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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT
TO THE 1934 ACT REPORTING REQUIREMENTS
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934.
FOR THE FISCAL QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-24833
FUTURELINK CORP.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 95-4763404
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6 MORGAN, IRVINE, CALIFORNIA 92618
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(949) 837-8252
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the registrant (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 [
]
The total number of shares of the Registrant's Common Stock outstanding as
of March 31, 2000 was 59,025,364.
Transitional Small Business Disclosure Format (check one): [ ] Yes No [X]
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FUTURELINK CORP.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
PAGE
----
PART I -- FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements................. 1
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999..................................... 1
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2000 and 1999................ 2
Condensed Consolidated Statements of Stockholders' Equity
to March 31, 2000......................................... 3
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999................ 4
Notes to Condensed Consolidated Financial Statements...... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings........................................... 14
Item 2. Changes in Securities....................................... 14
Item 3. Defaults Upon Senior Securities............................. 16
Item 4. Submission of Matters to a Vote of Security Holders......... 16
Item 5. Other Information........................................... 16
Item 6. Exhibits and Reports on Form 8-K............................ 16
SIGNATURES.................................................. 21
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PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
FUTURELINK CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,395 $ 19,185
Restricted cash........................................... 2,138 3,099
Accounts receivable, less allowance of $2,160 and $1,363
in 2000 and 1999, respectively......................... 22,230 14,284
Inventory................................................. 5,981 4,964
Prepaid expenses.......................................... 1,628 536
Deferred offering costs................................... 1,781 --
-------- --------
Total current assets.............................. 37,153 42,068
Property and equipment, less accumulated depreciation of
$3,606 and $2,276 in 2000 and 1999, respectively.......... 16,467 10,972
Goodwill and other intangibles, net......................... 262,687 186,866
Deposits and acquisition costs.............................. 688 543
Other assets................................................ 374 229
-------- --------
Total assets...................................... $317,369 $240,678
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit........................................... $ 961 $ 1,657
Accounts payable and accrued liabilities.................. 24,692 15,811
Settlement payable........................................ -- 5,000
Current portion of long-term debt......................... 17,865 8,554
Deferred revenues......................................... 1,921 1,330
-------- --------
Total current liabilities......................... 45,439 32,352
Long-term debt -- less current portion...................... 7,231 4,116
Convertible debentures, net................................. 653 874
Deferred taxes.............................................. 588 588
-------- --------
Total liabilities................................. 53,911 37,930
Commitments and contingencies............................... -- --
Stockholders' equity:
Common stock, $.0001 par value, 300,000,000 shares
authorized, 59,025,364 and 52,743,169 shares issued and
outstanding at March 31, 2000 and December 31, 1999,
respectively........................................... 7 7
Common stock issuable; 1,639,850 shares................... 42,636 42,636
Additional paid-in capital................................ 231,311 146,150
Warrants.................................................. 60,000 60,000
Deferred compensation..................................... (2,488) (1,393)
Loan receivable from officer.............................. (1,250) (1,500)
Cumulative foreign currency translation adjustment........ (563) (77)
Accumulated deficit....................................... (66,195) (43,075)
-------- --------
Total stockholders' equity........................ 263,458 202,748
-------- --------
Total liabilities and stockholders' equity........ $317,369 $240,678
======== ========
See notes to condensed consolidated financial statements.
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FUTURELINK CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
---------- ---------
(UNAUDITED)
Revenue:
Hardware and software..................................... $ 17,324 $ 383
Service delivery.......................................... 5,320 1,361
---------- ---------
22,644 1,744
---------- ---------
Expenses:
Cost of hardware and software............................. 14,074 353
Cost of service delivery.................................. 3,666 1,108
Selling, general and administration....................... 14,426 1,845
Goodwill amortization..................................... 11,783 500
Depreciation and other amortization....................... 1,494 161
---------- ---------
45,443 3,967
---------- ---------
Loss from operations........................................ (22,799) (2,223)
Interest expense.......................................... 429 998
Interest income........................................... (226) --
---------- ---------
Loss before income taxes.................................... (23,002) (3,221)
Provision (benefit) for income taxes........................ 118 (119)
---------- ---------
Net loss.................................................... $ (23,120) $ (3,102)
========== =========
Loss per share -- basic and diluted......................... $ (0.42) $ (0.53)
========== =========
Weighted average shares -- basic and diluted................ 55,369,965 5,813,993
========== =========
See notes to condensed consolidated financial statements.
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FUTURELINK CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK COMMON ADDITIONAL LOAN
------------------- STOCK PAID-IN DEFERRED RECEIVABLE
SHARES AMOUNT ISSUABLE CAPITAL WARRANTS COMPENSATION FROM OFFICER
---------- ------ -------- ---------- -------- ------------ ------------
(UNAUDITED)
BALANCE AT JANUARY 1, 2000...... 52,743,169 $7 $42,636 $146,150 $60,000 $(1,393) $(1,500)
Shares issued or issuable for
acquisitions.................. 3,001,486 -- -- 63,249 -- -- --
Shares issuable for services.... -- -- -- 668 -- -- --
Shares issued upon conversion of
debt.......................... 189,160 0 -- 218 -- -- --
Conversion of warrants.......... 2,545,783 0 -- 18,009 -- -- --
Value of options and warrants
issued for services........... -- -- -- 2,059 -- (1,095) --
Shares issued under loan
agreement..................... -- -- -- -- -- -- 250
Shares issued upon exercise.....
of employee stock options..... 545,766 0 -- 958 -- -- --
Foreign currency translation
adjustment.................... -- -- -- -- -- -- --
Net loss for the quarter........ -- -- -- -- -- -- --
---------- -- ------- -------- ------- ------- -------
BALANCE AT MARCH 31, 2000....... 59,025,364 $7 $42,636 $231,311 $60,000 $(2,488) $(1,250)
========== == ======= ======== ======= ======= =======
CUMULATIVE TOTAL
TRANSLATION ACCUMULATED STOCKHOLDERS' COMPREHENSIVE
ADJUSTMENT DEFICIT EQUITY LOSS
----------- ----------- ------------- -------------
(UNAUDITED)
BALANCE AT JANUARY 1, 2000...... $ (77) $(43,075) $202,748 $(35,725)
========
Shares issued or issuable for
acquisitions.................. -- -- 63,249 --
Shares issuable for services.... -- -- 668 --
Shares issued upon conversion of
debt.......................... -- -- 218 --
Conversion of warrants.......... -- -- 18,009 --
Value of options and warrants
issued for services........... -- -- 964 --
Shares issued under loan
agreement..................... -- -- 250 --
Shares issued upon exercise..... --
of employee stock options..... -- -- 958 --
Foreign currency translation
adjustment.................... (486) -- (486) (486)
Net loss for the quarter........ -- (23,120) (23,120) (23,120)
----- -------- -------- --------
BALANCE AT MARCH 31, 2000....... $(563) $(66,195) $263,458 $(59,331)
===== ======== ======== ========
See notes to condensed consolidated financial statements.
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FUTURELINK CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
-------- -------
(UNAUDITED)
OPERATING ACTIVITIES
Net loss.................................................... $(23,120) $(3,102)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................... 13,277 661
Deferred income taxes....................................... -- (120)
Amortization of deferred compensation....................... (1,095)
Common stock, warrants and options issued for services...... 2,309 125
Non-cash interest expense................................... -- 981
Change in operating assets and liabilities, net of effect of
business acquisitions:
Accounts receivable....................................... (1,239) (277)
Inventory................................................. 185 (522)
Prepaid expenses.......................................... (1,030) 18
Deferred offering costs................................... (1,781) --
Other assets.............................................. (22) (104)
Accounts payable and accrued expenses..................... 4,478 (157)
Settlement payable........................................ (5,000) --
Deferred revenues......................................... (161) --
-------- -------
NET CASH USED IN OPERATING ACTIVITIES.................. (13,199) (2,497)
-------- -------
INVESTING ACTIVITIES
Purchases of property and equipment......................... (444) (639)
Business acquisitions, net of cash balances acquired........ (16,439) --
Deposits on acquisitions.................................... (145) --
Decrease in restricted cash................................. 961 --
-------- -------
NET CASH USED IN INVESTING ACTIVITIES.................. (16,067) (639)
-------- -------
FINANCING ACTIVITIES
Net cash advanced (paid) under lines of credit.............. (4,196) 127
Proceeds from issuance of common shares, net................ -- (5)
Proceeds from exercise of employee stock options............ 958 --
Proceeds from exercise of warrants.......................... 18,009 --
Proceeds from issuance of notes payable..................... 248
Repayment of capital lease obligation....................... (809) (14)
Issuance of convertible debentures, net of costs............ -- 3,201
Repayment of convertible debentures and promissory notes.... -- (381)
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 13,962 3,176
-------- -------
Effect of currency rate changes............................. (486) (42)
-------- -------
Increase in cash............................................ (15,790) (2)
Cash at beginning of period................................. 19,185 7
-------- -------
Cash at end of period....................................... $ 3,395 $ 5
======== =======
NON CASH INVESTING AND FINANCING ACTIVITIES
Acquisition of businesses;
Assets acquired........................................... $ 96,349 $ 42
Liabilities assumed....................................... 8,655 --
Notes payable issued...................................... 7,250 --
Common stock and options issued........................... 63,249 42
-------- -------
Cash paid for acquisitions............................. 17,195 --
Capital lease obligations................................... 5,985 14
Conversion of convertible debt to equity.................... 218 1,561
SUPPLEMENTAL INFORMATION, CASH PAID FOR;
Interest.................................................... $ 429 $ 17
Income Taxes................................................ 118 --
See notes to condensed consolidated financial statements.
