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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 1999.
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________.
Commission File Number: 000-28391
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SourcingLink.net, Inc.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 98-0132465
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
16855 WEST BERNARDO DRIVE, SUITE 260, SAN DIEGO, CA 92127
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(Address of principal executive offices)
(858) 385-8900
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(Issuer's telephone number)
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X YES _____ NO
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Shares of Common Stock outstanding as of February 4, 2000: 7,548,120 shares
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SourcingLink.net, Inc.
CONTENTS
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<TABLE>
<CAPTION>
Page
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Condensed Balance Sheets as of
December 31, 1999 (unaudited) and March 31, 1999 3
Consolidated Condensed Statements of Operations
for the three and nine months ended December 31, 1999
and 1998 (unaudited) 4
Consolidated Condensed Statements of Cash Flows
for the nine months ended December 31, 1999 and 1998 (unaudited) 5
Notes to Consolidated Unaudited Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 15
Signature 16
</TABLE>
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
SourcingLink.net, Inc.
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1999 1999
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Current assets: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 6,519,448 $ 1,266,880
Accounts receivable, net 86,604 222,769
Other current assets 81,304 7,111
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Total current assets 6,687,356 1,496,760
Property and equipment, net 285,110 185,286
Other non-current assets 59,413 12,839
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Total assets $ 7,031,879 $ 1,694,885
============ ============
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities $ 1,044,533 $ 707,121
Deferred revenue and other 82,734 42,437
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Total current liabilities 1,127,267 749,558
STOCKHOLDERS' EQUITY
Series A convertible preferred stock 1,974 3,816
Common stock 7,504 5,631
Additional paid-in capital 25,286,533 15,315,395
Unearned stock-based compensation (1,998,592) -
Common stock note receivable (40,000) (40,000)
Accumulated deficit (17,438,174) (14,420,409)
Cumulative foreign currency translation adjustments 85,367 80,894
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Total stockholders' equity 5,904,612 945,327
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Total liabilities and stockholders' equity $ 7,031,879 $ 1,694,885
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
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SourcingLink.net, Inc.
Consolidated Condensed Statements Of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended December 31, Nine months ended December 31,
------------------------------- ------------------------------
1999 1998 1999 1998
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Network $ 184,084 $ 155,086 $ 586,649 $ 446,453
Consulting - 98,022 154,498 301,166
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184,084 253,108 741,147 747,619
Cost of revenue:
Network 206,345 67,394 370,377 187,024
Consulting - 98,022 129,498 301,166
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206,345 165,416 499,875 488,190
Gross profit (22,261) 87,692 241,272 259,429
Operating expenses:
Selling, general and
administrative 1,080,596 416,092 2,517,585 1,681,451
Product development 300,780 152,233 785,628 422,421
Cost of warrants issued to
strategic partners 91,628 - 91,628 -
----------- ------------ ----------- -----------
Total operating expenses 1,473,004 568,325 3,394,841 2,103,872
Operating loss (1,495,265) (480,633) (3,153,569) (1,844,443)
Other income (expense), net (18,911) (2,053) (20,646) 101,338
Interest income 92,396 2,939 156,450 7,181
----------- ------------ ----------- -----------
Net loss (1,421,780) (479,747) (3,017,765) (1,735,924)
Preferred dividend - - - (68,463)
----------- ------------ ----------- -----------
Net loss attributed to common
stockholders $(1,421,780) $ (479,747) $(3,017,765) $(1,804,387)
=========== ============ =========== ===========
Net loss per share (basic and
diluted) $ (0.20) $ (0.10) $ (0.47) $ (0.38)
=========== ============ =========== ===========
Weighted average number of shares
used in per share calculation
(basic and diluted) 7,135,123 4,903,293 6,447,405 4,749,341
=========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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SourcingLink.net, Inc.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended December 31,
--------------------------------------------
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,017,765) $(1,735,924)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization expense 89,056 66,863
Unrealized exchange (gain) loss 4,157 (107,878)
Loss on disposal of fixed assets 9,177 71,243
Expense related to stock options and warrants 91,628 370,693
Changes in operating assets and liabilities-net 399,353 178,412
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Net cash used in operating activities (2,424,394) (1,156,591)
Cash flows from investing activities:
Purchases of fixed assets (198,057) (146,315)
Proceeds from disposal of fixed assets - 4,413
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Net cash used in investing activities (198,057) (141,902)
Cash flows from financing activities:
Proceeds from issuance of common stock 7,309,076 2,899,837
Proceeds from exercise of stock options 571,873 -
Payments on capital leases (6,246) (7,189)
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Net cash provided by financing activities 7,874,703 2,892,648
Effect of exchange rate changes on cash 316 (14,505)
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Net increase (decrease) in cash and cash equivalents 5,252,568 1,579,650
Cash and cash equivalents, beginning of the period 1,266,880 475,145
----------- -----------
Cash and cash equivalents, end of the period $ 6,519,448 $ 2,054,795
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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SourcingLink.net, Inc.
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1. Basis of presentation:
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On July 20, 1999, the stockholders of the Company approved a proposal to change
the Company's name from QCS.net Corporation to SourcingLink.net, Inc. The name
change became effective as of that date upon the Company's filing of its Amended
and Restated Certificate of Incorporation with the Delaware Secretary of State.
The interim consolidated condensed financial statements of SourcingLink.net,
Inc. ("SourcingLink" or the "Company") are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments), which are, in the opinion of
management, necessary for a fair presentation, in all material respects, of the
financial position and operating results of the Company for the interim periods.
The results of operations for the three and nine months ended December 31, 1999
are not necessarily indicative of the results to be expected for the entire
fiscal year ending March 31, 2000. The year-end balance sheet data at March 31,
1999 was derived from the audited financial statements. All prior period share
and per share amounts have been restated to reflect the 1 for 4 reverse stock
split, which was effective August 25, 1999.
