MERCANTILE EQUITY PARTNERS III L P, SC 13D, 2000-11-22

MERCANTILE EQUITY PARTNERS III L P
SC 13D, 2000-11-22

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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13D
(RULE 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)

(AMENDMENT NO.)*

Vsource, Inc.
-------------------------------------------------------------------------------
(Name of Issuer)

Common Stock, $0.01 par value
-------------------------------------------------------------------------------
(Title of Class of Securities)

92908B 10 5
-------------------------------------------------------------------------------
(CUSIP Number)

Mercantile Equity Partners III, L.P.
Attention: I. Steven Edelson
1372 Sherman Road
Northbrook, Illinois 60062
(847) 509-3711

with a copy to:
Michael H. Altman, Esq.
Altheimer & Gray
10 South Wacker Drive
Chicago, Illinois 60606
(312) 715-4961
--------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

September 18, 2000
------------------
(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
Schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box. [ ]

Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934, as amended ("Act"), or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).

<PAGE> 2

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CUSIP No. 92908B 10 5 13D Page 2 of 22 Pages

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<S> <C> <C>
1. NAME OF REPORTING PERSON
IRS IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):

Mercantile VS, LLC
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

-------------------------------------------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware

---------------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: 191,918 (1)
SHARES
BENEFICIALLY ---------------------------------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER: -0-
EACH
REPORTING ---------------------------------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER: 191,918 (1)
WITH
---------------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER: -0-

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 191,918 (1)

-------------------------------------------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES:
[ ]
-------------------------------------------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 1.2% (2)

-------------------------------------------------------------------------------------------------------------------
14.
TYPE OF REPORTING PERSON: 00
-------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Mercantile VS, LLC ("Mercantile VS") directly holds 191,918 Series 1-A
Preferred Shares which are convertible into 191,918 shares of Common
Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A.

<PAGE> 3

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CUSIP No. 92908B 10 5 13D Page 3 of 22 Pages

Mercantile Equity Partners III, L.P.
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Illinois

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 191,918 (1)

-------------------------------------------------------------------------------------------------------------------
14.
TYPE OF REPORTING PERSON: PN
-------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Solely in its capacity as managing member of Mercantile VS. Mercantile
VS directly holds 191,918 Series 1-A Preferred Shares which are
convertible into 191,918 shares of Common Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A.

<PAGE> 4

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CUSIP No. 92908B 10 5 13D Page 4 of 22 Pages

Mercantile Equity Partners III, L.L.C.
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Illinois

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 191,918 (1)

(1) Solely in its capacity as general partner of Mercantile Equity Partners
III, L.P. ("MEP LP"), which is the managing member of Mercantile VS.
Mercantile VS directly holds 191,918 shares of Series 1-A Convertible
Preferred Stock which are convertible into 191,918 shares of Common
Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A.

<PAGE> 5

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CUSIP No. 92908B 10 5 13D Page 5 of 22 Pages

Mercantile Equity Partners I, L.P.
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Illinois

---------------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: 678,337 (1)
SHARES
BENEFICIALLY ---------------------------------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER: -0-
EACH
REPORTING ---------------------------------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER: 678,337 (1)
WITH
---------------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER: -0-

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 678,337 (1)

(1) Mercantile Capital Partners I, L.P. ("MCP") directly holds 624,025
shares of Series 2-A Convertible Preferred Stock which are convertible
into 624,025 shares of Common Stock and has a Warrant to purchase 54,312
shares of Common Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A.

<PAGE> 6

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CUSIP No. 92908B 10 5 13D Page 6 of 22 Pages

Mercantile Capital Group, LLC
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 678,337 (1)

(1) Solely in its capacity as the general partner of MCP. MCP directly holds
624,025 shares of Series 2-A Convertible Preferred Stock which are
convertible into 624,025 shares of Common Stock and has a Warrant to
purchase 54,312 shares of Common Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A.

