UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

  X    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
-----  ACT OF 1934. For the fiscal year ended December 31, 1999

       TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
-----  EXCHANGE  ACT OF 1934.  For the  transition  period  from  __________  to
       __________.

Commission File Number     000-27449

                               ReSourcePhoenix.com
             (exact name of Registrant as specified in its charter)


           Delaware                                52-2190830
   (State of incorporation)           (I.R.S. Employer Identification No.)

                              2401 Kerner Boulevard
                              San Rafael, CA 94901
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (415) 485-4600
        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                      Class A common stock, $.001 Par Value
                                (Title of Class)

    Indicate  by check mark  whether  the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  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. Yes   X     No
                                              -----      -----

    Indicate by check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. Yes   X     No
                                 -----      -----

    Based on the closing sale price of the Registrant's  Class A common stock on
the Nasdaq National  Market System on March 3, 2000, the aggregate  market value
of the  voting  and  non-voting  common  stock  held  by  non-affiliates  of the
Registrant was $76,769,358.

    At March 3, 2000, the number of shares outstanding of the Registrant's Class
A common  stock  was  4,028,000  and the  number of  shares  outstanding  of the
Registrant's Class B common stock was 7,172,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

    Part III  incorporates  information by reference  from the definitive  proxy
statement for the Registrant's  Annual Meeting of Stockholders to be held on May
18, 2000.

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                                     PART I
Item 1.         Business

Overview

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

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

Industry Background

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

     Shortfalls of traditional business information systems

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

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

     The  emergence  of ASPs and  their  limitations.  Traditionally,  companies
wanting to  implement  Internet-enabled  applications  had to develop  their own
software  applications or customize  existing  software  packages.  Recently,  a
number of companies  known as  application  service  providers,  or ASPs,  began
providing integrated software applications for business enterprises. ASPs manage
the hardware  and  software at their data centers and provide  access to clients
over the  Internet.  ASPs do not,  however,  provide the  accounting,  financial
analysis,   data  compilation  or  transaction   processing   professionals  and
infrastructure   that  is  required  to   effectively   operate  these  software
applications.  Moreover, ASPs can exacerbate an existing problem by putting more

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complicated  technology in the hands of users without  providing the  additional
training or support that is required to operate this technology effectively.

     Need for an outsourced solution

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

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

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

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

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

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

     o   the ongoing cost to keep up with leading technologies.

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

Our Solution

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

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

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

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

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

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

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

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

         --   expanding overhead to support the growing organization; and

         --   ongoing technology and process upgrades.

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

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

Our Strategy

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

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

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

     o   Extend technology leadership.  We believe that our ability to offer the
         latest, most technologically  advanced services possible is critical to
         expanding  our current  client  relationships  and client base. To this
         end, we employ a sizable staff of business and  information  technology

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<PAGE>

         professionals  whose  function  is to expand  and  update  our  service
         offerings  so that our clients can benefit  from the latest  technology
         available.   We  also   aggressively   recruit  key   professionals  in
         implementation and information technology management including Research
         and Development, Development and Quality Assurance.

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

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

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

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

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<PAGE>


Our Offerings

     Each of our service offerings is summarized below:
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------
      Product             Target Market                                    Services Offered
--------------------------------------------------------------------------------------------------------------------------
<S>                   <C>                         <C>

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

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

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

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

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to offer M.A.R.S.  as a licensed  software  product to our clients that prefer a
software-only solution.

Client Service

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

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

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

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

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

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

Our People

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

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

     o   Our  integration  and  implementation  specialists  are not required to
         spend extended periods on out-of-town client  assignments,  which would
         typically  be  required  of these  professionals  if they  worked for a

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         consulting   firm.   As  a  result,   we  can  offer  more   attractive
         opportunities than many other competing employers.

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

Our Network

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

     o   scalability;

     o   customizable and reliable security;

     o   flexible communication and networking worldwide;

     o   high availability (uptime); and

     o   flexible application hosting and integration capability.

     Scalability

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

     Customizable and reliable security

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

     Flexible communication and networking worldwide

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

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     High availability (uptime)

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

     Flexible application hosting and integration capability

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

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

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

Sales and Marketing

     We market our  services  through a direct sales  organization  based in the
United  States.  Our sales  force is  organized  by  industry,  with each  sales
professional having responsibility for one or more target industries. We believe
that having an industry focus allows our sales  professionals  to leverage their
experience to deliver a better solution to existing and prospective clients.

     Our sales force has, on average, 15 years of business  experience.  Because
the sale of our services requires a strong  understanding of business  functions
as well as the use of  technology to  facilitate  business  process and decision
support,  we recruit our sales force from sources of those skills.  For example,
two of our sales personnel each had over ten years experience at Arthur Andersen
LLP, including our Senior Vice President, Sales and Marketing who was previously
a partner at Arthur Andersen.

     Our  marketing  strategy  includes  building  awareness  of our  brand  and
developing  strategic  partner  relationships.   To  this  end,  we  launched  a
comprehensive advertising campaign, which began in September 1999. This campaign
began with print advertisements and radio commercials in Northern California. We
recently expanded this campaign nationally.  We will continue to target emerging
growth and middle-market companies. In addition, we plan to continue to direct a
large part of our  marketing  dollars  towards  the venture  capital  community,
attorneys, CPAs and financial institutions that work with our target companies.

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     Financial Outsourcing

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

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

     We currently  market our M.A.R.S.  software and services to the mutual fund
and variable annuity  industries,  money management firms and banks that sponsor
mutual funds.  We plan to expand the  industries to which we market our M.A.R.S.
software and service to include insurance and no-load mutual fund companies. Our
strategy is to emphasize  hosting M.A.R.S.  in our data centers while continuing
to offer M.A.R.S.  as a licensed  software  product to our clients that prefer a
software-only  solution.  We market our S.T.A.R.  service to sponsors of limited
partnerships  and real  estate  investment  trusts.  We will  continue to devote
resources  to the  marketing  of our  S.T.A.R.  services  and  intend  to pursue
additional sales opportunities as they arise.

Clients

     As of December 31, 1999, we had 50 clients with signed service contracts or
letters of intent,  including 47 unaffiliated clients and three clients that are
affiliated with Phoenix Leasing. Of the unaffiliated  clients, 23 were Financial
Outsourcing clients, 10 were M.A.R.S. clients and 14 were S.T.A.R.  clients. Set
forth below is a representative list of our unaffiliated clients.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
     Financial Outsourcing Clients                S.T.A.R. Clients                       M.A.R.S. Clients
--------------------------------------------------------------------------------------------------------------

<S>                                         <C>                                      <C>
        Air Transport Leasing                   Coordinated Services                    Aeltus Investments

             Blackstone                            First Winthrop                    Heritage Asset Management

    GE Capital Aviation Services/           GE Capital Aviation Services/              John Hancock Advisors
       Aircraft Finance Trust                           PIMC

         GE Capital Aviation                 Starwood Hotels and Resorts                  The Alger Fund
            Services/PIMC

       Thomas Weisel Partners                        W.P. Carey                          Wells Fargo Bank
--------------------------------------------------------------------------------------------------------------
</TABLE>



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

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

                                 Page 10 of 57
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<PAGE>

Business Partners

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

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

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

     Each of our key business relationships is described below:

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

     Necho  Systems  Corp.  We have an  agreement  with Necho that permits us to
license its Web-based travel and expense reporting application,  NavigatER,  and
use the software for the benefit of our customers.  This agreement requires that
we pay an initial software license fee, and pay additional amounts incrementally
as we add users.  This  agreement  is for a perpetual  term.  In  addition,  the
agreement  permits us to privately label the application.  Necho has also agreed
to provide us with product  demonstrations,  collateral  materials,  sales force
training and sales and technical support.  Finally,  we have agreed to co-market
our products and services  and Necho has  established  a referral  link on their
Web site to ours for prospective clients with fewer than 200 users.

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

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

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

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

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<PAGE>


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

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

     Vitria  Technology,  Inc. We have a relationship with Vitria, an e-business
platform provider,  pursuant to which we license Vitria's BusinessWare software.
We are  currently  integrating  this  software  into our  financial  outsourcing
service.  When this  integration is complete,  this integrated  service offering
will  allow  our  clients  to  exchange  information  over  the  Internet  among
applications,  customers,  third-party  vendors  and  accounting  functions.  We
believe that this relationship will provide greater flexibility in the expansion
of products and services we provide now and in the future.

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

     Imperial Bank. We have a relationship  with Imperial Bank's Emerging Growth
Division  which  gives us  periodic  opportunities  to meet with its lenders and
business developers to educate them about our service offerings.  We have agreed
to pay Imperial  fees for clients it refers to us with whom we  ultimately  sign
contracts.

Competition

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

     Prospective competitors include the following:

     Application   service   providers.   Our  potential   competitors   include
application service providers such as  USInternetworking,  NaviSite,  Oracle and
Corio.  Oracle, a business partner of ours, recently introduced a hosted service

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<PAGE>

offering based on its Web-enabled  enterprise resource planning software that it
markets  directly  to middle  market  companies.  Some of these  companies  have
significantly  greater  market  presence,  brand  recognition,   and  financial,
technical and personnel resources than we do.