The consolidated financial statements include the accounts of SourcingLink.net,
Inc. and its wholly owned subsidiary. All significant intercompany transactions
and account balances have been eliminated in consolidation.
This financial information should be read in conjunction with the audited
financial statements and notes thereto included in the Company's Form 10-KSB for
the fiscal period ended March 31, 1999.
Effective April 1, 1999, the Company changed its year-end to March 31, from June
30. The corresponding comparative Statements of Operations and Cash Flows for
the nine months ended December 31, 1998 have been presented accordingly.
2. Computation of net loss per share:
- ---------------------------------------
Net loss per share is presented on a basic and diluted basis. Basic earnings
per share is computed by dividing the income available to holders of Common
Stock by the weighted average number of shares of Common Stock outstanding for
the period. Diluted earnings per share are computed by giving effect to all
dilutive potential shares of Common Stock that were outstanding during the
period. For the Company, dilutive potential shares of Common Stock consist of
incremental shares of Common Stock issuable upon the exercise of stock options
and warrants and conversion of preferred stock for all periods.
Basic and diluted earnings per share are calculated as follows for the three and
nine months ended December 31, 1999 and 1998 (unaudited):
<TABLE>
<CAPTION>
Three months ended December 31, Nine months ended December 31,
------------------------------------- -------------------------------------
Basic and diluted: 1999 1998 1999 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net loss attributed to
Common shareholders $ (1,421,780) $ (479,747) $ (3,017,765) $ (1,804,387)
Weighted average shares
outstanding for the
period 7,135,123 4,903,293 6,447,405 4,749,341
---------------- ---------------- ---------------- ----------------
Net loss per share $ (0.20) $ (0.10) $ (0.47) $ (0.38)
================ ================ ================ ================
</TABLE>
All prior period share and per share amounts have been restated to reflect the 1
for 4 reverse stock split, which was effective August 25, 1999.
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At December 31, 1999, the Company had 869,000 options and 851,907 warrants
outstanding to purchase shares of Common Stock compared to 896,270 options and
844,660 warrants outstanding at March 31, 1999. These options and warrants were
not included in the computation of diluted earnings per share because their
inclusion would be anti-dilutive.
3. Reclassification:
- ----------------------
Certain prior period balances have been reclassified to conform to the current
period's presentation. These reclassifications did not affect the loss or total
stockholders' equity for the periods presented.
4. Comprehensive loss:
- ------------------------
Comprehensive loss for the three months ended December 31, 1999 and 1998 was
$1,417,414 and $480,770, respectively. For the nine months ended December 31,
1999 and 1998 the comprehensive loss was $3,013,292 and $1,856,968,
respectively. The principal difference between comprehensive loss and net loss
is the treatment of cumulative foreign currency translation adjustments.
5. Issuance of Common Stock:
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In August 1999, the Company completed a private placement of Common Stock,
primarily to institutional investors. The investment banking firm of Needham
and Co. acted as placement agent for the offering which totaled 1,258,000 Common
shares at a price of $6.40 per share, as adjusted for the August 25, 1999 1 for
4 reverse stock split. Gross proceeds were $8.1 million, and net proceeds,
after placement agent fees and other offering costs, were approximately $7.3
million. The net proceeds of the offering are expected to be used primarily for
general working capital and corporate purposes, including product development
and sales and marketing of the Company's Internet solutions.
6. Recent pronouncements:
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In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company has
adopted SOP No. 98-1 as of the first quarter of fiscal year 2000. The adoption
of SOP No. 98-1 did not have a material impact on the Company's financial
statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." The
interpretations outlined in SAB No. 101 have been and are currently being
consistently applied by the Company.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this Report, including, without limitation,
statements containing the words "believes," "anticipates," "expects" and the
like, constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. These factors include, but are not limited to,
the factors discussed under the caption "Risk Factors" below, and are discussed
in more detail in the Risk Factors section of the Company's Annual Report on
Form 10-KSB for the fiscal year ended March 31, 1999. Given these
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to update any
such factors or to announce publicly the results of any revisions of the
forward-looking statements contained or incorporated by reference herein to
reflect future events or developments.
Overview
The Company has developed an Internet-based turnkey solution for business-to-
business eCommerce that enables retailers to organize, automate and
significantly reduce the cost of their merchandise sourcing activities by
connecting
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directly with their merchandise suppliers around the globe. The Company's
revenues are generated principally from network revenues consisting of fees for
access to and use of the Company's solutions. These fees include initial
registration fees, fixed monthly or annual subscription fees or "pay-as-you-go"
transactional fees. Effective April 1, 1999, the Company discontinued offering
the pay-as-you-go transactional fee option for new subscribers to
SourceLink(TM), the Company's core Internet sourcing solution, and effective
January 1, 2000 the Company discontinued such transactional fees for any
SourceLink(TM) subscribers.
Historically, network revenues were primarily from customer use of the Company's
private network desktop solution. In February 1999, the Company began a rollout
of its new SourceLink(TM) Internet solution to selected merchandise suppliers of
the Company's retailer subscribers. While there continues to be revenue from the
desktop solution, primarily from the InspectLink(TM) inspection data
application, the Company's focus is now centered on the core Internet solutions,
and current retailer customers are either adopting or converting to
SourceLink(TM) or BuyLink(TM), the Company's Internet solution for Web-based
purchase orders and advance shipping notices.
In December 1999, the Company entered into an agreement with Paris, France-based
Carrefour, the world's second largest retailer following its recently approved
acquisition of Promodes, also of France. Under the agreement, Carrefour has
committed to rollout SourceLink(TM) to its more than 20,000 merchandise
suppliers worldwide. The initial use of the solution will be among Carrefour's
central buying offices and the approximately 1,500 merchandise suppliers to
those offices, with implementation expected over approximately six months. A
successful completion of the second phase of the rollout, to the local
merchandise buyers and suppliers in Carrefour's 26 operating countries, is
expected to take approximately 24 months.