<PAGE> 7

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CUSIP No. 92908B 10 5 13D Page 7 of 22 Pages

Mercantile Capital Management Corp.
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 678,337 (1)

-------------------------------------------------------------------------------------------------------------------
14.
TYPE OF REPORTING PERSON: CO
-------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Solely in its capacity as the manager of Mercantile Capital Group, LLC
("MCG") which is the general partner of MCP. MCP directly holds 624,025
shares of Series 2-A Convertible Preferred Stock which are convertible
into 624,025 shares of Common Stock and has a Warrant to purchase 54,312
shares of Common Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A. (1)

<PAGE> 8

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CUSIP No. 92908B 10 5 13D Page 8 of 22 Pages

Michael A. Reinsdorf
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware

---------------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: -0-
SHARES
BENEFICIALLY ---------------------------------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER: 870,255 (l)
EACH
REPORTING ---------------------------------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER: -0-
WITH
---------------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER: 870,255 (l)

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 870,255 (l)

-------------------------------------------------------------------------------------------------------------------
14.
TYPE OF REPORTING PERSON: IN
-------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Solely in his capacity as (a) a managing member of Mercantile Equity
Partners III, LLC ("MEP, LLC") which is the general partner of MEP, LP,
(b) a member of MCG, and (c) a member of the Investment Committee of
Mercantile Capital Management Corp. ("MCM"). MEP, LP is the managing
member of Mercantile VS. Mercantile VS directly holds 191,918 shares of
Series 1-A Convertible Preferred Stock which are convertible into
191,918 shares of Common Stock. MCG is the general partner of MCP. MCP
directly holds 624,025 shares of Series 2-A Convertible Preferred Stock
which are convertible into 624,025 shares of Common Stock and has a
Warrant to purchase 54,312 shares of Common Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A.

<PAGE> 9

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CUSIP No. 92908B 10 5 13D Page 9 of 22 Pages

I. Steven Edelson
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: United States

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 870,255 (l)

(1) Solely in his capacity as (a) a managing member of Mercantile Equity
Partners III, LLC ("MEP, LLC") which is the general partner of MEP, LP,
(b) a member of MCG, and (c) a member of the Investment Committee of
MCM. MEP, LP is the managing member of Mercantile VS. Mercantile VS
directly holds 191,918 shares of Series 1-A Convertible Preferred Stock
which are convertible into 191,918 shares of Common Stock. MCG is the
general partner of MCP. MCP directly holds 624,025 shares of Series 2-A
Convertible Preferred Stock which are convertible into 624,025 shares of
Common Stock and has a Warrant to purchase 54,312 shares of Common
Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A.

<PAGE> 10

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CUSIP No. 92908B 10 5 13D Page 10 of 22 Pages

The Edelson Family Trust dated September 17, 1997
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Illinois

---------------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: -0-
SHARES
BENEFICIALLY ---------------------------------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER: 191,918 (1)
EACH
REPORTING ---------------------------------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER: -0-
WITH
---------------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER: 191,918 (1)

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 191,918 (1)

(1) Solely in its capacity as a managing member of MEP, LLC which is the
general partner of MEP, LP. MEP, LP is the managing member of Mercantile
VS. Mercantile VS directly holds 191,918 shares of Series 1-A
Convertible Preferred Stock which are convertible into 191,918 shares of
Common Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A.

<PAGE> 11

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CUSIP No. 92908B 10 5 13D Page 11 of 22 Pages

Nathaniel C.A. Kramer
-------------------------------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]

(b) [X]
-------------------------------------------------------------------------------------------------------------------
3. SEC USE ONLY

-------------------------------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS: N/A

[ ]
-------------------------------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: United States

---------------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER: -0-
SHARES
BENEFICIALLY ---------------------------------------------------------------------------------------
OWNED BY 8. SHARED VOTING POWER: 678,337 (l)
EACH
REPORTING ---------------------------------------------------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER: -0-
WITH
---------------------------------------------------------------------------------------
10. SHARED DISPOSITIVE POWER: 678,337 (l)

-------------------------------------------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 678,337 (l)

(1) Solely in his capacity as (a) a member of MCG, and (b) a member of the
Investment Committee of MCM. MCG is the general partner of MCP. MCP
directly holds 624,025 shares of Series 2-A Convertible Preferred Stock
which are convertible into 624,025 shares of Common Stock and has a
Warrant to purchase 54,312 shares of Common Stock.
(2) Based on 15,914,189 shares of Common Stock outstanding as of August 29,
2000, as reported in the Issuer's Form 10QSB/A.

<PAGE> 12

Item 1. Security and Issuer.