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

     Software and systems integrators.  Our potential  competitors,  who include
national,  regional,  and local commercial systems  integrators who bundle their
services  with  software  and  hardware   providers  and  perform  a  facilities
management  outsourcing  role for the  customer,  generally  have  greater  name
recognition  or more  extensive  experience  than  we do.  EDS,  Perot  Systems,
Andersen  Consulting  and  PricewaterhouseCoopers  LLP,  among  others,  provide
professional  consulting  services  in  the  use  and  integration  of  software
applications in single-project client engagements. Large systems integrators may
establish  strategic  relationships  with  software  vendors  to offer  services
similar to our Financial Outsourcing offerings.  We expect that regional systems
integrators  are  likely to  compete  with us.  Additionally,  regional  systems
integrators may align  themselves with ISPs to offer complex Web site management
combined with professional implementation services.

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

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

Employees

     As of December 31, 1999,  we had 221 full-time  employees,  including 26 in
sales and marketing,  seven in management,  165 in operations and 23 in research
and  development.  None of our employees  are covered by  collective  bargaining
agreements. We believe that our relations with our employees are good.

                                 Page 13 of 57
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<PAGE>

                                  RISK FACTORS

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

                      Risks Associated With Our Operations

Our  success  depends on the  acceptance  and  increased  use of  Internet-based
software applications and business process outsourcing  solutions.  We cannot be
sure that these solutions will gain market acceptance.

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

     o   concerns over transaction security and user privacy;

     o   inadequate network infrastructure for the entire Internet; and

     o   inconsistent performance of the Internet.

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

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

     Our  Financial  Outsourcing  service is  targeted at early stage and middle
market companies, which may be more likely to be acquired or to cease operations
than other companies. As a result, our client base may be more volatile than the
client  bases of  companies  whose  client  bases  consist  of more  established
companies.  We have lost six unaffiliated clients to date, including two because
the clients were acquired and three because the clients ceased operations. If we
experience greater than expected client turnover, either because our clients are
acquired,  cease  operations  or for any other reason,  our business,  financial
condition and operating results could be seriously harmed.

Our growth  will be limited  if we are  unable to attract  and retain  qualified
personnel.

     We must continue to attract and retain  qualified  information  technology,
accounting, finance and transaction processing professionals in order to perform
services for our existing and future clients.  The personnel  capable of filling

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<PAGE>

these  positions are in great demand and  recruiting  and training them requires
substantial  resources.  We may not be able to hire the  necessary  personnel to
implement our business strategy,  or we may need to pay higher  compensation for
employees than we currently expect. We cannot assure you that we will succeed in
attracting and retaining the personnel we need to grow.

Our current and historical  financial  information  may not be comparable to our
future financial results.

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

     In August 1999 we began to market M.A.R.S. as a hosted application in which
our  clients  can  outsource  to  us  several   functions,   including  database
management,  call center services,  telemarketing services and sales transaction
processing.  Our strategy is to emphasize  hosting M.A.R.S.  in our data centers
while continuing to offer M.A.R.S. as a licensed software product to our clients
that prefer a  software-only  solution.  As a result,  we expect  that  software
license fees will  decline as a percentage  of revenues as we add clients to our
outsourced  M.A.R.S.   services  and  devote  greater  resources  to  our  other
outsourced financial and management reporting services.

We expect to continue to incur losses and experience negative cash flow.

     We expect to have significant  operating  losses and to record  significant
net cash outflow on a quarterly and annual basis. Our business has not generated
sufficient cash flow to fund our operations  without requiring  external sources
of capital.  Starting our company and building our network required  substantial
capital  and  other  expenditures.  As a  result,  we  reported  net  loss  from
operations  of $23.1  million for the period from  January 1, 1997,  the date on
which we began operations as a separate company,  through December 31, 1999, and
reported net cash used in operating  and  investing  activities of $20.2 million
for the same period.  Further  developing our business and expanding our network
will require significant  additional capital and other expenditures.  We may not
be able to obtain additional capital on terms favorable to us or at all.

Our stock price could  fluctuate  dramatically  because of  fluctuations  in our
quarterly  operating  results.  This  could  result  in  substantial  losses  to
investors.

     Period-to-period  comparisons  of our  operating  results may not be a good
indication of our future  performance.  Moreover,  our operating results in some
quarters may not meet the expectations of stock market analysts or investors. In
that event, our stock price would likely fall significantly.  As a result of the
evolving  nature of the  markets  in which we  compete,  we may have  difficulty
accurately  forecasting  our  revenue in any given  period.  In  addition to the
factors discussed  elsewhere in this section,  a number of factors may cause our
revenue  to fall short of our  expectations  or cause our  operating  results to
fluctuate, including:

                                 Page 15 of 57
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<PAGE>


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

     o   pricing changes by us or our competitors;

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

     o   sales cycle fluctuations.

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

     Stock markets often experience  significant price and volume  fluctuations.
These  fluctuations,  as well  as  general  economic  and  political  conditions
unrelated  to our  performance,  may  adversely  affect the price of our Class A
common  stock.  The market  prices of the  securities  of  Internet-related  and
technology-related companies have been especially volatile. The closing price of
our Class A common stock, for example,  has fluctuated  between $5.62 and $25.37
since  our  initial  public  offering  in  October  1999.  In  addition,  if our
performance  falls below the  expectations of securities  analysts or investors,
the price of our Class A common stock will likely fall significantly.

Our  operating  results  depend on our  relationships  with a limited  number of
clients.  As a  result,  the  loss of a single  client  may  seriously  harm our
operating results.

     Our results of operations and our business depend on our relationships with
a limited number of large clients.  As a result, the loss of a single client may
seriously  harm our  operating  results.  Set forth below is the  percentage  of
revenues  during 1999,  1998 and 1997 for each of our clients that accounted for
more than 10% of our revenues and for our ten largest clients combined:

                                            Year Ended December 31,
                                            -----------------------
                                          1999        1998        1997
                                          ----        ----        ----
Phoenix Leasing (an affiliate)             24%         41%         48%
GE Capital Aviation Services/PIMC           9%         20%         23%
John Hancock Advisors                      16%         --          --
Total of ten largest clients combined:     77%         86%         97%

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

We rely on third parties to supply us with the  software,  hardware and services
necessary to provide our services. The loss of any of this third party software,
hardware  or services  may be  difficult  to replace and may harm our  operating
results.

     A substantial  portion of the software that is integrated into our services
is licensed from third  parties,  including  Oracle  Corporation,  Necho Systems
Corp.,  BroadVision,  Inc.  and Vitria  Technology,  Inc. If we were to lose the
right to use the software that we have licensed from Oracle, Necho, BroadVision,

                                 Page 16 of 57
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<PAGE>

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

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

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

Our business and  reputation may be harmed if we make mistakes in performing our
services.

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

Our software products and the software that we have integrated into our services
may have  unknown  defects  that could harm our  reputation  or decrease  market
acceptance of our services.

     We derived  approximately  25% of our revenues from  licensing our M.A.R.S.
software  product  during the year ended  December 31, 1999. Our clients rely on
this software to perform critical  business  functions such as sales and expense
tracking and fulfillment/inventory  tracking.  Because our clients depend on our
M.A.R.S.  software  for their  critical  systems  and  business  functions,  any
interruptions  caused by  unknown  defects  in our  software  could  damage  our
reputation,  cause our clients to initiate  product  liability suits against us,
divert our research and development resources, cause us to lose revenue or delay
market  acceptance  of any  outsourced  business  service  that is based on this
software.  Any of these things could harm our business. Our software may contain
errors or defects,  particularly when new versions or enhancements are released.
We may not  discover  software  defects  that  affect our  current  software  or
enhancements  until after they are sold.  Although we have not  experienced  any
material  software  defects to date,  any  defects  could  cause our  clients to
experience severe system failures.

                                 Page 17 of 57
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<PAGE>


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

The markets we serve are highly  competitive  and many of our  competitors  have
much greater resources.

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

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

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

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

     o   negotiate more favorable licensing agreements with software application
         vendors;

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

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

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

     o   adopt more aggressive pricing policies.

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

We rely on rapidly changing technology and must anticipate new technologies.

     The  technologies  in which we have  invested  are rapidly  evolving.  As a
result,  we must  anticipate  and rapidly adapt to changes in technology to keep
pace with the  latest  technological  advances  that are  likely  to affect  our
business  and  competitive  position.  For  example,  we  recently  adapted  our
Financial   Outsourcing   service,   which   formerly   used   a   client-server
communications architecture, to use an Internet communications architecture. Our
future success will depend on our ability to deploy  advanced  technologies  and

                                 Page 18 of 57
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<PAGE>

respond to technological advances in a timely and cost effective manner. Even if
we are able to deploy  new  technologies  in a timely  manner,  we are likely to
incur  substantial cost in doing so. If we are unable to develop or successfully
introduce new technology on an as needed basis or if we are unable to do so in a
cost effective manner, our business,  financial  condition and operating results
would be seriously harmed.