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FUTURELINK CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
reflect the results of operations for FutureLink Corp. and its wholly owned
subsidiaries and have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals and
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto included in FutureLink's Annual Report on Form
10-KSB for the year ended December 31, 1999 filed with the Securities and
Exchange Commission (SEC) on March 30, 2000.
FutureLink Corp. (the "Company") is a Delaware corporation headquartered in
Irvine, California. The Company provides server-based computing services, and is
an application services provider, or ASP. The Company's services enable software
applications to be deployed, managed, supported and upgraded from centrally
located servers, rather than on individual desktop computers. For server-based
computing customers, the Company installs and integrates software applications
on customers' servers. For our ASP customers, the Company hosts software
applications on servers at data centers, and rents computing services to
customers for a monthly fee. ASP customers connect to facilities over the
Internet, through a dedicated telecommunications line or by wireless connection.
ASP services were introduced in March 1999.
The Company has experienced net losses over the past two years and had an
accumulated deficit of approximately $66.2 million at March 31, 2000. Such
losses are attributable to both cash losses resulting from costs incurred in the
development of the Company's services and infrastructure, interest expense and
non-cash charges. The Company expects operating losses to continue for the
foreseeable future as it continues to develop and promote its services.
NOTE 2. ACQUISITIONS
MicroLAN Systems, Inc.
On February 29, 2000, the Company acquired MicroLAN Systems, Inc. doing
business as Madison Technology Group, Madison Consulting Resources, Inc. and
Madison Consulting Resources NJ, Inc. The companies were acquired for total
consideration of $57.5 million, consisting of $6.5 million cash, a note payable
in the amount of $7.3 million that is secured by the Company's shares of a new
subsidiary formed for the acquisition, and 1,975,170 shares of common stock
valued at $43.7 million. The acquisition was accounted for by the purchase
method of accounting. In connection therewith, $12.4 million of the purchase
price was allocated to assembled workforce and is being amortized over three
years, and $45.2 million of the excess purchase price over the estimated fair
value of net assets acquired was allocated to goodwill and is being amortized
over five years.
Vertical Software, Inc.
On January 31, 2000, the Company acquired Vertical Software, Inc. ("VSI"),
a U.S. mid-Atlantic regional provider of system integration and information
technology services. The agreement provides for a merger of VSI with a
subsidiary of the Company such that all of VSI's outstanding stock was sold to
the Company in exchange for consideration of $27.6 million consisting of $8.1
million cash and 1,026,316 common shares of the Company's common stock valued at
$19.5 million. The acquisition was accounted for by the
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FUTURELINK CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
purchase method of accounting, and the excess purchase price of $26.7 million
over the estimated fair value of net assets acquired was allocated to goodwill
and is being amortized over five years.
The following pro forma results of operations give effect to the
acquisition of the above companies as if the transactions had occurred January
1, 1999 (dollars in thousands):
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
-------- -------
(UNAUDITED)
Revenue..................................................... $ 27,131 $20,830
Net (loss) income........................................... (23,810) (1,184)
(Loss) income per share..................................... $ (0.43) $ (0.20)
Pending Acquisition
On February 3, 2000, the Company entered into a definitive agreement to
acquire Charon Systems Inc. for $6.9 million in cash and 1,072,940 shares of
common stock.
3. GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangible assets are comprised of the following at
March 31, 2000 and December 31, 1999 (in thousands):
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
Goodwill.................................................... $265,361 $189,699
Assembled workforce......................................... 15,114 3,200
-------- --------
Total....................................................... 280,475 192,899
Less accumulated amortization............................... (17,788) (6,033)
-------- --------
Goodwill and other intangibles.............................. $262,687 $186,866
======== ========
4. LONG-TERM DEBT
Long-term debt consists of the following at March 31, 2000 and December 31,
1999 (in thousands):
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
Capital lease obligations, net of original issue discount of
$672 and $727, respectively............................... $ 11,161 $ 5,985
Notes payable to former KNS stockholders.................... 6,685 6,685
Note payable to former MicroLAN stockholders................ 7,250 --
-------- -------
25,096 12,670
Less current portion of long-term debt...................... (17,865) (8,554)
-------- -------
Long-term debt.............................................. $ 7,231 $ 4,116
======== =======
Capital lease obligations are for the lease of up to $22.5 million of
computer hardware and related infrastructure costs. Aggregate monthly payments
are currently $425,000 and are based upon thirty-six to forty-one month
amortization periods, including interest implicit in the lease at rates ranging
from 9% to 14% per annum. As of March 31, 2000, the Company had available
borrowings of $15.2 million under the various lease lines. In addition to the
lease payments, the Company issued to the lessors warrants valued at $727,000
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FUTURELINK CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
to acquire 42,553 shares of common stock at $8.50 per share. The value of the
warrants has been reflected as a discount of the related debt, and is being
amortized to interest expense over the life of the debt.
Notes payable to former KNS stockholders consist of notes of $2.7 million
and $4.0 million and are due April 6, 2000 and June 20, 2000, respectively. The
notes are unsecured and bear interest at LIBOR plus 1% per annum which is
payable at maturity. Subsequent to March 31, 2000, the Company paid the $2.7
million obligation.
Note payable to former MicroLAN stockholders consists of a note payable in
the amount of $7.25 million due July 31, 2000. The note is secured by the shares
of the Company's subsidiary that was formed in the acquisition. Interest is
payable monthly at a beginning rate of 9% per annum for April 2000, increasing
1% per month to a maximum rate of 12% per annum. If the note is not paid by July
31, 2000, the Company may be obligated to pay an additional $500,000, to extend
the note, with a default interest rate of 15% per annum on the unpaid amount.
5. STOCKHOLDERS' EQUITY
On February 11 and February 29, 2000, warrant holders exercised their
rights to acquire 2,401,041 shares of common stock at an effective price of
$7.50 per share for aggregate net proceeds to the Company of $18.0 million. The
warrants had an adjusted (for anti-dilution) exercise price of $8.40 per share
and the holders of these warrants effectively paid $7.50 per share after
adjustment for a warrant exercise fee of $0.90 for each warrant exercised.
On March 30, 2000 certain note holders of convertible debt converted
$200,000 of debt into 189,160 shares of common stock.
The Company recorded approximately $1.1 million in deferred compensation
for the quarter, for the difference between the exercise price of certain of the
Company's stock options granted under the Plan and the fair market value of the
underlying common stock. Such amount has been presented as a reduction to
stockholders' equity and is being amortized ratably over the vesting period of
the applicable options. The Company amortized an aggregate of $300,000 of
deferred compensation during the first quarter of 2000.
During the three months ended March 31, 2000, 545,766 shares of common
stock were issued to employees who exercised their stock options, resulting in
$1.0 million in cash.
6. CONTINGENCIES
From time to time the Company is a defendant or plaintiff in litigation
arising in the ordinary course of business. To date, other than litigation
SmallCaps OnLine Group LLC brought and the subsequent settlement of that action,
no litigation has had a material effect on the Company and the Company is not a
party to any material litigation except as described below.
SmallCaps OnLine Group LLC, previously known as Bridge Technology Group
LLC, sued the Company on January 12, 2000 in the New York County Supreme Court
to recover fees the Company allegedly owed for advisory and investor relations
services. SmallCaps' complaint requested compensation for fees totaling $5.1
million, as well as warrants to purchase an aggregate of 3,289,689 shares of
common stock at exercise prices ranging from $1.00 to $8.50 per share. The total
value of the damages SmallCaps claimed was $110.0 million. On February 11, 2000,
the Company settled SmallCaps' complaint by agreeing to pay SmallCaps $5.0
million on or before March 14, 2000, and to issue to SmallCaps warrants to
purchase an aggregate of 3,000,000 shares of common stock at exercise prices
ranging from $8.50 to $22.50 per share, subject to anti-dilution protection.