This statement on Schedule 13D relates to the shares of common stock,
$0.01 par value (the "Common Stock") of Vsource, Inc., a Delaware corporation
("Issuer").

The principal executive offices of Issuer are located at 5740 Ralston
Street, Suite 110, Ventura, California 93003.

Item 2. Identity and Background.

(a)

Pursuant to Rule 13d-1(k)(1) of Regulation 13D-G under the Securities
Exchange Act of 1934, as amended (the "Act"), the undersigned hereby files this
Schedule 13D on behalf of Mercantile VS, LLC ("Mercantile VS"), Mercantile
Equity Partners III, L.P. ("MEP LP"), Mercantile Equity Partners III, L.L.C.
("MEP LLC"), Mercantile Capital Partners I, L.P. ("MCP"), Mercantile Capital
Group ("MCG"), Mercantile Capital Management Corp. ("MCM."), Michael A.
Reinsdorf ("Mr. Reinsdorf"), I. Steven Edelson ("Mr. Edelson"), The Edelson
Family Trust dated September 17, 1997 (the "Trust"), and Nathaniel C.A. Kramer
("Mr. Kramer"). Mercantile VS, MEP, LP, MEP, LLC, MCP, MEC Group, MCM Corp., Mr.
Reinsdorf, Mr. Edelson, the Trust and Mr. Kramer are sometimes hereinafter
referred to collectively as the "Reporting Persons." The Reporting Persons are
making this single, joint filing because they may be deemed to constitute a
"group" within the meaning of Section 13d-5(b)(1) of the Act, although neither
the fact of this filing nor anything contained herein shall be deemed to be an
admission by the Reporting Persons that a "group" exists.

(b)-(c)

Mercantile VS

Mercantile VS is a Delaware limited liability company, the principal
business of which is the purchase, sale, exchange, acquisition and holding of
investment securities of the Issuer. The principal business address of
Mercantile VS, which also serves as its principal office, is 1372 Shermer Road,
Northbrook, Illinois 60062. Pursuant to Instruction C to Schedule 13D of the
Act, certain information with respect to MEP, LP, the managing member of
Mercantile VS, is set forth below.

MEP, LP

MEP, LP is an Illinois limited partnership, the principal business of
which is making the purchase, sale, exchange, acquisition and holding of
investment securities. The principal business address of MEP, LP, which also
serves as its principal office, is 1372 Shermer Road, Northbrook, Illinois
60062. Pursuant to Instruction C to Schedule 13D of the Act, certain information
with respect to MEP, LLC, the general partner of MEP, LP, is set forth below.

MEP, LLC

MEP, LLC is an Illinois limited liability company, the principal
business of which is managing entities whose principal business is the purchase,
sale, exchange, acquisition and holding of investment securities. The principal
business address of MEP, LLC, which also serves as its principal office, is 1372
Shermer Road, Northbrook, Illinois 60062. Pursuant to Instruction C to Schedule
13D of the Act, certain information with respect to Mr. Reinsdorf, Mr. Edelson
and the Trust, the managing members of MEP, LLC, is set forth below.

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<PAGE> 13

MCP

MCP is an Illinois limited partnership, the principal business of which
is the purchase, sale, exchange, acquisition and holding of investment
securities. The principal business address of MCP, which also serves as its
principal office, is 1372 Shermer Road, Northbrook, Illinois 60062. Pursuant to
Instruction C to Schedule 13D of the Act, certain information with respect to
Mercantile Capital Group, LLC, the general partner of MCP, is set forth below.

MCG

MCG is a Delaware limited liability company, the principal business of
which is managing entities whose principal business is the purchase, sale,
exchange, acquisition and holding of investment securities. The principal
business address of MCG, which also serves as its principal office, is 1372
Shermer Road, Northbrook, Illinois 60062. Pursuant to Instruction C to Schedule
13D of the Act, certain information with respect to Mr. Reinsdorf, Mr. Edelson
and Mr. Kramer, the members of MCG, and MCM, the non-member manager of MCG, is
set forth below.

MCM

MCM is an Illinois corporation, the principal business of which is
managing MCG. The principal business address of MCM, which also serves
as its principal office, is 1372 Shermer Road, Northbrook, Illinois 60062.
Pursuant to Instruction C to Schedule 13D of the Act, certain information with
respect to Mr. Reinsdorf, Mr. Edelson and Mr. Kramer, the sole shareholders of
MCM, is set forth below.