We  recently  began to expand  very  rapidly  and  managing  our  growth  may be
difficult.

     In mid-1999, we began to aggressively expand our operations.  To the extent
that our  business  continues  to grow both  geographically  and in terms of the
number of products and services we offer, we must:

     o   expand, train and manage our employee base effectively;

     o   enlarge our network and infrastructure to accommodate new clients;

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

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

     We must recruit qualified information technology personnel, for which there
is high  demand  and  short  supply.  In  addition,  we must  recruit  qualified
accounting, finance and transaction processing personnel, which are also in high
demand.  During the second half of 1999,  we opened  eight new  offices  outside
northern California. In addition, we plan to open additional sales offices and a
data  center  outside of  California.  We have  little  experience  operating  a
multi-office business.

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

We depend  on a  limited  number of key  executives  who would be  difficult  to
replace.

     Our success  depends in significant  part on the continued  services of our
senior management  personnel.  Gus Constantin,  our chairman and chief executive
officer,  founded us and our predecessor business more than 27 years ago. Bryant
Tong,  our  president  and chief  operating  officer,  has worked for us and our
predecessor  business  for more than 16 years.  David  Brunton,  our senior vice
president of operations, has worked for us and our predecessor business for more
than 13 years. Losing one or more of our key executives could seriously harm our
business,  financial  condition and operating results. We cannot assure you that
we will be able to retain our key executives or that we would be able to replace
any of our key executives if we were to lose their  services for any reason.  If
we had to replace any of our key executives, we would not be able to replace the
significant amount of knowledge that many of our key executives have about us.

We could be harmed if our products,  services or technologies are not compatible
with other products, services or technologies.

     We believe  that our ability to compete  successfully  also  depends on the
continued  compatibility  of our services  with  products,  services and network
architectures  offered by various vendors. If we fail to conform to a prevailing
or emerging standard,  our business,  financial  condition and operating results
could be  seriously  harmed.  We  cannot  be sure that  their  products  will be
compatible  with ours or that they will  adequately  address  changing  customer

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<PAGE>

needs.  We also cannot be sure what new  industry  standards  will  develop.  We
cannot assure you that we will be able to conform to these new standards quickly
enough to stay  competitive.  In addition,  we cannot assure you that  products,
services  or  technologies  developed  by  others  will not  make our  products,
services or technologies noncompetitive or obsolete.

If we do not  effectively  address our market,  we may never realize a return on
the investments we have made to execute our strategy.

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

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

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

     o   developing implementation resources around specific applications.

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

Intellectual  property infringement claims against us, even without merit, could
cost a significant amount of money to defend and divert  management's  attention
away from our business.

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

We may be  liable  if we lose  client  data  from  natural  disasters,  security
breaches or for any other reason.

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

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

     Our operations are dependent on SunGard being able to successfully  provide
back-up  processing  capability  if we are unable to protect  our  computer  and
network systems against damage from a major catastrophe such as an earthquake or

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<PAGE>

other natural disaster,  fire, power loss,  security breach,  telecommunications
failure or similar event. We cannot assure you that the precautions that we have
taken to  protect  ourselves  against  these  types of events  will  prove to be
adequate.  If we suffer  damage to our data or operations  center,  experience a
telecommunications failure or experience a security breach, our operations could
be seriously  interrupted.  We cannot assure you that any such  interruption  or
other loss will be covered by our insurance. Any such interruption or loss could
seriously harm our business and operating results.

Gus Constantin can exert substantial control over our company.

     Gus Constantin, our founder, chairman and chief executive officer, owns all
of the shares of our Class B common stock,  each share of which  entitles him to
five votes on most stockholder  actions.  As a result,  Mr. Constantin  controls
89.9% of the combined voting power of both classes of our common stock.  Holders
of Class A common stock are entitled to one vote per share and in the  aggregate
have 10.1% of the combined  voting power of both classes of our common stock. As
a result of his stock ownership, Mr. Constantin can, without the approval of our
public  stockholders,  take  corporate  actions  that  could  conflict  with the
interests of our public stockholders, such as:

     o   amending our charter documents;

     o   approving or defeating mergers or takeover attempts;

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

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

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

Our charter  documents could deter a takeover  effort,  which could inhibit your
ability to receive an acquisition premium for your shares.

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

Item 2.         Facilities

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

     We entered into a lease in 1999 for a 67,482 square foot  facility  located
in Alameda,  California to accommodate  expected growth in staff. The lease term
expires in December 2006. In addition,  we lease sales offices in Austin, Texas;
Kirkland, Washington; Newton, Massachusetts; Sacramento, California; Schaumburg,
Illinois;  Scottsdale,  Arizona; Stamford,  Connecticut; Upper Saddle River, New

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<PAGE>

Jersey;  Vienna,  Virginia; and Westlake Village,  California.  These leases are
typically for executive  suite type space with a term of less than one year with
options to renew for set periods. The aggregate lease expense for all facilities
in 1999 was approximately $651,000.

Item 3.         Legal Proceedings

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

Item 4.         Submission of Matters to a Vote of Security Holders

     No matter was  submitted to a vote of the Company's  stockholders,  through
the  solicitation  of proxies or otherwise,  during the fourth quarter of fiscal
year 1999.

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<PAGE>

                                     PART II

Item 5.         Market for Registrant's Common Stock and Related Stockholder
                Matters

Market Information

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

                                                         High          Low
                                                         ----          ---
2000
     First Quarter (through March 3, 2000)              $25.38        $13.56
1999
     Fourth Quarter (from October 14, 1999)              21.38          5.63

     As of March 3, 2000,  there were  approximately 29 holders of record of our
Class A common stock  although  there are a larger number of beneficial  holders
and one  holder of record of our  Class B common  stock.  On March 3, 2000,  the
last  reported sale price on the Nasdaq  National  Market for our Class A common
stock was $18.813.

Dividend Policy

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

Use of Proceeds

     On  October  14,  1999  we  commenced  our  initial  public  offering  (the
"Offering"),  which consisted of 4,000,000 shares of our Class A common stock at
$8.00 per share pursuant to a registration  statement (No.  333-84589)  declared
effective by the  Securities  and Exchange  Commission on October 14, 1999.  The
Offering  has been  terminated  and all  shares  have been  sold.  The  managing
underwriters  for the Offering  were  BancBoston  Robertson  Stephens,  Inc. and
Thomas  Weisel  Partners  LLC.  Aggregate  proceeds  from the Offering  were $32
million.

     We incurred approximately $3.2 million in total expenses in connection with
the  Offering,   comprised  of  approximately   $2.2  million  in  underwriters'
commissions and $1.0 million in other expenses.

     After deducting  expenses of the Offering,  the net offering proceeds to us
were $28.8 million. The approximate amount of net offering proceeds used through
December 31, 1999 was $6.6 million to repay outstanding  promissory notes to our
majority  stockholder,  $4.2 million in capital additions and approximately $2.2
million for general corporate purposes, including working capital. The remaining
net proceeds  have been invested in short-term  cash  instruments  pending final
deployment.  We  currently  estimate  that the  remaining  net  proceeds  of the
offering will be used as follows:

     o    15% to 25% for capital expenditures; and

     o    55% to 65% for general corporate purposes, including working capital.

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<PAGE>


     As of the date of this Form 10-K, we can only estimate the particular  uses
for the net proceeds  received  from the  Offering.  As a result,  the foregoing
estimates  and our use of  proceeds  are  subject to change at our  management's
discretion.  The amounts actually expended for each of the purposes listed above
may  vary  significantly  depending  upon a number  of  factors,  including  the
progress of our marketing programs and capital spending requirements.

Item 6.         Selected Financial Data

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

                                 Page 24 of 57
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<PAGE>

                    CONSOLIDATED STATEMENT OF OPERATIONS DATA
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                                     Year Ended December 31,
                                             ----------------------------------------------------------------------
                                                  1999          1998           1997          1996          1995
                                             -------------  ------------  ------------  ------------   ------------
                                                                                                        (Unaudited)

<S>                                          <C>            <C>           <C>           <C>            <C>
Revenue:
     Contract service revenue                $    4,001     $    2,465    $    2,255    $    1,175     $     896
     Contract service revenue - affiliate         2,772          2,182         3,085          -             -
     Software revenue                             2,300             39          -             -             -
                                             ----------     ----------    ----------    ----------     ---------
Total revenue                                     9,073          4,686         5,340         1,175           896
                                             ----------     ----------    ----------    ----------     ---------

Operating Expenses:
     Cost of providing services                   5,859          4,304         3,052           570           442
     Cost of providing software revenue             901            455          -             -             -
     General and administrative                   4,554          1,963         1,823           298           222
     Research and development                     3,185          2,181           566          -             -
     Client acquisition                           5,278          1,144           547           418           347
     Depreciation and amortization                  943            307           133            12             8
     Stock-related compensation                   5,007           -             -             -             -
                                             ----------     ----------    ----------    ----------     ---------
Total operating expenses                         25,727         10,354         6,121         1,298         1,019
                                             ----------     ----------    ----------    ----------     ---------

