating costs, including property taxes, insurance
and maintenance, and contain renewal options and provisions adjusting the lease
payments based upon changes in operating costs or in fixed increments. Rent
expense is reflected on a straight-line basis over the terms of the related
leases. The future minimum lease payments under operating leases subsequent to
December 31, 1999 are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                  YEAR ENDING DECEMBER 31,
                  ------------------------
<S>                                                           <C>
2000........................................................  $ 1,783
2001........................................................    1,629
2002........................................................    1,263
2003........................................................    1,417
2004........................................................    1,460
Thereafter..................................................    3,050
                                                              -------
          Total minimum lease payments......................  $10,602
                                                              =======
</TABLE>

                                      F-19
<PAGE>   87
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6. STOCKHOLDERS' EQUITY

     On October 14, 1999, the Company commenced an initial public offering of
its Class A common stock. The offering consisted of 4,000,000 shares of Class A
common stock issued to the public at $8.00 per share. On October 19, 1999 the
Company closed its initial public offering, which resulted in net proceeds to
the Company, after expenses, of approximately $28,819,000.

     Pursuant to its Amended and Restated Certificate of Incorporation, the
Company is authorized to issue an aggregate of 40,000,000 shares of capital
stock, consisting of 27,800,000 shares of Class A common stock, par value $0.001
per share, 7,200,000 shares of Class B common stock, par value $0.001 per share,
and 5,000,000 shares of preferred stock, par value $0.001 per share.

     COMMON STOCK

     Shares of Class A common stock and Class B common stock are identical in
all respects, except for voting rights and certain conversion rights, as
described below.

     Voting Rights. Each outstanding share of Class A common stock is entitled
to one vote on all matters submitted to a vote of the Company's stockholders,
including the election of directors, and each share of Class B common stock is
entitled to five votes on each such matter. Except as required by applicable
law, holders of the Class A common stock and Class B common stock vote together
as a single class on all matters. There is no cumulative voting in the election
of directors.

     For so long as there are any shares of Class B common stock outstanding,
any action that may be taken at a meeting of the stockholders may be taken by
written consent in lieu of a meeting if the Company receives consents signed by
stockholders having the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares entitled to vote on the
matter were present and voted. This could permit the holders of Class B common
stock to take action regarding certain matters without providing other
stockholders the opportunity to voice dissenting views or raise other matters.
The right to take such action by written consent of stockholders will expire
when there are no longer any shares of Class B common stock outstanding.

     Dividends, Distributions and Stock Splits. Holders of Class A common stock
and Class B common stock are entitled to receive dividends at the same rate if,
as and when such dividends are declared by the Company's Board of Directors out
of assets legally available therefor after payment of dividends required to be
paid on shares of preferred stock, if any.

     Conversion. The shares of Class A common stock are not convertible. Each
share of Class B common stock is convertible into one share of Class A common
stock at any time at the option of the holder. Each share of Class B common
stock will automatically convert into one share of Class A common stock upon the
sale or transfer of such share of Class B common stock to any person. The
holders of Class B common stock shall have, upon conversion of their shares of
Class B common stock into shares of Class A common stock, one vote per share of
Class A common stock held.

     Liquidation. In the event of any dissolution, liquidation, or winding up of
the Company's affairs, whether voluntary or involuntary, after payment of the
Company's debts and other liabilities and making provision for the holders of
preferred stock, if any, the Company's remaining assets will be distributed
ratably among the holders of the Class A common stock and the Class B common
stock, treated as a single class.

                                      F-20
<PAGE>   88
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Mergers and Other Business Combinations. Upon a merger, combination, or
other similar transaction in which shares of common stock are exchanged for or
changed into other stock or securities, cash and/or any other property, holders
of the Class A common stock and Class B common stock will be entitled to receive
an equal amount per share of stock, securities, cash, and/or any other property,
as the case may be, into which or for which each share of any other class of
common stock is exchanged or changed; provided that in any transaction in which
shares of capital stock are distributed, such shares so exchanged for or changed
into may differ as to voting rights and conversion rights to the extent and only
to the extent that the voting rights and conversion rights of Class A common
stock and Class B common stock differ at that time.

     PREFERRED STOCK

     On August 4, 1999, 5,000,000 shares of undesignated preferred stock were
authorized for issuance. The Company's board has the authority to issue
preferred stock in one or more series and to establish the rights and
restrictions granted to or imposed on any unissued shares of preferred stock and
to fix the number of shares constituting any series without any further vote or
action by the stockholders. The Company's board has the authority, without
approval of the stockholders, to issue preferred stock that has voting and
conversion rights superior to the common stock, which could have the effect of
delaying or preventing a change in control.

NOTE 7. STOCK BASED INCENTIVE PLANS

     PRIOR PHANTOM PLAN

     On January 1, 1999, the Company adopted an Incentive Plan ("the Phantom
Plan") for its key employees, whereby share appreciation and dividend income
rights were granted to such employees by reference to the Company's common
shares. Upon exercise of such rights, the employees were required to provide to
the Company an amount equal to $2.08 per share. The rights granted under the
Phantom Plan vested ratably over four years.

     On August 4, 1999, the Company terminated the Phantom Plan, subject to the
effectiveness of the Company's proposed initial public offering at the
completion of the initial public offering. All outstanding awards under the
Phantom Plan were terminated and replaced by option grants under the Stock
Option Plan (defined below).