Mr. Reinsdorf

Mr. Reinsdorf's business address is 1372 Shermer Road, Northbrook,
Illinois 60062. Mr. Reinsdorf is a managing member of MEP, LLC, a member of MCG
and a member of the Investment Committee of MCM. His principal occupation or
employment is engaging in financial activities.

Mr. Edelson

Mr. Edelson's business address is 1372 Shermer Road, Northbrook,
Illinois 60062. Mr. Edelson is a managing member of MEP, LLC, a member of MCG
and a member of the Investment Committee of MCM. His principal occupation or
employment is engaging in financial activities.

The Trust

The Trust's business address is c/o I. Steven Edelson, 3010 Floral
Drive, Northbrook, Illinois 60062. The principal business is as a private family
trust.

Mr. Kramer

Mr. Kramer's business address is 641 Lexington Avenue, Suite 1450, New
York, New York 10022. Mr. Kramer is a member of MCG and a member of the
Investment Committee of MCM. His principal occupation or employment is engaging
in financial activities.

(d) None of the Reporting Persons have, during the last five years,
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).

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<PAGE> 14

(e) None of the Reporting Persons has, during the last five years, been
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.

(f) Mercantile VS and MCG are Delaware entities. MEP, LP, MEP, LLC,
MCP, MCM, and the Trust are all Illinois entities. Mr. Reinsdorf, Mr. Edelson
and Mr. Kramer are citizens of the United States.

Item 3. Source and Amount of Funds or Other Consideration.

The source and amount of funds or other consideration used by the
Reporting Persons to purchase the shares of Series 1-A Convertible Preferred
Stock consisted of $497,795 of working capital invested by the members of
Mercantile VS.

The source and amount of funds or other consideration used by the
Reporting Persons to purchase the 624,025 shares of Series 2-A Convertible
Preferred Stock and the Warrant for 54,312 shares of Common Stock consisted of
$4,000,000 of working capital invested by the partners of MCP. The "Warrant"
means the Warrant issued to MCP to purchase 54,312 shares of Common Stock of the
Issuer for $6.41 per share. The form of Warrant is attached as an exhibit hereto
and is incorporated herein by reference.

Item 4. Purpose of Transaction.

On February 3, 2000, Mercantile VS acquired 191,918 shares of Series
1-A Convertible Preferred Stock pursuant to a Subscription Agreement dated
February 3, 2000 between the Issuer and Mercantile VS.

On September 18, 2000, MCP acquired 624,025 shares of Series 2-A
Convertible Preferred Stock and a Warrant to purchase 54,312 shares of Common
Stock for an exercise price of $6.41 per share pursuant to a Convertible
Preferred Stock Purchase Agreement dated July 31, 2000 between the Issuer, MCP
and other investors as amended.

Series 1-A Convertible Preferred Stock. The Issuer has authorized the
issuance of 2,900,000 shares of Series 1-A Convertible Preferred with the
following characteristics:

- Redemption. The shares of Series 1-A Convertible Preferred Stock
are not redeemable by the Issuer or Mercantile VS.

- Voting Rights. Mercantile VS, as the holder of each share of
Series 1-A Convertible Preferred Stock, has the right to one vote
for each share of Common Stock into which such Series 1-A
Preferred Stock could then be converted.

- Conversion. Each share of Series 1-A Convertible Preferred Stock
is initially convertible into one share of Common Stock, at the
option of Mercantile VS at any time after issuance, subject to
adjustment in certain circumstances. Each share of Series 1-A
Convertible Preferred Stock will automatically be converted into
shares of Common Stock immediately upon the closing of a public
offering of the Issuer's Common Stock with aggregate gross
proceeds of at least $10,000,000 and a per share price to the
public of at least five dollars ($5.00), or at the election of the
holders of a majority of the outstanding shares of Series 1-A

-14-
<PAGE> 15

Convertible Preferred Stock. The conversion price is subject to
customary adjustment in the event of (a) stock splits and or
combinations, (b) certain dividends and distributions, (c)
recapitalizations, reclassification or exchange, (d)
reorganizations, mergers, consolidations or sales of assets, or
(e) a sale of shares by the Issuer below the conversion price of
the shares of Series 1-A Convertible Preferred Stock.