Loss from Operations                            (16,654)        (5,668)         (781)         (123)         (123)
Other income                                        174             11            41          -             -
                                             ----------     ----------    ----------    ----------     ---------
Net Loss                                     $  (16,480)    $   (5,657)   $     (740)   $     (123)    $    (123)
                                             ==========     ==========    ==========    ==========     =========

Basic and diluted net loss per share         $    (2.05)    $    (0.79)   $    (0.10)   $    (0.02)    $   (0.02)
Shares used in computing basic and
     diluted net loss per share                   8,055          7,200         7,200         7,200         7,200


                                           CONSOLIDATED BALANCE SHEET DATA
                                      (in thousands, except per share amounts)

                                                                   Year Ended December 31,
                                             ----------------------------------------------------------------------
                                                  1999          1998           1997          1996          1995
                                             -------------  ------------  ------------  ------------   ------------
                                                                                          (Unaudited)   (Unaudited)

Cash and cash equivalents                    $   15,780     $      503    $      106    $     -        $    -
Accounts receivable                                 981            601           889           303           300
Property and equipment, net                       6,287            694           686           256           250
Other assets                                      1,005             24            51          -             -
Total assets                                     24,053          1,822         1,732           559           550
Accounts payable and accrued liabilities          3,110          1,195           874           361           369
Deferred revenue                                    994            627          -             -             -
Total liabilities                                 4,104          1,822           874           361           369
Stockholders' equity                             19,949           -              858           198           181
</TABLE>


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<PAGE>

Item 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                RESULTS OF OPERATIONS

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

Overview

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

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

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

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

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

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

     Contract service revenue. We derive contract service revenue primarily from
fees  to  provide  monthly  information  technology,   accounting,  finance  and
transaction  processing  for  services  related  to  Financial  Outsourcing  and
S.T.A.R.,  including  one-time  installation  fees, and fees for maintenance and
hosting  services  for  M.A.R.S  clients.  We  recognize  monthly  fees as these
services are  performed  and  installation  fees on a percentage  of  completion
basis, except those related to the sale of software.

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<PAGE>

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

     Software  revenue.  We derive software  revenue from software license fees,
consulting services,  and training for our M.A.R.S.  software.  Software license
fee  revenue  consists  principally  of  up-front  license  fees earned from the
licensing of the M.A.R.S.  software and related implementation and installation.
Revenue from up-front  software  license  agreements is recognized in accordance
with the  American  Institute  of  Certified  Public  Accountants  Statement  of
Position 97-2. This revenue is recognized when delivery has occurred, collection
is  deemed  probable,  the fee is fixed  or  determinable,  and  vendor-specific
objective  evidence  exists  to  allocate  the total  fee to all  delivered  and
undelivered elements of the arrangement.  Historically, we licensed our M.A.R.S.
product  primarily  on a  perpetual  basis.  Consulting  services  and  training
revenues are recognized as services are performed and accepted by the customers.
Maintenance  revenue is  recognized  ratably over the term of the  agreement and
recorded as an element of contract service revenue.  In instances where software
license  agreements include a combination of consulting  services,  training and
maintenance,  these separate  elements are unbundled from the agreement based on
the element's fair value.  In the fourth quarter of 1999, we completed the first
installation  of  M.A.R.S.  services  on a hosted  basis.  We expect that in the
future  software  revenue will decline as a  percentage  of total  revenue as we
devote greater resources to our other outsourced business services

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

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

                                 Page 27 of 57
                  The Index to Exhibits is located at Page 55
<PAGE>

Consolidated Results of Operations

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

                                                     Year Ended December 31,
                                                 ------------------------------
                                                   1999       1998       1997
                                                 --------   --------   --------

Consolidated Statements of Operations Data:
Revenue:
   Contract service revenue...................     44.1%      52.6%      42.2%
   Contract service revenue-- affiliate.......     30.6       46.6       57.8
   Software revenue...........................     25.3        0.8       --
                                                 --------   --------   --------
         Total Revenue........................    100.0      100.0      100.0
                                                 --------   --------   --------
Operating expenses:...........................
   Cost of providing services.................     64.6       91.9       57.2
   Cost of providing software revenue.........      9.9        9.7       --
   General and administrative.................     50.2       41.9       34.1
   Research and development...................     35.1       46.5       10.6
   Client acquisition.........................     58.2       24.4       10.2
   Depreciation and amortization..............     10.4        6.5        2.5
   Stock-related compensation.................     55.2       --         --
                                                 --------   --------   --------
         Total operating expenses.............    283.6      220.9      114.6
                                                 --------   --------   --------
Loss from operations..........................   (183.6)    (120.9)     (14.6)
Other income..................................      1.9        0.2        0.7
                                                 --------   --------   --------
Net loss......................................   (181.7)%   (120.7)%    (13.9)%
                                                 ========   ========   ========

     Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

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

     Contract  service revenue.  Contract service revenue  increased 62% to $4.0
million  in 1999  from  $2.5  million  in 1998.  Financial  Outsourcing  revenue
increased  138% to $1.9 million in 1999 from $0.8  million in 1998.  The revenue
increase  was  primarily  due to the  increase  in the number of  non-affiliated
Financial Outsourcing clients from 11 at December 31, 1998 to 23 at December 31,
1999.  S.T.A.R.  revenue increased 20% to $2.0 million in 1999 from $1.7 million
in 1998. The increase in S.T.A.R.  revenue was attributed to the addition of one
new client in the year and increased  activity for existing  clients.  The total
number of S.T.A.R. clients in 1999 was 14 compared to 13 in the prior year.

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

     Software  revenue.  Software revenue increased to $2.3 million in 1999 from
$39,000 in 1998.  This  increase was primarily  due to the  introduction  of our
current  M.A.R.S.  release in March 1999.  The number of M.A.R.S.  clients under
contract increased from six at December 31, 1998 to ten at December 31, 1999.

                                 Page 28 of 57
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<PAGE>


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

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

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

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

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

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

     Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

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

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

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

     Software  revenue.  Software revenue increased from zero in 1997 to $39,000
in 1998.  This increase  consists of  non-refundable  installation  fees for our
M.A.R.S. product.

     Cost of providing  services.  Cost of providing  services  increased 41% to
$4.3 million in 1998 from $3.1 million in 1997.  The increase was  primarily due
to the  increase  in the number of clients  serviced,  which  required us to add

                                 Page 29 of 57
                  The Index to Exhibits is located at Page 55

<PAGE>

personnel  in our  operations  group and  resulted in  additional  salaries  and
benefits of $1.2 million for these personnel.

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

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

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

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

                                 Page 30 of 57
                  The Index to Exhibits is located at Page 55

<PAGE>

Quarterly Results of Operations.

     The following table sets forth selected  unaudited  quarterly  consolidated
financial  information  for  each of the  eight  quarters  in the  period  ended
December 31, 1999, as well as such data expressed as a percentage of our revenue
for the periods  presented.  This  information  has been derived from  unaudited
consolidated  statements of operations  data that, in the opinion of management,
are  stated  on a basis  consistent  with  the  audited  consolidated  financial
statements  and include all  adjustments  (consisting  only of normal  recurring
adjustments) necessary for a fair presentation of such information in accordance
with generally accepted accounting principles. Certain prior period amounts have
been reclassified to conform to the current period presentation.  Our results of
operations for any quarter are not  necessarily  indicative of the results to be
expected in any future period.

<TABLE>
<CAPTION>
                                                                           Quarter Ended
                                  ------------------------------------------------------------------------------------------------
                                  December 31, September 30, June 30,    March 31, December 31, September 30, June 30,   March 31,
                                      1999        1999         1999        1999        1998        1998        1998        1998
                                  ------------ ------------- --------    --------- ------------ ------------- --------   ---------
                                                                           (In Thousands)
<S>                                <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>

STATEMENT OF OPERATIONS DATA:
Revenue:
   Contract service revenue ....   $  1,262    $    989    $    937    $    813    $    645    $    581    $    575    $    664
   Contract service revenue -- .      1,059         800         435         478         559         589         481         553
   affiliate
   Software revenue ............        281         521       1,408          90           0           0          39        --
                                   --------    --------    --------    --------    --------    --------    --------    --------
     Total revenue .............      2,602       2,310       2,780       1,381       1,204       1,170       1,095       1,217
Operating expense:
   Cost of providing services ..      2,030       1,423       1,378       1,028         916       1,041       1,125       1,223
   Cost of providing software ..        268         231         225         177         187         210          58        --
   revenue
   General and administrative ..      2,085       1,470         488         511         807         489         373         294
   Research and development ....        812       1,022         695         656         956         588         363         274
   Client acquisition ..........      2,805       1,384         613         476         528         262         176         177
   Depreciation and amortization        464         251         137          91          86          80          73          68
   Stock-related compensation ..      3,051      (3,335)      2,933       2,358        --          --          --          --
                                   --------    --------    --------    --------    --------    --------    --------    --------
     Total operating expenses ..     11,515       2,446       6,469       5,297       3,480       2,670       2,168       2,036
                                   --------    --------    --------    --------    --------    --------    --------    --------
Loss from operations ...........     (8,913)       (136)     (3,689)     (3,916)     (2,276)     (1,500)     (1,073)       (819)
Other income (expense) .........        184         (27)          8           9           3          49         (21)        (20)
                                   --------    --------    --------    --------    --------    --------    --------    --------
Net loss .......................   $ (8,729)   $   (163)   $ (3,681)   $ (3,907)   $ (2,273)   $ (1,451)   $ (1,094)   $   (839)
                                   ========    ========    ========    ========    ========    ========    ========    ========