Since the issuance of these warrants, their exercise prices have been adjusted
and now range from $8.33 to $22.05 per share. The Company issued the warrants to
SmallCaps on March 1, 2000 and paid SmallCaps the $5.0 million on March 14,
2000. The total value of the settlement on
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FUTURELINK CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 11, 2000 was $65.0 million which has been recorded in the accompanying
condensed consolidated balance sheets as a charge to paid-in capital.
On November 6, 1998, the Company's former Chief Executive Officer and a
director, Mr. Cameron Chell, entered into a Settlement Agreement with The
Alberta Stock Exchange to resolve a pending investigation into Mr. Chell's
alleged breaches of Alberta Stock Exchange rules and by-laws. As part of the
Settlement Agreement, Mr. Chell acknowledged that he had breached certain duties
of supervision, disclosure, or compliance relating to various offers and sales
of securities, and Mr. Chell was prohibited from receiving Alberta Stock
Exchange approval in any capacity for a five year period, subjected to a
CDN$25,000 fine and a three year period of enhanced supervision. The Company
cannot be certain that the Settlement Agreement with the Alberta Stock Exchange
ends all proceedings with regard to these matters.
On January 20, 2000, the Company commenced a proceeding in Canada against
Mr. Chell, various other former employees of and consultants to the Company and
various other defendants alleging that these defendants misappropriated a
corporate opportunity in breach of fiduciary and contractual obligations. Most
of these defendants made counterclaims seeking, among other things, damages for
interference with their economic interests and for severance compensation in the
form of cash and stock options. The Company entered into a settlement agreement
with the defendants effective April 26, 2000 that has the following key terms:
- Mr. Chell will be entitled to exercise options to acquire 175,000 shares
of common stock that were scheduled to vest June 1, 2000,
- Mr. Chell or his nominee shall pay the Company $400,000 in settlement of
a related party debt that involved Mr. Chell, and
- All other claims have been dropped by all parties, who have provided
mutual releases, with the claim and counterclaims to be discontinued.
On January 7, 2000, Tony Bryson, an individual who had previously been
employed by the Company, filed a lawsuit against the Company seeking $180,000
for the value of lost stock options, salary and benefits the Company allegedly
promised him, and other damages he allegedly sustained as a result of alleged
actions by the Company. This lawsuit has been filed under Canadian law. Canadian
law provides for severance pay to any employee of the Company's Canadian
operations in an amount that is appropriate based on, among other things, the
nature of the position held by the employee and the length of time the employee
worked for the company, unless the employer can establish that the termination
was for just cause. The exact amount of severance pay is often disputed between
employers and employees in Canada. Accordingly, there is a risk that in addition
to this lawsuit, one or more other former employees will make claims for cash
severance pay as well as options.
On January 26, 2000, Michael Chan filed a suit in the Court of Queen's
Bench of Alberta, Judicial District of Calgary, alleging that the Company's
subsidiary, FutureLink Alberta, breached its contract to deliver him options to
purchase 250,000 shares of FutureLink Alberta at $1.00 per share. Mr. Chan seeks
50,000 shares of common stock or, alternatively, damages of approximately $1.5
million in cash, general damages of approximately $200,000 and punitive damages
of approximately $200,000. On May 10, 2000, the Company filed a Statement of
Defense in response to this claim.
In the past, persons formerly associated with the Company may have engaged
in activities as part of an effort to profit from unlawful trading activity in
our stock. As a result, the Company may be subject to civil or criminal actions,
fines or penalties. If any proceedings are commenced against the Company, the
Company will need to spend significant money and management time in the
Company's defense. If a court determined that the Company participated in these
activities, the Company could be liable for damages or penalties that would have
a material adverse effect on the Company's financial condition and results of
operation.
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FUTURELINK CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Under certain California State regulatory requirements, the Company was to
offer a rescission of certain options granted to California employees. The
Company applied for and has received an order from the State of California
approving the proposed terms of the rescission offer. The rescission offer was
made with respect to 1,240,500 options at an exercise price of $8.50, and 40,000
shares issued in relation to other options exercised to date which offer will
remain open subsequent to December 31, 1999. In light of market prices for the
Company's common stock recently being significantly in excess of the exercise
price, the Company received rescission notices from only three option holders in
January 2000 for a total of 29,000 options. The Company paid $31,800 plus
interest to these option holders in exchange for cancellation of their options
under the rescission offer.
A claim has been filed against the Company in the amount of approximately
$340,000 plus costs for damages from alleged Company misrepresentations and
interference with contractual relations regarding a sale transaction between two
third parties involving shares of the Company's common stock. The Company has
entered into an indemnity agreement with a former principal of the Company
whereby the former principal defends this action on behalf of the Company, bears
the costs of legal counsel and agrees to indemnify the Company for any losses.
Management believes the claim is without merit.
A claim has been filed against FutureLink Alberta in the amount of $194,000
plus costs for damages and loss of rent related to a purported lease agreement
with respect to a building in Calgary, Alberta, Canada. The Company is counter
claiming an amount of approximately $266,000 against the claimant. The plaintiff
has now leased the premises in question to a third party, thereby mitigating its
alleged losses. However, it is impossible at this time for the Company to
predict with any certainty the outcome of such litigation. Management believes
the claim is without merit and will defend the Company's position vigorously.
A claim was filed against the Company's subsidiary, SysGold (now merged
into FutureLink Alberta) by TAP Consulting Ltd. in the amount of approximately
$102,000 for damages and loss of compensation relating to services provided to
the Company. Management believes the claim is without merit. An indemnity
agreement has been obtained from the previous stockholders of SysGold.
The Company is currently aware of other former employees and consultants
who may make claims against the Company that represent, in the aggregate, $1.5
million in damages which includes approximately 85,000 stock options and
monetary damages. At this time, management is unable to determine an amount, if
any, it may ultimately be required to pay to settle these issues.
The Company's pending lawsuits involve complex questions of fact and law
and could require the expenditure of significant costs and diversion of
resources to defend. Although management believes the outcome of the Company's
outstanding legal proceedings, claims and litigation will not have a material
adverse effect on the Company's business, results of operations or financial
position, the results of litigation are inherently uncertain. The Company is
unable to make an estimate of the range of possible loss from outstanding
litigation, except as noted, and no amounts have been provided for such matters
in the consolidated financial statements.
7. SUBSEQUENT EVENTS
On April 28, 2000, the Company completed a private placement of
approximately $15 million of common equity with institutional private equity
investors. A total of 1,764,704 restricted shares of common stock were issued,
in addition to warrants to purchase 441,176 shares of common stock at an
exercise price of $9.25 per share. The warrants expire at the end of April 2003.
On April 29, 2000, certain note holders of convertible debt converted
$620,000 of debt into 676,408 shares of common stock.
9
12
This Quarterly Report contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and other similar expressions or variations of
such words are intended to identify these forward-looking statements.
Additionally, statements concerning future matters such as the development of
new products, enhancements or technologies, possible changes in legislation and
other statements regarding matters that are not historical fact are
forward-looking statements. Forward-looking statements involve risks and
uncertainties. Actual results could differ materially from those projected in
the forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, availability of financial resources
adequate for short-, medium- and long-term needs, demand for our products and
services and market acceptance, as well as those factors discussed in this "Item
2. Management's Discussion and Analysis of Financial Condition and Operating
Results" and elsewhere in this Report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We provide server-based computing services and are an application service
provider, or ASP. Our services enable software applications to be deployed,
managed, supported and upgraded from centrally located servers, rather than on
individual desktop computers. For our server-based computing customers, we
install and integrate software applications on our customers' servers. For our
ASP customers, we host software applications on our servers at our data centers,
and rent computing services to our customers for a monthly fee. Our ASP
customers connect to our facilities over the Internet, through a dedicated
telecommunications line or by wireless connection. Our goal is to provide our
ASP services with the speed, simplicity and reliability of a utility service.
We introduced our ASP services in March 1999 and launched our sales program
for ASP services in July 1999. Since then, we have built our server-based
computing business through six acquisitions that we closed between October 15,
1999, and February 29, 2000 as follows:
- On October 15, 1999, we acquired Executive LAN Management, Inc. for total
consideration of $86.0 million.
- On November 5, 1999, we acquired CN Networks, Inc. for total
consideration of $19.9 million.
- On November 26, 1999, we acquired Async Technologies, Inc. for total
consideration of $35.0 million.
- On December 22, 1999, we acquired KNS Holdings Limited, for total
consideration of $44.0 million.
- On January 31, 2000, we acquired Vertical Software, Inc. for total
consideration of $27.6 million.
- On February 29, 2000, we acquired MicroLAN Systems, Inc., doing business
as Madison Technology Group, Madison Consulting Resources, Inc. and
Madison Consulting Resources N.J., Inc. for total consideration of $57.5.