Series 2-A Convertible Preferred Stock. The Issuer has authorized the
issuance of 2,100,000 shares of Series 2-A Convertible Preferred with the
following characteristics:

- Redemption. The shares of Series 2-A Convertible Preferred Stock
are not redeemable by the Issuer or MCP.

- Voting Rights. MCP, as the holder of each share of Series 2-A
Convertible Preferred Stock, has the right to one vote for each
share of Common Stock into which such Series 2-A Preferred Stock
could then be converted.

- Conversion. Each share of Series 2-A Convertible Preferred Stock
was initially convertible into one share of Common Stock, at
MCP's option at any time after issuance, subject to adjustment in
certain circumstances. Each share of Series 2-A Convertible
Preferred Stock will automatically be converted into shares of
Common Stock immediately upon the closing of a public offering of
the Issuer's Common Stock with aggregate gross proceeds of at
least $20,000,000 and a per share price to the public of at least
thirteen dollars ($13.00), or at the election of the holders of a
majority of the outstanding shares of Series 2-A Convertible
Preferred Stock. The conversion price is subject to customary
adjustment in the event of (a) stock splits and or combinations,
(b) certain dividends and distributions, (c) recapitalizations,
reclassification or exchange, (d) reorganizations, mergers,
consolidations or sales of assets, or (e) a sale of shares by the
Issuer below the conversion price of the shares of Series 2-A
Convertible Preferred Stock.

- Registration Rights. MCP, as the holder of shares of Series 2-A
Convertible Preferred Stock, was granted certain registration
rights with respect to such shares as set forth below:

1. The Issuer is required to prepare a shelf registration
statement with the SEC with respect to the shares of
Common Stock underlying the shares of Series 2-A
Convertible Preferred Stock and the Warrant. If the
shelf registration statement is not declared effective
before January 18, 2001, then the Issuer must issue to
MCP a warrant to purchase, at an exercise price equal
to the purchase price of MCP's shares, a number of
shares of Common Stock equal to the product of (x) two
percent (2%) of the number of registrable shares then
held by MCP (including registrable shares which may be
acquired upon conversion of shares of Series 2-A
Convertible Preferred Shares) and (y) a fraction, the
numerator of which is the lesser of 450 and the number
of days by which the date on which the shelf
registration statement is declared effective and the
denominator of which is thirty (30); and

2. MCP was granted customary piggy back registration
rights.

Warrant. Pursuant to the terms of the Warrant, MCP may purchase 54,312
shares of Common Stock at an initial exercise price of $6.41 per share (the
"Warrant Shares"). MCP may purchase some or all of the Warrant Shares at any
time or from time to time until September 17, 2005. The number of Warrant Shares
and/or the exercise price per share (i.e., $6.41) are subject to customary
adjustment in the

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<PAGE> 16

event of (a) stock splits and or combinations, (b) certain dividends and
distributions, (c) recapitalizations, reclassification or exchange, (d)
reorganizations, mergers, consolidations or sales of assets, or (e) a sale of
shares below conversion price. MCP acquired the Warrant for investment purposes.

Other. MCP received certain visitation and board observer rights under
the Convertible Preferred Stock Purchase Agreement until the fifth anniversary
of the closing, so long as MCP and its affiliates own at least one percent (1%)
of the voting securities of the Issuer. Consistent with such rights, the
Reporting Persons have had, and may have in the future, discussions with
management of the Issuer concerning the Issuer's recent operating history as
well as the Issuer's general business outlook and prospects. In addition, MCP
and its affiliates are participating in setting the parameters of the Issuer's
search for a chief executive officer and are evaluating individual candidates
for such office.

Depending on market conditions and other factors that each may deem
material to its investment decision, each of the Reporting Persons may purchase
additional Common Shares in the open market or in private transactions or may
dispose of all or a portion of the Common Shares that such Reporting Person now
owns or hereafter may acquire, or imposed by law.

Other than as described in Item 3 and this Item 4, none of the
Reporting Persons have any plans or proposals which relate to or would result in
any of the matters described in subparagraphs (a) through (j) of Item 4 of
Schedule 13D (although they reserve the right to develop such plans).