                                                                     As a Percentage of Revenue
                                  ------------------------------------------------------------------------------------------------
                                  December 31, September 30, June 30,    March 31, December 31, September 30, June 30,   March 31,
                                      1999        1999         1999        1999        1998        1998        1998        1998
                                  ------------ ------------- --------    --------- ------------ ------------- --------   ---------
                                                                           (In Thousands)

STATEMENT OF OPERATIONS DATA:
Revenue:
   Contract service revenue....        48.5%        42.8%       33.7%        58.9%       53.6       49.7%        52.5%     54.6%
   Contract service revenue --         40.7         34.6        15.6         34.6        46.4       50.3         43.9      45.4
   affiliate...................
   Software revenue............        10.8         22.6        50.7          6.5        --         --            3.6      --
                                    -------      -------     -------      -------     -------    -------      -------    ------
     Total revenue.............       100.0        100.0       100.0        100.0       100.0      100.0        100.0     100.0
Operating expense:
   Cost of providing services..        78.0         61.6        49.6         74.4        76.1       89.0        102.7     100.5
   Cost of providing software          10.3         10.0         8.1         12.8        15.5       17.9          5.3      --
   revenue.....................
   General and administrative..        80.1         63.6        17.6         37.0        67.0       41.8         34.1      24.2
   Research and development....        31.2         44.2        25.0         47.5        79.4       50.3         33.1      22.5
   Client acquisition..........       107.8         60.0        22.0         34.5        43.9       22.4         16.1      14.5
   Depreciation and amortization       17.8         10.9         4.9          6.6         7.1        6.8          6.7       5.6
   Stock-related compensation..       117.3       (144.4)      105.5        170.8        --         --           --        --
                                    -------      -------     -------      -------     -------    -------      -------    ------
     Total operating expenses..       442.5        105.9       232.7        383.6       289.0      228.2        198.0     167.3
                                    -------      -------     -------      -------     -------    -------      -------    ------
Loss from operations...........      (342.5)        (5.9)     (132.7)      (283.6)     (189.0)    (128.2)       (97.9)    (67.3)
                                    -------      -------     -------      -------     -------    -------      -------    ------
Other income (expense).........         7.1         (1.2)        0.3          0.7         0.2        4.2         (1.9)     (1.6)
Net loss.......................      (335.5)%       (7.1)%    (132.4)%     (282.9)%    (188.8)%   (124.0)%      (99.9)%   (68.9)%
                                    =======      =======     =======      =======     =======    =======      =======    ======
</TABLE>
                                 Page 31 of 57
                  The Index to Exhibits is located at Page 55
<PAGE>

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

     Contract  service  revenue.  Contract  service revenue  increased from $0.7
million  for the quarter  ended  March 31, 1998 to $1.3  million for the quarter
ended  December 31, 1999  primarily as a result of adding  additional  Financial
Outsourcing clients.

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

     Software revenue. The increase in software revenue was primarily due to the
introduction of our current  M.A.R.S.  release in March 1999 and the increase in
dedicated sales  personnel.  Software revenue in the quarter ended June 30, 1999
includes $0.6 million of revenue deferred in prior periods, which was recognized
at the time of final installation and acceptance of our M.A.R.S. product by some
of our  customers.  Prior to 1999,  the M.A.R.S.  product was in beta testing at
client sites.  Customer  acceptance was contingent upon  installation of a final
working copy of the software,  which occurred  during the quarter ended June 30,
1999. As a result,  all software revenue was deferred until customer  acceptance
was  received  as  required  under SOP 97-2  except an  insignificant  amount of
non-refundable  installation fees. The number of M.A.R.S. clients under contract
increased from six at December 31, 1998 to ten at December 31, 1999.

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

     Cost of providing software revenue.  Cost of providing software revenue has
generally  increased  over the eight  quarters  ended  December 31,  1999.  This
increase  has been  primarily  due to the  increase  in the  number of  M.A.R.S.
contracts.

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

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

                                 Page 32 of 57
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<PAGE>

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

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

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

Liquidity and Capital Resources

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

     At December 31, 1999, we had  approximately  $15.8 million of cash and cash
equivalents.  Net cash used in operating  activities in 1999,  1998 and 1997 was
$9.6  million,  $4.1 million and $0.7  million,  respectively.  The cash used in
operating  activities  in 1999,  1998 and 1997 was  primarily  the result of net
losses.

     Net cash used in investing  activities  was $5.1 million,  $0.3 million and
$0.5  million  in  1999,  1998 and  1997,  respectively.  The net  cash  used in
investing  activities  resulted  primarily  from capital  expenditures  for data
processing  equipment,  and furniture and fixtures. We expect to make additional
capital  expenditures  for computer  hardware and  software,  new office  space,
furniture,  equipment  and  fixtures  to  support  the  continued  growth of our
operations. We expect that these expenditures will exceed amounts spent in 1999.

     Net cash provided by financing  activities was $29.9 million,  $4.8 million
and $1.3  million in 1999,  1998 and 1997,  respectively.  Net cash  provided by
financing  activities  in 1999 was  primarily  provided by the proceeds from our
initial public offering, which closed in October 1999, and capital contributions

                                 Page 33 of 57
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<PAGE>

from our then sole  stockholder.  Net cash  provided by financing  activities in
1998 and 1997 was  primarily  a result  of equity  investments  by our then sole
stockholder.

     In executing  our business  plan we will need to raise  additional  capital
during fiscal year 2000.  We may sell  additional  debt or equity  securities or
enter into new credit  facilities  to meet our cash needs.  We cannot assure you
that we will be able to raise  capital on  favorable  terms or at all.  Any cash
raised may also be used to acquire or invest in  complementary  businesses or to
obtain the right to use complementary technologies,  although we have no current
plans to do so.

Recent Accounting Pronouncements

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

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

Year 2000 Compliance

     As of February 1, 2000,  we had not  incurred any  material  cost  directly
associated  with our year  2000  compliance  efforts,  except  for  compensation
expense  associated  with our salaried  employees who have devoted some of their
time to our year 2000 assessment and remediation  efforts.  We do not expect the
total  cost of year  2000  issues  to be  material  to our  business,  financial
condition and operating results.

     As of February  1, 2000,  we had not  encountered  any  material  year 2000
problems  with the  hardware and software  systems  used in our  operations.  In
addition,  none of our  critical  vendors have  reported any material  year 2000
problems  nor have we  experienced  any  decline  in  service  levels  from such
vendors.

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

Item 7A.        Quantitative and Qualitative Disclosures about Market Risk.

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

                                 Page 34 of 57
                  The Index to Exhibits is located at Page 55
<PAGE>

Item 8.         Financial Statements and Supplementary Data

                       RESOURCEPHOENIX.COM AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                          Page
                                                                          ----

Report of Arthur Andersen LLP, Independent Public Accountants              36

Consolidated Statements of Operations for the years ended
     December 31, 1999, 1998 and 1997                                      37

Consolidated Balance Sheets as of December 31, 1999 and 1998               38

Consolidated Statements of Changes In Stockholders' Equity for
     the years ended December 31, 1999, 1998 and 1997                      39

Consolidated Statements of Cash Flows for the years ended
     December 31, 1999, 1998 and 1997                                      40

Notes to Consolidated Financial Statements                                 41


                                 Page 35 of 57
                  The Index to Exhibits is located at Page 55
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



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

     We  have  audited  the   accompanying   consolidated   balance   sheets  of
ReSourcePhoenix.com  (a Delaware  corporation) and subsidiary as of December 31,
1999  and  1998  and  the  related   consolidated   statements  of   operations,
stockholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1999. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and  disclosures  in financial  statements.  An audit also  includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

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

                                            ARTHUR ANDERSEN LLP



San Francisco, California
January 31, 2000


                                 Page 36 of 57
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<PAGE>

                               RESOURCEPHOENIX.COM
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except share and per share amounts)

                                                       Year Ended
                                        ---------------------------------------
                                          12/31/99      12/31/98      12/31/97
                                        -----------   -----------   -----------

Revenue:

     Contract service revenue           $     4,001   $     2,465   $     2,255
     Contract service revenue -
       affiliate                              2,772         2,182         3,085
     Software revenue                         2,300            39          --
                                        -----------   -----------   -----------

Total revenue                                 9,073         4,686         5,340

Operating expenses:

     Cost of providing services               5,859         4,304         3,052
     Cost of providing software
       revenue                                  901           455          --
     General and administrative               4,554         1,963         1,823
     Research and development                 3,185         2,181           566
     Client acquisition costs                 5,278         1,144           547
     Depreciation and amortization              943           307           133
     Stock-related compensation               5,007          --            --
                                        -----------   -----------   -----------

Total operating expenses                     25,727        10,354         6,121

Loss from operations                        (16,654)       (5,668)         (781)

Other income                                    174            11            41
                                        -----------   -----------   -----------

Net loss                                $   (16,480)  $    (5,657)  $      (740)
                                        ===========   ===========   ===========

Basic and diluted net loss per share    $     (2.05)  $     (0.79)  $     (0.10)
Shares used in computing basic and
     diluted net loss per share           8,055,000     7,200,000     7,200,000


        The accompanying notes are an integral part of these statements.