     STOCK OPTION PLAN

     On August 4, 1999, the Board of Directors adopted its 1999 Stock Plan ("the
Stock Option Plan") pursuant to which a total of 1,260,000 shares of Class A
common stock have been reserved for issuance to provide additional incentive to
its employees, officers, directors and consultants. Pursuant to the Stock Option
Plan, the Company may grant stock options and stock purchase rights to
employees, officers, directors and consultants. Under the Stock Option Plan, the
Company can grant either incentive stock options or non-qualified stock options.
The Board of Directors granted options to purchase an aggregate of 836,210
shares of Class A common stock at an exercise price of $2.08 per share, subject
to the closing of the Company's initial public offering. These grants vested
fully upon the closing of the Company's initial public offering. Compensation
expense of $1,956,000 previously charged under the Phantom Plan was reversed and
compensation expense of $5,007,000

                                      F-21
<PAGE>   89
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

representing the difference between the fair value of $8.00 per share and the
exercise price of $2.08 was charged.

     The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") requires use of
option valuation models that were developed for use in estimating the fair value
of traded options that have no vesting restrictions and are fully transferable
and not for use in valuing employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense was
recognized for all options granted subsequent to the Company's initial public
offering.

     A summary of the activity under the Stock Option Plan through December 31,
1999 is set forth below:

<TABLE>
<CAPTION>
                                                                         WEIGHTED AVERAGE
                                                          NUMBER OF       EXERCISE PRICE
                                          ALLOCATIONS   SHARES GRANTED      PER SHARE
                                          -----------   --------------   ----------------
<S>                                       <C>           <C>              <C>
August 4, 1999..........................   1,260,000
Grants..................................  (1,014,560)     1,014,560           $ 3.37
Cancelled...............................         200           (200)           15.69
                                          ----------      ---------           ------
December 31, 1999.......................     245,640      1,014,360           $ 3.37
                                          ==========      =========           ======
</TABLE>

     The maximum term of a stock option granted under the Stock Option Plan is
generally limited to ten years. If an optionee terminates his or her service,
the optionee generally may exercise only those options vested as of the date of
termination of service. Unless otherwise specified in the option agreement, the
optionee must effect such exercise within three months of termination of service
for any reason other than death or disability, and within one year after
termination due to death or disability. The exercise price of incentive stock
options granted under the Stock Option Plan must be at least equal to the fair
market value of the Company's Class A common stock on the date of grant. Terms
of any stock purchase rights granted under the Stock Option Plan shall be
determined by the Plan Administrator at the time such rights are issued. Upon
the termination of a purchaser's service with the Company, the Company shall
have an option to repurchase his or her shares at the original price paid by the
purchaser.

     The Company's directors are granted options periodically in lieu of
director's fees. Such options are issued at the current market price and are
100% vested upon grant.

     In the event the Company is acquired or merged with another entity or
transfers all or substantially all of the Company's assets, then each
outstanding option and stock purchase right shall automatically vest and become
fully exercisable unless the successor entity assumes such option or stock
purchase right or replaces it with a comparable option or right.

     Under the Company's Stock Option Plan 845,160 options were exercisable at
December 31, 1999, at exercise prices ranging from $2.08 to $17.25. The
contractual life at December 31, 1999 was 10 years, with a weighted average
contractual life of 9.8 years.

                                      F-22
<PAGE>   90
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following is a summary of fixed stock options outstanding and
exercisable by price range at December 31, 1999:

<TABLE>
<CAPTION>
                                OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
                 -------------------------------------------------   ---------------------------------
    ACTUAL         NUMBER      WEIGHTED-AVERAGE                          NUMBER
   RANGE OF      OUTSTANDING      REMAINING       WEIGHTED-AVERAGE   EXERCISABLE AT   WEIGHTED-AVERAGE
EXERCISE PRICES  AT 12/31/99   CONTRACTUAL LIFE    EXERCISE PRICE       12/31/99       EXERCISE PRICE
---------------  -----------   ----------------   ----------------   --------------   ----------------
<S>              <C>           <C>                <C>                <C>              <C>
$ 2.08 -  2.08      836,210           9.8              $ 2.08           836,210            $ 2.08
$ 6.50 -  8.00      145,700           9.8              $ 7.86             2,700            $ 8.00
$14.00 - 17.25       29,450           9.9              $15.91             6,250            $17.25
$21.38 - 21.38        3,000          10.0              $21.38                --                --
--------------    ---------          ----              ------           -------            ------
$ 2.08 - 21.38    1,014,360           9.8              $ 3.37           845,160            $ 2.21
</TABLE>

     Pro forma information regarding net income and earnings per share is
required by SFAS No. 123 and is determined as if the Company had accounted for
its employee stock options under the fair value method of SFAS No. 123. The fair
value of each option grant under the fixed price option plan was estimated at
the date of grant using a Black-Scholes option-pricing model. The dividend yield
was assumed to be zero for the period below. The weighted-average of all other
significant assumptions and the weighted-average fair value of grants made
during the year ended December 31, 1999 are as follows:

        Volatility: 100%
        Risk-free interest rate: 5.67%
        Expected lives: 4 yrs.
        Fair value of grants: $6.97

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma net loss and loss per share, basic and diluted, would have been
($17,478,000) or ($2.17) for the fiscal year 1999.

     EMPLOYEE STOCK PURCHASE PLAN

     Concurrently with the offering, the Company established an Employee Stock
Purchase Plan ("the Purchase Plan") under which a total of 360,000 shares of
Class A common stock were made available for sale. The Purchase Plan, which is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended, and is
administered by the Compensation Committee appointed by the Company's Board of
Directors. Employees are eligible to participate if they are employed by the
Company or one of its subsidiaries designated by the Board for at least 20 hours
per week and for more than five months in any calendar year. The Purchase Plan
permits eligible employees to purchase Class A common stock through payroll
deductions, which may not exceed 15% of an employee's total compensation,
subject to certain limitations. The Purchase Plan will be implemented in a
series of consecutive, overlapping offering periods, each approximately six
months in duration. Offering periods will begin on the first trading day on or
after April 30 and October 31 of every other year and terminate on the last
trading day in the period six months later. However, the first offering period
shall be the period of approximately 24 months commencing on the date upon which
the Company's registration statement was declared effective by the Securities
and Exchange Commission, October 19, 1999, and terminating on the last trading
day in the period ending October 31, 2001. Each participant will be granted an
option to purchase stock on the first day of the six-month purchase period and
such option