The above summary of the terms of the shares of Series 1-A Convertible
Preferred Stock, the shares of Series 2-A Convertible Preferred Stock, the
Warrant and the Registration Rights Agreement is qualified in its entirety by
reference to the exhibits attached hereto and expressly incorporated herein by
this reference.

Item 5. Interest in Securities of the Issuer.

Each of the calculations in this Item 5 are based on 15,914,189 shares
of Common Stock outstanding as of August 29, 2000, as reported in the Issuer's
most recent Form 10QSB/A and assumes the exercise of the Warrant held by MCP
(which Warrant is currently exercisable). Statements regarding the power to vote
and dispose of the shares of Common Stock assume that the Warrant has been
exercised.

(a)

Mercantile VS

The aggregate number of shares of Common Stock that Mercantile VS may
be deemed to beneficially own, pursuant to Rule 13d-3 of the Act, is 191,918
(upon conversion of 191,918 shares of Series 1-A Convertible Preferred Shares)
which constitutes approximately 1.2% of the issued and outstanding shares of
Common Stock.

MEP, LP

As the sole managing member of Mercantile VS, MEP, LP may, pursuant to
Rule 13d-3 of the Act, be deemed to be the beneficial owner of 191,918 shares of
Common Stock (upon conversion of 191,918 shares of Series 1-A Convertible
Preferred Stock) which constitutes approximately 1.2% of the issued and
outstanding shares of Common Stock.

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<PAGE> 17

MEP, LLC

As the sole general partner MEP, LP, MEP, LLC may, pursuant to Rule
13d-3 of the Act, be deemed to be the beneficial owner of 191,918 shares of
Common Stock (upon conversion of 191,918 shares of Series 1-A Convertible
Preferred Stock) which constitutes approximately 1.2% of the issued and
outstanding shares of Common Stock.

MCP

The aggregate number of shares of Common Stock that MCP may be deemed
to beneficially own, pursuant to Rule 13d-3 of the Act, is 678,337 (upon (a)
conversion of 624,025 shares of Series 2-A Convertible Preferred Stock, and (b)
exercise of the Warrant for 54,312 shares of Common Stock) which constitutes
approximately 4.1% of the issued and outstanding shares of Common Stock.

MCG

As the sole general partner of MCP, MCG may, pursuant to Rule 13d-3 of
the Act, be deemed to be the beneficial owner of 678,337 shares of Common Stock
(upon (a) conversion of 624,025 shares of Series 2-A Convertible Preferred
Stock, and (b) exercise of the Warrant for 54,312 shares of Common Stock) which
constitutes approximately 4.1% of the issued and outstanding shares of Common
Stock.

MCM

As the non-member manager of MCG, MCM may, pursuant to Rule 13d-3 of
the Act, be deemed to be the beneficial owner of 678,337 shares of Common Stock
(upon (a) conversion of 624,025 shares of Series 2-A Convertible Preferred
Stock, and (b) exercise of the Warrant for 54,312 shares of Common Stock) which
constitutes approximately 4.1% of the issued and outstanding shares of Common
Stock.

Mr. Reinsdorf

As a managing member of MEP, LLC, a member of MCG and a stockholder of
MCM, Mr. Reinsdorf may, pursuant to Rule 13d-3 of the Act, be deemed to be the
beneficial owner of 870,255 shares of Common Stock (upon (a) conversion of
191,918 shares of Series 1-A Convertible Preferred Stock, (b) conversion of
624,025 shares of Series 2-A Convertible Preferred Stock, and (c) exercise of
the Warrant for 54,312 shares of Common Stock) which constitutes approximately
5.2% of the issued and outstanding shares of Common Stock.

Mr. Edelson

As a managing member of MEP, LLC, a member of MCG and a stockholder of
MCM, Mr. Edelson may, pursuant to Rule 13d-3 of the Act, be deemed to be the
beneficial owner of 870,255 shares of Common Stock (upon (a) conversion of
191,918 shares of Series 1-A Convertible Preferred Stock, (b) conversion of
624,025 shares of Series 2-A Convertible Preferred Stock, and (c) exercise of
the Warrant for 54,312 shares of Common Stock) which constitutes approximately
5.2% of the issued and outstanding shares of Common Stock.