The Company entered into a multi-faceted eCommerce agreement with IBM in the
third quarter of fiscal 1998, as an amendment to an earlier 1996 agreement under
which the Company became an active participant in IBM's e-commerce group. Under
the 1998 contract, referred to as the IBM Agreement or the Agreement in the
discussion below, IBM provided most of the sales and marketing effort, worldwide
help desk support and project management for the Company through the expiration
of the Agreement on September 30, 1999. Under the same Agreement, IBM also
provided the network and server infrastructure supporting the Company's
solutions. Payments to IBM for these services were based on a percentage of
sales under a revenue sharing provision of the Agreement, and were accounted for
as cost of sales. Through September 30, 1999, the Company assisted IBM with
certain sales and marketing efforts for the Company's solution, and billed IBM
at cost for such services. These billings to IBM have been recorded as
consulting revenue. As this consulting was on a cost-reimbursement basis, there
was an equal and offsetting cost of revenue, and thus no gross profit margin
associated with this consulting revenue. Effective October 1, 1999, the Company
began performing its sales and project management in-house; therefore, there is
no further revenue from consulting services to IBM after September 30, 1999.
New agreements have been entered into with IBM as of October 1, 1999, as
discussed below.
New IBM Agreements
Effective October 1, 1999, the Company entered into a new network services and
infrastructure agreement with IBM. In addition, the Company entered into a
separate agreement to define its on-going co-marketing relationship with IBM.
As mentioned above, the cost of these services was historically based on revenue
sharing, and was all included in cost of revenue. Beginning October 1, 1999,
the accounting for these new agreements is as follows:
. For the infrastructure agreement, which includes the housing of
servers in IBM's secure data management center, the Company will pay
IBM under a combined fixed and variable price structure, based upon
the level of service. Payments for these services will be accounted
for as cost of revenue.
. For the co-marketing agreement, which includes use of the IBM logo and
e-business mark on Company marketing material and our website and
participation with IBM at its e-commerce trade show booths, there are
no payments required under the Company's present status as a premier
IBM e-business partner.
Accumulated Losses
From its inception in 1993 through December 31, 1999, the Company has generated
an accumulated deficit of approximately $17.4 million. Since inception, the
Company has incurred substantial costs to develop its technology,
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to develop and introduce its sourcing solutions, to establish marketing and
distribution relationships, to recruit and train a sales and marketing group and
to build an administrative organization. The Company's prospects must be
considered in light of its operating history, and the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new, unproved and rapidly evolving
markets. The limited operating history of the Company makes the prediction of
future results of operations difficult or impossible and, therefore, there can
be no assurance that the Company will grow or that it will be able to achieve or
sustain profitability. The Company's success depends to a significant degree
upon the Company's ability to raise additional capital, and continued
contributions of key management, engineering, sales and marketing, and finance
personnel, certain of whom would be difficult to replace. The loss of the
services of any of the key personnel or the inability to attract or retain
qualified management and other personnel in the future, or delays in hiring
required personnel, could have a material adverse effect on the Company's
business, operating results or financial condition. Also, the Company's success
is highly dependent on its ability to execute in a timely manner its new sales
and marketing plan, of which no assurance can be made.
Change in Fiscal Year
In May 1999, the Company's Board of Directors approved a change in the Company's
fiscal year end from June 30 to March 31, commencing April 1, 1999. In the
comparison of the three and nine-month periods ended December 31, 1999 and 1998,
the current fiscal year's periods represent the third quarter and first nine
months of fiscal year 2000. The 1998 comparative three-month period is the
second quarter of old fiscal year 1999. The 1998 comparative nine-month period
is the fourth quarter of old fiscal year 1998 plus the first six months of old
fiscal year 1999.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1999 AND
1998
Revenues
Total revenues for the three months ended December 31, 1999 decreased $69,000,
or 27%, to $184,000 from $253,000 in the three months ended December 31, 1998.
Total revenue declined because the IBM Agreement was discontinued by the Company
as of September 30, 1999. Under that Agreement the Company paid fees based on
revenue sharing for both hosting services and sales and marketing support. The
Company was reimbursed by IBM for certain of the Company's sales and marketing
expenses, with such reimbursements included as revenue for financial statement
purposes. Thus, the current three-month period includes no Consulting revenue,
whereas the three months ended December 31, 1998 included $98,000 of such
reimbursements from IBM. As discussed above, the IBM Agreement was replaced by
two new arrangements, one fee-bearing contract for the network infrastructure
for hosting the Company's application services, and a second contract under
which the Company receives certain co-marketing privileges with IBM, but has no
payments or revenue sharing costs for such privileges. The Company has moved
its sales and marketing function in-house as of October 1, 1999.
Network revenues for the three-months ended December 31, 1999 increased $29,000,
or 19%, to $184,000 from $155,000 in the same period last year. This increase
is primarily attributable to revenue from the Company's new Internet sourcing
solution. The Company began rolling-out its Internet solution in February 1999,
and therefore was not receiving revenue from this application service in the
three-month period ended December 31, 1998. The increase in Internet-based
Network revenue has more than offset a decrease in Network revenue from the
Company's desktop solution, which is being de-emphasized because of the broader
market potential of the Internet solutions.
Total revenues for the nine months ended December 31, 1999 decreased $6,000, or
1%, to $741,000 from $748,000 in the nine months ended December 31, 1998. As in
the three-month period, there has been a decline in Consulting revenue and an
increase in Network revenue for the reasons mentioned above. For the nine-
months ended December 31, 1999, the increase in Network revenues was $140,000,
or 31%, to $587,000 from $446,000 last year. Consulting revenues for the
current year's nine-month period decreased $147,000, or 49%, to $154,000 from
$301,000 for the nine-month period one year ago.