                                      F-23
<PAGE>   91
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

will be automatically exercised on the last date of each offering period. The
purchase price of each share of Class A common stock under the Purchase Plan
will be equal to 85% of the lesser of the fair market value per share of Class A
common stock on the start date of that offering period or on the date of
purchase. Employees may modify or end their participation in the offering at any
time during the offering period. Participation ends automatically on termination
of employment with the Company. The Purchase Plan will terminate in 2009 unless
sooner terminated by the Company's Board of Directors. Total contributions as of
December 31, 1999 were approximately $181,000. Under APB 25, this is a
noncompensatory plan.

NOTE 8. DEFINED CONTRIBUTION PENSION PLAN

     The Company maintains a tax deferred savings plan under section 401(k) of
the Code (the "Plan") for the benefit of certain qualifies employees. Employees
may elect to contribute to the Plan, through payroll deductions of up to 15% of
their compensation, subject to annual limits. Employee contributions to the Plan
are subject to statutory limitations regarding maximum contributions. The
Company reserves the right to amend the Plan at any time. The Company, at its
discretion, may make additional contributions. The Company did not make any
contributions to the Plan in fiscal 1999, 1998 or 1997.

NOTE 9. PROFIT SHARING

     The Company has a profit sharing plan covering substantially all employees
who meet certain service requirements. Contributions to the plan by the Company
are made at the discretion of the Board of Directors. The profit sharing expense
was $210,000, $133,000, and $213,000 for the years ended December 31, 1999,
1998, and 1997, respectively.

NOTE 10. NET LOSS PER SHARE

     The Company computes net loss per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128. This statement requires the
presentation of basic and diluted net loss per share. Basic and diluted net loss
per share is computed using the weighted average number of common shares
outstanding during the period. During the two years ended December 31, 1998,
there were no common share equivalents.

     The calculation of basic and diluted net loss per share follows (in
thousands except per share information):

<TABLE>
<CAPTION>
                                                              1999       1998       1997
                                                            --------    -------    ------
<S>                                                         <C>         <C>        <C>
HISTORICAL:
Net loss..................................................  $(16,480)   $(5,657)   $ (740)
Weighted average shares of common stock outstanding used
  in computing basic and diluted net loss per share.......     8,055      7,200     7,200
Basic and diluted net loss per share......................  $  (2.05)   $ (0.79)   $(0.10)
</TABLE>

     If the Company had reported net income, the calculation of diluted earnings
per share would have included the shares used in the computation of net loss per
share as well as an additional 137,000 common equivalent shares (determined
using the treasury stock method) related to outstanding stock options not
included above for fiscal 1999.

                                      F-24
<PAGE>   92
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11. COMMITMENTS AND CONTINGENCIES

     The Company is not currently involved in any material legal proceedings.
The Company is not aware of any legal proceedings pending against it.

NOTE 12. RELATED PARTY TRANSACTIONS

     The Company provides accounting, investor administration and information
technology services to certain affiliates, wholly owned by the Company's
majority stockholder. For the twelve months ended December 31, 1999, 1998, and
1997 the Company recorded revenue of $2,772,000, $2,182,000, and $3,085,000,
respectively, for the provision of these services. Through July 31, 1999, these
services were charged at the fully allocated cost to provide such services.
Effective August 1, 1999, the Company increased its fees to affiliates to
reflect a market rate.

     On April 1, 1997 the Company also received from the same affiliated company
certain employees who performed corporate functions including legal, human
relations, facilities, word processing and communications. These employees were
transferred back to the affiliate as of January 1, 1998. Effective August 1,
1999, these functions were transferred back to the Company.

     Beginning August 1, 1999, the Company leased its office space under a
noncancellable operating lease with an affiliate. Prior to August 1999, the
Company was charged rent and certain other expenses by the affiliate on an
allocated cost basis.

     The Company has amounts due from affiliates for services of $33,000 and
$182,000 as of December 31, 1999 and 1998 respectively.

     On August 26, 1999, the Company issued two secured notes payable to its
majority shareholder for $1,245,000 and $1,005,000 (which includes $79,000
payable to shareholder at June 30, 1999). On September 12, 1999, the Company
declared a dividend of $1,000,000, which was paid in the form of a secured note
payable to its majority stockholder. On September 30, 1999 the Company issued a
secured note payable to its majority shareholder for $1,927,000. Also on
September 30, 1999, the Company issued a secured note payable to its majority
shareholder for $549,000. This note was used by the majority shareholder to
essentially offset amounts owed to the Company for fees by affiliates which are
wholly owned by the majority shareholder. On October 6 and October 13, 1999 the
Company issued two secure notes payable to its majority shareholder for $700,000
each. All four notes bear interest at a rate of 9% per annum. The Company repaid
the notes totaling $6,577,000 and interest of $57,032 using proceeds from the
initial public offering. The net proceeds of the notes were used to fund the
operations of the Company.

                                      F-25
<PAGE>   93
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     The Company's quarters end on March 31, June 30, September 30 and December
31. Selected quarterly financial data for 1999 and 1998 are summarized as
follows (in thousands except per share amounts).