-17-
<PAGE> 18

The Trust

As a managing member of MEP, LLC, the Trust may, pursuant to Rule
13d-3 of the Act, be deemed to be the beneficial owner of 191,918 shares of
Common Stock (upon conversion of 191,918 shares of Series 1-A Convertible
Preferred Stock) which constitutes approximately 1.2% of the issued and
outstanding shares of Common Stock

Mr. Kramer

As a member of MCG and a stockholder of MCM, Mr. Kramer may, pursuant
to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 678,337 shares
of Common Stock (upon (a) conversion of 624,025 shares of Series 2-A Convertible
Preferred Stock and (b) exercise of the Warrant for 54,312 shares of Common
Stock) which constitutes approximately 4.1% of the issued and outstanding shares
of Common Stock.

(b)

Mercantile VS

Mercantile VS may be deemed to have sole voting power and sole
dispositive power with respect to 191,918 shares of Common Stock (upon
conversion of 191,918 shares of Series 1-A Convertible Preferred Stock) which
constitutes approximately 1.2% of the outstanding shares of Common Stock.

MEP, LP

As the sole managing member of Mercantile VS, MEP, LP may be deemed to
have sole voting power and sole dispositive power with respect to 191,918 shares
of Common Stock (upon conversion of 191,918 shares of Series 1-A Convertible
Preferred Stock) which constitutes approximately 1.2% of the outstanding shares
of Common Stock.

MEP, LLC

As the sole general partner MEP, LP, MEP, LLC may be deemed to have
sole voting power and sole dispositive power with respect to 191,918 shares of
Common Stock (upon conversion of 191,918 shares of Series 1-A Convertible
Preferred Stock) which constitutes approximately 1.2% of the outstanding shares
of Common Stock.

MCP

MCP may be deemed to have sole voting power and sole dispositive power
with respect to 678,337 shares of Common Stock (upon conversion of 624,025
shares of Series 2-A Convertible Preferred Stock and exercise of the Warrant for
54,312 shares of Common Stock) which constitutes approximately 4.1% of the
outstanding shares of Common Stock.

MCG

As the sole general partner of MCP, MCG may be deemed to have sole
voting power and sole dispositive power with respect 678,337 shares of Common
Stock (upon conversion of 624,025 shares of Series 2-A Convertible Preferred
Stock and exercise of the Warrant for 54,312 shares of Common Stock) which
constitutes approximately 4.1% of the outstanding shares of Common Stock.

-18-
<PAGE> 19

MCM

As the non-member manager of MCG, MCM may be deemed to have sole
voting power and sole dispositive power with respect 678,337 shares of Common
Stock (upon conversion of 624,025 shares of Series 2-A Convertible Preferred
Stock and exercise of the Warrant for 54,312 shares of Common Stock) which
constitutes approximately 4.1% of the outstanding shares of Common Stock.

Mr. Reinsdorf

As a managing member of MEP, LLC, a member of MCG and a stockholder of
MCM, Mr. Reinsdorf may be deemed to have shared voting power and shared
dispositive power with respect to 870,255 shares of Common Stock (upon (a)
conversion of 191,918 shares of Series 1-A Convertible Preferred Stock, (b)
conversion of 624,025 shares of Series 2-A Convertible Preferred Stock, and (c)
exercise of the Warrant for 54,312 shares of Common Stock) which constitutes
approximately 5.2% of the outstanding shares of Common Stock.

Mr. Edelson

As a managing member of MEP, LLC, a member of MCG and a stockholder of
MCM, Mr. Edelson may be deemed to have shared voting power and shared
dispositive power with respect to 870,255 shares of Common Stock (upon (a)
conversion of 191,918 shares of Series 1-A Convertible Preferred Stock, (b)
conversion of 624,025 shares of Series 2-A Convertible Preferred Stock, and (c)
exercise of the Warrant for 54,312 shares of Common Stock) which constitutes
approximately 5.2% of the outstanding shares of Common Stock.

The Trust

As a managing member of MEP, LLC, the Trust may be deemed to have
shared voting power and shared dispositive power with respect to 191,918 shares
of Common Stock (upon conversion of 191,918 shares of Series 1-A Convertible
Preferred Stock) which constitutes approximately 1.2% of the outstanding shares
of Common Stock.