                                 Page 37 of 57
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<PAGE>

                               RESOURCEPHOENIX.COM
                           CONSOLIDATED BALANCE SHEETS
                       (in thousands except share amounts)

                                                                 Year Ended
                                                            -------------------
                                                            12/31/99   12/31/98
                                                            --------   --------

                                     ASSETS
Current Assets:
     Cash and cash equivalents                              $ 15,780   $    503
     Accounts receivable, net of allowance of $54 in 1999
     and $8 in 1998                                              948        419
     Receivable from affiliates                                   33        182
     Prepaid expenses and other current assets                   729         20
                                                            --------   --------

     Total current assets                                     17,490      1,124

     Property and equipment                                    7,669      1,133
     Accumulated depreciation                                 (1,382)      (439)
                                                            --------   --------
         Net property and equipment                            6,287        694

     Other assets                                                276          4
                                                            --------   --------

     Total assets                                           $ 24,053   $  1,822
                                                            ========   ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable                                       $  1,455   $    269
     Accrued liabilities                                       1,655        926
     Deferred revenue                                            994        627
                                                            --------   --------

         Total current liabilities                             4,104      1,822

Commitments and contingencies                                   --         --

Stockholders' Equity

     Preferred Stock, $.001 par value; 5,000,000
       shares authorized, none issued or outstanding            --         --

     Class A common stock, $.001 par value;
       27,800,000 authorized, 4,028,000 and no
       shares issued and outstanding at December 31,
       1999 and 1998, respectively                            32,869       --

     Class B common stock, $.001 par value;
       7,200,000 shares authorized, 7,172,000 and
       7,200,000 shares issued and outstanding at
       December 31, 1999 and 1998, respectively                9,957      6,397

     Accumulated deficit                                     (22,877)    (6,397)
                                                            --------   --------

         Total stockholders' equity                           19,949       --
                                                            --------   --------

         Total liabilities and stockholders' equity         $ 24,053   $  1,822
                                                            ========   ========

        The accompanying notes are an integral part of these statements.

                                 Page 38 of 57
                  The Index to Exhibits is located at Page 55

<PAGE>

                               RESOURCEPHOENIX.COM
                      CONSOLIDATED STATEMENT OF CHANGES IN
                              STOCKHOLDERS' EQUITY
                      (in thousands, except share amounts)


<TABLE>
<CAPTION>

                                                   CLASS A                   CLASS B                          TOTAL
                                                COMMON STOCK              COMMON STOCK                        STOCK-
                                                                                                 ACCUM       HOLDERS'
                                              SHARES      AMOUNT       SHARES        AMOUNT     DEFICIT       EQUITY
                                            ----------  ----------   ----------   ----------   ----------   ----------
<S>                                         <C>         <C>          <C>          <C>          <C>          <C>

Balance at January 1, 1997                        --    $     --           --     $     --           --     $     --
Net Loss                                          --          --           --           --           (740)        (740)
Capital contribution from stockholder             --          --          1,000        1,598         --          1,598
                                            ----------  ----------   ----------   ----------   ----------   ----------
Balance at December 31, 1997                      --          --          1,000        1,598         (740)         858
Net Loss                                          --          --           --           --         (5,657)      (5,657)
Capital contribution from stockholder             --          --           --          4,799         --          4,799
                                            ----------  ----------   ----------   ----------   ----------   ----------
Balance at December 31, 1998                      --          --          1,000        6,397       (6,397)        --
Net Loss                                          --          --           --           --        (16,480)     (16,480)
Capital contribution from stockholder             --          --           --          3,603         --          3,603
Cancellation of stock                             --          --         (1,000)        --           --           --
Issuance of Class B common stock                  --          --      7,200,000         --           --           --
Dividend                                          --        (1,000)        --           --           --         (1,000)
Compensation paid by issuing stock options        --         5,007         --           --           --          5,007
Transfer of Class B common stock
   and issuance of Class A
   common stock                                 28,000          43      (28,000)         (43)        --           --
Issuance of Class A common stock             4,000,000      32,000         --           --           --         32,000
   Underwriter/broker commissions                 --        (2,240)        --           --           --         (2,240)
   Offering expenses                              --          (941)        --           --           --           (941)
                                            ----------  ----------   ----------   ----------   ----------   ----------

Balance at December 31, 1999                 4,028,000  $   32,869    7,172,000   $    9,957   $  (22,877)  $   19,949
                                            ==========  ==========   ==========   ==========   ==========   ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                 Page 39 of 57
                  The Index to Exhibits is located at Page 55

<PAGE>

                               RESOURCEPHOENIX.COM
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                    Year Ended
                                                          ------------------------------
Operating Activities                                      12/31/99   12/31/98   12/31/97
                                                          --------   --------   --------
<S>                                                       <C>        <C>        <C>

   Net loss                                               $(16,480)  $ (5,657)  $   (740)
   Adjustments to reconcile net loss to net cash
     used in operating activities:
     Depreciation and amortization                             943        307        133
       Stock-related compensation expense                    5,007       --         --
     Change in operating assets and liabilities:
       Accounts receivable, net                               (529)       125       (544)
       Receivable from (due to) affiliates                     149        163       (345)
       Prepaid expenses and other current assets              (981)        27        (51)
       Accounts payable                                      1,186        127        240
       Accrued liabilities                                     729        194        634
       Deferred revenue                                        367        627       --
                                                          --------   --------   --------

         Net cash used in operating activities              (9,609)    (4,087)      (673)

Investing activities

   Purchase of equipment, furniture and fixtures            (5,062)      (315)      (496)
                                                          --------   --------   --------

         Net cash used in investing activities              (5,062)      (315)      (496)

Financing activities

   Proceeds from notes payable to stockholder                5,577       --         --
   Repayment of notes to stockholder                        (5,577)      --         --
   Proceeds from capital contributions from stockholder      2,129      4,799      1,275
   Payment of dividend                                      (1,000)      --         --
   Proceeds from initial public offering, net               29,760       --         --
   Expenses of offering                                       (941)      --         --
                                                          --------   --------   --------

         Net cash provided by financing activities          29,948      4,799      1,275
                                                          --------   --------   --------

Net increase in cash and cash equivalents                   15,277        397        106

Cash and cash equivalents, beginning of period                 503        106       --
                                                          --------   --------   --------

Cash and cash equivalents, end of period                  $ 15,780   $    503   $    106
                                                          ========   ========   ========

Supplemental disclosure of noncash financing activities

   Contribution of property and equipment from affiliate  $  1,474

Supplemental disclosure of cash flow information
   Cash paid during the period for interest               $     57
</TABLE>

        The accompanying notes are an integral part of these statements.

                                 Page 40 of 57
                  The Index to Exhibits is located at Page 55

<PAGE>

                       RESOURCEPHOENIX.COM AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.         ORGANIZATION

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

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

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

NOTE 2.         SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES

     Use Of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period.
Actual results could differ from those estimates.

     Revenue Recognition

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

     Contract  service  revenue.   Contract  service  revenue  includes  monthly
contractual  payments for ongoing accounting,  finance,  data center operations,
software  maintenance  and hosting,  and other functions in addition to up front
implementation  fees. Contract service revenue is recognized as the services are

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<PAGE>

provided.  Contract  services are also  provided to  affiliates  and reported as
affiliate  revenue.  Maintenance  revenue is recognized ratably over the term of
the agreement.

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

     Deferred Revenue

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

     Operating Expenses

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

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

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

     Research  and  development  expenses  include  salaries  and  benefits  for
personnel  engaged  in  M.A.R.S.  development,  consulting  fees paid to outside
service providers engaged in M.A.R.S.  development and other miscellaneous costs
associated  with M.A.R.S.  development.  In addition,  research and  development
includes  similar  costs  related to  applications  development  that  relate to
Financial Outsourcing  services.  Research and development costs are expensed as
incurred  and  consist  primarily  of  software  development  costs.   Financial
accounting  standards require the capitalization of certain software development
costs after  technological  feasibility of the software is  established.  In the
development   of  the  Company's  new  products  and  existing   products,   the

                                 Page 42 of 57
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<PAGE>

technological feasibility of the software is not established until substantially
all product  development  is complete,  including the  development  of a working
model. Internal software development costs that were eligible for capitalization
were  insignificant and were charged to research and development  expense in the
accompanying consolidated statement of operations.