<TABLE>
<CAPTION>
                                                              QUARTERLY DATA
                                                 ----------------------------------------
                                                  FIRST     SECOND      THIRD     FOURTH
                                                 QUARTER    QUARTER    QUARTER    QUARTER
                                                 -------    -------    -------    -------
<S>                                              <C>        <C>        <C>        <C>
YEAR ENDED DECEMBER 31, 1999:
Total revenue..................................  $ 1,381    $ 2,780    $ 2,310    $ 2,602
Net loss.......................................  $(3,907)   $(3,681)   $  (163)   $(8,729)
Basic and diluted net loss per share...........  $ (0.54)   $ (0.51)   $ (0.02)   $ (0.82)
Basic and diluted shares outstanding...........    7,200      7,200      7,200     10,629
YEAR ENDED DECEMBER 31, 1998:
Total revenue..................................  $ 1,217    $ 1,095    $ 1,170    $ 1,204
Net loss.......................................  $  (839)   $(1,094)   $(1,451)   $(2,273)
Basic and diluted net loss per share...........  $ (0.12)   $ (0.15)   $ (0.20)   $ (0.32)
Basic and diluted shares outstanding...........    7,200      7,200      7,200      7,200
</TABLE>

NOTE 14. SUBSEQUENT EVENTS

     CHANGE IN ACCOUNTING PRINCIPLE

     In December 1999, the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements" which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. Subsequently,
the SEC released SAB 101A, which delayed the implementation date of SAB 101 for
registrants with fiscal years that begin between December 16, 1999 and March 15,
2000 to the second quarter of their fiscal year. The Company elected to
implement SAB No. 101 the first quarter of 2000, the effect of which is
described as follows:

     Effective January 1, 2000, the Company deferred recognition of
implementation fees for its Financial Outsourcing, S.T.A.R. and M.A.R.S. hosting
services and will amortize such fees ratably over a three-year period as client
services are performed. Prior to January 1, 2000, implementation fees were
recognized when the work was completed on a percentage of completion basis. The
cumulative effect of the change in the method of recognizing implementation
revenue on prior years' income was a one-time charge of $129,000 or $0.01 per
share. Of this amount, $85,000 is attributable to the first quarter of 1999. The
effect of this change in accounting principle on first quarter 2000's revenue
was to reduce total revenue from $3.7 million to $3.0 million. Costs related to
client implementation activities are expensed as incurred.

                                      F-26
<PAGE>   94
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Set forth below is a comparison of operating results for the three months
ended March 31, 2000:

<TABLE>
<CAPTION>
                                                     ASSUMING SAB 101 HAD
                                                       NOT BEEN ADOPTED
                                   MARCH 31, 2000       MARCH 31, 2000
                                   --------------    ---------------------
<S>                                <C>               <C>
Revenue..........................     $ 2,951               $ 3,701
Operating Expenses...............      10,697                10,697
Net Loss from Operations.........      (7,746)               (6,996)
</TABLE>

     NEED FOR ADDITIONAL FINANCING

     The Company will need to raise additional capital during the second
quarter. In late April the Company began to implement a number of steps aimed at
reducing its operating costs, which, prior to that point, had been predicated on
higher anticipated revenue levels. Those steps included, among other things,
staff reductions amounting to approximately 15% of its work force and cessation
of certain development efforts that will reduce expenditures for outside
consulting expertise. We expect to record a charge of approximately $900,000 in
the second quarter of 2000 related to these reductions. Despite these efforts,
the Company will continue to operate at a significant cash negative level.
Absent additional financing, the Company may not have sufficient resources to
continue as a going concern beyond its second quarter. We may sell additional
debt or equity securities or enter into new credit facilities to meet our cash
needs. To that end, the Company has entered into a stock purchase agreement with
Torneaux Ltd. to provide us with equity financing. Our ability to raise funds
through the equity facility with Torneaux is subject to certain conditions at
the time of each sale of our Class A common stock. We may not be able to satisfy
the conditions for each sale of our Class A common stock. We cannot assure you
that we will be able to complete this or any other financing, that such
financing will be adequate for the Company's needs, or that a financing will be
completed prior to the Company running out of funds.

     The factors discussed above create substantial doubt about the Company's
ability to continue as a going concern and an uncertainty as to the
recoverability and classification of recorded asset amounts and the amounts and
classification of liabilities. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.

     FINANCING ARRANGEMENT WITH TORNEAUX LTD.

     On June 6, 2000, we entered into a common stock purchase agreement with
Torneaux Ltd. Pursuant to the agreement, we may issue and sell, from time to
time, up to 7,000,000 shares of our Class A common stock, subject to the
satisfaction of certain conditions.

     Beginning on the date a registration statement is declared effective by the
SEC, and continuing for 14 months thereafter, we may in our sole discretion
sell, or put, shares of our Class A common stock to Torneaux. The 14-month
period is divided into pricing periods, each consisting of 20 trading days on
the Nasdaq National Market.

     From time to time during the 14-month term, we may make 12 monthly draw
downs, by giving notice and requiring Torneaux to purchase shares of our Class A
common stock, for the draw down amount. Torneaux's purchase price may fluctuate
based upon the daily volume weighted average price
                                      F-27
<PAGE>   95
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

over a 20 day trading period. Prior to each draw down, we will provide Torneaux
with a notice that sets forth the number of shares of Class A common stock we
will sell, the commencement date of the pricing period, and the threshold price,
which is the lowest price per share at which we will issue new shares of Class A
common stock. We may issue a draw down notice for up to $1,500,000 if the
threshold price is equal to or exceeds $1.00, and an additional $500,000 for
every $1.00 increase of the threshold price above $1.00 up to $21.00 for a
maximum draw down amount of $11,500,000. If we set the threshold price between
$1.00 and $10.00, then the purchase price to be paid by Torneaux is 94% of the
daily volume weighted average price over the pricing period. If we set the
threshold price between $10.00 and $21.00, then for each $1.50 increase in the
threshold price above $10.00, the purchase price to be paid by Torneaux is
increased by 0.10%. If the daily volume weighted average price on a given
trading day is less than the threshold price set by us, then the amount that we
can draw down will be reduced by 1/20 for that pricing period. In addition, if
trading in our Class A common stock is suspended for more than three hours in
any trading day, then the daily volume weighted average price for that trading
day is deemed to be below the threshold price and, consequently, reduces the
draw down amount by 1/20.