Sales of the Company's Internet solution generally require adoption by retailers
and then a rollout to the retailer's merchandise suppliers which the Company
expects will result in lengthy sales and implementation cycles. Revenues
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from the Internet solution in the current year are primarily from subscriptions
among the groups of suppliers that have been made available for rollout by three
of the Company's current retailer customers.
Cost of Revenues
For the quarter ended December 31, 1999, the cost of Network revenues increased
$139,000, or 206%, to $206,000 from $67,000 in the quarter ended December 31,
1998. The Company's cost of revenue consists primarily of fees paid to IBM for
infrastructure support and hosting of the Company's application services within
the IBM Global Network. Effective with the beginning of the current quarter,
the fees paid for these hosting services are based on a new contract that
provides for a combination of fixed and variable costs based on the level of
service. The cost of sales incurred in the quarter ended December 31, 1999 is
near the minimum cost provided for in the contract. In the prior year, the cost
of revenue for IBM infrastructure support was based on revenue sharing, which
resulted in a lower cost in that period. The Company did not continue the
revenue sharing basis of paying IBM due to its belief that significant
additional costs may have resulted in the future under a revenue sharing
arrangement. For the nine months ended December 31, 1999, the cost of Network
revenues increased $183,000, or 98%, to $370,000 from $187,000 during the
comparable nine-month period one year ago. The increase in these costs for the
nine-month period is due to the higher revenues subject to the revenue sharing
charge in the first six months of this fiscal year as compared to the comparable
period last year, and the higher costs in the third quarter, as previously
described.
There was no Consulting revenue or cost of Consulting revenue in the quarter
ended December 31, 1999. For the nine-month periods, the cost of Consulting
revenue was $129,000 in the current year compared to $301,000 in the nine months
ended December 31, 1998. Consulting revenues from IBM, which comprise the
majority of the total Consulting revenues, have a cost of revenue equal to the
revenues received. The reduction in these costs for the nine-month periods is
due to a decrease in the Consulting activities with IBM through September 30,
1999, with no further consulting after that date, as described above.
Overall, gross profit in the current quarter decreased $110,000 to a loss of
$22,000 from gross profit of $88,000 in the three months ended December 31,
1998. For the nine-month periods, overall gross profit decreased to $241,000,
or 33% of revenues in the current year, from $259,000, or 35% of revenues in the
nine months ended December 31, 1998. The decrease in gross profit as a percent
of sales for both the three and nine-month periods is largely attributable to
increased costs under the new infrastructure agreement with IBM in the third
quarter of this fiscal year, as described above.
Under the new agreement with IBM, network and other infrastructure support costs
will not be tied to revenue sharing, and will be relatively fixed over varying
levels of activity; accordingly, future fluctuations in revenue may have a
greater impact on gross profit margins than in prior periods.
Operating Expenses
Selling, General and Administrative Expenses. In the quarter ended December 31,
1999, the Company's selling, general and administrative expenses increased
$665,000, or 160%, to $1.08 million from $416,000 in the quarter ended December
31, 1998. The Company has expanded its management team, and began hiring an
internal sales and project management staff during the second and third quarters
of the current year. The associated labor and travel costs, as well as costs
related to a larger facility for the increased staff, outsourced help desk
support, various filing fees, and shareholder relations and directors and
officers' insurance, comprise the majority of the increase in selling, general
and administrative expenses compared to the same period in the prior year. For
the nine months ended December 31, 1999, selling, general and administrative
expenses increased $836,000, or 50%, to $2.52 million from $1.68 million in the
same nine months of the prior year. The percentage increase in these costs for
the nine-month period is not as great as the percentage increase in the current
quarter because of certain one-time charges taken in the three months ended June
30, 1998. The charges taken in the quarter ended June 30, 1998 related to the
issuance of warrants, and to legal and accounting fees associated with the
closure of offices in France and Hong Kong.
Product Development Expenses. Product development expenses during the three
months ended December 31, 1999 increased by $149,000, or 98%, to $301,000 from
$152,000 in the three months ended December 31, 1998. For the nine months,
product development expenses increased $363,000, or 86%, to $786,000 from
$422,000 for the same period last year. The increase in product development
expenses for both the three and nine-month periods is primarily
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labor and support costs associated with continued development of the Company's
Internet solution, including new management and development personnel.
The Company expects that product development and selling, general and
administrative expenses will continue to increase as it expands its operations,
increases its in-house sales and project management capabilities, and incurs
additional labor and other costs related to the development and sales of its
solutions.
Cost of Warrants Issued to Strategic Partners. During the quarter ended
December 31, 1999, the Company issued a total of 160,000 warrants for the
purchase of Common Stock to two strategic partners of the Company. The amount
of expense for the warrants was determined under the Black-Scholes valuation
method and is being amortized over the two-year period associated with each of
the business agreements underlying the warrants. Of these warrants, 150,000
were issued to Carrefour, one of the Company's retailer customers.
Other Income (Expense), net and Interest Income
The principal component of other income (expense), net is the exchange gain or
loss on foreign currency translations with the Company's subsidiary in France.
Primarily as a result of these foreign currency translations, other income
(expense), net was an expense of $19,000 and $2,000 in the three months ended
December 31, 1999 and 1998, respectively. For the nine-month periods, the
current year result is an expense of $21,000 compared to income of $101,000 in
the prior year. Interest income increased to $92,000 in the current year's
third quarter from $3,000 in the quarter ended December 31, 1998. For the nine
months ended December 31, 1999 and 1998, interest income was $156,000 and
$7,000, respectively. During August 1999, the Company completed a private
placement of 1,258,000 shares of its Common Stock, primarily to a limited number
of institutional investors. Gross proceeds of the offering were $8.1 million,
and after placement agent fees and other offering costs, net proceeds of $7.3
million were received by the Company. The increases in interest income for the
three and nine-month periods are primarily attributable to the increased cash
available for investment as a result of this private placement.