In addition, we have a definitive agreement to acquire Charon Systems Inc.
for approximately $6.9 million in cash and 1,072,940 shares of our common stock.
Our acquisitions reflect our strategy to rapidly expand our market
penetration and our ability to deliver ASP services. All of the companies we
have acquired to date, and Charon Systems Inc., who we have agreed to acquire,
offer their customers information technology services, specializing in
server-based applications relying on software from Citrix Systems, Inc., which
interacts with Windows NT Terminal Server software from Microsoft, the same
software used by us to run our ASP servers. The acquisitions have allowed us to
enter other major markets through an established market participant, with local
sales and marketing teams now able to offer both server-based integration and
outsourcing services and ASP, while allowing us to leverage the talents of
additional technical staff to deliver ASP as well as the more traditional
server-based computing solutions to a wider range of clients.
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The completed acquisitions resulted in approximately $280.5 million of
purchase price in excess of net assets acquired that we have allocated to
goodwill. We believe that in respect of our acquisitions we will be able to
realize the value of the goodwill acquired through the overall expansion of our
ASP business based on our strategic business plan. We will periodically evaluate
the goodwill based upon the future undiscounted cash flows using the forecasts
in our strategic business plan. If our estimate of future undiscounted cash flow
should change or our strategic business plan is not achieved, future analyses
may indicate insufficient future undiscounted cash flows to recover the carrying
value the goodwill, in which case the goodwill would be written down to fair
value.
Our historical financial statements for the three months ended March 31,
1999 reflect FutureLink's historical Canadian business and Canadian ASP
operations and do not reflect any United States server-based computing, ASP
business or server-based computing distribution business until the effective
dates of the acquisitions listed above. These acquired businesses now represent
a significant portion of our revenue, operations and employees.
Our analysis of operations for the three months ended March 31, 2000 and
1999 follows. We have omitted a narrative comparison of operations for the three
months ended March 31, 2000 as compared to the three months ended March 31, 1999
as our significant acquisition activity during 1999 distorts the comparison.
RESULTS OF OPERATIONS
Revenue
The components of our revenue for the three months ending March 31, 2000
and 1999 were as follows (in millions):
MARCH 31, MARCH 31,
2000 1999
--------- ---------
Sale of hardware and software............................... $17.3 $ .4
Service delivery............................................ 5.3 1.3
----- ----
Total.................................................. $22.6 $1.7
===== ====
Revenue for the three months ended March 31, 2000 consisted of $5.3 million
of information technology, outsourcing revenue, of which $0.5 million related to
ASP service revenue. We also purchase and resell hardware and software to our
customers as part of our services, which accounted for $17.3 million of revenue
for the three months ended March 31, 2000.
Revenue for the three months ended March 31, 1999 consisted of $1.3 million
of information technology outsourcing revenue. The purchase and resale of
hardware and software to our customers accounted for $0.4 million of revenue for
the three months ended March 31, 1999.
Cost of Goods Sold
Cost of goods sold reflects costs of hardware and software purchased for
resale to customers. Our cost of goods sold for the three months ended March 31,
2000 was $14.1 million, or 81% of related hardware and software sales.
Cost of goods sold for the three months ended March 31, 1999 was $0.4
million, or 92% of hardware and software sales.
Cost of Service Delivery
Our cost of service delivery for the three months ended March 31, 2000 was
$3.7 million, or 69% of service delivery revenue. Our cost of service delivery
reflects payroll and benefit costs for our outsourcing consultants who support
the information technology activities of our clients and payroll, benefit, and
operational costs related to testing and operating our data center and
installing and supporting software applications related to our ASP and
information technology outsourcing businesses.
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Our cost of service delivery for the three months ended March 31, 1999 was
$1.1 million, or 81% of service delivery revenue. This includes amounts related
to the cost of service delivery of information technology outsourcing and the
direct cost related to the development of our ASP services, including operating
a "beta test" data center for early customers.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses include travel, payroll,
operations, advertising, and marketing expenses to secure customers and to
develop business partnerships, as well as for meeting and developing
relationships with industry analysts and financiers. Selling, general and
administrative expenses for the three months ended March 31, 2000 increased
$12.6 million to $14.4 million, from $1.8 million in the comparable period in
1999. The increase in such costs results from the expansion of our ASP business
which resulted in increased payroll and operating costs, additional costs for
our financing and marketing activities, and the additional selling, general and
administrative costs of the subsidiaries that we acquired during 1999 and the
first quarter of 2000. The 2000 amount also includes $1.3 million of non-cash
compensation charges relating to the issuance of our common stock, options and
warrants.
Our selling, general and administrative expenses for the three months ended
March 31, 1999 were $1.8 million. The 1999 amount also includes $0.1 million of
non-cash compensation charges relating to the issuance of our common stock,
options and warrants.
Depreciation and Amortization of Goodwill and Other Intangible Assets
Our depreciation and amortization costs for the three months ended March
31, 2000 and 1999 are comprised of the following (in thousands):
THREE MONTHS
ENDED
MARCH 31,
---------------
2000 1999
------- ----
Goodwill amortization....................................... $11,783 $500
Depreciation and other amortization......................... 1,494 161
------- ----
$13,277 $661
======= ====
Amortization of goodwill for the three months ended March 31, 2000 relates
to the acquisitions made during 1999 and the three months ended March 31, 2000.
Our depreciation and other amortization expense for the three months ended March
31, 2000 includes depreciation on the expansion of our Irvine and Canadian data
centers, software user licenses, and office and leasehold improvements, and
amortization of our assembled workforce.
Our amortization of intangible assets for the three months ending March 31,
1999 relates to the amortization of the assembled workforce that we acquired
during 1998.
Interest Expense
Our interest expense of $0.4 million for the three months ended March 31,
2000 reflects non-cash charges of $0.1 million related to, among other factors,
amortization of deferred financing fees and debt discount, and $0.3 million
relates to interest on bank indebtedness and lines of credit, capital lease
obligations and convertible debt outstanding during the three months.
Our first quarter 1999 interest expense of $1.0 million includes a non-cash
of $0.9 million charge related to amortization of intrinsic value of conversion
features related to convertible debenture financing and $0.1 million relates to
interest on bank indebtedness and lines of credit, capital lease obligations and
convertible debt outstanding during the three months.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended March 31, 2000, we had net cash outflows from
operating activities of $13.2 million and utilized another $16.4 million for
acquisitions. These outflows related mainly to the expansion of
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our ASP business, our significant acquisition activity and a payment of $5.0
million to Small Caps. In addition, during the three months ended March 31, 2000
we invested $0.5 million in property and equipment, mostly in expanding our
existing data centers, and for the acquisition of software, hardware and other
infrastructure costs necessary to host our ASP customers. These net cash
outflows are significantly greater than net cash outflows for the same period in
1999.
We acquired two companies during the three months ended March 31, 2000. The
total consideration for these acquisitions was $85.1 million consisting of $14.6
million cash; 3,001,486 shares of common stock valued at $63.2 million; and a
note payable of $7.3 million, which are all due in 2000.
We used the following sources of financing to fund operations, our
acquisitions, expansion of our ASP business, expansion into the United States,
investments in property and equipment, and for the acquisition of software,
hardware and other infrastructure costs necessary to host our ASP customers:
Issuance of common stock and warrants -- During 1999, we completed a
private placement of $50.0 million of common equity with institutional private
equity investors and received net proceeds of approximately $46.1 million after
deducting commissions and fees. As part of this placement, we issued warrants to
acquire 2,401,041 shares of common stock to the investors and the placement
agent. The holders exercised these warrants in February 2000, resulting in net
proceeds to the Company of $18.0 million. On April 28, 2000, the Company
completed a private placement of approximately $15 common equity with
institutional private equity investors. As part of this placement, the Company
issued to the investors 1,764,706 shares of common stock and warrants to
purchase 441,176 shares of common stock at an exercise price of $9.25 per share.
Lease Financing -- During the three months ended March 31, 2000, we
utilized several capital asset lease lines with financial lenders and computer
hardware vendors. These lines allow us to lease up to $22.5 million of computer
hardware and related infrastructure. As of March 31, 2000, we have used $7.3
million of these lines. Aggregate monthly payments under these lines are
currently $0.4 million, including interest implicit in the lease at rates
ranging from 9% to 14% per annum. We have available borrowings of $15.2 million
under the various lease lines as of March 31, 2000. These lines have been
partially used to build and expand our Irvine and Canadian data centers.
Bank Financing -- We have various lines of credit with banks and financial
institutions that allow us to borrow up to $1.8 million. As of March 31, 2000,
we had aggregate borrowing outstanding of $1.0 million under the various lines.
