-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HX+4akzqne/PsVzbys8N1J92HOp9cYLVFIsLQNhWbZSJzQOxLExB7Pz8fPq1mB6B JES788e9al4XN3YSPtKi4A== 0001017062-00-000455.txt : 20000215 0001017062-00-000455.hdr.sgml : 20000215 ACCESSION NUMBER: 0001017062-00-000455 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOURCINGLINK NET INC CENTRAL INDEX KEY: 0000825517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 980132465 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-28391 FILM NUMBER: 541260 BUSINESS ADDRESS: STREET 1: 650 CASTRO STREET SUITE 210 STREET 2: C/O RICHARD S LANE ESQ CITY: MOUNTAIN VIEW STATE: CA ZIP: 94041 BUSINESS PHONE: 6509661214 MAIL ADDRESS: STREET 1: 650 CASTRO ST STREET 2: STE 210 CITY: MOUNTAIN VIEW STATE: CA ZIP: 94041 FORMER COMPANY: FORMER CONFORMED NAME: QCS NET CORP DATE OF NAME CHANGE: 19990621 FORMER COMPANY: FORMER CONFORMED NAME: QCS CORP DATE OF NAME CHANGE: 19941216 FORMER COMPANY: FORMER CONFORMED NAME: PARKWAY CAPITAL CORP DATE OF NAME CHANGE: 19920703 10QSB 1 QUARTERLY REPORT FOR THE PERIOD ENDED DEC. 31 1999 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 --------- SourcingLink.net, Inc. - -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) DELAWARE 98-0132465 -------- ---------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 16855 WEST BERNARDO DRIVE, SUITE 260, SAN DIEGO, CA 92127 - -------------------------------------------------------------------------------- (Address of principal executive offices) (858) 385-8900 - -------------------------------------------------------------------------------- (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 ------- Shares of Common Stock outstanding as of February 4, 2000: 7,548,120 shares SourcingLink.net, Inc. CONTENTS --------
Page 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
2 PART I FINANCIAL INFORMATION Item 1 Financial Statements SourcingLink.net, Inc. Consolidated Condensed Balance Sheets
December 31, March 31, ASSETS 1999 1999 ------------ ------------ Current assets: (Unaudited) Cash and cash equivalents $ 6,519,448 $ 1,266,880 Accounts receivable, net 86,604 222,769 Other current assets 81,304 7,111 ------------ ------------ 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 ------------ ------------ 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 ------------ ------------ 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 ------------ ------------ Total stockholders' equity 5,904,612 945,327 ------------ ------------ Total liabilities and stockholders' equity $ 7,031,879 $ 1,694,885 ============ ============
The accompanying notes are an integral part of these consolidated condensed financial statements. 3 SourcingLink.net, Inc. Consolidated Condensed Statements Of Operations (Unaudited)
Three months ended December 31, Nine months ended December 31, ------------------------------- ------------------------------ 1999 1998 1999 1998 ----------- ------------ ----------- ----------- Revenue: Network $ 184,084 $ 155,086 $ 586,649 $ 446,453 Consulting - 98,022 154,498 301,166 ----------- ------------ ----------- ----------- 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 ----------- ------------ ----------- ----------- 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 =========== ============ =========== ===========
The accompanying notes are an integral part of these consolidated condensed financial statements. 4 SourcingLink.net, Inc. Consolidated Condensed Statements of Cash Flows (Unaudited)
Nine months ended December 31, -------------------------------------------- 1999 1998 ------------ ------------ 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 ----------- ----------- 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 ----------- ----------- 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) ----------- ----------- Net cash provided by financing activities 7,874,703 2,892,648 Effect of exchange rate changes on cash 316 (14,505) ----------- ----------- 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 =========== ===========
The accompanying notes are an integral part of these consolidated condensed financial statements. 5 SourcingLink.net, Inc. NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS 1. Basis of presentation: - --------------------------- 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):
Three months ended December 31, Nine months ended December 31, ------------------------------------- ------------------------------------- Basic and diluted: 1999 1998 1999 1998 ---------------- ---------------- ---------------- ---------------- 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) ================ ================ ================ ================
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. 6 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: - ------------------------------ 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: - --------------------------- 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 7 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, 8 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 9 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 10 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 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 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 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 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 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 EX-10.1 2 LETTER AGREEMENT WITH CARREFOUR 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. 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. . 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.
- ---------------------------------------------------------------------------------------------------- Task Description Estimated Start Date - ---------------------------------------------------------------------------------------------------- Receipt of memorandum of understanding - Carrefour November 12, 1999 - ---------------------------------------------------------------------------------------------------- Agreement signed by Carrefour Head Office November 12, 1999 - ----------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------ 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 - -----------------------------------------------------------------------------------------------------
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. 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 ---------------------------------- ------------------------------- EX-27 3 FINANCIAL DATA SCHEDULE - ARTICLE 5
5 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. 0000825517 SOURCINGLINK.NET 1,000 3-MOS MAR-31-2000 APR-01-1999 DEC-31-1999 6,519 0 122 35 0 81 469 183 7,032 1,127 0 0 2 8 5,895 7,032 0 184 0 206 1,473 0 0 (1,422) 0 (1,422) 0 0 0 (1,422) (.20) (.20)
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