Mr. Kramer

As a member of MCG and a stockholder of MCM, Mr. Kramer may be deemed
to have shared voting power and shared dispositive power with respect to 678,337
shares of Common Stock (upon (a) conversion of 624,025 shares of Series 2-A
Convertible Preferred Stock and (b) exercise of the Warrant for 54,312 shares of
Common Stock) which constitutes approximately 4.1% of the outstanding shares of
Common Stock.

(c) Except as set forth in Item 4 above, none of the Reporting Persons
have effected any other transactions in Common Stock during the past sixty (60)
days.

(d) None of the Reporting Persons have the right to receive, or the
power to direct the receipt of, dividends from, or the proceeds from the sale
of, any of the securities of the Issuer acquired by the Reporting Persons as
described in Item 5.

(e) Not applicable.

-19-
<PAGE> 20

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.

Except as set forth in this Schedule 13D or in the Exhibits filed
herewith and incorporated herein by reference, and except for the Joint Filing
Agreement dated November 21, 2000 among the Reporting Persons attached as
Exhibit 1 to this Schedule 13D, the Reporting Persons do not have any contracts,
arrangements, understandings or relationships (legal or otherwise) with any
person with respect to any securities of the Issuer, including but not limited
to transfer or voting of any of the shares of Common Stock of the Issuer,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or withholding
of proxies, or a pledge or power over the shares of Common Stock of the Issuer.

Item 7. Materials to be Filed as Exhibits.

Exhibit 1 Statement made pursuant to Rule 13d-1(k)(1)(iii) of
Regulation 13D-G of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.

Exhibit 2 Amended Certificate of Designation of Series 1-A
Convertible Preferred Stock.

Exhibit 3 Certificate of Designation of Series 1-A Convertible
Preferred Stock.

Exhibit 4 Certificate of Designation of Series 2-A Convertible
Preferred Stock.

Exhibit 5 Form of Common Stock Warrant.

Exhibit 6 Form of Registration Rights Agreement for the Series
2-A Convertible Preferred Stock.

-20-
<PAGE> 21

After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

Dated: November 21, 2000 MERCANTILE VS, LLC, a Delaware limited
liability company

By: Mercantile Equity Partners III, L.P.,
an Illinois limited partnership, its
Managing Member

By: Mercantile Equity Partners III,
L.L.C., an Illinois limited
liability company, its General
Partner

By: /s/ I. Steven Edelson
-------------------------
Name: I. Steven Edelson
Title: Managing Member

MERCANTILE EQUITY PARTNERS III, L.P., an
Illinois limited partnership, its Managing
Member

By: Mercantile Equity Partners III, L.L.C.,
an Illinois limited liability company,
its General Partner

By: /s/ I. Steven Edelson
-------------------------
Name: I. Steven Edelson
Title: Managing Member

MERCANTILE EQUITY PARTNERS III, L.L.C., an
Illinois limited liability company, its
General Partner

By: /s/ I. Steven Edelson
-------------------------
Name: I. Steven Edelson
Title: Managing Member

MERCANTILE CAPITAL PARTNERS I, LP, an Illinois
limited partnership

By: Mercantile Capital Group, LLC, a
Delaware limited liability company, its
general partner

By: Mercantile Capital Management
Corp., an Illinois corporation,
its manager

By: /s/ I. Steven Edelson
------------------------
Name: I. Steven Edelson
Title: President

<PAGE> 22

MERCANTILE CAPITAL GROUP, LLC, a Delaware
limited liability company

By: Mercantile Capital Management Corp.,
an Illinois corporation, its manager

By: /s/ I. Steven Edelson
-------------------------
Name: I. Steven Edelson
Title: President

MERCANTILE CAPITAL MANAGEMENT CORP., an
Illinois corporation, its manager

By: /s/ I. Steven Edelson
----------------------------
Name: I. Steven Edelson
Title: President

/s/ Michael A. Reinsdorf
-----------------------------------
MICHAEL A. REINSDORF, an Individual

/s/ I. Steven Edelson
-----------------------------------
I. STEVEN EDELSON, an Individual

THE EDELSON FAMILY TRUST DATED
SEPTEMBER 17, 1997

By: /s/ I. Steven Edelson
----------------------------
Name: I. Steven Edelson
Title: Trustee

/s/ Nathaniel C.A. Kramer
-----------------------------------
NATHANIEL C.A. KRAMER, an Individual