The lines bear interest at various rates ranging from prime plus 1% to prime
plus 3% per annum, and matures at various intervals ending November 30, 2000.
The prime rate was 9.0% at March 31, 2000. Certificate of deposit aggregating
$1.1 million, receivables and other assets of certain of our subsidiaries secure
these lines. We have available borrowings of $0.8 million under the various
lines of credit as of March 31, 2000.
We believe that our available cash will be sufficient to meet our
anticipated cash needs to fund our operating losses, working capital and capital
expenditures for at least the next twelve months. However, we may need
additional capital to fund our operations and our expansion. This financing may
involve incurring debt or selling equity securities. We cannot assure you that
additional financing will be available to us on commercially reasonable terms or
at all. If we incur debt, the risks associated with our business and with owning
our common stock should increase. If we raise capital through the sale of equity
securities, the percentage ownership of our shareholders would be diluted. In
addition, any new equity securities may have rights, preferences or privileges
senior to those of our common stock. If we are unable to obtain additional
financing, our ability to fund our operations and meet our current plans for
expansion could be materially adversely affected.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has debt subject to interest rate fluctuation during the period
covered by this Quarterly Report. The Company has not entered into any hedging
transactions or acquired any derivative instruments during the period covered by
this Quarterly Report.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we are a defendant or plaintiff in litigation arising in
the ordinary course of our business. To date, other than litigation SmallCaps
OnLine Group LLC brought and the subsequent settlement of that action, no
litigation has had a material effect on us and, as of the date of this Quarterly
Report, we are not a party to any material litigation except as previously
disclosed in our Annual Report on Form 10-K filed on March 29, 2000.
On April 26, 2000, we settled our previously disclosed litigation with our
former Chief Executive Officer and a director, Mr. Cameron Chell, various other
former employees of and consultants to our company and various other defendants,
pursuant to which Mr. Chell may exercise options to acquire 175,000 shares of
common stock that were scheduled to vest June 1, 2000, Mr. Chell or his nominee
shall pay to us $400,000 in settlement of a related party debt that involved Mr.
Chell, and all other claims have been dropped by all parties, who have provided
mutual releases, with the claim and counterclaims to be discontinued.
On May 10, 2000, we filed a Statement of Defense in connection with the
previously disclosed lawsuit filed against us by Michael Chan.
ITEM 2. CHANGES IN SECURITIES
1. On January 31, 2000, we issued 1,026,316 shares of common stock to the two
selling shareholders of Vertical Software, Inc. d.b.a VSI Technology
Solutions. In exchange for the issuances and certain other consideration, we
acquired all of the outstanding shares of VSI Technology Solutions. We issued
these securities under an exemption provided by Rule 506 of Regulation D
under the Securities Act Rules. Both selling shareholders were accredited
investors and certified to us that they complied with Rule 501 of Regulation
D. These former shareholders of Vertical Software, Inc. certified that they
were acquiring the securities as an investment and not with a view to
distribution and would not resell the securities unless they became
registered or another exemption from registration was available. The
securities issued by us were appropriately legended to reflect these
restrictions.
2. On February 3, 2000 we entered into a definitive agreement to acquire all of
the outstanding shares of Charon Systems Inc., a foreign entity, from its 14
current shareholders, all of whom are non-US residents or entities. At
closing, we intend to issue 1,072,940 shares of common stock as part of the
consideration payable to these non-U.S. selling shareholders pursuant to an
exemption provided by Rule 903 of Regulation S under the Securities Act
Rules. The selling shareholders will be required to certify that they are not
U.S. persons, that they are not acquiring the securities for the account or
benefit of any U.S. person and that they will not resell the securities in
the U.S. for at least one year. When we issue these securities, we intend to
appropriately legend the certificates representing these securities to
reflect these restrictions and we will retain the right to refuse to register
any transfer of these securities not made in accordance with Regulation S.
3. On February 11, 2000 we agreed to, and on March 1, 2000 did issue, warrants
to acquire, in the aggregate, up to 3,000,000 shares of common stock to a
U.S. entity to settle litigation commenced against us by such entity claiming
fees for financial advisory services earned between April 1999 and November
1999. We issued these securities under an exemption provided for Rule 506 of
Regulation D under the Securities Act Rules. The party to whom we issued
these securities is an "accredited investor" as defined in Rule 501 of
Regulation D, acquired the securities as an investment and not with a view to
distribution, and has agreed to not resell the securities unless they became
registered or another exemption from registration was available. The
securities issued by us were appropriately legended to reflect these
restrictions.
4. On February 29, 2000, we issued 1,975,170 shares of common stock to the four
selling shareholders of MicroLAN Systems, Inc., doing business as Madison
Technology Group, Madison Consulting Resources, Inc. and Madison Consulting
Resources NJ, Inc. to acquire all of the outstanding shares of such
14
17
companies. We issued these securities pursuant to an exemption provided by
Rule 506 of Regulation D under the Securities Act Rules. All four selling
shareholders certified to us that they are "accredited investors" as defined
in Rule 501 of Regulation D. All of the former shareholders of these
companies also certified that they were acquiring the securities as an
investment and not with a view to distribution and would not resell the
securities unless they became registered or another exemption from
registration was available. The securities issued by us were appropriately
legended to reflect these restrictions. The shares were issued under a stock
purchase agreement that was entered into prior to the filing of this
registration statement and had no conditions to closing for the selling
shareholders that were within their control.
5. On February 22, 1999, we granted to two non-U.S. residents, warrants to
purchase up to 75,310 shares of common stock. During February 2000, we issued
144,742 shares to these purchasers upon the exercise of their warrants. We
issued these securities under an exemption provided by Rule 903 of Regulation
S under the Securities Act Rules. We made no directed selling efforts of
these securities within the United States. The purchasers of the securities
certified that they are not U.S. persons, were not acquiring the securities
for the account or benefit of any U.S. person and would not resell the
securities in the U.S. for at least one year. The securities issued by us
were appropriately legended to reflect these restrictions and we have the
right to refuse to register any transfer of these securities not made in
accordance with Regulation S.
6. On May 7, 1999, we issued a 10% convertible debenture in the amount of
$278,160 and a warrant to purchase up to 44,505 shares of common stock to a
non-U.S. entity. We made these issuances in satisfaction of a debt in the
amount of $278,160 owed to that entity. On March 30, 2000, this entity
elected to convert $200,000 of the principal amount of its convertible
debenture plus accrued interest into 189,160 shares of common stock. We
issued these securities pursuant to an exemption provided by Rule 903 of
Regulation S under the Securities Act Rules. We made no directed selling
efforts of these securities within the United States. The purchaser of the
securities certified that it is not a U.S. person, was not acquiring the
securities for the account or benefit of any U.S. person and would not resell
the securities in the U.S. for at least one year. The securities issued by us
were appropriately legended to reflect these restrictions and we have the
right to refuse to register any transfer of these securities not made in
accordance with Regulation S.
7. On October 15, 1999, we issued 9,090,909 shares of common stock and warrants
to purchase up to 2,372,727 shares of common stock to various U.S.-based
investment funds. In exchange for the issuances, we received total
consideration of $50 million. During February 2000, we issued 2,401,041
shares of common stock to such investment funds upon the conversion of these
warrants, which gives effect to antidilution since their issuance. Gerard
Klauer Mattison & Co., Inc. acted as our placement agent in the offering and
received commissions and placement fees equal to $3 million (6% of the gross
proceeds of the offering) and agent's warrants which currently allow that
firm to acquire 928,551 shares of common stock. We issued these securities
under an exemption provided by Rule 506 of Regulation D under the Securities
Act Rules. Each purchaser of these securities certified that it was an
"accredited investor" as defined in Rule 501 of Regulation D, was acquiring
the securities as an investment and not with a view to distribution, and
would not resell the securities unless they became registered or another
exemption from registration was available. The securities issued by us were
appropriately legended to reflect these restrictions.
8. Between January 1, 2000 and March 31, 2000, we issued an aggregate of
1,768,300 stock options to directors, officers and employees at various
exercises prices. We issued these securities under Rule 701 of Regulation E
under the Securities Act Rules.