Income Taxes
The Company recorded net losses of $3.0 million and $1.7 million during the nine
months ended December 31, 1999 and 1998, respectively. Accordingly, no
provision for income taxes was recorded in any of these periods. As of December
31, 1999, the Company had net operating loss carryforwards for United States
income tax purposes of approximately $10 million. These losses expire at
various dates between 2002 and 2020. As of December 31, 1999, the Company also
had net operating loss carryforwards for income tax purposes in France of
approximately $3.7 million which expire at various dates between 1999 and 2003.
A valuation allowance has been recorded for the tax benefit of the net operating
loss carryforwards and the deferred tax assets of the Company due to the fact
that, as of the present time, it is more likely than not that such assets will
not be realized.
Fluctuations in Quarterly Operating Results
Our quarterly operating results have varied significantly in the past and will
likely vary significantly in the future. We believe that period-to-period
comparisons of our results of operations are not meaningful and should not be
relied upon as indicators of future performance. Our operating results could
fall below the expectations of securities analysts or investors in some future
quarter or quarters. Our failure to meet these expectations would likely
adversely affect the market price of our Common Stock.
Our quarterly operating results may vary depending on a number of factors,
including: demand for our solution and services; actions taken by our
competitors, including new product introductions and enhancements; delays or
reductions in spending for, or the implementation of, supply chain management
solutions by our customers and potential customers as companies review eCommerce
applications; ability to scale our network and operations infrastructure;
ability to develop, introduce and market our solutions on a timely basis;
changes in our pricing policies or those of our competitors; ability to expand
our sales and marketing operations, including hiring additional sales personnel;
size and timing of sales of our solution and services; success in maintaining
and enhancing existing relationships and developing new relationships with
strategic partners; ability to control costs; technological changes in our
markets; deferrals of customer subscriptions in anticipation of new developments
or features of our solution; customer budget cycles and changes in these budget
cycles; and general economic factors.
11
<PAGE>
We have increased our operating expenses substantially, and plan to continue to
do so, to expand our sales and marketing operations, fund greater levels of
product development, increase general and administrative support, develop new
partnerships, increase our professional services and support capabilities and
improve our operational and financial systems. If our revenues do not increase
along with these expenses, our business, operating results and financial
condition could be seriously harmed and net losses in a given quarter could be
even larger than expected. In addition, because our expense levels are
relatively fixed in the near term and are based in part on expectations of our
future revenues, any decline in our revenues to a level that is below our
expectations would have a disproportionately adverse impact on our operating
results.
Liquidity and Capital Resources
The Company's cash and cash equivalents at December 31, 1999 were $6.5 million,
an increase of $5.3 million from March 31, 1999. During August 1999, the
Company completed a private placement of its Common Stock through a placement
agent to a limited number of institutional investors. The offering included
1,258,000 Common shares and gross proceeds were $8.1 million. Net proceeds,
after placement agent fees and other offering costs, were $7.3 million, and are
expected to be used primarily for general working capital and corporate
purposes, including product development and the expansion of the sales,
marketing and management functions. Cash used in operating activities for the
nine months ended December 31, 1999 was $2.4 million, compared to $1.2 million
for the nine months ended December 31, 1998. Such cash usage in each period is
primarily related to the losses incurred, with stepped-up investments in sales
and marketing, administration and product development in the current year
resulting in more cash used in operations this year than in the prior year's
comparable nine month period. The Company plans to continue investing in
product development and sales and marketing of its Internet sourcing solution,
and use of cash to fund such activities is expected to continue at or above
current levels for the foreseeable future.
The Company believes that its current working capital will be sufficient to meet
its working capital requirements for the next 12 to 15 months. The Company
plans to actively seek additional equity investment to fund operations beyond
that period. If such efforts are unsuccessful, the Company will need to reduce
operating spending significantly, which would materially and adversely affect
the Company's business.
During this year's third quarter, the Company moved its headquarters and
operations from Mountain View, California to San Diego, California. The
majority of the employees located in Mountain View also relocated to San Diego.
There was no significant impact on operations or cash flow from the move.
The Company currently does not have a bank credit line. The Company does not
intend to pay cash dividends with respect to capital stock in the foreseeable
future.
Recent Pronouncements
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company has
adopted SOP No. 98-1 as of the first quarter of fiscal year 2000. The adoption
of SOP No. 98-1 did not have a material impact on the Company's financial
statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." The
interpretations outlined in SAB No. 101 have been and are currently being
consistently applied by the Company.
Year 2000 Compliance
The "Year 2000" issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Without corrective
measures, computer programs that have date sensitive software might recognize a
date using "00" as the year 1900 rather than the year 2000, possibly resulting
in program failure, miscalculation or disruptions of operations. During
calendar year 1999, the Company reviewed its internal computer systems, its
Internet solutions and its desktop software solution that could be affected by
the "Year 2000" issue. The Company's Internet solutions were designed and
developed to be "Year 2000" compliant. Within its internal computer systems
12
<PAGE>
and its desktop software solution the Company identified some systems and
software applications that would be affected, and took steps to remedy those
issues prior to December 31, 1999. No "Year 2000" problems have been encountered
in the first month following the beginning of 2000. However, if the designs,
modifications and conversions that have been made by the Company are not
adequate, "Year 2000" related problems could yet occur, and while the Company
would take corrective action in those circumstances, there can be no assurance
that such problems would not have a material adverse effect on the business,
financial condition and results of operations of the Company.
RISK FACTORS
- ------------
We have a history of losses and expect to incur losses in the future.
We incurred net losses of $1.5 million in fiscal 1999 and $3.0 million in the
first nine months of fiscal 2000. As of December 31, 1999, we had an
accumulated deficit of approximately $17.4 million. We expect to derive
substantially all of our revenues for the foreseeable future from subscription
fees of our Internet sourcing solution, which is based on an unproven business
model. Although these revenues have grown in the most recent quarter, we may
not be able to sustain this growth in the future. In fact, we may not have any
revenue growth, and our revenues could decline. Moreover, we expect to incur
significant sales and marketing, product development, and general and
administrative expenses. As a result, we expect to incur significant losses for
the foreseeable future.