     On June 6, 2000, we also issued warrants to Torneaux to purchase up to
1,800,000 shares of our Class A common stock at exercise prices ranging from
$2.50 to $7.00 per share. Torneaux may exercise the warrants through June 5,
2003. The first warrant, Warrant A, is immediately exercisable for 125,000
shares of Class A common stock. Thereafter, Warrant A is exercisable in
increments of 125,000 shares upon the sale of the 125,000 shares previously
issued. 500,000 shares of Class A common stock are issuable to Torneaux at $2.50
per share upon the exercise of Warrant A. Once all of the shares issued upon
exercise of Warrant A have been sold, then Warrant B may be exercised in
increments of 125,000 shares upon the sale of the 125,000 shares previously
issued. 500,000 warrant shares are issuable to Torneaux at $4.00 per share upon
the exercise of Warrant B. After the Warrant B shares have been sold, then
Torneaux may exercise Warrant C for up to 400,000 warrant shares at $6.00 per
share. Warrant C may be exercised in increments of 100,000 shares upon the sale
of the 100,000 shares previously issued. Upon the sale of all shares issued
under Warrant C, then Torneaux may exercise Warrant D for up to 400,000 shares
of Class A common stock at $7.00 per share. Warrant D may be exercised in
increments of 100,000 shares upon the sale of the 100,000 shares previously
issued. The warrants contain provisions that protect Torneaux against dilution
by adjustment of the exercise price and the number of shares issuable thereunder
upon the occurrence of specified events, such as a merger, stock split, stock
dividend, recapitalization and additional issuances of common stock. The
exercise price for the warrant shares is payable in cash.

     DEBT FINANCING

     Line of Credit.  On June 7, 2000, we entered into a line of credit for up
to $2,000,000 with Pacific Business Funding, a division of Cupertino National
Bank. Pursuant to the credit agreement, we may borrow up to 80% against all
eligible receivables due within 90 days, and we will pay interest at a rate of
15% per annum on the average daily balance of the amount borrowed. In addition,
we will pay a commitment fee of 1% of the commitment amount and an
administration fee of  1/2% of the face amount of each invoice financed. The
line of credit is secured by our accounts receivable and inventory. In
connection with the credit agreement, we will issue a warrant to Pacific
Business Funding to purchase shares up to 85,715 shares of our Class A common
stock at $1.75 per share, which is the average closing price of our Class A
common stock on the Nasdaq National Market for the five trading days prior to
Pacific Business Funding's credit commitment.

                                      F-28
<PAGE>   96
                              RESOURCEPHOENIX.COM

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Equipment Lease Financing.  On June 6, 2000, we entered into an equipment
lease financing commitment with Lease Management Associates, Inc., which is
affiliated with Gus Constantin, our Chief Executive Officer and one of our
directors and shareholders. We expect to enter into a definitive agreements with
Lease Management Associates by the end of June 2000. Pursuant to the proposed
equipment lease line, we will sell furniture, fixtures, office and computer
equipment for up to $3,000,000 to Lease Management Associates, Inc., which we
refer to as LMA. Pursuant to the commitment, LMA agreed to lease the equipment
to our company for three years. During the term of the proposed lease, we will
make a monthly lease payment of up to $90,000 and a final lease payment of up to
$600,000. The interest rate on the equipment lease line is approximately 15% per
annum. We will grant LMA a security interest in the furniture, fixtures and
equipment. In addition, we will issue a warrant to LMA to purchase the number of
shares of our Class A common stock equal to 300,000 divided by the average
closing price of our Class A common stock for the five trading days following
our Board's approval of the transaction, which occurred on June 6, 2000.

                                      F-29
<PAGE>   97

--------------------------------------------------------------------------------

You should rely only on the information contained in this prospectus when making
a decision about whether to invest in our Class A common stock. Neither we nor
the selling shareholder have authorized anyone to provide you with information
different from that contained in this prospectus. The selling shareholder is
offering to sell, and seeking offers to buy, shares of Class A common stock only
in jurisdictions where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this prospectus,
regardless of when this prospectus or any shares of our Class A common stock are
delivered.
<PAGE>   98

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of common stock being registered. All amounts are estimates except
the SEC registration fee, the NASD filing fee and the Nasdaq National Market
listing fee.

<TABLE>
<CAPTION>
                                                              AMOUNT TO BE PAID
                                                              -----------------
<S>                                                           <C>
SEC registration fee........................................      $  6,875
Nasdaq National Market listing fee..........................        17,500
Printing and engraving expenses.............................       150,000
Legal fees and expenses.....................................       200,000
Accounting fees and expenses................................        75,000
Blue Sky qualification fees and expenses....................         5,000
Miscellaneous fees..........................................        25,000
                                                                  --------
  Total.....................................................       479,375
                                                                  ========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Article 12 of the Registrant's Certificate of Incorporation (Exhibit 3.1
hereto) and Article VI of the Registrant's Bylaws (Exhibit 3.2 hereto) provide
for mandatory indemnification of its directors and officers, and permissible
indemnification of employees and other agents, to the maximum extent permitted
by the Delaware General Corporation Law. In addition, the Registrant has entered
into Indemnification Agreements (Exhibit 10.1 hereto) with its officers and
directors. Reference is also made to Section of the Common Stock Purchase
Agreement contained in Exhibit 1.1 hereto, which provides for the
indemnification of officers and directors of the Registrant against certain
liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

     Since the Registrant's inception, the Registrant issued and sold the
following securities:

     On August 4, 1999, we issued 7,200,000 shares of Class B Common Stock to
Gus Constantin in exchange for the outstanding capital stock of
ReSource/Phoenix, Inc., a California corporation. The foregoing issuance was
made in reliance on Section 4(2) of the Securities Act as a transaction not
involving any public offering. All of the securities were acquired by the
recipient for investment and not with a view toward the resale or distribution
thereof. The recipient was a director and officer of ours and a sophisticated
investor, the offer and sales were made without any public solicitation and the
stock certificates bear restrictive legends. No underwriter was involved in the
transactions and no commissions were paid. The recipient had adequate access,
through his relationships with the Registrant, to information about the
Registrant.