Except as otherwise set forth above, no underwriters were engaged in the sales
of securities described above.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Share Purchase Agreement dated August 4, 1998 between
FutureLink Distribution Corp., a Colorado corporation,
Donald A. Bialik, Olivia B. Bialik, Bialik Family Trust,
Riverview Management Corporation, SysGold Ltd., and
FutureLink Distribution Corp., an Alberta corporation(1)
2.2 Targetco Acquisition Agreement dated August 3, 1998 between
FutureLink Distribution Corp., a Colorado corporation, and
FutureLink Alberta(1)
2.3 Amending Agreement to Share Purchase Agreement dated August
21, 1998 between FutureLink Distribution Corp., a Colorado
corporation, Donald A. Bialik, Olivia B. Bialik, Bialik
Family Trust, Riverview Management Corporation, SysGold
Ltd., and FutureLink Alberta(3)
2.4 Agreement and Plan of Reorganization and Merger dated June
2, 1999 between FutureLink Distribution Corp., FutureLink
California Acquisition Corp., Executive LAN Management,
Inc., dba Micro Visions, and the selling shareholders of
Micro Visions(6)
2.5 Agreement and Plan of Merger dated August 1, 1999 between
FutureLink Distribution Corp. and FutureLink California
Acquisition Corporation, a Delaware corporation(8)
2.6 Agreement and Plan of Reorganization and Merger dated
September 7, 1999 between FutureLink Distribution Corp.,
FutureLink Pleasanton Acquisition Corp., CN Networks, Inc.,
and the selling shareholders of CN Networks, Inc.(9)
2.7 Agreement and Plan of Reorganization and Merger dated
September 7, 1999 between FutureLink Distribution Corp.,
FutureLink Michigan Acquisition Corp., Async Technologies,
Inc., and the selling shareholders of Async Technologies,
Inc.(10)
2.8 Certificate of Merger dated October 15, 1999 of FutureLink
Distribution Corp., a Colorado corporation, into FutureLink
California Acquisition Corp., a Delaware corporation(8)
2.9 Amending Agreement dated October 15, 1999 to Agreement and
Plan of Reorganization and Merger between FutureLink Corp.,
FutureLink California Acquisition Corp., and the selling
shareholders of Executive LAN Management, Inc.(8)
2.10 Amending Agreement dated October 29, 1999 to Agreement and
Plan of Reorganization and Merger, between FutureLink
Distribution Corp., FutureLink Michigan Acquisition Corp.,
Async Technologies, Inc., and the selling shareholders of
Async Technologies, Inc.(10)
2.11 Amending Agreement dated October 31, 1999 to Agreement and
Plan of Reorganization and Merger between FutureLink Corp.,
FutureLink Pleasanton Acquisition Corp., CN Networks, Inc.
and the selling shareholders of CN Networks, Inc.(9)
2.12 Amending Agreement dated November 14, 1999 to Agreement and
Plan of Reorganization and Merger between FutureLink Corp.,
FutureLink Michigan Acquisition Corp., Async Technologies,
Inc., and the selling shareholders of Async Technologies,
Inc.(10)
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19
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.13 Agreement for the Sale and Purchase of the Entire Issued
Share Capital of KNS Holdings Limited dated November 15,
1999 between FutureLink Corp. and the selling shareholders
of KNS Holdings Limited(11)
2.14 Amending Agreement dated November 26, 1999 to Agreement and
Plan of Reorganization and Merger between FutureLink Corp.,
FutureLink Michigan Acquisition Corp., Async Technologies,
Inc., and the selling shareholders of Async Technologies,
Inc.(10)
2.15 Supplemental Agreement dated December 20, 1999 to Agreement
for Sale and Purchase of the Entire Issued Share Capital of
KNS Holdings Limited, between FutureLink Corp. and the
selling shareholders of KNS Holdings Limited(11)
2.16 The Agreement and Plan of Reorganization and Merger dated
December 2, 1999 by and among FutureLink Corp., FutureLink
Maryland Acquisition Corp., Vertical Software, Inc., Curtis
Eshelman and James C. Harvey(13)
2.17 The Agreement and Plan of Reorganization and Merger dated
February 1, 2000 by and among FutureLink Corp., FutureLink
Delaware Acquisition Corp., MicroLAN Systems Inc., Madison
Consulting Resources Inc., Madison Consulting Resources (NJ)
Inc., Ira Silverman, Richard Silverman, Adam Silverman and
Adam Fox(14)
3.1 Certificate of Incorporation of FutureLink Corp.(8)
3.2 Bylaws of FutureLink Corp.(8)
10.1 Stock Option Plan dated June 29, 1998(1)
10.2 First Amendment to Second Amended and Restated Stock Option
Plan dated December 10, 1999, as amended(12)
10.3 Agency Agreement dated April 14, 1999 between FutureLink
Distribution Corp. and Commonwealth(5)
10.4 Letter Agreement dated December 6, 1999 between FutureLink
Distribution Corp. and Thomson Kernaghan & Co. Limited(12)
10.5 Advisory Agreement dated May 1, 1999 between FutureLink
Distribution Corp. and Commonwealth Associates, L.P.(5)
10.6 Agency Agreement dated July 1, 1999 between FutureLink
Distribution Corp. and Commonwealth Associates, L.P.(7)
10.7 Loan Agreement dated August 1, 1999 between FutureLink Corp.
and Vincent L. Romano(7)
10.8 Securities Purchase Agreement dated October 15, 1999 between
FutureLink Corp., Pequot Private Equity Investment Fund II,
L.P. and certain other investors(8)
10.9 Amended and Restated Registration Rights Agreement dated
April 28, 2000 between FutureLink Corp., Pequot Private
Investment Fund II, L.P., and certain other investors
(blacklined to the Registration Rights Agreement dated
October 15, 1999 between the parties which was filed as an
Exhibit to the Registration Statement on Form SB-2 filed on
February 11, 2000)(16)
10.10 Securities Purchase Agreement dated April 28, 2000 between
FutureLink Corp., Pequot Private Equity Investment Fund II,
L.P. and Pequot Endowment Fund, L.P.(16)
10.11 Form of Warrant to Purchase Shares of Common Stock(16)
10.12 Registration Rights Agreement dated December 6, 1999 between
FutureLink Corp. and CPQ Holdings, Inc.(12)
10.13 Securities Purchase Agreement dated December 6, 1999 between
FutureLink Corp. and CPQ Holdings, Inc.(12)
10.14 Employment Agreement dated June 1, 1999 between Philip R.
Ladouceur and FutureLink Distribution Corp.(12)(17)
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20
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.15 Employment Agreement dated September 30, 1999 between Glenn
C. Holmes and FutureLink Corp.(12)
10.16 Employment Agreement dated August 1, 1999 between Vincent L.
Romano and FutureLink Corp.(12)
10.17 Client/Agency Agreement dated August 7, 1999 between Sicola,
Martin, Koons & Frank, Inc. and FutureLink Distribution
Corp., as revised(12)
10.18 Master Loan and Security Agreement dated November 3, 1999
between Transamerica Business Credit Corporation, FutureLink
Corp. and FutureLink Micro Visions Corp.(12)
10.19 Security Agreement dated November 3, 1999 between
Transamerica Business Credit Corporation and FutureLink
Distribution Corp.(12)
10.20 Master Lease and Financing Agreement dated November 15, 1999
between Compaq Financial Services and FutureLink Corp.(12)
10.21 Master Lease Agreement dated December 16, 1999 between
EMC(2) and FutureLink Corp.(12)
10.22 Revised Offer to Lease dated March 24, 1998 between Bow
Valley Square Management Ltd. and SysGold, Ltd., as amended,
for 250 6th Avenue, Calgary(1)
10.23 Lease Agreement dated September 23, 1999 between Kilroy
Realty, L.P., Kilroy Realty Corporation, and FutureLink
Distribution Corporation for 220 Technology Drive, Irvine
and assignment of Lease Agreement dated October 15, 1999(12)
10.24 Microsoft Certified Solution Provider Agreement dated
January 28, 2000 between Microsoft Corporation and
FutureLink Corp.(15)(18)
10.25 Microsoft Application Services Agreement dated December 23,
1999 between Microsoft Corporation and FutureLink
Corp.(12)(18)
10.26 Final Invoice/Enrollment Contract (MSCP) dated April 28,
1998 between Microsoft Corporation and FutureLink Corp.(1)
10.27 Direct Commercial Service License Agreement dated May 21,
1999 between Microsoft Corporation and FutureLink
Distribution Corp.(12)(18)
10.28 Service Agreement dated June 1, 1998 between Willson
Stationers Ltd. and FutureLink Alberta(1)
10.29 Solution Provider Contract dated July 27, 1998 between IBM
Canada Ltd. and FutureLink/ SysGold Ltd.(1)
10.30 Hosting Services Distributor Agreement (version 4) dated
November 12, 1998 between Onyx Software Corp. and FutureLink
Distribution Corp.(12)
10.31 Onyx Software License Agreement dated August 5, 1998 between
Onyx Software Corp. and FutureLink Distribution Corp.(12)
10.32 Alliance Partner Agreement dated October 26, 1998 between
Great Plains Software and FutureLink Distribution Corp.(12)
10.33 Citrix Solutions Network Gold Renewal Membership Agreement
dated July 16, 1999 between Citrix Systems, Inc. and
FutureLink Distribution Corp.(12)(18)
10.34 Citrix Solutions Network Platinum Renewal Membership
Agreement dated April 20, 1999 between Citrix Systems, Inc.
and Async Technologies, Inc.(12)(18)
10.35 Information Systems Services Agreement dated January 19,
1999 between FutureLink Alberta and Numac Energy, Inc.(12)
10.36 Information Systems Services Agreement dated July 1, 1999
between Canadian Natural Resources, Ltd. and FutureLink
Alberta(12)
18
21
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.37 Alliance Partner Agreement dated February 12, 1999 between
FutureLink Alberta and JAWS Technologies, Inc.(1)
10.38 Master Consulting Agreement dated December 1, 1998 between
Ameriquest Mortgage Company and Micro Visions(12)
10.39 Internet Data Center Services Agreement dated May 7, 1999
between Exodus Communications, Inc. and Executive LAN
Management, Inc.(12)
10.40 Form of EMC(2) Corporation Software License Agreement(12)
21.0 List of Subsidiaries(16)
27.0* Financial Data Schedule
- -------------------------
* To be filed herewith.