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

     Cash and Cash Equivalents

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

     Property and Equipment

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

     Concentration of Credit Risk

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

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

                                                   1999      1998       1997
                                                   ----      ----       ----

     Phoenix Leasing Incorporated (Affiliate)       24%       41%        48%
     John Hancock Advisors                          16%       -          -
     GE Capital Aviation/PIMC                        9%       20%        23%

     Segment Reporting

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

     Income Taxes

     Prior to the  completion  of the Company's  initial  public  offering,  the
Company  elected to be treated as a subchapter S  corporation  as defined by the
Internal Revenue Code of 1986, as amended (the "Code"). As such, the Company was
not  subject to federal  taxes on its  income and items of income,  gain,  loss,
deductions and credit are reportable by individual  stockholders of the Company.

                                 Page 43 of 57
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<PAGE>

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

     Recently Issued Accounting Standards

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

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

     Reclassifications

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

     Basic and Diluted Net Loss per Share

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

                                 Page 44 of 57
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<PAGE>


NOTE 3.         PROPERTY AND EQUIPMENT

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

                                                      December 31,  December 31,
                                                          1999          1998
                                                      ------------  ------------

     Furniture, fixtures and leasehold improvements     $   838       $   270
     Computer hardware and equipment                      4,668           542
     Software                                             2,163           321
                                                        -------       -------
                                                          7,669         1,133

     Less accumulated depreciation and amortization      (1,382)         (439)
                                                        -------       -------
     Net property and equipment                         $ 6,287       $   694
                                                        =======       =======

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

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

NOTE 4.         INCOME TAXES

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

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

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

                                 Page 45 of 57
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<PAGE>


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

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

NOTE 5.         LEASE OBLIGATIONS

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

     Year ending December 31,
     2000    ...............................  $ 1,783
     2001    ...............................    1,629
     2002    ...............................    1,263
     2003    ...............................    1,417
     2004    ...............................    1,460
     Thereafter.............................    3,050
                                              -------

     Total minimum lease payments...........  $10,602
                                              =======

NOTE 6.         STOCKHOLDER'S EQUITY

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

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

                                 Page 46 of 57
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<PAGE>

per share, 7,200,000 shares of Class B common stock, par value $0.001 per share,
and 5,000,000 shares of preferred stock, par value $0.001 per share.

     Common Stock

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

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

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

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

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

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

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

                                 Page 47 of 57
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<PAGE>

     Preferred Stock

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

NOTE 7.         STOCK BASED INCENTIVE PLANS

     Prior Phantom Plan

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

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

     Stock Option Plan

     On August 4, 1999, the Board of Directors adopted its 1999 Stock Plan ("the
Stock Option  Plan")  pursuant to which a total of  1,260,000  shares of Class A
common stock have been reserved for issuance to provide additional  incentive to
its employees, officers, directors and consultants. Pursuant to the Stock Option
Plan,  the  Company  may  grant  stock  options  and  stock  purchase  rights to
employees, officers, directors and consultants. Under the Stock Option Plan, the
Company can grant either incentive stock options or non-qualified stock options.
The Board of  Directors  granted  options to  purchase an  aggregate  of 836,210
shares of Class A common stock at an exercise price of $2.08 per share,  subject
to the closing of the Company's  initial  public  offering.  These grants vested
fully upon the closing of the Company's  initial public  offering.  Compensation
expense of $1,956,000 previously charged under the Phantom Plan was reversed and
compensation expense of $5,007,000  representing the difference between the fair
value of $8.00 per share and the exercise price of $2.08 was charged.

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

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

                                 Page 48 of 57
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<PAGE>


                                            Number of        Weighted Average
                          Allocations   Shares Granted  Exercise Price per Share
                          -----------   --------------  ------------------------

     August 4, 1999        1,260,000

     Grants               (1,014,560)      1,014,560           $    3.37
     Cancelled                   200            (200)              15.69
                          ----------      ----------           ---------

     December 31, 1999       245,640       1,014,360           $    3.37
                          ==========      ==========           =========

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

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

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

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

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

<TABLE>
<CAPTION>
                                    Options Outstanding                                Options Exercisable
                      ----------------------------------------------------   ------------------------------------
       Actual            Number      Weighted Average                            Number
      Range of         Outstanding       Remaining       Weighted Average      Exercisable       Weighted Average
   Exercise Prices     at 12/31/99   Contractual Life     Exercise Price       at 12/31/99        Exercise Price
--------------------  -------------  -----------------  ------------------   ---------------    -----------------

    <S>               <C>            <C>                <C>                  <C>                <C>
    $  2.08 - 2.08       836,210            9.8             $   2.08            836,210            $   2.08
    $  6.50 - 8.00       145,700            9.8             $   7.86              2,700            $   8.00
    $ 14.00 -17.25        29,450            9.9             $  15.91              6,250            $  17.25
    $ 21.38 -21.38         3,000           10.0             $  21.38               -                   -
--------------------  -------------  -----------------  ------------------   ---------------    -----------------

    $  2.08 -21.38     1,014,360            9.8             $   3.37            845,160            $   2.21
</TABLE>

     Pro forma  information  regarding  net  income  and  earnings  per share is
required by SFAS No. 123 and is  determined  as if the Company had accounted for

                                 Page 49 of 57
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<PAGE>

its employee stock options under the fair value method of SFAS No. 123. The fair
value of each option  grant under the fixed price  option plan was  estimated at
the date of grant using a Black-Scholes option-pricing model. The dividend yield
was assumed to be zero for the period below. The  weighted average  of all other
significant  assumptions  and the  weighted average  fair  value of grants  made
during the year ended December 31, 1999 are as follows:

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

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

     Employee Stock Purchase Plan

     Concurrently with the offering,  the Company  established an Employee Stock
Purchase  Plan ("the  Purchase  Plan") under which a total of 360,000  shares of
Class A common stock were made available for sale.  The Purchase Plan,  which is
intended to qualify as an  employee  stock  purchase  plan within the meaning of
Section  423  of  the  Internal  Revenue  Code  of  1986,  as  amended,  and  is
administered by the Compensation  Committee  appointed by the Company's Board of
Directors.  Employees  are eligible to  participate  if they are employed by the
Company or one of its subsidiaries designated by the Board for at least 20 hours
per week and for more than five months in any calendar  year.  The Purchase Plan
permits  eligible  employees to purchase  Class A common stock  through  payroll
deductions,  which  may not  exceed  15% of an  employee's  total  compensation,
subject to certain  limitations.  The  Purchase  Plan will be  implemented  in a
series of consecutive,  overlapping  offering  periods,  each  approximately six
months in duration.  Offering  periods will begin on the first trading day on or
after  April 30 and  October 31 of every  other year and  terminate  on the last
trading day in the period six months later.  However,  the first offering period
shall be the period of approximately 24 months commencing on the date upon which
the Company's  registration  statement was declared  effective by the Securities
and Exchange  Commission,  October 19, 1999, and terminating on the last trading
day in the period ending October 31, 2001. Each  participant  will be granted an
option to purchase stock on the first day of the six-month  purchase  period and
such option will be  automatically  exercised on the last date of each  offering
period.  The  purchase  price of each  share of Class A common  stock  under the
Purchase  Plan will be equal to 85% of the lesser of the fair  market  value per
share of Class A common  stock on the start date of that  offering  period or on
the date of purchase.  Employees  may modify or end their  participation  in the
offering  at  any  time  during  the   offering   period.   Participation   ends
automatically  on termination of employment with the Company.  The Purchase Plan
will  terminate  in 2009 unless  sooner  terminated  by the  Company's  Board of
Directors.  Total  contributions  as of  December  31,  1999 were  approximately
$181,000. Under APB 25, this is a noncompensatory plan.

NOTE 8.         DEFINED CONTRIBUTION PENSION PLAN

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

                                 Page 50 of 57
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<PAGE>

NOTE 9.         PROFIT SHARING

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

NOTE 10.        NET LOSS PER SHARE

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

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

                                                   1999       1998       1997
                                                 --------   --------   --------

Historical:
Net loss ......................................  $(16,480)  $ (5,657)  $   (740)
Weighted average shares of common
     stock outstanding used in computing
     basic and diluted net loss per share .....     8,055      7,200      7,200
Basic and diluted net loss per share ..........  $  (2.05)  $  (0.79)  $  (0.10)

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

NOTE 11.        COMMITMENTS AND CONTINGENCIES

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

NOTE 12.        RELATED PARTY TRANSACTIONS

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

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

                                 Page 51 of 57
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<PAGE>


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

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

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

NOTE 13.        SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

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

                                                   Quarterly Data
                                      -----------------------------------------
                                        First     Second      Third     Fourth
                                       Quarter    Quarter    Quarter    Quarter
                                      --------   --------   --------   --------

Year Ended December 31, 1999:

Total revenue                         $  1,381   $  2,780   $  2,310   $  2,602
Net loss                              $ (3,907)  $ (3,681)  $   (163)  $ (8,729)
Basic and diluted net loss per share  $  (0.54)  $  (0.51)  $  (0.02)  $  (0.82)
Basic and diluted shares outstanding     7,200      7,200      7,200     10,629

Year Ended December 31, 1998:

Total revenue                         $  1,217   $  1,095   $  1,170   $  1,204
Net loss                              $   (839)  $ (1,094)  $ (1,451)  $ (2,273)
Basic and diluted net loss per share  $  (0.12)  $  (0.15)  $  (0.20)  $  (0.32)
Basic and diluted shares outstanding     7,200      7,200      7,200      7,200


                                 Page 52 of 57
                  The Index to Exhibits is located at Page 55
<PAGE>

Item 9.         Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure

     None.