     On August 4, 1999 we granted options to purchase an aggregate of 846,291
shares of Class A common stock at an exercise price of $2.08 per share, subject
to the effectiveness of our initial public offering. The foregoing grants were
made in reliance on Rule 701 under the Securities Act.

                                      II-1
<PAGE>   99

     On June 6, 2000, we entered into a stock purchase agreement pursuant to
which we may put up to 7,000,000 shares of Class A common stock to Torneaux Ltd.
In addition, we issued warrants to Torneaux Ltd. to purchase up to 1,800,000
shares of our Class A common stock at exercise prices ranging from $2.50 to
$7.00 per share. The foregoing transactions were made in reliance on Section
4(2) of the Securities Act as a transaction not involving any public offering.

     On June 6, 2000, we issued a warrant to Peter Benz to purchase up to 75,000
shares of our Class A common stock. The foregoing issuance was made in reliance
on Section 4(2) of the Securities Act as a transaction not involving any public
offering. All of the securities were acquired by the recipient for investment
and not with a view toward the resale or distribution thereof.

                                      II-2
<PAGE>   100

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
 1.1     Common Stock Purchase Agreement dated June 6, 2000 between
         Registrant and Torneaux Ltd.
 2.1     Contribution Agreement, dated August 4, 1999, between Gus
         Constantin, as trustee for the Gus and Mary Constantin 1978
         Living Trust, and Registrant (incorporated by reference to
         exhibit 2.1 to the Registrant's registration statement on
         Form S-1 (File No. 333-84589)).
 3.1     Amended and Restated Certificate of Incorporation of
         Registrant (incorporated by reference to exhibit 3.1 to the
         Registrant's registration statement on Form S-1 (File No.
         333-84589)).
 3.2     Bylaws of Registrant (incorporated by reference to exhibit
         3.2 to the Registrant's registration statement on Form S-1
         (File No. 333-84589)).
 4.1     Form of Registrant's Class A Common Stock certificate
         (incorporated by reference to exhibit 4.1 to the
         Registrant's registration statement on Form S-1 (File No.
         333-84589)).
 4.2     Form of Registrant's Class B Common Stock Certificate
         (incorporated by reference to exhibit 4.2 to the
         Registrant's registration statement on Form S-1 (File No.
         333-84589)).
 4.3     Warrant A, dated June 6, 2000, to purchase 500,000 shares of
         Class A common stock of the Registrant issued to Torneaux
         Ltd.
 4.4     Warrant B, dated June 6, 2000, to purchase 500,000 shares of
         Class A common stock of the Registrant issued to Torneaux
         Ltd.
 4.5     Warrant C, dated June 6, 2000, to purchase 400,000 shares of
         Class A common stock of the Registrant issued to Torneaux
         Ltd.
 4.6     Warrant D, dated June 6, 2000, to purchase 400,000 shares of
         Class A common stock of the Registrant issued to Torneaux
         Ltd.
 5.1*    Opinion of Wilson Sonsini Goodrich & Rosati.
10.1     Form of Indemnification Agreement (incorporated by reference
         to exhibit 10.1 to the Registrant's registration statement
         on Form S-1 (File No. 333-84589)).
10.2     Letter of Understanding and Summary of Discussion, dated
         June 1, 1998, between Bryant Tong and Registrant
         (incorporated by reference to exhibit 10.2 to the
         Registrant's registration statement on Form S-1 (File No.
         333-84589)).
10.3     Amendment to Letter of Understanding, dated August 4, 1999,
         between Bryant Tong and Registrant (incorporated by
         reference to exhibit 10.3 to the Registrant's registration
         statement on Form S-1 (File No. 333-84589)).
10.4     Restated 1999 Stock Plan (incorporated by reference to
         exhibit 10.4 to the Registrant's registration statement on
         Form S-1 (File No. 333-84589)).
10.5     Restated 1999 Employee Stock Purchase Plan (incorporated by
         reference to exhibit 10.5 to the Registrant's registration
         statement on Form S-1 (File No. 333-84589)).
10.6     Administrative Services Agreement, dated August 1, 1999,
         between Phoenix Cable Incorporated and Registrant
         (incorporated by reference to exhibit 10.6 to the
         Registrant's registration statement on Form S-1 (File No.
         333-84589)).
10.7     Administrative Services Agreement, dated August 1, 1999,
         between Phoenix Precision Graphics, Inc. and Registrant
         (incorporated by reference to exhibit 10.7 to the
         Registrant's registration statement on Form S-1 (File No.
         333-84589)).
10.8     Administrative Services Agreement, dated August 1, 1999,
         between Phoenix Leasing Incorporated and Registrant
         (incorporated by reference to exhibit 10.8 to the
         Registrant's registration statement on Form S-1 (File No.
         333-84589)).
</TABLE>