(1) Included as an Exhibit to FutureLink's registration statement on Form SB-2
filed August 24, 1998.
(2) Included as an Exhibit to FutureLink's Amendment No. 1 to registration
statement on Form SB-2 filed October 23, 1998.
(3) Included as an Exhibit to FutureLink's Amendment No. 2 to registration
statement on Form SB-2 filed November 24, 1998.
(4) Included as an Exhibit to FutureLink's Amendment No. 3 to registration
statement on Form SB-2 filed December 14, 1998.
(5) Included as an Exhibit to FutureLink's Quarterly Report on Form 10-QSB for
period ended March 31, 1999, filed May 20, 1999.
(6) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
June 16, 1999.
(7) Included as an Exhibit to FutureLink's Quarterly Report on Form 10-QSB for
period ended June 30, 1999, filed August 18, 1999.
(8) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
October 27, 1999.
(9) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
November 23, 1999.
(10) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
December 8, 1999.
(11) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
January 6, 2000.
(12) Included as an Exhibit to FutureLink's registration statement on Form SB-2
filed February 11, 2000.
(13) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
February 14, 2000.
(14) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
March 15, 2000.
(15) Included as an Exhibit to FutureLink's First Amendment to Registration
Statement on Form SB-2 filed April 14, 2000.
(16) Included as an Exhibit to FutureLink's Second Amendment to Registration on
Form SB-2 filed May 3, 2000.
(17) We entered into an employment agreement with Raghu Kilambi on June 1, 1999,
which we amended on October 8, 1999 that is substantially identical in all
material respects to our employment agreement with Mr. Ladouceur, except as
to salary and bonus provisions. Mr. Kilambi's base salary is $180,000 per
year and he is entitled to receive a performance bonus of up to $180,000.
(18) Some of our subsidiaries are parties to agreements with the same party that
are substantially identical in all material respects.
19
22
(b) REPORTS ON FORM 8-K IN LAST FISCAL QUARTER.
(1) On January 6, 2000, we filed a Current Report on Form 8-K reporting our
completion of the previously announced acquisition of UK-based KNS
Holdings Limited (doing business as KNS Distribution). We filed as
Exhibits to the Current Report on Form 8-K, audited combined financial
statements for KNS Holdings Limited as at February 28, 1999 and for the
years ended February 28, 1998 and 1999, and unaudited financial
statements for KNS Holdings Limited as at September 30, 1999 and for
the seven months ended September 30, 1999.
(2) On February 9, 2000, we filed a Current Report on Form 8-K reporting
(i) our agreement to acquire MicroLAN Systems, Inc. (doing business as
Madison Technology Group of New York), Madison Consulting Resources,
Inc. and Madison Consulting Resources of New Jersey, and (ii) our
agreement to acquire all of the issued and outstanding shares of
Toronto, Ontario based Charon Systems Inc.
(3) On February 14, 2000, we filed a Current Report on Form 8-K reporting
(i) our completion of the previously announced acquisition of Maryland
based Vertical Software, Inc., and (ii) our completion of the
previously announced acquisition of KNS Holdings Limited (doing
business as KNS Distribution).
(4) On March 8, 2000, we filed a Current Report on Form 8-K reporting (i)
the exercise by funds managed by JDS Capital Management, Inc., of
warrants to purchase 722,902 shares of our common stock, and (ii) the
exercise by funds managed by Pequot Capital Management, Inc., of
warrants to purchase 1,678,139 shares of our common stock.
(5) On March 15, 2000, we filed a Current Report on Form 8-K reporting our
completion of the previously announced acquisition of privately-held
MicroLAN Systems, Inc. (doing business as Madison Technology Group of
New York), Madison Consulting Resources, Inc. and Madison Consulting
Resources NJ, Inc. We filed as Exhibits to the Current Report on Form
8-K, audited financial statements for each of the three companies for
the years ended December 31, 1999 and 1998.
20
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FUTURELINK CORP.
Date: May 15, 2000 By: /s/ R. KILAMBI
-------------------------------------------------
Raghu Kilambi,
Executive Vice-President &
Chief Financial Officer
Date: May 15, 2000 By: /s/ K.B. SCOTT
-------------------------------------------------
Kyle B.A. Scott,
Vice-President & Secretary
21
24
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Share Purchase Agreement dated August 4, 1998 between
FutureLink Distribution Corp., a Colorado corporation,
Donald A. Bialik, Olivia B. Bialik, Bialik Family Trust,
Riverview Management Corporation, SysGold Ltd., and
FutureLink Distribution Corp., an Alberta corporation(1)
2.2 Targetco Acquisition Agreement dated August 3, 1998 between
FutureLink Distribution Corp., a Colorado corporation, and
FutureLink Alberta(1)
2.3 Amending Agreement to Share Purchase Agreement dated August
21, 1998 between FutureLink Distribution Corp., a Colorado
corporation, Donald A. Bialik, Olivia B. Bialik, Bialik
Family Trust, Riverview Management Corporation, SysGold
Ltd., and FutureLink Alberta(3)
2.4 Agreement and Plan of Reorganization and Merger dated June
2, 1999 between FutureLink Distribution Corp., FutureLink
California Acquisition Corp., Executive LAN Management,
Inc., dba Micro Visions, and the selling shareholders of
Micro Visions(6)
2.5 Agreement and Plan of Merger dated August 1, 1999 between
FutureLink Distribution Corp. and FutureLink California
Acquisition Corporation, a Delaware corporation(8)
2.6 Agreement and Plan of Reorganization and Merger dated
September 7, 1999 between FutureLink Distribution Corp.,
FutureLink Pleasanton Acquisition Corp., CN Networks, Inc.,
and the selling shareholders of CN Networks, Inc.(9)
2.7 Agreement and Plan of Reorganization and Merger dated
September 7, 1999 between FutureLink Distribution Corp.,
FutureLink Michigan Acquisition Corp., Async Technologies,
Inc., and the selling shareholders of Async Technologies,
Inc.(10)
2.8 Certificate of Merger dated October 15, 1999 of FutureLink
Distribution Corp., a Colorado corporation, into FutureLink
California Acquisition Corp., a Delaware corporation(8)
2.9 Amending Agreement dated October 15, 1999 to Agreement and
Plan of Reorganization and Merger between FutureLink Corp.,
FutureLink California Acquisition Corp., and the selling
shareholders of Executive LAN Management, Inc.(8)
2.10 Amending Agreement dated October 29, 1999 to Agreement and
Plan of Reorganization and Merger, between FutureLink
Distribution Corp., FutureLink Michigan Acquisition Corp.,
Async Technologies, Inc., and the selling shareholders of
Async Technologies, Inc.(10)
2.11 Amending Agreement dated October 31, 1999 to Agreement and
Plan of Reorganization and Merger between FutureLink Corp.,
FutureLink Pleasanton Acquisition Corp., CN Networks, Inc.