                                 Page 53 of 57
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<PAGE>

                                    PART III

Item 10.        Directors and Executive Officers of the Registrant

     Information  with  respect  to our  directors  and  executive  officers  is
incorporated  by reference to the information  under the captions:  "Election of
Directors--Nominees,"  "Section 16(a) Beneficial Ownership Reporting Compliance"
and  "Executive  Officers"  in our  definitive  Proxy  Statement  for our annual
meeting of stockholders to be held on May 18, 2000 (the "Proxy Statement").

Item 11.        Executive Compensation

     Incorporated by reference to the information under the caption:  "Executive
Compensation   and  Other   Matters"  and   "Election  of   Directors,   Certain
Relationships and Related Transactions" in our Proxy Statement.

Item 12.        Security Ownership of Certain Beneficial Owners and Management

     Incorporated by reference to the information  under the caption:  "Election
of Directors -- Security Ownership of Management" in our Proxy Statement.

Item 13.        Certain Relationships and Related Transactions

     Incorporated by reference to the information  under the caption:  "Election
of Directors -- Certain  Relationships  and Related  Transactions"  in our Proxy
Statement.


                                 Page 54 of 57
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<PAGE>

                                     PART IV

Item 14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K

     (a)        (1)   Financial Statements, see Item 8 above.
                (2)   Financial Statement Schedules - None.
                (3)   Exhibits.

Exhibit No.                                Description
-----------                                -----------

      2.1         Contribution  Agreement,  dated  August 4, 1999,  between  Gus
                  Constantin,  as trustee for the Gus and Mary  Constantin  1978
                  Living Trust,  and  Registrant  (incorporated  by reference to
                  exhibit 2.1 to the Registrant's registration statement on Form
                  S-1 (File No. 333-84589)).
      3.1         Amended  and  Restated   Certificate   of   Incorporation   of
                  Registrant  (incorporated  by  reference to exhibit 3.1 to the
                  Registrant's  registration  statement  on Form S-1  (File  No.
                  333-84589)).
      3.2         Bylaws of Registrant (incorporated by reference to exhibit 3.2
                  to the Registrant's  registration  statement on Form S-1 (File
                  No. 333-84589)).
      4.1         Form  of  Registrant's   Class  A  common  stock   certificate
                  (incorporated  by reference to exhibit 4.1 to the Registrant's
                  registration statement on Form S-1 (File No. 333-84589)).
      4.2         Form  of  Registrant's   Class  B  common  stock   certificate
                  (incorporated  by reference to exhibit 4.2 to the Registrant's
                  registration statement on Form S-1 (File No. 333-84589)).
     10.1         Form of Indemnification  Agreement  (incorporated by reference
                  to exhibit 10.1 to the Registrant's  registration statement on
                  Form S-1 (File No. 333-84589)).
     10.2         Letter of Understanding and Summary of Discussion,  dated June
                  1, 1998,  between Bryant Tong and Registrant  (incorporated by
                  reference  to exhibit  10.2 to the  Registrant's  registration
                  statement on Form S-1 (File No. 333-84589)).
     10.3         Amendment  to Letter of  Understanding,  dated August 4, 1999,
                  between Bryant Tong and Registrant  (incorporated by reference
                  to exhibit 10.3 to the Registrant's  registration statement on
                  Form S-1 (File No. 333-84589)).
     10.4         Restated 1999 Stock Plan (incorporated by reference to exhibit
                  10.4 to the  Registrant's  registration  statement on Form S-1
                  (File No. 333-84589)).
     10.5         Restated 1999 Employee  Stock Purchase Plan  (incorporated  by
                  reference  to exhibit  10.5 to the  Registrant's  registration
                  statement on Form S-1 (File No. 333-84589)).
     10.6         Administrative  Services  Agreement,  dated  August  1,  1999,
                  between    Phoenix   Cable    Incorporated    and   Registrant
                  (incorporated by reference to exhibit 10.6 to the Registrant's
                  registration statement on Form S-1 (File No. 333-84589)).
     10.7         Administrative  Services  Agreement,  dated  August  1,  1999,
                  between  Phoenix  Precision  Graphics,   Inc.  and  Registrant
                  (incorporated by reference to exhibit 10.7 to the Registrant's
                  registration statement on Form S-1 (File No. 333-84589)).
     10.8         Administrative  Services  Agreement,  dated  August  1,  1999,
                  between   Phoenix   Leasing    Incorporated   and   Registrant
                  (incorporated by reference to exhibit 10.8 to the Registrant's
                  registration statement on Form S-1 (File No. 333-84589)).
     10.9#        Business  Alliance  Program  Agreement,  dated  May 15,  1997,
                  between Oracle  Corporation  and Registrant  (incorporated  by
                  reference  to exhibit  10.9 to the  Registrant's  registration
                  statement on Form S-1 (File No. 333-84589)).
     10.10        Amendment One to Business Alliance  Agreement,  dated Mary 15,
                  1997, between Oracle Corporation and Registrant  (incorporated
                  by reference to exhibit 10.10 to the Registrant's registration
                  statement on Form S-1 (File No. 333-84589)).

                                 Page 55 of 57
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<PAGE>

    10.11#        Software  License and Services  Agreement,  dated November 14,
                  1997, between Oracle Corporation and Registrant  (incorporated
                  by reference to exhibit 10.11 to the Registrant's registration
                  statement on Form S-1 (File No. 333-84589)).
     10.12        Amendment  One to  Software  License and  Services  Agreement,
                  dated  November  14,  1997,  between  Oracle  Corporation  and
                  Registrant  (incorporated by reference to exhibit 10.12 to the
                  Registrant's  registration  statement  on Form S-1  (File  No.
                  333-84589)).
    10.13#        Software License, Support and Professional Services Agreement,
                  dated June 29, 1999 between Necho Systems Corp. and Registrant
                  (incorporated   by   reference   to   exhibit   10.13  to  the
                  Registrant's  registration  statement  on Form S-1  (File  No.
                  333-84589)).
     10.14        Lease,   dated  August  1,  1999,   between  Phoenix  American
                  Incorporated  and  Registrant  (incorporated  by  reference to
                  exhibit 10.14 to the  Registrant's  registration  statement on
                  Form S-1 (File No. 333-84589)).
     10.15        Sublease dated August 31, 1999 between ReSource/Phoenix,  Inc.
                  and PeopleSoft USA Inc.  (incorporated by reference to exhibit
                  10.15 to the Registrant's  registration  statement on Form S-1
                  (File No. 333-84589)).
    10.16##       Software  License and Services  Agreement  dated  November 11,
                  1999 between BroadVision, Inc. and Registrant.
     21.1         List of  subsidiaries  (incorporated  by  reference to exhibit
                  21.1 to the  Registrant's  registration  statement on Form S-1
                  (File No. 333-84589)).
     23.1         Consent   of   Arthur   Andersen   LLP,   Independent   Public
                  Accountants.
     24.1         Power of Attorney (see signature page).
     27.1         Financial Data Schedule.

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

     (b)        Reports on Form 8-K

     We did not file any Current  Reports on Form 8-K during the  quarter  ended
December 31, 1999.


                                 Page 56 of 57
                  The Index to Exhibits is located at Page 55
<PAGE>

                                   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.

                                RESOURCEPHOENIX.COM

                                By:      /s/ BRYANT TONG
                                         --------------------------------------
                                         Bryant Tong
                                         President and Chief Operating Operator

                                POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears
below  constitutes  and appoints Bryant Tong and Gregory  Thornton,  jointly and
severally, his attorneys-in-fact,  each with the power of substitution,  for him
in any and all  capacities,  to sign any amendments to this Report on Form 10-K,
and to file the same,  with exhibits  thereto and other  documents in connection
therewith  with the  Securities and Exchange  Commission,  hereby  ratifying and
confirming  all  that  each  of said  attorneys-in-fact,  or his  substitute  or
substitutes  may do or  cause  to be  done by  virtue  hereof.  Pursuant  to the
requirements of the Securities Exchange Act of 1934, this Report has been signed
below by the following persons in the capacities and on the dates indicated.


      Signature                        Title                          Date
----------------------   ----------------------------------   ------------------


/s/ GUS CONSTANTIN           Chairman of the Board and         ___________, 2000
----------------------        Chief Executive Officer
   Gus Constantin          (Principal Executive Officer)


/s/ BRYANT TONG          President, Chief Operating Officer    ___________, 2000
----------------------             and Director
     Bryant Tong


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


/s/ JAMES BARRINGTON                  Director                 ___________, 2000
----------------------
   James Barrington


/s/ GLEN MCLAUGHLIN                   Director                 ___________, 2000
----------------------
   Glen McLaughlin


/s/ ROGER SMITH                       Director                 ___________, 2000
----------------------
     Roger Smith


                                 Page 57 of 57
                  The Index to Exhibits is located at Page 55