                                      II-3
<PAGE>   101

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<C>      <S>
10.9#    Business Alliance Program Agreement, dated May 15, 1997,
         between Oracle Corporation and Registrant (incorporated by
         reference to exhibit 10.9 to the Registrant's registration
         statement on Form S-1 (File No. 333-84589)).
10.10    Amendment One to Business Alliance Agreement, dated May 15,
         1997, between Oracle Corporation and Registrant
         (incorporated by reference to exhibit 10.10 to the
         Registrant's registration statement on Form S-1 (File No.
         333-84589)).
10.11#   Software License and Services Agreement, dated November 14,
         1997, between Oracle Corporation and Registrant
         (incorporated by reference to exhibit 10.11 to the
         Registrant's registration statement on Form S-1 (File No.
         333-84589)).
10.12    Amendment One to Software License and Services Agreement,
         dated November 14, 1997, between Oracle Corporation and
         Registrant (incorporated by reference to exhibit 10.12 to
         the Registrant's registration statement on Form S-1 (File
         No. 333-84589)).
10.13#   Software License, Support and Professional Services
         Agreement, dated June 29, 1999 between Necho Systems Corp.
         and Registrant (incorporated by reference to exhibit 10.13
         to the Registrant's registration statement on Form S-1 (File
         No. 333-84589)).
10.14    Lease, dated August 1, 1999, between Phoenix American
         Incorporated and Registrant (incorporated by reference to
         exhibit 10.14 to the Registrant's registration statement on
         Form S-1 (File No. 333-84589)).
10.15    Sublease dated August 31, 1999 between ReSource/Phoenix,
         Inc. and PeopleSoft USA Inc. (incorporated by reference to
         exhibit 10.15 to the Registrant's registration statement on
         Form S-1 (File No. 333-84589)).
10.16#   Software License and Services Agreement dated November 11,
         1999 between BroadVision, Inc. and Registrant (incorporated
         by reference to exhibit 10.16 to Registrant's annual report
         filed March 23, 2000 on Form 10-K).
10.17    Factoring Agreement, dated June 7, 2000, between Pacific
         Business Funding and Registrant.
21.1     List of subsidiaries (incorporated by reference to exhibit
         21.1 to the Registrant's registration statement on Form S-1
         (File No. 333-84589)).
23.1     Consent of Arthur Andersen LLP, Independent Public
         Accountants.
23.2*    Consent of Wilson Sonsini Goodrich & Rosati (included in
         Exhibit 5.1).
24.1     Power of Attorney (see signature page).
27.1     Financial Data Schedule.
</TABLE>

-------------------------
 # Confidential treatment granted for portions of this exhibit.

  * To be filed by amendment.

     (b) Financial Statement Schedules

     None.

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes:

     (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;

          (i) to include any prospectus required by section 10(a)(3) of the
     Securities Act of 1933;

          (ii) To reflect in the prospectus any facts or events arising after
     the effective date of this registration statement (or its most recent
     post-effective amendment) which, individually or in the aggregate,
     represent a fundamental change in the information set forth in this
     registration

                                      II-4
<PAGE>   102

     statement. Notwithstanding the foregoing, any increase or decrease in
     volume of securities offered (if the total dollar value of securities
     offered would not exceed that which was registered) and any deviation from
     the low or high end of the estimated maximum offering range may be
     reflected in the form of prospectus filed with the Commission pursuant to
     Rule 424(b) if, in the aggregate, the changes in volume and price represent
     no more than a 20% change in the maximum aggregate offering price set forth
     in the "Calculation of Registration Fee" table in the effective
     registration statement.

          (iii) To include any material information with respect to the plan of
     distribution not previously disclosed in the registration statement or any
     material change to such information in the registration statement.

     (2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

     (3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has had been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

(c) The undersigned Registrant hereby undertakes that:

     (1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

     (2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

                                      II-5
<PAGE>   103

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has had duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in San Rafael, California
on this 12th day of June, 2000.

                                          RESOURCEPHOENIX.COM

                                          By: /s/ GUS CONSTANTIN
                                            ------------------------------------
                                                       Gus Constantin
                                                  Chief Executive Officer

     Each person whose signature appears below constitutes and appoints Gus
Constantin, Corey West and Gregory Thornton, and each of them, as
attorneys-in-fact, each with the power of substitution, for him or her in any
and all capacities, to sign any amendment to this Registration Statement
(including post-effective amendments and registration statements filed pursuant
to Rule 462 and otherwise), and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting to said attorneys-in-fact, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has had been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
                     SIGNATURE                                     TITLE                    DATE
                     ---------                                     -----                    ----
<S>                                                  <C>                                <C>
                /s/ GUS CONSTANTIN                    Chairman of the Board and Chief   June 12, 2000
---------------------------------------------------    Executive Officer (Principal
                  Gus Constantin                            Executive Officer)

                 /s/ W. COREY WEST                    Director, President, and Chief    June 12, 2000
---------------------------------------------------          Operating Officer
                   W. Corey West

               /s/ GREGORY THORNTON                       Chief Financial Officer       June 12, 2000
---------------------------------------------------      (Principal Financial and
                 Gregory Thornton                           Accounting Officer)

               /s/ JAMES BARRINGTON                              Director               June 12, 2000
---------------------------------------------------
                 James Barrington

                /s/ GLEN MCLAUGHLIN                              Director               June 12, 2000
---------------------------------------------------
                  Glen McLaughlin

                  /s/ ROGER SMITH                                Director               June 12, 2000
---------------------------------------------------
                    Roger Smith
</TABLE>