and the selling shareholders of CN Networks, Inc.(9)
2.12 Amending Agreement dated November 14, 1999 to Agreement and
Plan of Reorganization and Merger between FutureLink Corp.,
FutureLink Michigan Acquisition Corp., Async Technologies,
Inc., and the selling shareholders of Async Technologies,
Inc.(10)
2.13 Agreement for the Sale and Purchase of the Entire Issued
Share Capital of KNS Holdings Limited dated November 15,
1999 between FutureLink Corp. and the selling shareholders
of KNS Holdings Limited(11)
2.14 Amending Agreement dated November 26, 1999 to Agreement and
Plan of Reorganization and Merger between FutureLink Corp.,
FutureLink Michigan Acquisition Corp., Async Technologies,
Inc., and the selling shareholders of Async Technologies,
Inc.(10)
2.15 Supplemental Agreement dated December 20, 1999 to Agreement
for Sale and Purchase of the Entire Issued Share Capital of
KNS Holdings Limited, between FutureLink Corp. and the
selling shareholders of KNS Holdings Limited(11)
25
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.16 The Agreement and Plan of Reorganization and Merger dated
December 2, 1999 by and among FutureLink Corp., FutureLink
Maryland Acquisition Corp., Vertical Software, Inc., Curtis
Eshelman and James C. Harvey(13)
2.17 The Agreement and Plan of Reorganization and Merger dated
February 1, 2000 by and among FutureLink Corp., FutureLink
Delaware Acquisition Corp., MicroLAN Systems Inc., Madison
Consulting Resources Inc., Madison Consulting Resources (NJ)
Inc., Ira Silverman, Richard Silverman, Adam Silverman and
Adam Fox(14)
3.1 Certificate of Incorporation of FutureLink Corp.(8)
3.2 Bylaws of FutureLink Corp.(8)
10.1 Stock Option Plan dated June 29, 1998(1)
10.2 First Amendment to Second Amended and Restated Stock Option
Plan dated December 10, 1999, as amended(12)
10.3 Agency Agreement dated April 14, 1999 between FutureLink
Distribution Corp. and Commonwealth(5)
10.4 Letter Agreement dated December 6, 1999 between FutureLink
Distribution Corp. and Thomson Kernaghan & Co. Limited(12)
10.5 Advisory Agreement dated May 1, 1999 between FutureLink
Distribution Corp. and Commonwealth Associates, L.P.(5)
10.6 Agency Agreement dated July 1, 1999 between FutureLink
Distribution Corp. and Commonwealth Associates, L.P.(7)
10.7 Loan Agreement dated August 1, 1999 between FutureLink Corp.
and Vincent L. Romano(7)
10.8 Securities Purchase Agreement dated October 15, 1999 between
FutureLink Corp., Pequot Private Equity Investment Fund II,
L.P. and certain other investors(8)
10.9 Amended and Restated Registration Rights Agreement dated
April 28, 2000 between FutureLink Corp., Pequot Private
Investment Fund II, L.P., and certain other investors
(blacklined to the Registration Rights Agreement dated
October 15, 1999 between the parties which was filed as an
Exhibit to the Registration Statement on Form SB-2 filed on
February 11, 2000)(16)
10.10 Securities Purchase Agreement dated April 28, 2000 between
FutureLink Corp., Pequot Private Equity Investment Fund II,
L.P. and Pequot Endowment Fund, L.P.(16)
10.11 Form of Warrant to Purchase Shares of Common Stock(16)
10.12 Registration Rights Agreement dated December 6, 1999 between
FutureLink Corp. and CPQ Holdings, Inc.(12)
10.13 Securities Purchase Agreement dated December 6, 1999 between
FutureLink Corp. and CPQ Holdings, Inc.(12)
10.14 Employment Agreement dated June 1, 1999 between Philip R.
Ladouceur and FutureLink Distribution Corp.(12)(17)
10.15 Employment Agreement dated September 30, 1999 between Glenn
C. Holmes and FutureLink Corp.(12)
10.16 Employment Agreement dated August 1, 1999 between Vincent L.
Romano and FutureLink Corp.(12)
10.17 Client/Agency Agreement dated August 7, 1999 between Sicola,
Martin, Koons & Frank, Inc. and FutureLink Distribution
Corp., as revised(12)
26
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.18 Master Loan and Security Agreement dated November 3, 1999
between Transamerica Business Credit Corporation, FutureLink
Corp. and FutureLink Micro Visions Corp.(12)
10.19 Security Agreement dated November 3, 1999 between
Transamerica Business Credit Corporation and FutureLink
Distribution Corp.(12)
10.20 Master Lease and Financing Agreement dated November 15, 1999
between Compaq Financial Services and FutureLink Corp.(12)
10.21 Master Lease Agreement dated December 16, 1999 between
EMC(2) and FutureLink Corp.(12)
10.22 Revised Offer to Lease dated March 24, 1998 between Bow
Valley Square Management Ltd. and SysGold, Ltd., as amended,
for 250 6th Avenue, Calgary(1)
10.23 Lease Agreement dated September 23, 1999 between Kilroy
Realty, L.P., Kilroy Realty Corporation, and FutureLink
Distribution Corporation for 220 Technology Drive, Irvine
and assignment of Lease Agreement dated October 15, 1999(12)
10.24 Microsoft Certified Solution Provider Agreement dated
January 28, 2000 between Microsoft Corporation and
FutureLink Corp.(15)(18)
10.25 Microsoft Application Services Agreement dated December 23,
1999 between Microsoft Corporation and FutureLink
Corp.(12)(18)
10.26 Final Invoice/Enrollment Contract (MSCP) dated April 28,
1998 between Microsoft Corporation and FutureLink Corp.(1)
10.27 Direct Commercial Service License Agreement dated May 21,
1999 between Microsoft Corporation and FutureLink
Distribution Corp.(12)(18)
10.28 Service Agreement dated June 1, 1998 between Willson
Stationers Ltd. and FutureLink Alberta(1)
10.29 Solution Provider Contract dated July 27, 1998 between IBM
Canada Ltd. and FutureLink/ SysGold Ltd.(1)
10.30 Hosting Services Distributor Agreement (version 4) dated
November 12, 1998 between Onyx Software Corp. and FutureLink
Distribution Corp.(12)
10.31 Onyx Software License Agreement dated August 5, 1998 between
Onyx Software Corp. and FutureLink Distribution Corp.(12)
10.32 Alliance Partner Agreement dated October 26, 1998 between
Great Plains Software and FutureLink Distribution Corp.(12)
10.33 Citrix Solutions Network Gold Renewal Membership Agreement
dated July 16, 1999 between Citrix Systems, Inc. and
FutureLink Distribution Corp.(12)(18)
10.34 Citrix Solutions Network Platinum Renewal Membership
Agreement dated April 20, 1999 between Citrix Systems, Inc.
and Async Technologies, Inc.(12)(18)
10.35 Information Systems Services Agreement dated January 19,
1999 between FutureLink Alberta and Numac Energy, Inc.(12)
10.36 Information Systems Services Agreement dated July 1, 1999
between Canadian Natural Resources, Ltd. and FutureLink
Alberta(12)
10.37 Alliance Partner Agreement dated February 12, 1999 between
FutureLink Alberta and JAWS Technologies, Inc.(1)
10.38 Master Consulting Agreement dated December 1, 1998 between
Ameriquest Mortgage Company and Micro Visions(12)
27
INDEX TO EXHIBITS (CONTINUED)
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.39 Internet Data Center Services Agreement dated May 7, 1999
between Exodus Communications, Inc. and Executive LAN
Management, Inc.(12)
10.40 Form of EMC(2) Corporation Software License Agreement(12)
21.0 List of Subsidiaries(16)
27.0* Financial Data Schedule
- -------------------------
* To be filed herewith.
(1) Included as an Exhibit to FutureLink's registration statement on Form SB-2
filed August 24, 1998.
(2) Included as an Exhibit to FutureLink's Amendment No. 1 to registration
statement on Form SB-2 filed October 23, 1998.
(3) Included as an Exhibit to FutureLink's Amendment No. 2 to registration
statement on Form SB-2 filed November 24, 1998.
(4) Included as an Exhibit to FutureLink's Amendment No. 3 to registration
statement on Form SB-2 filed December 14, 1998.
(5) Included as an Exhibit to FutureLink's Quarterly Report on Form 10-QSB for
period ended March 31, 1999, filed May 20, 1999.
(6) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
June 16, 1999.
(7) Included as an Exhibit to FutureLink's Quarterly Report on Form 10-QSB for
period ended June 30, 1999, filed August 18, 1999.
(8) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
October 27, 1999.
(9) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
November 23, 1999.
(10) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
December 8, 1999.
(11) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
January 6, 2000.
(12) Included as an Exhibit to FutureLink's registration statement on Form SB-2
filed February 11, 2000.
(13) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
February 14, 2000.
(14) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
March 15, 2000.
(15) Included as an Exhibit to FutureLink's First Amendment to Registration
Statement on Form SB-2 filed April 14, 2000.
(16) Included as an Exhibit to FutureLink's Second Amendment to Registration on
Form SB-2 filed May 3, 2000.
(17) We entered into an employment agreement with Raghu Kilambi on June 1, 1999,
which we amended on October 8, 1999 that is substantially identical in all
material respects to our employment agreement with Mr. Ladouceur, except as
to salary and bonus provisions. Mr. Kilambi's base salary is $180,000 per
year and he is entitled to receive a performance bonus of up to $180,000.
(18) Some of our subsidiaries are parties to agreements with the same party that
are substantially identical in all material respects.