The Company believes that its current working capital will be sufficient to meet
its working capital requirements for the next 12 to 15 months. The Company plans
to actively seek additional equity investment to fund operations beyond that
period. If such efforts are unsuccessful, the Company will need to reduce
operating spending significantly, which would materially and adversely affect
the Company's business.
We expect to depend on our Internet solution for substantially all of our
revenues for the foreseeable future.
Our solution and related services account for substantially all of our revenues.
We anticipate that revenues from our solution and related services will continue
to constitute substantially all of our revenues for the foreseeable future.
Consequently, a decline in the price of, or demand for, our solution, or its
failure to achieve broad market acceptance, would seriously harm our business.
Implementation of our solutions by large retailers is complex, time consuming
and expensive. We frequently experience long sales and implementation cycles.
Our supply chain management solution is an enterprise-wide solution that must be
deployed with many users within a large retailer's sourcing organization. Its
adoption by large retailers is characterized by long sales cycles beginning with
pilot studies and concluding with retailers strongly encouraging their
merchandise suppliers to subscribe to our solution. In many cases, our customers
must change established business practices and conduct business in new ways. In
addition, they must generally consider a wide range of other issues before
committing to purchase our product, including product benefits, integration,
interoperability with existing computer systems, scalability, functionality and
reliability. As a result, we must educate potential customers on the use and
benefits of our solution. It frequently takes several months to finalize a sale
and the sale must often be approved by a number of management levels within the
customer organization. The implementation of our solution requires a commitment
of resources by our customers and third-party professional services
organizations. Entering into an agreement with a customer for the adoption of
our solution does not assure that the customer will in fact make such adoption
or assure the time frame in which the adoption may occur. A delay or change of
these commitments may adversely affect our financial results of any particular
quarter.
We currently depend on IBM for the management and security of our network
infrastructure, and for co-marketing of our solution.
We depend on IBM Global Network, or IGN, for certain services relating to our
infrastructure, including maintenance of communications lines and management of
network data centers. IGN may terminate its performance of these services for
us at any time on 90 days notice to us. If IGN were to terminate these
services, we would have to obtain them from another service provider or perform
them ourselves. There can be no assurance that we would be able to
13
<PAGE>
obtain or perform these services on a timely or cost-effective basis. If we were
able to obtain such services from a third party, we would be entirely dependent
on them to manage and maintain our network infrastructure and to provide
security for it.
In addition, we have a co-marketing alliance with IBM, and certain of our
marketing activities depend on this co-marketing arrangement. Therefore, IBM's
decisions and performance with respect to these matters have a material impact
on our ability to market our solution. While we have taken over a substantial
portion of our sales and marketing activities, our effectiveness in so doing is
not assured. Our agreement with IBM will permit IBM to discontinue the co-
marketing of our solution upon specified notice. A decision by IBM to cease or
reduce substantially this co-marketing arrangement would have an immediate and
material adverse effect on our financial condition and results of operations.
We depend on our key personnel.
Our future performance depends on the continued service of our senior
management, product development and sales personnel. The loss of the services
of one or more of our key personnel could seriously harm our business. Our
future success also depends on our continuing ability to attract, hire, train
and retain a substantial number of highly skilled managerial, technical, sales,
marketing and customer support personnel. We are particularly dependent on
hiring additional personnel to increase our direct sales and product development
organizations. In addition, new hires frequently require extensive training
before they achieve desired levels of productivity. Competition for qualified
personnel is intense, and we may fail to retain our key employees or to attract
or retain other highly qualified personnel.
We depend on increasing use of the Internet and on the growth of eCommerce. If
the use of the Internet and eCommerce do not grow as anticipated, our business
will be seriously harmed.
Our success depends on the increased acceptance and use of the Internet as a
medium of commerce on a global basis. Rapid growth in the use of the Internet
is a recent phenomenon. As a result, acceptance and use may not continue to
develop at historical rates and a sufficiently broad base of business customers
may not adopt or continue to use the Internet as a medium of commerce. Demand
and market acceptance for recently introduced services and products over the
Internet are subject to a high level of uncertainty, and there exist few proven
services and products.
Our business would be seriously harmed if:
. Use of the Internet, the web and other online services does not
continue to increase or increases more slowly than expected;
. The infrastructure for the Internet, the web and other online services
does not effectively support expansion that may occur; or
. The Internet, the web and other online services do not create a viable
commercial marketplace, inhibiting the development of eCommerce and
reducing the need for our solution.
The market for our solution is at an early stage. We need a critical mass of
retailers and their merchandise suppliers to implement and use our solution.
The market for Internet-based supply chain management solutions and services is
at an early stage of development. Our success depends on a significant number of
large retailers implementing our solution and requiring their merchandise
suppliers to subscribe to our solution. The implementation of our solution by
major retailers and their merchandise suppliers is controlled by multiple
parties in the retail organization. In many cases, these organizations must
change established business practices and conduct business in new ways. Our
ability to attract additional customers for our solution will depend on
leveraging our existing customers as reference accounts. Our solution may not
achieve significant market acceptance. Unless a critical mass of retailers and
their merchandise suppliers implement our solution, our solution may not achieve
widespread market acceptance and our business would be seriously harmed.
We face intense competition. If we are unable to compete successfully, our
business will be seriously harmed.
The market for business-to-business eCommerce solutions in general, and supply
chain management solutions in particular, is extremely competitive, evolving and
characterized by continuous rapid development of technology.
14
<PAGE>
Competition to capture business users is intense and is expected to increase
dramatically in the future, which will likely result in price reductions,
reduced profit margins and a decrease in our market share, which could have a
serious adverse impact on our business.
Indirect competitors are traditional Value Added Network, or VAN, solution
providers that have extended their VAN connections over the Internet and new
Internet companies that are focused on trading exchanges that allow merchandise
buyers and sellers to access each other on channels within existing portals. One
or more of these companies may develop and add preorder merchandise sourcing
capabilities to their existing product offerings, giving them a more
comprehensive solution than our solution, which could adversely affect our
business. We expect that additional established and emerging companies will seek
to enter our market as it continues to develop and expand. We may not be able to
compete successfully against future competitors, especially those with
significantly greater financial, marketing, service, support, technical and
other resources.
Additional risk factors are discussed in more detail in the risk factor section
of the Company's Annual Report on Form 10-KSB for the fiscal year ended March
31, 1999.
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Letter agreement with Carrefour*
27 Financial Data Schedule
b. Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter for which this report is filed.
* Portions omitted pursuant to a request for confidential treatment.
15
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: February 15, 2000 SourcingLink.net, Inc.
By: /s/ Gary Davidson
------------------
Gary Davidson,
Vice President Finance and Administration,
Chief Financial Officer
16
<PAGE>
EXHIBIT 10.1
Confidential Treatment Requested
Carrefour and SourcingLink.net, Inc.
Letter Agreement
SourcingLink.net, Inc. (SourcingLink) desires to enter into an
agreement with Carrefour relating to the adoption by Carrefour of SourcingLink's
Internet Merchandise Sourcing Solution and continued use of the SourcingLink
desktop quality inspection and shipping and tracking solution. The significant
terms and conditions of the agreement are outlined below.
1. Overview
Carrefour as a strategic partner to SourcingLink is interested in
enabling a more efficient supply chain connection and process between its
worldwide suppliers and Carrefour. To facilitate this goal, Carrefour has asked
SourcingLink to deliver an e-commerce solution allowing Carrefour to efficiently
and cost effectively communicate with and manage its suppliers worldwide.
The Solution will allow Carrefour to establish the necessary
connectivity infrastructure to efficiently distribute business information to
its suppliers and have suppliers feed information into Carrefour's systems using
standard web browsers to access the Solution over the Internet. The SourcingLink
Solution will provide Carrefour with a variety of standardized electronic
communication capabilities to exchange information with its suppliers including
electronic supplier profiles, negotiations, sending and receiving requests for
quotation, product development, sharing product catalogs, publishing vendor
policies and procedures, sending purchase orders and invoices, receiving
shipment notices, placing inspection orders and receiving inspection reports.
Carrefour understands that in order to implement this solution it must
mandate its suppliers to subscribe to the SourcingLink Solution.
SourcingLink will provide Carrefour a leading edge, cost-efficient
supply chain management solution and will work closely with Carrefour to develop
and implement additional functionality across these connections over time.
SourcingLink and Carrefour understand and agree that continued use of
the SourcingLink Solution is based on Carrefour's on-going satisfaction and use
of this Solution can be terminated by Carrefour for any reason with ninety (90)
days prior written notice.
2. Roll Out Scope
Carrefour has indicated that providing its CMI offices with an e-
commerce solution to transmit sourcing information from the international
suppliers to the buyers in the operating countries is the first priority in the
implementation plan. Based on this desire, SourcingLink will structure its
implementation into distinct phases focusing immediately on connecting the CMI
offices in Hong Kong, Italy and Mexico, to their suppliers and to the buyers in
the operating countries.
It is anticipated that after linking the international suppliers to
its CMI offices, Carrefour will extend usage of the SourcingLink Solution to
include mandating the domestic suppliers in each operating country to subscribe
to the SourcingLink Solution.
<PAGE>
Phase One - January 1, 2000 - May 31, 2000
Aggressively roll out the SourcingLink Solution to the international
suppliers, the CMI offices and the buyers in each of the operating countries:
. Work with Carrefour to document the current sourcing workflow.
. Connect the three (3) CMI offices, their suppliers and their main
operating country customers (France, Spain, Argentina, Brazil,
Taiwan...others) to the SourcingLink Solution through a fast
Internet connection.
. Customize the forms with the SourcingLink Solution to support the
product catalog document workflow from the suppliers through CMI
and then to the operating countries.
. Publish purchasing policies and procedures provided by Carrefour
for international suppliers.
. Develop and interface between SourcingLink and the Carrefour back
office system(s) to enable the automatic transfer of information,
where required.
. Install a supplier relations button on the Carrefour website with
a hotlink to SourcingLink.
Phase Two - June 2000 - June 2001
Extend the SourcingLink Solution to link the buyers in the operating countries
with their domestic suppliers:
. Connect the various operating country buyers with their domestic
suppliers (order of operating country roll out to be agreed upon
with Carrefour).
. Customize forms within the SourcingLink Solution to support the
product catalog workflow from the domestic suppliers to the
various operating country buyers.
. Publish purchasing policies and procedures provided by Carrefour
for domestic suppliers.
Phase Three - Starting date and priorities to be agreed upon with Carrefour
In order to fully utilize the existing connectivity, Carrefour and
SourcingLink will work cooperatively to add and enhance features between
Carrefour and both its international and domestic suppliers
. Include web based Order Management related documents in the
workflow with the suppliers.
. Broadcast information to vendors on a one-to-one basis, e.g.,
inventory status, faulty deliveries.
. Develop the corresponding interface between SourcingLink and the
Carrefour back office system(s) to enable the automatic transfer
of the necessary information, where required.
. Provide agreed upon additional functionality to the SourcingLink
Solution
Carrefour will be responsible to put in place the infrastructure necessary
to implement the SourcingLink Solution to include fast Internet connection and
machines in each of the buying offices for the buyers/merchandisers to access
the Internet. In addition, Carrefour will need to appoint a corporate project
manager and a project manager in each operating country to act as the interface
to the SourcingLink project management teams to support the implementation of
the Solution.
3. Implementation Process
. We will jointly document the current workflow.
<PAGE>
. We will jointly develop the project plan with tasks,
responsibilities and milestones for each phase of the roll out.
. SourcingLink will provide the Buyer training in all CMI and
Operating countries and Carrefour will make buyers available for
all training.
. SourcingLink will provide forms customization for current
international product catalog documents used by the CMI offices
and the operating countries.
4. Responsibilities -- SourcingLink
. Training
. SourcingLink will assign a worldwide Project Manager to serve as
the owner of the Carrefour implementation worldwide.
. SourcingLink will assign a project manager for each country
implementing the SourcingLink Solution (a project manager may
handle multiple countries).
. SourcingLink will develop with Carrefour a project plan and
review its progress and the key deliverable items on a regular
basis with Carrefour Corporate Project management as well as each
of the countries in active implementation.
. SourcingLink will identify and raise project issues as necessary
with Carrefour appointed project management
. SourcingLink will provide forms customization
. SourcingLink will provide worldwide support through its Solution
center to buyers and suppliers
. SourcingLink will provide support for interface developments for
connection to ERP and/or other back-office systems
. Supplier recruiting through telemarketing.
Responsibilities Carrefour
. Carrefour will mandate that supplier subscribe to the
SourcingLink Solution.
. Carrefour will provide connectivity to the Internet.
. Carrefour will make buyers available for training.
. Carrefour will assign a Corporate Project Manager who will be the
focal point for communications and who has the authority to act
for Carrefour in all aspects related to this proposal.
. Carrefour will appoint a project manager in each roll out country
with access to necessary personnel and information at Carrefour
related to the successful completion of the implementation.
. Carrefour will work to establish, develop and approve all forms
customization.
. Carrefour will provide office space to SourcingLink at Carrefour.
. Carrefour will provide supplier listings and approve sending
letters to the suppliers on Carrefour letterhead and provide
buyer follow-up to recruit suppliers.
. Carrefour will develop the necessary interface between the
SourcingLink Solution and its ERP and other back office systems.
. Carrefour will implement buying practices and procedures that
reinforce utilization of the SourcingLink Solution.
5. Initial Implementation - Phase One
The project start date is estimated to be December 1 and is subject to
final agreements between Carrefour and SourcingLink that fully reflect the
detail terms related to this memorandum of understanding.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Task Description Estimated Start Date
- ----------------------------------------------------------------------------------------------------
<S> <C>
Receipt of memorandum of understanding - Carrefour November 12, 1999
- ----------------------------------------------------------------------------------------------------
Agreement signed by Carrefour Head Office November 12, 1999
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------
<S> <C>
Meet with CMI offices to: January 4, 2000-January 15,
. Develop project plan 2000
. Document workflow
. Obtain supplier target lists
. Schedule buyer training
. Agree upon date to send letters to suppliers
. Check on Internet connectivity
. Establish working group for form customization
. Establish working group for policies and procedures
- -----------------------------------------------------------------------------------------------------
Meet with operating countries to: January 22, 2000
. Check on Internet connectivity
. Schedule buyer training
- -----------------------------------------------------------------------------------------------------
Standard agreements signed January 31, 2000
- -----------------------------------------------------------------------------------------------------
Carrefour starts sending letters to international suppliers February 15, 2000
- -----------------------------------------------------------------------------------------------------
</TABLE>
6. Internet Solution
Charges
. $95 per month per buyer trained on the Solution and provided a user ID
[*]. Payable monthly upon receipt of invoice.
. One time roll out fees estimated at US$450,000 (450 man days at an
average of US$1,000). This includes 200 days of buyer training, 200
days of project management and 50 days of sourcing forms
customization.
. Total estimated one-time fees above: US$450,000. Payable as services
are provided and billed.
. Estimates will be confirmed with final project plans.
. All billing will be payable by Carrefour corporate.
Not Included
------------
. Man-days in excess of estimate
. Our travel expenses will be invoiced at cost.
. Additional functionality requiring development.
. Any projects to interface to Carrefour back office systems will be
subject to a separate proposal.
. Additional forms customization for forms currently not in use by
Carrefour will be subject to a separate proposal.
. Data migration.
Suppliers will pay a registration fee of $100 and $95 per month per seat or
$1,025 per year per seat. [*]
7. Warrants
SourcingLink will grant to Carrefour 150,000 warrants for the purchase
of 150,000 shares of SourcingLink common stock at an exercise price equal to the
closing price of the SourcingLink stock as of the date this agreement is signed
by both parties. [*]
These warrants are granted in consideration of the commitment to this
alliance by Carrefour and contemplate that Carrefour will actively participate
in the implementation.
* Portions omitted pursuant to a request for confidential treatment.
<PAGE>
8. Supplier Confidentiality
SourcingLink agrees that any supplier that has an exclusive
relationship with Carrefour or provides private lable goods to Carrefour will
remain private in the SourcingLink database and will not be accessible to any
retailer other than Carrefour.
9. Other
Carrefour will become a Charter member participating in the
development of the direction and content of the SourcingLink Solution. In
addition, Carrefour will be showcased on our public site as a Charter member
with a description of our alliance and your leadership role in e-commerce.
Carrefour will agree to public disclosure of the business relationship
and the plans for implementation and to act as a reference site and showcase for
investors, non-competitive retailers, and suppliers.
It is understood that Carrefour has acquired Promodes. Upon completion
of the integration phase of this acquisition, SourcingLink agrees to consolidate
agreements in affect at that date where the terms of the Carrefour agreement
will prevail.
CARREFOUR SOURCINGLINK.NET, INC.
By: /s/ William N. Anderson By: /s/ Sean M. Maloy
---------------------------------- -------------------------------
William N. Anderson Sean M. Maloy
Chief Merchandise and Marketing President and Chief Executive
Officer Officer
Date: December 8, 1999 Date: December 8, 1999
---------------------------------- -------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THREE
MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> SOURCINGLINK.NET
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<PERIOD-END> DEC-31-1999
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