                                      II-6
<PAGE>   104

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
 1.1      Common Stock Purchase Agreement dated June 6, 2000 between
          Registrant and Torneaux Ltd.
 2.1      Contribution Agreement, dated August 4, 1999, between Gus
          Constantin, as trustee for the Gus and Mary Constantin 1978
          Living Trust, and Registrant (incorporated by reference to
          exhibit 2.1 to the Registrant's registration statement on
          Form S-1 (File No. 333-84589)).
 3.1      Amended and Restated Certificate of Incorporation of
          Registrant (incorporated by reference to exhibit 3.1 to the
          Registrant's registration statement on Form S-1 (File No.
          333-84589)).
 3.2      Bylaws of Registrant (incorporated by reference to exhibit
          3.2 to the Registrant's registration statement on Form S-1
          (File No. 333-84589)).
 4.1      Form of Registrant's Class A Common Stock certificate
          (incorporated by reference to exhibit 4.1 to the
          Registrant's registration statement on Form S-1 (File No.
          333-84589)).
 4.2      Form of Registrant's Class B Common Stock Certificate
          (incorporated by reference to exhibit 4.2 to the
          Registrant's registration statement on Form S-1 (File No.
          333-84589)).
 4.3      Warrant A, dated June 6, 2000, to purchase 500,000 shares of
          Class A common stock of the Registrant issued to Torneaux
          Ltd.
 4.4      Warrant B, dated June 6, 2000, to purchase 500,000 shares of
          Class A common stock of the Registrant issued to Torneaux
          Ltd.
 4.5      Warrant C, dated June 6, 2000, to purchase 400,000 shares of
          Class A common stock of the Registrant issued to Torneaux
          Ltd.
 4.6      Warrant D, dated June 6, 2000, to purchase 400,000 shares of
          Class A common stock of the Registrant issued to Torneaux
          Ltd.
 5.1*     Opinion of Wilson Sonsini Goodrich & Rosati.
10.1      Form of Indemnification Agreement (incorporated by reference
          to exhibit 10.1 to the Registrant's registration statement
          on Form S-1 (File No. 333-84589)).
10.2      Letter of Understanding and Summary of Discussion, dated
          June 1, 1998, between Bryant Tong and Registrant
          (incorporated by reference to exhibit 10.2 to the
          Registrant's registration statement on Form S-1 (File No.
          333-84589)).
10.3      Amendment to Letter of Understanding, dated August 4, 1999,
          between Bryant Tong and Registrant (incorporated by
          reference to exhibit 10.3 to the Registrant's registration
          statement on Form S-1 (File No. 333-84589)).
10.4      Restated 1999 Stock Plan (incorporated by reference to
          exhibit 10.4 to the Registrant's registration statement on
          Form S-1 (File No. 333-84589)).
10.5      Restated 1999 Employee Stock Purchase Plan (incorporated by
          reference to exhibit 10.5 to the Registrant's registration
          statement on Form S-1 (File No. 333-84589)).
10.6      Administrative Services Agreement, dated August 1, 1999,
          between Phoenix Cable Incorporated and Registrant
          (incorporated by reference to exhibit 10.6 to the
          Registrant's registration statement on Form S-1 (File No.
          333-84589)).
10.7      Administrative Services Agreement, dated August 1, 1999,
          between Phoenix Precision Graphics, Inc. and Registrant
          (incorporated by reference to exhibit 10.7 to the
          Registrant's registration statement on Form S-1 (File No.
          333-84589)).
10.8      Administrative Services Agreement, dated August 1, 1999,
          between Phoenix Leasing Incorporated and Registrant
          (incorporated by reference to exhibit 10.8 to the
          Registrant's registration statement on Form S-1 (File No.
          333-84589)).
</TABLE>
<PAGE>   105

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
10.9#     Business Alliance Program Agreement, dated May 15, 1997,
          between Oracle Corporation and Registrant (incorporated by
          reference to exhibit 10.9 to the Registrant's registration
          statement on Form S-1 (File No. 333-84589)).
10.10     Amendment One to Business Alliance Agreement, dated May 15,
          1997, between Oracle Corporation and Registrant
          (incorporated by reference to exhibit 10.10 to the
          Registrant's registration statement on Form S-1 (File No.
          333-84589)).
10.11#    Software License and Services Agreement, dated November 14,
          1997, between Oracle Corporation and Registrant
          (incorporated by reference to exhibit 10.11 to the
          Registrant's registration statement on Form S-1 (File No.
          333-84589)).
10.12     Amendment One to Software License and Services Agreement,
          dated November 14, 1997, between Oracle Corporation and
          Registrant (incorporated by reference to exhibit 10.12 to
          the Registrant's registration statement on Form S-1 (File
          No. 333-84589)).
10.13#    Software License, Support and Professional Services
          Agreement, dated June 29, 1999 between Necho Systems Corp.
          and Registrant (incorporated by reference to exhibit 10.13
          to the Registrant's registration statement on Form S-1 (File
          No. 333-84589)).
10.14     Lease, dated August 1, 1999, between Phoenix American
          Incorporated and Registrant (incorporated by reference to
          exhibit 10.14 to the Registrant's registration statement on
          Form S-1 (File No. 333-84589)).
10.15     Sublease dated August 31, 1999 between ReSource/Phoenix,
          Inc. and PeopleSoft USA Inc. (incorporated by reference to
          exhibit 10.15 to the Registrant's registration statement on
          Form S-1 (File No. 333-84589)).
10.16#    Software License and Services Agreement dated November 11,
          1999 between BroadVision, Inc. and Registrant (incorporated
          by reference to exhibit 10.16 to Registrant's annual report
          filed March 23, 2000 on Form 10-K).
10.17     Factoring Agreement, dated June 7, 2000, between Pacific
          Business Funding and Registrant.
21.1      List of subsidiaries (incorporated by reference to exhibit
          21.1 to the Registrant's registration statement on Form S-1
          (File No. 333-84589)).
23.1      Consent of Arthur Andersen LLP, Independent Public
          Accountants.
23.2*     Consent of Wilson Sonsini Goodrich & Rosati (included in
          Exhibit 5.1).
24.1      Power of Attorney (see signature page).
27.1      Financial Data Schedule.
</TABLE>

-------------------------
 # Confidential treatment granted for portions of this exhibit.

  * To be filed by amendment.


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission